UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended September 27, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 1-6836
Flanigan's Enterprises, Inc.
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(Exact name of registrant as specified in its charter)
Florida 59-0877638
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2841 Cypress Creek Road, Fort Lauderdale, Florida 33309
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code, (954) 974-9003
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, $0.10 Par Value American Stock Exchange
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Title of each class Name of each exchange
on which registered
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes [X[ No [ ]
The aggregate market value of the voting stock held by non-affiliates of the
registrant was $5,027,763 as of December 11, 1997.
There were 907,000 shares of the Registrant's Common Stock ($0.10) Par Value)
outstanding as of September 27, 1997.
DOCUMENTS INCORPORATED BY REFERENCE
Information contained in the Registrant's 1997 definitive proxy material has
been incorporated by reference in Items 10, 11, 12 and 13 of Part III of this
Annual Report on Form 10-KSB.
<PAGE>
PART I
Item 1. Business.
General
Flanigan's Enterprises, Inc., (the "Company") owns and/or operates
restaurants with lounges, package liquor stores and an entertainment oriented
club (collectively the "units"). At September 27, 1997, the Company operated 14
units, and had interests in seven additional units which have been franchised by
the Company. The table below sets out the changes in the type and number of
units being operated.
<TABLE>
<CAPTION>
FISCAL FISCAL
YEAR YEAR NOTE
TYPES OF UNITS 1996 1997 NUMBER
- -------------- ---- ---- ------
<S> <C> <C> <C>
Combination package and restaurant ........ 4 4
Restaurant only ........................... 5 5 (1)(2)
Package store only ........................ 4 4 (3)
Clubs ..................................... 1 1 (4)
TOTAL - Company operated units ............ 14 14
FRANCHISED - units ........................ 7 7
</TABLE>
Notes:
(1) During the fiscal year 1995, the Company became the owner, through
foreclosure, of a lounge previously sold by the Company, which lounge had been
operated by a wholly owned subsidiary of the Company as a receiver appointed by
the Court since fiscal year 1994. The Company tried to operate this store as a
restaurant under its "Flanigan's Cafe" concept, but since it was not possible to
operate it up to the same standards of the Company's other restaurants, the unit
was closed April 10, 1996. During the fourth quarter, a contract was entered
into by the landlord for the sale of the real property and improvements of this
location. Simultaneously therewith, a separate contract was entered into by the
Company for the sale of its liquor license to the same buyer. At closing, which
occurred during the first quarter of fiscal 1997, the Company's lease for this
store was vacated.
(2) Also during the first quarter of fiscal year 1996, the Company
began operating a restaurant under the "Flanigan's Seafood Bar and Grill"
servicemark as general partner and fifty percent owner of a limited partnership
established for such purpose.
(3) During fiscal year 1995, the Company was granted possession of a
store previously sold by the Company and began operating the package liquor
store pursuant to Court Order. During the first quarter of fiscal year 1997 the
Company acquired ownership of this store through foreclosure.
<PAGE>
(4) Through September 20, 1996, the Company operated its remaining
Pennsylvania club, (Store #850, King of Prussia, Pennsylvania), which was
financed through a limited partnership in which a wholly owned subsidiary of the
Company acted as general partner. The lease for this unit had only thirteen
months remaining, with no more renewal options and revenues were down as a
result of competition from some expensive new clubs constructed on the
waterfront. An opportunity arose to sell the lease, leasehold improvements and
liquor license to Dick Clark Restaurants, Inc. With the approval of the Limited
Partners, the sale of the unit was consummated on September 20, 1996 for a
purchase price of $500,000. The Company had one club (in Atlanta, Georgia)
remaining at fiscal yearend 1997.
All of the Company's package liquor stores, restaurants and clubs are
operated on leased properties. As a result of significant escalations of rent on
certain of such leased properties and on leased properties that were not being
operated by the Company, on November 4, 1985 the Company, not including its
subsidiaries, filed a Voluntary Petition in the United States Bankruptcy Court
for the Southern District of Florida seeking to reorganize under Chapter 11 of
the Federal Bankruptcy Code. On May 5, 1987 the Company's Plan of Reorganization
as amended and modified ("the Plan") was confirmed by the Bankruptcy Court. On
December 28, 1987 the Company was officially discharged from bankruptcy. See
Note 2 to the consolidated financial statements for a discussion of the
bankruptcy proceedings to date and Item 7 for a discussion of the effect of the
bankruptcy proceedings herein.
The Company was incorporated in Florida in 1959 and operated in South
Florida as a chain of small cocktail lounges and package liquor stores. By 1970,
the Company had established a chain of "Big Daddy's" lounges and package liquor
stores between Vero Beach and Homestead, Florida. From 1970 to 1979, the Company
expanded its package liquor store and lounge operations throughout Florida and
opened clubs in five other "Sun Belt" states. In 1975, the Company discontinued
most of its package store operations in Florida except in the South Florida
areas of Dade, Broward, Palm Beach and Monroe Counties. In 1982, the Company
expanded its club operations into the Philadelphia, Pennsylvania area as general
partner of several limited partnerships organized by the Company. In March 1985,
the Company began franchising its package liquor stores and lounges in the South
Florida area. See Note 11 to the consolidated financial statements and the
discussion of franchised units on page 5.
During fiscal year 1987, the Company began renovating its lounges to
provide full restaurant food service, and subsequently renovated and added food
service to most of its lounges. The restaurant concept, as the Company offers
it, has been so well received by the public that food sales now represent
approximately 77.0% of total restaurant sales.
The Company's package liquor stores emphasize high volume business by
providing customers with a wide variety of brand name and private label
merchandise at discount prices. The Company's restaurants provide efficient
service of alcoholic beverages and full food service with abundant portions,
reasonably priced, served in a relaxed friendly atmosphere.
The Company's principal sources of revenue are the sale of food and
alcoholic beverages.
<PAGE>
The Company conducts its operations directly and through a number of
wholly owned subsidiaries. The operating subsidiaries are as follows:
SUBSIDIARY STATE OF INCORPORATION
Flanigan's Management Services, Inc. Florida
Flanigan's Enterprises. Inc. of Georgia Georgia
Seventh Street Corp. Florida
Big Daddy's #48 Inc. Florida
Flanigan's Enterprises, Inc. of Pa. Pennsylvania
The income derived and expenses incurred by the Company relating to the
aforementioned subsidiaries are consolidated for accounting purposes with the
income and expenses of the Company in the consolidated financial statements in
this Form 10-KSB.
The Company's executive offices are located in a leased facility at
2841 Cypress Creek Road, Fort Lauderdale, Florida 33309 and its telephone
number at such address is (954) 974-9003.
Corporate Reorganization
As noted in Note 2 to the consolidated financial statements, on
November 4, 1985, the Company, not including any of its subsidiaries, filed a
Voluntary Petition in the United States Bankruptcy Court for the Southern
District of Florida seeking to reorganize under Chapter 11 of the Federal
Bankruptcy Code. The primary purposes of the petition were (1) to reject leases
which were significantly above market rates and (2) to reject leases on closed
units which had been repossessed by, or returned to the Company. On May 5, 1987
the Company's Plan of Reorganization as amended and modified was confirmed by
the Bankruptcy Court. On December 28, 1987 the Company was officially discharged
from bankruptcy. See Note 2 to the consolidated financial statements for a
discussion of the bankruptcy proceedings to date and Item 7 for a discussion of
the effect of the bankruptcy proceedings herein.
Financial Information Concerning Industry Segments
The Company's business is carried out principally in two segments: the
restaurant segment, which was the restaurant and lounge segment prior to the
closing of the remaining lounges during fiscal year 1996, and the package liquor
store segment.
Financial information broken into these two principal industry segments
for the two fiscal years ended September 28, 1996 and September 27, 1997 is set
forth in the consolidated financial statements which are attached hereto, and is
incorporated herein by reference.
The Company's Package Liquor Stores and Restaurants
The Company's package liquor stores are operated under the "Big Daddy's
Liquors" servicemark and the Company's restaurants are operated under the
servicemark "Flanigan's Seafood Bar and Grill". The Company's package liquor
stores emphasize high volume business by providing customers with a wide
selection of brand name and private label liquors, beer and wines. The Company
has a policy of meeting the published sales prices of its competitors. The
<PAGE>
Company provides extensive sales training to its package liquor store personnel.
Most package liquor stores are open six or seven days a week from 9:00-10:00
a.m. to 9:00-10:00 p.m., depending upon demand and local law. A small number of
the Company's units have "night windows" with extended evening hours.
The Company's restaurants offer full food and alcoholic beverage
service with approximately 77.0% of their sales being food items. These
restaurants are operated under the "Flanigan's Seafood Bar and Grill"
servicemark. Although these restaurants provide a neighborhood atmosphere, they
have the degree of standardization prevalent in casual dining restaurant chains,
including menu. The interior decor is nautical with numerous fishing and boating
pictures and decorations. Drink prices may vary between locations to meet local
conditions. Food prices are standardized. The restaurants' hours of operation
are from 11:00 a.m. to 1:00 - 5:00 a.m. The Company continues to develop strong
customer recognition of its "Flanigan's Seafood Bar and Grill" servicemark
through very competitive pricing and efficient and friendly service.
The Company's package liquor stores and restaurants were designed to
permit minor modifications without significant capital expenditures. However,
from time to time the Company is required to redesign and refurbish its units at
significant cost. See Item 2, Properties and Item 7 for further discussion.
Franchised Package Liquor Stores and Lounges
In March of 1985, the Company's Board of Directors approved a plan to
sell, on a franchise basis, up to 26 of the Company's package liquor stores and
lounges in the South Florida area. Under the terms of the franchise plan, the
Company sold the liquor license, furniture, fixtures and equipment of a
particular unit, entered into a sublease for the business premises and a
franchise agreement, whereby the franchisee licensed the right to use the
Company's servicemarks "Big Daddy's Liquors" and "Big Daddy's Lounges" in the
operation of its business. Investors purchasing units were required to execute
ten year franchise agreements with a thirty day cancellation provision. The
franchise agreement also provided for a royalty to the Company, in the amount of
1% of gross sales, plus a contribution to advertising, in an amount between
1-1/2 - 2% of gross sales. In most cases, the sublease agreement provided for
rent in excess of the amount paid by the Company, in order to realize an
additional return of between 2% - 3% of gross sales, depending upon a number of
factors, including but not limited to the performance of the particular unit
sold and its expected sales growth.
As of the end of fiscal year 1986, ten units had been franchised. Four
of these units were franchised to members of the family of the Chairman of the
Board. The Company had limited response to its franchise offering and suspended
its franchise plan at the end of fiscal year 1986.
During fiscal year 1988, two franchisees (one of whom is on the
Company's Board of Directors) exercised the thirty day cancellation clause under
the franchise agreement and related documents and returned their franchised
units to the Company. No gain or loss was recognized on these returns. The
Company has been profitably operating these two units.
During fiscal year 1990, the Company completed a foreclosure to take
one franchise back, reducing the number of franchised units to seven. This unit
was sold pursuant to a private offering to a Subchapter S corporation whose
president was the Chairman and whose investors included three directors and
<PAGE>
members of the Chairman's family. This unit was managed by the Company through
the end of fiscal year 1992. In the first quarter of fiscal year 1993, the Board
of Directors agreed to purchase this unit from the group of investors. In
purchasing this unit, the Board of Directors determined that the projected
profitability would provide a fair return on investment, whereas without this
purchase, the Company would only have received its 4% management fee until the
Subchapter S corporation received its full investment back from this unit.
During fiscal year 1991, the Company sold one unit to the unit's
manager, an unaffiliated third party, who had been operating it pursuant to a
management agreement since 1987. This unit consisted of a package liquor store
and restaurant, which restaurant was not operating under the Company's
"Flanigan's Seafood Bar and Grill" servicemark. The Company also entered into a
franchise agreement with the manager, licensing the use of the "Big Daddy's
Liquors" servicemark for the liquor package store in exchange for a royalty in
the amount of 1% of gross sales. Although the Company counted this unit as a
franchise, the Company did not consider this transaction a part of its franchise
plan. During fiscal year 1995, the manager executed the Company's new franchise
agreement for the operation of his restaurant under the "Flanigan's Seafood Bar
and Grill" service- mark, as more fully described below. At the same time the
former manager also executed a new franchise agreement for a second restaurant
opened since the purchase of the unit from the Company during fiscal year 1991.
During fiscal year 1992, one unaffiliated franchisee expressed an
interest in selling his unit or returning it to the Company pursuant to the
terms of its franchise agreement and related documents. As a result of the
substantial investment necessary to upgrade and renovate this unit, an
affiliated group of investors formed a Subchapter S corporation and purchased
this unit from the franchisee. The shareholder interest of all officers and
directors represents 42% of the total invested capital. The shareholder interest
of the Chairman's family represents an additional 47.5% of the total invested
capital. The Company continues to receive the same royalties, rent and mortgage
payments as it had received from the unaffiliated franchisee.
During fiscal year 1996, one franchisee exercised the thirty day
cancellation clause under the franchise agreement and related documents and
returned its franchised unit to the Company. The franchisee had operated a
package liquor store and lounge under the "Big Daddy's" servicemark. The Company
has been profitably operating the package liquor store of the franchised unit
but has not reopened the lounge. The lease agreement for the business premises
expired on December 31, 1995 and the Company occupies the same on an oral month
to month lease agreement paying its prorata share of the real property taxes
monthly and insuring the property. Subsequent to the end of the fiscal year the
Company received written notification from the landlord of the termination of
the oral month to month lease agreement as of December 31, 1997.
During the third quarter of fiscal year 1996, another unaffiliated
franchisee expressed its intent to terminate its new franchise agreement
(package liquor store only) and to return its unit, including restaurant, to the
Company. In order to induce the franchisee to continue operating its franchise
through the end of the fiscal year, the Company agreed to reduce the weekly
sublease rent and suspend all weekly payments on account of its purchase money
chattel mortgage. In the interim, the Company determined that the cost necessary
to convert this unit to a "Flanigan's Seafood Bar and Grill" restaurant exceeded
the funds available to the Company and on September 30, 1996, during the first
quarter of fiscal year 1997, the franchise was sold to a related third party, in
lieu of its return to the Company. The initial shareholder interest of all
officers and directors, which was comprised of the Chairman and a member of is
<PAGE>
family, represented one hundred percent of the initial invested capital. It was
also agreed that the Company would manage the franchise for the related third
party, pursuant to a management agreement. Subsequent to the closing of the sale
of the franchise, another related franchisee, who is also a member of the Board
of Directors of the Company, paid the Company the sum of $150,000 to approve his
purchase of this franchise from the related third party and for the Company to
relinquish its right to act as manager of the franchise. As part of this
transaction, the Company agreed to continue the reduced sublease rent, the
waiver of any franchise royalties and the suspension of mortgage payments
through March 1997. Since April 1, 1997 the Company has received the same weekly
payment as previously paid by the former franchisee during fiscal year 1996.
During the third quarter of fiscal year 1997 this related party formed a limited
partnership to own this franchise and through which it raised the necessary
funds to renovate the restaurant. The Company is an investor in the franchise,
as are other related parties, including but not limited to officers and
directors of the Company and their families.
The units that continue to be franchised are doing well and continue to
generate income for the Company. Many of the units that were originally offered
as franchises have been sold outright and are no longer being operated as
Flanigan's or Big Daddy's stores.
Franchised Restaurants
During fiscal year 1995, the Company completed its new franchise
agreement for a franchisee to operate a restaurant under the "Flanigan's Seafood
Bar and Grill" service mark pursuant to a license from the Company. The new
franchise agreement was drafted jointly with existing franchisees with all
modifications requested by the franchisees incorporated therein. The new
franchise agreement provides the Company with the ability to maintain a high
level of food quality and service at its franchised restaurants, which are
essential to a successful franchise operation. A franchisee is required to
execute a new franchise agreement for the balance of the term of its lease for
the business premises, extended by the franchisee's continued occupancy of the
business premises thereafter, whether by lease or ownership. The new franchise
agreement provides for a royalty to the Company in the amount of approximately
3% of gross sales, plus a contribution to advertising in an amount between 1-1/2
to 3% of gross sales. In most cases, the Company does not sublease the business
premises to the franchisee and in those cases where it does, the Company no
longer receives rent in excess of the amount paid by the Company.
As of the end of fiscal year 1996, all existing franchisees who operate
restaurants under the "Flanigan's Seafood Bar and Grill" or other authorized
service marks have executed new franchise agreements.
During fiscal year 1996, the Company's franchise agreement with a
member of Mr. Flanigan's family expired and the Company declined to offer the
franchisee the option of executing its new franchise agreement. During the first
quarter of fiscal year 1997, the Company filed suit against the franchisee for
servicemark infringement, seeking injunctive relief and monetary damages.
Subsequent to the end of fiscal year 1997 a Stipulated Agreed Order of Dismissal
Upon Mediation was issued whereby the Company received $110,000 and the former
franchisee agreed to cease all use of the "Flanigan's" servicemark and other
trade dress features common to the Company owned and/or franchised restaurants.
<PAGE>
Investment in Joint Ventures
During the first quarter of fiscal year 1996, the Company began
operating a restaurant under the "Flanigan's Seafood Bar and Grill" servicemark
as general partner and fifty percent owner of a limited partnership established
for such purpose. The limited partnership agreement gives the limited
partnership the right to use the "Flanigan's Seafood Bar and Grill" servicemark
while the Company acts as general partner only.
As previously discussed, during the third quarter of fiscal year 1997,
a related party formed a limited partnership to own a certain franchise in Fort
Lauderdale, Florida, through which it raised the necessary funds to renovate the
restaurant. The Company is a twenty-five percent owner of the limited
partnership as are other related parties, including but not limited to officers
and directors of the Company and their families.
During the fourth quarter of fiscal year 1997, the Company formed a
limited partnership and raised funds through a private offering to purchase the
assets of a restaurant in Surfside, Florida and renovate the same for operation
under the "Flanigan's Seafood Bar and Grill" servicemark. The Company acts as
general partner of the limited partnership and is also a forty percent owner of
the same, as are other related parties, including but not limited to officers
and directors of the Company and their families. The limited partnership
agreement gives the limited partnership the right to use the "Flanigan's Seafood
Bar and Grill" servicemark for a fee equal to 3% of gross sales from the
operation of the restaurant, while the Company acts as general partner only. The
Company projects that the renovation to the restaurant will be complete and the
restaurant open for business in mid March 1998.
In order to ensure that the Company has adequate cash reserves in view
of its investment in the restaurant discussed above, and for other improvements,
during the second quarter of fiscal year 1997, the Board of Directors authorized
the Company to borrow up to $1,200,000 at an interest rate of twelve (12%)
percent per annum and fully amortized over five (5) years. During the fourth
quarter of fiscal year 1997, the Company borrowed $375,000 from private
investors, in units of $5,000, which loan is fully secured with specific
receivables owned by the Company. Subsequent to the end of the fiscal year the
Company closed on its loan from Barnett Bank in the amount of $500,000, with
interest at prime rate. Equal quarterly principal payments will begin March, 31,
1998 and continue quarterly for three (3) years. Interest is payable monthly on
the outstanding principal balance. The loan is also fully secured with liquor
licenses owned by the Company.
Clubs
As of the end of fiscal year 1996, the Company owned one club in
Atlanta Georgia, which was operated by an unaffiliated third party, as discussed
below. In addition, until September 20, 1996, the Company operated its remaining
Pennsylvania club, (Store #850, King of Prussia, Pennsylvania), which was
financed through a limited partnership in which a wholly owned subsidiary of the
Company acted as general partner. The lease for this unit had only thirteen
months remaining, with no more renewal options, and revenues were down as a
result of competition from some expensive new clubs constructed on the
waterfront. An opportunity arose to sell the lease, leasehold improvements and
liquor license to Dick Clark Restaurants, Inc. With the approval of the Limited
Partners, the sale of the unit was consummated on September 20, 1996 for a
purchase price of $500,000. The Company had one club (in Atlanta, Georgia)
remaining at fiscal yearend 1997.
<PAGE>
Operation of Units by Unaffiliated Third Parties
During fiscal year 1992, the Company entered into a Management
Agreement with Mardi Gras Management, Inc. for the operation of the Company's
club in Atlanta, Georgia through the balance of the initial term of the lease,
unless sooner terminated by Mardi Gras Management, Inc. upon thirty days prior
written notice, with or without cause. Mardi Gras Management, Inc. assumed the
management of this club effective November 1, 1991 and is currently operating
the club under an adult entertainment format. During fiscal year 1997, the
Company agreed to modify the Management Agreement to give Mardi Gras Management,
Inc. one five year renewal option to extend the term of the same provided the
Company is satisfied with the financial condition of Mardi Gras Management, Inc.
within its sole discretion, and Mardi Gras Management, Inc. agreed to modify the
owner's fee to $150,000 per year versus ten percent of gross sales from the
club, whichever is greater. Pursuant to the Management Agreement, as modified,
the Company receives a monthly owner's fee of $12,500, subject to adjustment
each year on or about July 1, for any additional rent due as a result of 10%
gross sales exceeding $150,000 for the prior 12 month period.
Operations and Management
The Company emphasizes systematic operations and control of all units.
Each unit has its own manager who is responsible for monitoring inventory
levels, supervising sales personnel, food preparation and service in restaurants
and generally assuring that the unit is managed in accordance with Company
guidelines and procedures. The Company has in effect an incentive cash bonus
plan for its managers and salespersons based upon various performance criteria.
The Company's operations are supervised by area supervisors. Each area
supervisor supervises the operations of the units within his or her territory
and visits those units to provide on-site management and support. There are
three area supervisors responsible for package store, restaurant and club
operations in specific geographic districts.
All of the Company's managers and salespersons receive extensive
training in sales techniques.
The Company arranges for independent third parties, or "spotters", to
inspect each unit in order to evaluate the unit's operations, including the
handling of cash transactions.
Purchasing and Inventory
The package liquor business requires a constant substantial capital
investment in inventory in the units. Liquor inventory purchased can normally be
returned only if defective or broken.
All Company purchases of liquor inventory are made through its
purchasing department from the Company's corporate headquarters. The major
portion of inventory is purchased under individual purchase orders with licensed
wholesalers and distributors who deliver the merchandise within one to two days
of the placing of an order. Frequently, there is only one wholesaler in the
immediate marketing area with an exclusive distributorship of certain liquor
product lines.
Substantially all of the Company's liquor inventory is shipped by the
wholesalers or distributors directly to the Company's units. The Company
significantly increases its inventory prior to Christmas, New Year's Eve and
other holiday periods.
<PAGE>
Pursuant to Florida law, the Company pays for its liquor purchases
within ten days of delivery.
All negotiations with food suppliers are handled by the Company's
purchasing department at the Company's corporate headquarters. This ensures that
the best quality and prices will be available to each unit. Orders for food
products are prepared by each unit's kitchen manager and reviewed by the unit's
general manager before being placed with the approved vendor. Merchandise is
delivered by the supplier directly to each unit. Orders are placed several times
a week to ensure product freshness. Food inventory is primarily paid for
monthly.
Government Regulation
The Company is subject to various federal, state and local laws
affecting its business. In particular, the units operated by the Company are
subject to licensing and regulation by the alcoholic beverage control, health,
sanitation, safety and fire department agencies in the state or municipality
where located.
Alcoholic beverage control regulations require each of the Company's
units to apply to a state authority and, in certain locations, county and
municipal authorities, for a license or permit to sell alcoholic beverages on
the premises. In some instances, a unit may be required to apply for separate
licenses in order to sell beer and wine, to sell mixed drinks and to provide
facilities for dancing or live entertainment.
In the State of Florida, which represents all but one of the total
liquor licenses held by the Company, liquor licenses are issued on a "quota
license" basis. Quota licenses are issued on the basis of a population count
established from time to time under the latest applicable census. Because the
total number of liquor licenses available under a quota license system is
limited, the licenses have purchase and resale value based upon supply and
demand in the particular areas in which they are issued. The Florida quota
licenses held by the Company allow the sale of liquor for on- premises and/or
off-premises consumption. In the State of Georgia, the other state in which the
Company operates, licensed establishments do not have quota restrictions for
on-premises consumption and such licenses are issued to any applicant who meets
all of the state and local licensing requirements based upon extensive license
application filings and investigations of the applicant.
All licenses must be renewed annually and may be revoked or suspended
for cause at any time. Suspension or revocation may result from violation by the
licensee or its employees of any federal, state or local law or regulation
pertaining to alcoholic beverage control. Alcoholic beverage control regulations
relate to numerous aspects of the daily operations of the Company's units,
including minimum age of patrons and employees, hours of operation, advertising,
wholesale purchasing, inventory control, handling, storage and dispensing of
alcoholic beverages, internal control and accounting and collection of state
alcoholic beverage taxes.
As the sale of alcoholic beverages constitutes a large share of the
Company's revenue, the failure to receive or retain, or a delay in obtaining a
liquor license in a particular location could adversely affect the Company's
operations in that location and could impair the Company's ability to obtain
licenses elsewhere.
<PAGE>
The Company is subject in certain states to "dram shop" or "liquor
liability" statutes, which generally provide a person injured by an intoxicated
person the right to recover damages from an establishment that wrongfully served
alcoholic beverages to such person. See Item 1, Insurance, and Item 3, Legal
Proceedings, for further discussion.
The Company maintains a continuous program of training and surveillance
from its corporate headquarters to assure compliance with all applicable liquor
laws and regulations. During the fourth quarter of fiscal year 1997, the
Division of Alcoholic Beverages and Tobacco (DABT), subpoenaed several employees
of the Company to inquire about three cash purchases of inventory made by the
Company in calendar years 1995 and 1996 from a distributor, without invoices.
The total purchase price for the inventory was $5,100. It is anticipated that
the Company will face administrative charges from the DABT, but will only be
subject to a civil fine, which will not have a materially adverse effect upon
the Company. At its meeting on September 4, 1997, the Board of Directors was
advised of the pending investigation by the DABT and unanimously passed a
resolution prohibiting management from purchasing inventory without an invoice
and in cash. Otherwise, during the fiscal year ended September 27, 1997, through
the present time, the Company has had no significant pending matters initiated
by the beverage authorities concerning any of the Company's licenses which might
be expected to result in a revocation of a liquor license or other significant
actions against the Company.
The Company is not aware of any statute, ordinance, rule or regulation
under present consideration which would significantly limit or restrict its
business as now conducted. However, in view of the number of jurisdictions in
which the Company does business, and the highly regulated nature of the liquor
business, there can be no assurance that additional limitations may not be
imposed in the future, even though none are presently anticipated.
Federal and state environmental regulations have not had a material
effect on the Company's operation.
Insurance
The Company has general liability insurance which incorporates a
semi-self-insured plan under which the Company assumes the full risk of the
first $50,000 of exposure per occurrence. The Company's insurance carrier is
responsible for $1,000,000 coverage per occurrence above the Company's
self-insured deductible, up to a maximum aggregate of $2,000,000, per year. The
Company is self-insured against liability claims in excess of $1,000,000.
The Company's general policy is to settle only those legitimate and
reasonable claims asserted and to aggressively defend and go to trial, if
necessary, on frivolous and unreasonable claims. The Company has established a
select group of defense attorneys which it uses in conjunction with this
program. Under the Company's current liability insurance policy, any expenses
incurred by the Company in defending a claim, including adjusters and attorney's
fees, are a part of the $50,000 self-insured retention.
An accrual for the Company's estimated liability on liability claims is
included in the consolidated balance sheets in the caption "Accrued and Other
Current Liabilities". A significant unfavorable judgment or settlement against
the Company in excess of its liability insurance coverage could have a
materially adverse effect on the Company.
<PAGE>
Through the end of the 1990 fiscal year, the Company was uninsured for
dram shop liability. Pennsylvania still has an unrestricted dram shop law, which
allows persons injured by an "obviously intoxicated person" to bring a civil
action against the business which served alcoholic beverages to an "obviously
intoxicated person". Florida has restricted its dram shop law by statute,
permitting persons injured by an "obviously intoxicated person" to bring a civil
action against the business which served alcoholic beverages to a minor or an
individual known to be habitually addicted to alcohol. Dram shop claims normally
involve traffic accidents and the Company generally does not learn of dram shop
claims until after a claim is filed and the Company then vigorously defends
these claims on the grounds that its employees did not serve an "obviously
intoxicated person". Damages in most dram shop claims are substantial. During
fiscal year 1996, the Company favorably settled the two dram shop cases, (three
dram shop claims), relating to one incident filed against the Company in Florida
during fiscal years 1994 and 1995. During fiscal year 1997, the Company
favorably settled its remaining uninsured dram shop claim asserted against one
of the limited partnerships in Pennsylvania and the Company, as general partner.
At the present time, there are no dram shop claims pending against the Company.
Competition and the Company's Market
The liquor and the hospitality industries are highly competitive and
are often affected by changes in taste and entertainment trends among the
public, by local, national, and economic conditions affecting spending habits,
and by population and traffic patterns. The Company believes that the principal
means of competition among package liquor stores is price and that, in general,
the principal means of competition among restaurants include location, type and
quality of facilities and type, quality and price of beverage and food served.
The Company's package liquor stores compete directly or indirectly with
local retailers and discount "superstores". Due to the competitive nature of the
liquor industry in South Florida, the Company has had to adjust its pricing to
stay competitive, including meeting all competitor's advertisements. Such
practices will continue in the package liquor business. It is the opinion of the
Company's management that the Company has a competitive position in its market
because of widespread consumer recognition of the "Big Daddy's" and "Flanigan's"
names.
As previously noted, at September 27, 1997 the Company owned and
operated nine restaurants, eight of which had formerly been lounges and were
renovated to provide for full food service. These restaurants compete directly
with other restaurants serving liquor in the area. The Company's restaurants are
competitive due to four factors; product quality, portion size, moderate pricing
and a standardization throughout the Company owned restaurants and most of the
franchises.
The Company's business is subject to seasonal effects, in that liquor
purchases tend to increase during the holiday seasons. The liquor industry and
the Company's liquor business have also been adversely affected by the physical
fitness awareness.
Trade Names
The Company operates principally under three trade names: "Flanigan's",
"Big Daddy's", and "Flanigan's Seafood Bar and Grill". Throughout Florida the
Company's package liquor stores are operated under the "Big Daddy's Liquors"
servicemark. The Company's rights to the use of the "Big Daddy's" servicemark
are set forth under a consent decree of a Federal Court entered into by the
Company in settlement of federal trademark litigation. The consent decree and
<PAGE>
the settlement agreement allow the Company to continue, and expand, its use of
the "Big Daddy's" servicemark in connection with limited food and liquor sales
in Florida. The consent decree further contained a complete restriction upon all
future sales of distilled spirits in Florida under the "Big Daddy's" name by the
other party who has a federally registered servicemark for "Big Daddy's" use in
the restaurant business. The Federal Court retained jurisdiction to enforce the
consent decree. The Company has acquired a registered federal trademark on the
principal register for its "Flanigan's" service mark.
During fiscal year 1996, the Company's franchise agreement with a
member of Mr. Flanigan's family expired and the Company declined to offer the
franchisee the option of executing its new franchise agreement. During the first
quarter of fiscal year 1997, the Company filed suit against the franchisee for
servicemark infringement, seeking injunctive relief and monetary damages.
Subsequent to the end of fiscal year 1997, a Stipulated Agreed Order of
Dismissal Upon Mediation was issued whereby the Company received $110,000 and
the former franchisee agreed to cease all use of the "Flanigan's" servicemark
and other dress features common to the Company owned and/or franchised
restaurants.
The standard symbolic trademark associated with the Company and its
facilities is the bearded face and head of "Big Daddy" which is predominantly
displayed at all "Flanigan's" facilities and all "Big Daddy's" facilities
throughout the country. The face comprising this trademark is that of the
Company's founder, Joseph "Big Daddy" Flanigan, and it is a federally registered
trademark owned by the Company.
Employees
As of year end, the Company employed 325 persons, of which 218 were
full-time and 107 were part-time. Of these employees, 25 were employed at the
Company's corporate offices. Of the remaining employees, 28 were employed in
package liquor stores, and 272 in restaurants.
None of the Company's employees are represented by collective
bargaining organizations. The Company considers its labor relations to be
favorable.
<PAGE>
<TABLE>
<CAPTION>
EXECUTIVE OFFICERS OF THE REGISTRANT
POSITIONS AND OFFICES OFFICE OR POSITION
NAME CURRENTLY HELD AGE HELD SINCE
---- -------------- --- ----------
<S> <C> <C> <C>
Joseph G. Flanigan Chairman of the Board
of Directors, Chief
Executive Officer,
and President 68 1959
William Patton Vice President
Community Relations 74 1975
Mary C. Reymann Vice President Finance
Controller
and Secretary 73 1980
Edward A. Doxey Treasurer 56 1992
Jeffrey D. Kastner Assistant Secretary 44 1995
</TABLE>
Item 2. Properties
The Company's operations are all conducted on leased property.
Initially, most of these properties were leased by the Company on long-term
ground and building leases with the buildings either constructed by the lessors
under build-to-suit leases or constructed by the Company. A relatively small
number of business locations involve the lease or acquisition of existing
buildings. In almost every instance where the Company initially owned the land
or the building on leased property, the Company entered into a sale and
lease-back transaction with investors to recover a substantial portion of its
per unit investment.
The majority of the Company's leases contained rent escalation clauses
based upon the consumer price index which made the continued profitable
operation of many of these locations impossible and jeopardized the financial
position of the Company. As a result of the Company's inability to renegotiate
these leases, on November 4, 1985 the Company, not including its subsidiaries,
filed a Voluntary Petition in the United States Bankruptcy Court for the
Southern District of Florida seeking to reorganize under Chapter 11 of the
Federal Bankruptcy Code. The primary purpose of the reorganization was to reject
and/or renegotiate the leases on such properties.
On January 11, 1986, the Bankruptcy Court entered its Order granting
the Company's motions to reject thirteen leases and the Company was successful
in negotiating a termination of three other leases. On April 7, 1986, the
Bankruptcy Court granted the Company's motions to reject two additional leases
and two more leases were rejected by the Company's failure to assume the same by
May 22, 1986. In addition, during the pendency of the bankruptcy proceedings,
the Company was successful in renegotiating a substantial number of the
Company's remaining leases, generally amending the terms to five years with
three five year renewal options and deleting cost of living rental adjustments
in exchange for rents based upon the "fair market rental" for each particular
location. The Company believes that the units retained, especially with the
aforementioned lease modifications, are adequate to support its operations,
including any damages as a result of its bankruptcy proceedings.
<PAGE>
All of the Company's units require periodic refurbishing in order to
remain competitive. The Company has budgeted $300,000 for its refurbishing
program for fiscal year 1998. See Item 7, "Liquidity and Capital Resources", for
discussion of the amounts spent in fiscal year 1997.
The following table summarizes the Company's properties as of September
27, 1997 including franchise locations, clubs and Company managed locations.
<TABLE>
<CAPTION>
Square License
Name and Location Footage Seats Owned by Lease Terms
- ----------------- ------- ----- -------- -----------
<S> <C> <C> <C> <C>
Big Daddy's Liquors #9 (2)
Flanigan's Enterprises, Inc.
1550 W. 84th Street 8/1/71 to 12/31/99
Hialeah, Florida 4,300 130 Company options to 12/31/2009
Big Daddy's Liquors #10 (2)(4)
Flanigan's Enterprises, Inc.
15191-93 South Dixie Highway Month to month
Miami, Florida 3,500 84 Company terminated 1/1/98
Big Daddy's Liquors #14 (2)(3)
Big Daddy's #14, Inc.
2041 N.E. Second Street 6/1/79 to 6/1/99
Deerfield Beach, Florida 3,320 90 Franchisee options to 2009
Big Daddy's Liquors #15 (3)(5)
CIC Investors #15 Ltd.
1479 E. Commercial Boulevard 3/12/76 to 8/31/01
Fort Lauderdale, Florida 4,000 90 Franchisee options to 8/31/2011
Big Daddy's Liquors #18 (2)(3)(5)
Twenty-Seven Birds, Corp.
2721 Bird Avenue 2/15/72 to 12/31/2000
Miami, Florida 4,300 100 Franchisee options to 12/31/2010
Big Daddy's Liquors #19 (2)(4)
Flanigan's Enterprises, Inc.
2505 N. University drive 3/1/72 to 12/31/2000
Hollywood, Florida 4,500 160 Company option to 12/31/2005
Big Daddy's Liquors #20 (2) 7/15/68 to 12/31/98
Flanigan's Enterprises, Inc. options to 12/31/2006
13205 Biscayne Boulevard Additional Lease
North Miami, Florida 5,100 140 Company 5/1/69 to 12/31/98
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Square License
Name and Location Footage Seats Owned by Lease Terms
- ----------------- ------- ----- -------- -----------
<S> <C> <C> <C> <C>
Big Daddy's Liquors #22 (2)(4)
Flanigan's Enterprises, Inc.
2600 W. Davie Boulevard 12/16/68 to 12/31/2000
Fort Lauderdale, Florida 4,100 150 Company options to 12/31/2010
Flanigan's Cafe #27
Flanigan's Enterprises, Inc.
732-734 N.E. 125th Street
North Miami, Florida 3,000 90 Company 7/1/50 to 6/30/2049
Big Daddy's Liquors #31 (2)
Flanigan's Enterprises, Inc.
4 North Federal Highway 9/6/68 to 12/31/2000
Hallandale, Florida 4,600 150 Company options to 12/31/2010
Big Daddy's Liquors #33 (2)(3)(5) 11/1/68 to 10/31/1998
Guppies, Inc. options to 10/31/2003
45 South Federal Highway New lease
Boca Raton, Florida 4,620 130 Franchisee 11/1/2003 to 12/31/2009
Big Daddy's Liquors #34 (1)
Flanigan's Enterprises, Inc.
9494 Harding Avenue
Surfside, Florida 3,000 50 Company 5/29/97 to 5/28/2002
Big Daddy's Liquors #36 (2) 3/10/87 to 12/31/2000
Flanigan's Enterprises, Inc. Additional lease
102 North Dixie Highway 4/29/87 to 12/31/2000
Lake Worth, Florida 4,600 60 Company option to 12/31/2005
Big Daddy's Liquors #37 (4)
Flanigan's Enterprises, Inc.
1720 North Andrews Avenue 6/1/69 to 5/31/99
Fort Lauderdale, Florida 4,100 80 Company options to 5/31/2019
Big Daddy's Liquors #40 (2)
Flanigan's Enterprises, Inc.
5450 North State Road #7 4/1/71 to 12/31/2000
Fort Lauderdale, Florida 4,600 140 Company option to 12/31/2005
Big Daddy's Liquors #43 (2)(3)(5)
BD 43 Corporation
2500 E. Atlantic Avenue 12/1/72 to 11/30/2002
Pompano Beach, Florida 4,500 90 Franchisee options to 2012
Big Daddy's Liquors #47 (6)(8)
Flanigan's Enterprises, Inc.
8600 Biscayne Boulevard 12/21/68-1/1/2010
Miami, Florida 6,000 210 Company options to 1/1/2060
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Square License
Name and Location Footage Seats Owned by Lease Terms
- ----------------- ------- ----- -------- -----------
<S> <C> <C> <C> <C>
Flanigan's Lounge #600 (7)
Powers Ferry Landing 5/1/76 to 4/30/2001
Atlanta, Georgia 10,000 400 Company option to 4/30/2006
</TABLE>
(1) License subject to chattel mortgage.
(2) License pledged to secure lease rental.
(3) Franchised by Company.
(4) Former franchised unit returned and now operated by the
Company.
(5) Lease assigned to franchisee.
(6) Lease originally assigned to unaffiliated third parties.
During fiscal year 1996, the Company purchased 37% of the
leasehold interest from the unaffiliated third parties. An
additional 11% was purchased during fiscal year 1997, bringing
the total interest purchased to 48%.
(7) Location managed by an unaffiliated third party.
(8) Business formerly operated by the Company pursuant to Court
Order, until December 31, 1996, when the Company reacquired
ownership of the business through foreclosure.
<PAGE>
Item 3. Legal Proceedings.
Due to the nature of the business, the Company is sued from
time-to-time by patrons, usually for alleged personal injuries occurring at the
Company's business locations. The Company has liability insurance which
incorporates a semi-self-insured plan under which the Company assumes the full
risk of the first $50,000 of exposure per occurrence. The Company's insurance
carrier is responsible for $1,000,000 coverage per occurrence above the
Company's self-insured deductible, up to a maximum aggregate of $2,000,000 per
year. Certain states have liquor liability (dram shop) laws which allow a person
injured by an "obviously intoxicated person" to bring a civil suit against the
business (or social host) who had served intoxicating liquors to an already
"obviously intoxicated person". The Company's insurance coverage relating to
this type of incident is limited.
Through the end of the 1990 fiscal year, the Company was uninsured for
dram shop liability. Pennsylvania still has an unrestricted dram shop law, which
allows persons injured by an "obviously intoxicated person" to bring a civil
action against the business which had served alcoholic beverages to an
"obviously intoxicated person". Florida has restricted its dram shop law by
statute permitting persons injured by an "obviously intoxicated person" to bring
a civil action against the business which had served alcoholic beverages to a
minor or an individual known to be habitually addicted to alcohol. Dram shop
claims normally involve traffic accidents and the Company generally does not
learn of dram shop claims until after a claim is filed and the Company then
vigorously defends these claims on the grounds that its employee did not serve
an "obviously intoxicated person". Damages in most dram shop claims are
substantial. During fiscal year 1997, the Company favorably settled the two dram
shop cases, (three dram shop claims) relating to one incident filed against the
Company in Florida during fiscal years 1994 and 1995. During fiscal year 1997,
the Company favorably settled its remaining uninsured dram shop claim asserted
against one of the limited partnerships in Pennsylvania and the Company, as
general partner. At the present time, there are no dram shop claims pending
against the Company.
On November 4, 1985 the Company, not including its subsidiaries, filed
a Voluntary Petition in the United States Bankruptcy Court for the Southern
District of Florida seeking to reorganize under Chapter 11 of the Federal
Bankruptcy Code. The Petition, identified as case no. 85-02594-BKC-AJC, was
filed in Fort Lauderdale, Florida. By Order of the Court dated November 4, 1985,
the Company was appointed "debtor in possession". The Company's action was a
result of significant escalations of rent on certain of the Company's leases
which made continued profitable operations at those locations impossible and
jeopardized the Company's financial position. The major purpose of the
reorganization was to reject such leases.
On January 11, 1986, the Bankruptcy Court granted the Company's motions
to reject thirteen leases and the Company was successful in negotiating the
termination of three additional leases. On April 7, 1986, the Bankruptcy Court
granted the Company's motion to reject two additional leases and two more leases
were automatically rejected due to the Company's failure to assume the same
prior to May 22, 1986. During the fiscal year ended October 3, 1987, the Company
negotiated a formula with the Official Committee of Unsecured Creditors,
("Committee"), which formula was used to calculate lease rejection damages under
the Company's Amended Plan of Reorganization. Stipulations were filed by the
Company with all but three of these unsecured creditors, which stipulations
received Bankruptcy Court approval prior to the hearing on confirmation.
<PAGE>
In addition to the rejection of leases, the Company also sought its
release from lease agreements for businesses sold, which sales included the
assignment of the leases for the business premises. While several landlords
whose leases had been assigned did file claims against the Company, the majority
did not, which resulted in the Company being released from its guarantees under
those leases. The Company has also been successful in negotiating the limitation
or release of the lease guarantees of those landlords who filed claims, which
settlements received Bankruptcy Court approval prior to the hearing on
confirmation.
On February 5, 1987, the Company filed its Amended Plan of
Reorganization and Amended Disclosure Statement, which documents were approved
by the Committee. On February 25, 1987, the Company further modified its Amended
Plan of Reorganization to secure the claims of Class 6 Creditors (Lease
Rejection) and Class 8 Creditors (Lease Guarantee Rejections). The Bankruptcy
Court approved the Amended Disclosure Statement by Order dated March 7, 1987 and
scheduled the hearing to consider confirmation of the Amended Plan of
Reorganization on April 13, 1987. On April 10, 1987, in order to insure receipt
of the necessary votes to approve its Amended Plan of Reorganization, the
Company agreed to a further modification of its Amended Plan, whereby creditors
of Classes 6 and 8 will receive $813,000 prorata as additional damages under the
terms of the Amended Plan. On April 13, 1987, the Company's Amended Plan of
Reorganization was confirmed and the Bankruptcy Court entered its Order of
Confirmation on May 5, 1987.
Pursuant to the terms of the Amended Plan of Reorganization, the
Effective Date of the same was June 30, 1987. As of that date, confirmation
payments totaling $1,171,925 were made by the Company's Disbursing Agent with
$647,226 being retained in escrow for disputed claims ($1,819,151 total). The
Bankruptcy Court ratified the disbursements made by the Disbursing Agent by its
Order dated December 21, 1987.
On December 28, 1987, the Bankruptcy Court entered its Notice of
Discharge of the Company.
During fiscal 1991 and again during fiscal 1992, the Company and Class
6 and Class 8 Creditors under the Company's Amended Plan of Reorganization
modified the schedule for the payment of bankruptcy damages, reducing the amount
of the quarterly payments by extending the term of the same, but without
reducing the total amount of bankruptcy damages. The modification to the payment
schedule provided the Company with needed capital.
Item 4. Submission of Matters to a Vote of Security Holders.
During the fourth quarter of fiscal year 1997 the Company did not
submit any matter to a vote of security holders.
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters.
<TABLE>
<CAPTION>
RANGE OF PER SHARE MARKET PRICES
FISCAL 1996 FISCAL 1997
----------- -----------
High Low High Low
<S> <C> <C> <C> <C>
First quarter 4-5/8 3-1/8 5-7/8 4-3/4
Second quarter 5-3/8 3-3/4 4-3/4 4
Third quarter 5-7/8 4-3/8 4-7/8 3-5/8
Fourth quarter 5-7/16 4-5/8 10-3/16 7-1/4
</TABLE>
The Company's shares are traded on the American Stock Exchange, under
the symbol BDL. No dividends were paid to shareholders from the date of the
initial public offering in August 1969, through the fiscal year ended September
27, 1975. Cash dividends of 20 cents and 10 cents per share were paid on January
12, 1976 and July 5, 1976, respectively. No dividends were paid during the
period July 5, 1976 to March 15, 1988. During fiscal year 1988, a cash dividend
of 10 cents per share was paid on March 15, 1988. No dividends were paid from
March 16, 1988 through the fiscal year ended September 27, 1997.
Item 6. Selected Financial Data.
Not required.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
At September 28, 1996, the Company was operating 14 units, including
one unit operated by the Company pursuant to Court Order, and had interests in
an additional seven units which had been franchised by the Company. Of the units
operated by the Company, four were combination package liquor stores and
restaurants, five were restaurants only, and four were package liquor stores
only. The unit operated by the Company pursuant to Court Order was a package
liquor store only. There was one club operated by an unaffiliated third party
under a management agreement.
In comparison to fiscal year 1996, at September 27, 1997, the Company
was still operating 14 units. The Company acquired ownership of the assets of
the unit formerly operated under Court Order which unit is included in the total
of stores being operated, and had interests in an additional seven units which
had been franchised by the Company. Of the units operated by the Company, four
were combination package liquor stores and restaurants, five were restaurants
only, and four were package liquor stores only. The unit formerly operated by
the Company pursuant to Court Order was a package liquor store only. There was
one club operated by an unaffiliated third party under a management agreement.
<PAGE>
Liquidity and Capital Resources
Cash Flows
The following table is a summary of the Company's cash flows for the
two years ended September 27, 1997.
<TABLE>
<CAPTION>
Fiscal
Years Ended
1996 1997
------- -------
(in thousands)
<S> <C> <C>
Net cash provided by
operating activities ................... $ 531 $ 2,094
Net cash used in
investing activities .................... (277) (1,291)
Net cash used in
financing activities .................... (143) (266)
------- -------
Net increase in cash
and cash equivalents ................... 111 537
Cash and cash equivalents:
Beginning of year ...................... 686 797
------- -------
End of year ............................ $ 797 $ 1,334
======= =======
</TABLE>
Adjustments to net income to reconcile to cash flows from operating
activities in fiscal year 1996 include a provision for uncollectible notes and
mortgages receivable of $104,000 and the recognition of $114,000 in deferred
gain, most of which resulted from the payment of a balloon mortgage receivable.
Also included is a $53,000 loss on retirement of fixed assets and a gain of
$135,000 from the sale of the assets of the Pennsylvania partnership.
Adjustments to net income to reconcile to cash flows from operating
activities in fiscal year 1997 include a provision for uncollectible notes and
mortgages receivable of $21,000. Also included is a $19,000 loss on the
retirement of fixed assets, a reduction of $58,000 in the accrual for potential
liability claims and $150,000 received from the sale of the rights to manage a
franchise.
Subsequent to fiscal yearend 1997 the Company closed on its loan from
Barnett Bank in the principal amount of $500,000, being fully amortized over
three years with interest accruing at the prime rate charged by Barnett Bank to
its commercial customers. The loan is payable in twelve equal quarterly
installments of principal, each in the amount of $41,667, commencing March 31,
1998, with interest payable monthly. The Company pledged twelve liquor licenses
as collateral, which liquor licenses have an estimated fair market value of
approximately $550,000.
<PAGE>
The Year 2000 Issue
The Company has assessed and continues to assess the impact of the Year
2000 Issue on its reporting systems and operations. The Year 2000 Issue exists
because many computer systems and applications currently use two-digit date
fields to designate a year. As the century date occurs, date sensitive systems
will recognize the year 2000 as 1900 or not at all. This inability to recognize
or properly treat the year 2000 may cause our systems to process critical
financial and operational information incorrectly.
During the current fiscal year the Company began its evaluation of the
modifications needed to meet this challenge. It has not yet incurred any costs,
and has not determined what costs could be incurred in 1998 and 1999. The
Company is also communicating with its major suppliers to understand their
intended solutions to this issue.
If the Company's remediation plan is not successful, there could be a
significant disruption to the Company's ability to transact business as
efficiently as it does at the present time. The Company does not rely solely on
computer systems to transact business with its suppliers and does not use any
computer operated production lines.
Improvements
Capital expenditures were $613,000 and $1,468,000 during fiscal years
1996 and 1997, respectively. The capital expenditures were for upgrading
existing units serving food, improvements to package liquor stores and upgrading
the corporate computer system. During the third quarter of fiscal year 1997, the
Company closed on its purchase of the real property adjacent to its restaurant
located at 4 N. Federal Highway, Hallandale. The Company plans to improve this
real property as additional parking for customers of its restaurant. The
purchase price was $620,000, with the seller holding a purchase money mortgage
in the amount of $485,000. The purchase of and improvements to this property are
included in the capital expenditures of $1,468,000. Except as otherwise noted
all of the money for additions came from operations.
All of the Company's units require periodic refurbishing in order to
remain competitive. During fiscal 1992, as cash flow improved, the Company
embarked on a refurbishing program which continued through fiscal year 1997. The
budget for fiscal year 1998 includes approximately $300,000 for this program.
The Company believes that improved operations will provide the cash to continue
the refurbishing program.
Property and Equipment
The Company's property and equipment, at cost less accumulated
depreciation and amortization, was $2,634,000 at September 28, 1996 compared to
$3,544,000 at September 27, 1997. The Company's liquor licenses less accumulated
amortization were $349,000 at September 28, 1996 compared to $358,000 at
September 27, 1997. The Company's leased property under capital leases, less
accumulated amortization, was $195,000 at September 28, 1996 compared to
$162,000 at September 27, 1997. The Company's leased property under capital
leases has continued to decline because any new leases the Company enters into
are operating leases, and thus there are no additions to capital leases.
<PAGE>
Long term debt
The Company's long term debt was $21,000 at fiscal year end 1996 and
$896,000 at fiscal yearend 1997. The increase in long term debt includes the
purchase money mortgage of $485,000 included as a part of the purchase price for
the real property adjacent to the Company's restaurant at 4 North Federal
Highway, Hallandale and the $375,000 borrowed from private investors.
The Company repaid long term debt, capital lease obligations and
Chapter 11 damages in the amount of $355,000 and $340,000 in fiscal years 1996
and 1997, respectively.
Working capital
The table below summarizes the current assets, current liabilities and
working capital for fiscal years 1996 and 1997:
<TABLE>
<CAPTION>
Sept. 28, Sept. 27,
Item 1996 1997
---- ---------- ---------
<S> <C> <C>
Current assets $2,522,000 $3,000,000
Current liabilities 2,158,000 2,658,000
Working capital 364,000 342,000
</TABLE>
During fiscal year 1991 and again in fiscal year 1992, the Company
refinanced existing debt due Class 6 and Class 8 Creditors under the Company's
Amended Plan by extending the payment schedule to the year 2002, thereby
reducing the payments from $500,000 per year to $200,000 per year for two years
and thereafter to $300,000 per year until paid, but without reducing the total
amount of bankruptcy damages.
Management believes that positive cash flow from operations will
adequately fund operations, debt reductions and planned capital expenditures in
fiscal year 1998.
The Company's Amended Plan of Reorganization was prepared to allow the
Company to meet its obligations from cash generated from operations. The Amended
Plan was approved by a majority of the creditors and confirmed by the Bankruptcy
Court on May 5, 1987 and the Company was officially discharged from bankruptcy
on December 28, 1987. As noted above, during fiscal year 1991 and again in
fiscal year 1992, the Class 6 and Class 8 Creditors agreed to refinance existing
debt by extending their payment schedule. See Bankruptcy Proceedings below and
Note 2 to the consolidated financial statements.
Income Taxes
Financial Accounting Standards Board Statement No. 109, Accounting for
Income Taxes requires, among other things, recognition of future tax benefits
measured at enacted rates attributable to deductible temporary differences
between financial statement and income tax bases of assets and liabilities and
to tax net operating loss carryforwards to the extent that realization of said
benefits is more likely than not. For discussion regarding the Company's net
operating loss carryforwards refer to Note 4 in the Company's Annual Report on
Form 10-KSB for the fiscal year ended September 27, 1997.
<PAGE>
Bankruptcy Proceedings
As noted above and in Note 2 to the consolidated financial statements,
on November 4, 1985, Flanigan 's Enterprises, Inc., not including any of its
subsidiaries, filed a Voluntary Petition in the United States Bankruptcy Court
for the Southern District of Florida seeking to reorganize under Chapter 11 of
the Federal Bankruptcy Code. The primary purposes of the Petition were (1) to
reject leases which were significantly above market rates and (2) to reject
leases on closed units which had been repossessed by or returned to the Company.
During fiscal year 1986 the Company terminated or rejected 34 leases.
Many of the leases remaining were renegotiated to five year terms, with three
five year renewal options at fair market rental. As was their right under the
Bankruptcy Code, the landlords of properties rejected by the Company filed
claims for losses or damages sustained as a result of the Company's rejection of
such leases. The amount of such damages is limited by federal law. The Company
outlined a schedule for payment of these damages in the Amended Plan. As noted
above, the Amended Plan was approved by the Bankruptcy Court on May 5, 1987. The
gross amount of damages payable to creditors for rejected leases was $4,278,000.
Since the damage payments were to be made over nine years, the total amount due
was discounted at a rate of 9.25%. See Note 2 to the consolidated financial
statements for the current payment schedule of these damages.
Other Legal Matters
Through the end of fiscal year 1990, the Company was uninsured for dram
shop liability. During fiscal year 1996, the Company favorably settled the three
insured dram shop claims [two lawsuits relating to one incident], against the
Company in Florida and subsequent to the end of fiscal year 1996, favorably
settled its remaining uninsured dram shop claim against a limited partnership in
Pennsylvania and the Company, as general partner. See page 12 and 19 for further
discussion regarding dram shop suits.
During fiscal year 1996, the Company was forced to continue its lawsuit
against the assignee of a sold store in 1990 when the assignee failed to
amicably return the package liquor store in order to regain possession of the
business premises, including furniture, fixtures, equipment and liquor license,
and for damages for unpaid real property taxes, rent and damages to the business
premises. During the first quarter of fiscal year 1997, the parties entered into
a Stipulation, whereby the Court entered an Agreed Summary Final Judgment for
Eviction, Damages and Foreclosure of Security Agreement, ("Summary Final
Judgment"), through which the furniture, fixtures, equipment and liquor license
at this location were sold at foreclosure sale and through which the Company
received an award of damages against the assignee, the principal of the assignee
who personally guaranteed its obligations, and the affiliated entity of the
assignee, which also guaranteed its obligations to the Company. During the first
quarter of fiscal year 1997, the Company reacquired ownership of the furniture,
fixtures, equipment and liquor license,at this location, as well as possession
of the business premises through the foreclosure sale. The Company operated the
package liquor store throughout the litigation and continues doing so after
acquiring ownership of the same. The Company also intends to try to collect the
award of damages in the Summary Final Judgment against the assignee, the
principal of the assignee who personally guaranteed its obligations and the
affiliated entity of the assignee, which also guaranteed its obligations to the
Company.
<PAGE>
During fiscal year 1996, two claims were filed against the Company with
the Equal Employment Opportunity Commission ("EEOC") alleging sexual harassment
and/or discrimination. In the first claim, a former employee initially alleged
that the Company permitted sexual harassment to continue at one of its
restaurants. After the former employee was transferred to another restaurant,
she resigned, and thereafter amended her complaint to allege that she was forced
to resign due to retaliatory conduct on the part of the Company. During the
first quarter of fiscal year 1997, the EEOC closed its files on these claims
taking no action. From the date the EEOC closed its file, the former employee
had ninety days to file suit in Federal Court, which she failed to do.
Similarly, an action under Florida law is barred by a one year statute of
limitations.
In the second claim, a former employee alleged that her position with
the Company was changed due to her pregnancy. The Equal Employment Opportunity
Commission failed to make a determination on this claim within one hundred
eighty (180) days of its filing and subsequent to the end of the fiscal year
1996, this claimant filed suit against the Company. The Company disputed this
claim and vigorously defended the same. During the fourth quarter of fiscal year
1997, the former employee's attorney withdrew and subsequent to the end of
fiscal year 1997 the lawsuit was dismissed due to the failure of the former
employee to retain substitute counsel.
Results of Operations
<TABLE>
<CAPTION>
REVENUES (in thousands):
Fifty-Two Weeks Ended
Sales Sept. 28, 1996 Sept. 27, 1997
- ----- ------------------- -------------------
<S> <C> <C> <C> <C>
Restaurant, food $ 9,588 50.1% $ 9,648 50.2%
Restaurant, bar 3,220 16.8% 2,888 15.0%
Non-Restaurant, bar 234 1.2% -
Package goods 6,112 31.9% 6,681 34.8%
------- ----- ------- -----
Total 19,154 100. % 19,217 100. %
Franchise revenues 629 591
Owner's fee 150 150
Joint venture income 65 168
Other operating income 186 194
------- -------
Total revenues $20,184 $20,320
</TABLE>
As the table above illustrates, total revenues have increased for the
fiscal year ended September 27, 1997 when compared to fiscal year ended
September 28, 1996.
<PAGE>
During the second quarter of fiscal year 1996, the lease on one unit
operated by the Company as a lounge only, expired and the Company was unable to
renew same upon suitable terms. Also during the second quarter of fiscal 1996,
the Company closed its last two lounges at combination package and lounge units,
but continued to operate the package liquor stores. Bar business, without an
accompanying restaurant, continued to decline to the point of being marginally
profitable. The Company could not foresee this trend reversing and the two units
were not suitable for conversion to restaurants. The closing of these units was
responsible for the absence of non-restaurant bar sales in fiscal year 1997.
Restaurant food sales represented 50.1% of total sales in the fifty-two
weeks ended September 28, 1996 as compared to 50.2% in the comparable period of
fiscal year 1997. The weekly average of same store restaurant food sales was
$182,170 and $184,272 for the fifty-two week period of fiscal years 1996 and
1997 respectively, an increase of 1.2%.
The same store weekly average for restaurant bar sales was $60,269 for
the twelve months ended September 28, 1996 compared to $55,530 for the twelve
months ended September 27, 1997, a decrease of 7.9%. The Company's emphasis
during the past few years has been towards increasing its restaurant food sales,
which caters to a family oriented business. This accounts for the decrease in
weekly average of same store restaurant bar sales.
Package goods sales have reversed the decline of prior years remaining
stable at a weekly average of same store sales of $117,546 for the fifty-two
weeks of fiscal year 1996 compared to $118,434 for the fifty-two weeks of fiscal
year 1997.
Although the amount received from franchisees for royalty and
bookkeeping fees increased for fiscal year 1997, franchise related revenues,
which were $629,000 for fiscal year 1996, declined to $591,000 for fiscal year
1997. The decline is related to the expiration of one franchise at the end of
fiscal year 1996 and the temporary suspension of sublease rent and royalties on
another franchised unit that was sold to a related party rather than being
returned to the Company. The new franchisee is again paying the full weekly
amounts due.
Owner's fee represents fees received pursuant to a Management Agreement
from the operation of a club owned by the Company in Atlanta, Georgia.
During the first quarter of fiscal year 1996, the Company began
operating a restaurant under the "Flanigan's Seafood Bar and Grill" servicemark
as general partner and fifty percent owner of a limited partnership established
for such purpose. During fiscal year 1996 the Company received $65,000 as its
share of income, compared to $164,000, the majority of joint venture income for
fiscal year 1997.
The gross profit margin for restaurant sales was 61.5% and 63.3% for
the twelve months of fiscal years 1996 and 1997, respectively.
The gross profit margin for package goods sales during the fifty-two
weeks ended September 28, 1996 and September 27, 1997 was 26.4% and 26.8%,
respectively.
Overall gross profits were 50.8% for the twelve months ended September
28, 1996 compared to 50.6% for the same period in fiscal year 1997.
<PAGE>
Operating Costs and Expenses
Operating costs and expenses for the fifty-two weeks ended September
28, 1996 were $19,731,000 compared to $19,268,000 for the same period in fiscal
year 1997. Operating expenses are comprised of the cost of merchandise sold,
payroll and related costs, occupancy costs and selling, general and
administrative expenses.
Payroll and related costs, which include workers compensation insurance
premiums, were $5,574,000 and $5,580,000 for the twelve months of fiscal years
1996 and 1997, respectively.
Occupancy costs, which include rent, common area maintenance, repairs
and taxes were $949,000 and $927,000 for the twelve months of fiscal years 1996
and 1997, respectively.
Selling, general and administrative expenses were $3,782,000 for the
fifty-two weeks ended September 28, 1996 and $3,270,000 for the fifty-two weeks
ended September 27, 1997. The net decrease of 13.5% in selling, general and
administrative expenses was achieved through management's careful monitoring of
the same and a more favorable worker's compensation experience in fiscal year
1997.
Other Income and Expense
Other income and expense totaled $339,000 and $54,000 in fiscal years
1996 and 1997 respectively.
The increase of $22,000 in interest expense on long-term debt, which
was $69,000 and $91,000 for the fifty-two weeks of fiscal years 1996 and 1997,
respectively, is attributed to the increase in long-term debt. The decline of
$8,000 in interest expense on obligations under capital leases, which was
$62,000 and $54,000 for the fifty-two weeks of fiscal years 1996 and 1997,
respectively, is the result of declining principal balances of capital leases in
general.
Fiscal year 1996 included a recovery of $53,000 from insured losses, a
gain of $50,000 on a repossession and $66,000 in income from the Pennsylvania
partnership and the recognition of $114,000 in deferred gains. The Pennsylvania
unit was sold at the end of fiscal year 1996.
As discussed on page 9, the sale of the lease, leasehold improvements
and liquor license of the club in King of Prussia was completed on September 20,
1996 and the Company realized a gain of $135,000 from its investment in this
limited partnership. Also, as discussed on page 7, the Company received $150,000
in fiscal year 1997 from the sale of its right to manage a franchise.
The category "Other, net" was $124,000 for the fifty-two weeks of
fiscal year 1996 and $-0- for the fifty-two weeks of fiscal year 1997. Other,
net in the consolidated statements of income consists of the following for the
twelve months ended September 28, 1996 and September 27, 1997:
<PAGE>
<TABLE>
<CAPTION>
Fiscal year ending
Sept. 28, Sept. 27,
1996 1997
--------- ---------
<S> <C> <C>
Non-franchise related rental income ........ $ 32,000 $ 32,000
Loss on retirement of fixed assets ......... (79,000) (19,000)
Gain on sale of liquor licenses ............ 26,000 --
Gain on repossession of store .............. 50,000 --
Adjustment on sale of Pennsylvania
limited partnership ............... -- (31,000)
Insurance recovery ......................... 53,000 13,000
Miscellaneous .............................. 42,000 5,000
--------- ---------
$ 124,000 $ --
========= =========
</TABLE>
Trends
During the next twelve months management expects a continued increase
in income from investments in joint ventures and anticipates that expenses will
remain constant, thereby increasing overall profits. The Company intends to add
more restaurants as cash becomes available.
Other Matters
Impact of Inflation
The Company does not believe that inflation has had any material effect
during the past two years. To the extent allowed by competition, the Company
recovers increased costs by increasing prices.
Post Retirement Benefits Other Than Pensions
The Company currently provides no post retirement benefits to any of
its employees, therefore Financial Accounting Standards Board Statement No. 106
has no effect on the Company's financial statements.
Item 8. Financial Statements and Supplementary Data.
Financial statements of the Company at September 28, 1996 and September
27, 1997, which include each of the two years in the period ended September 27,
1997 and the independent certified public accountants' report thereon are
incorporated by reference from the 1997 Annual Report to Shareholders, included
herein.
Item 9. Disagreements on Accounting and Financial Disclosure.
(Not Applicable.)
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant.
The information set forth under the caption "Election of Directors" in
the Company's definitive Proxy Statement for its 1998 Annual Meeting of
Shareholders, to be filed with the Securities and Exchange Commission pursuant
to regulation 14A under the Securities and Exchange Act of 1934, as amended (the
1998 Proxy Statement), is incorporated herein by reference. See also "Executive
Officers of the Registrant" included in Part I hereof.
Item 11. Executive Compensation.
The information set forth in the 1998 Proxy Statement under the caption
"Executive Compensation" is incorporated by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The information set forth under the caption "Security Ownership of
Certain Beneficial Owners and Management" in the 1998 Proxy Statement is
incorporated by reference.
Item 13. Certain Relationships and Related Transactions
The information set forth under the caption "Election of Directors
Certain Relationships and Related Transactions" in the 1998 Proxy Statement
is incorporated by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedule, and Reports on Form 8-K
(a) 1. Financial Statements
All the financial statements, financial statement schedule and
supplementary data listed in the accompanying Index to
Financial Statements and Schedule are filed as part of this
Annual Report.
2. Exhibits
The exhibits listed on the accompanying Index to Exhibits are
filed as part of this Annual Report.
(b) Reports on Form 8-K
No reports on form 8-K were filed during the fourth quarter of
fiscal 1997 or subsequent to yearend.
<PAGE>
Index to Exhibits
Item 14 (a) (2)
Description
(2) Plan of Reorganization, Amended Disclosure Statement, Amended Plan of
Reorganization, Modification of Amended Plan of Reorganization, Second
Modification of Amended Plan of Reorganization, Order Confirming Plan of
Reorganization, (Item 7 (c) of Quarterly Report on Form 8-K filed May 5, 1987 is
incorporated herein by reference).
(3) Restated Articles of Incorporation (Part IV, Item 14 (a)(2) of Annual Report
on Form 10-K filed on December 29, 1982 is incorporated herein by reference).
(3) By-laws (Part IV, Item 14 (a)(2) of Annual Report on Form 10-K filed on
December 29, 1982 is incorporated herein by reference).
(10)(a)(1) Employment Agreement with Joseph G. Flanigan (Exhibit A of the Proxy
Statement dated January 27, 1988 is incorporated herein by reference).
(10)(a)(2) Form of Employment Agreement between Joseph G. Flanigan and the
Company (as ratified and amended by the stockholders at the 1988 annual meeting
is incorporated herein by reference).
(10)(c) Consent Agreement regarding the Company's Trademark Litigation (Part
7(c)(19) of the Form 8-K dated April 10, 1985 is incorporated herein by
reference).
(10)(d) King of Prussia (#850) Partnership Agreement (Part 7 (c)(19) of the Form
8-K dated April 10, 1985 is incorporated herein by reference).
(10)(o) Management Agreement for Atlanta, Georgia (#600) (Item 14 (a)(10)(o) of
the Form 10-K dated October 3, 1992 is incorporated herein by reference).
(10)(p) Settlement Agreement with Former Vice Chairman of the Board of Directors
(re #5) (Item 14 (a)(10)(p) of the Form 10-K dated October 3, 1992 is
incorporated herein by reference).
(10)(q) Hardware Purchase Agreement and Software License Agreement for
restaurant point of sale system. (Item 14(a)(10)(g) of the Form 10-KSB dated
October 2, 1993 is incorporated herein by reference).
(10)(a)(3) Key Employee Incentive Stock Option Plan (Exhibit A of the Proxy
Statement dated January 26, 1994 is incorporated herein by reference).
(10)(r) Limited Partnership Agreement of CIC Investors #13, Ltd., between
Flanigan's Enterprises, Inc., as General Partner and fifty percent owner of the
limited partnership, and Hotel Properties, LTD. (Item 14 (a)(10)(r) of the Form
10-KSB dated September 30, 1995 is incorporated herein by reference.)
(10)(s) Form of Franchise Agreement between Flanigan's Enterprises, Inc., and
Franchisees. (Item 14 (a)(10)(s) of the Form 10-KSB dated September 30, 1995 is
incorporated herein by reference.)
<PAGE>
(10)(t) Licensing Agreement between Flanigan's Enterprises, Inc. and James B.
Flanigan, dated November 4, 1996, for non-exclusive use of the servicemark
"Flanigan's" in the Commonwealth of Pennsylvania. (Item 14 (a)(10)(t) of the
Form 10-KSB dated September 28, 1996 is incorporated herein by reference.)
(10)(u) Limited Partnership Agreement of CIC Investors #15 Ltd., dated March 28,
1997, between B.D. 15 Corp. as General Partner and numerous limited partners,
including Flanigan's Enterprises, Inc. as a limited partner owning twenty-five
percent of the limited partnership (Attached).
(10)(v) Limited Partnership Agreement of CIC Investors #60, Ltd., dated July 8,
1997, between Flanigan's Enterprises, Inc., as General Partner and numerous
limited partners, including Flanigan's Enterprises, Inc. as a limited partner
owning forty percent of the limited partnership (attached).
(10)(w) Stipulated Agreed Order of Dismissal upon Mediation with former
franchisee (attached).
(11) Statement regarding computation of per share earnings is set forth in this
Annual Report on Form 10-KSB.
(13) Registrant's Form 10-KSB constitutes the Annual Report to Shareholders for
fiscal year ended September 27, 1997.
(22)(a) Company's subsidiaries are set forth in this Annual Report on Form
10-KSB.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934 the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
Flanigan's Enterprises, Inc.
Registrant
Date 12/15/1997 By: /s/JOSEPH G. FLANIGAN
---------------------
Joseph G. Flanigan
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
/s/JOSEPH G. FLANIGAN Chairman of the Board, Date 12/15/1997
--------------------- Chief Executive Officer
Joseph G. Flanigan and President
/s/MARY C. REYMANN Vice President Finance, Date 12/15/1997
------------------ Controller
Mary C. Reymann Secretary and Director
/s/CHARLES KUHN Director Date 12/15/1997
---------------
Charles Kuhn
/s/GERMAINE M. BELL Director Date 12/15/1997
-------------------
Germaine M. Bell
/s/CHARLES E. MCMANUS Director Date 12/15/1997
---------------------
Charles E. McManus
/s/JEFFREY D. KASTNER Assistant Secretary Date 12/15/1997
--------------------- and Director
Jeffrey D. Kastner
/s/WILLIAM PATTON Vice President, Public Date 12/15/1997
----------------- Relations and Director
William Patton
/s/JAMES G. FLANIGAN Director Date 12/15/1997
--------------------
James G. Flanigan
/s/PATRICK J. FLANIGAN Director Date 12/15/1997
----------------------
Patrick J. Flanigan
</TABLE>
<PAGE>
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS AND SCHEDULE
FINANCIAL STATEMENTS:
Report of Independent Certified Public Accountants
Consolidated Balance Sheets -- September 28, 1996 and September 27, 1997
Consolidated Statements of Income for the Years Ended September 28, 1996
and September 27, 1997
Consolidated Statements of Stockholders' Investment for the Years Ended
September 28, 1996 and September 27, 1997
Consolidated Statements of Cash Flows for the Years Ended September 28,
1996 and September 27, 1997
Notes to Consolidated Financial Statements
SCHEDULE:
II Valuation and Qualifying Accounts for the Years Ended September 28,
1996 and September 27, 1997
Schedules, other than the schedule listed above, are not submitted
because they are not applicable, not required, or because the required
information is included in the consolidated financial statements or
notes thereto.
Individual financial statements of the registrant have been omitted
because the registrant is primarily an operating company and the
subsidiaries included in the consolidated financial statements are
wholly owned.
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
Flanigan's Enterprises, Inc.:
We have audited the accompanying consolidated balance sheets of Flanigan's
Enterprises, Inc. (a Florida corporation) and subsidiaries as of September 28,
1996 and September 27, 1997, and the related consolidated statements of income,
stockholders' investment and cash flows for the years then ended. These
consolidated financial statements and the schedule referred to below are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and schedule based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Flanigan's Enterprises, Inc.
and subsidiaries as of September 28, 1996 and September 27, 1997, and the
results of their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index to
financial statements is presented for the purpose of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
Miami, Florida,
November 26, 1997.
<PAGE>
<TABLE>
<CAPTION>
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 28, 1996 AND SEPTEMBER 27, 1997
ASSETS
1996 1997
--------- ----------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents ................. $ 797,000 $1,334,000
Receivables, less allowance for
uncollectible amounts and deferred
gains, including related party
receivables of $3,000 and $24,000
(before allowances and deferred gains)
in 1996 and 1997, respectively .......... 486,000 80,000
Inventories ............................... 911,000 1,253,000
Prepaid expenses .......................... 328,000 333,000
---------- ----------
Total current assets ...................... 2,522,000 3,000,000
---------- ----------
PROPERTY AND EQUIPMENT, net ........................ 2,634,000 3,544,000
---------- ----------
LEASED PROPERTY UNDER CAPITAL LEASES,
less accumulated amortization of
$678,000 and $711,000 in 1996
and 1997, respectively .................... 195,000 162,000
---------- ----------
OTHER ASSETS:
Liquor licenses, less accumulated
amortization of $83,000 and
$90,000 in 1996 and 1997, respectively .. 349,000 358,000
Notes and mortgages receivable, less
allowance for uncollectible amounts and
deferred gains, including related party
receivables of -0- and $197,000 (before
allowances and deferred gains)
in 1996 and 1997, respectively .......... 76,000 168,000
Investment in joint ventures .............. 120,000 987,000
Other ..................................... 413,000 163,000
---------- ----------
Total other assets ........................ 958,000 1,676,000
---------- ----------
TOTAL ASSETS ....................................... $6,309,000 $8,382,000
========== ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 28, 1996 AND SEPTEMBER 27, 1997
LIABILITIES AND STOCKHOLDERS' INVESTMENT
(continued)
1996 1997
----------- -----------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable ....................... $ 582,000 $ 859,000
Accrued and other current liabilities .. 820,000 1,304,000
Current portion of long-term debt ...... 16,000 84,000
Current obligations under capital
leases ............................... 61,000 70,000
Current portion of damages payable on
terminated or rejected leases ........ 249,000 259,000
Due to Pennsylvania limited
partnership .......................... 430,000 82,000
----------- -----------
Total current liabilities .............. 2,158,000 2,658,000
----------- -----------
LONG-TERM DEBT, net of current portion .......... 5,000 812,000
----------- -----------
OBLIGATIONS UNDER CAPITAL LEASES,
net of current portion ................. 387,000 319,000
----------- -----------
DAMAGES PAYABLE ON TERMINATED OR
REJECTED LEASES, net of current portion 1,212,000 954,000
----------- -----------
COMMITMENTS AND CONTINGENCIES (Notes 5 and 10)
STOCKHOLDERS' INVESTMENT:
Common stock, par value $.10,
authorized 5,000,000 shares,
issued and outstanding 2,099,000
shares in 1996 and 1997 .............. 210,000 210,000
Capital in excess of par value ......... 6,395,000 6,395,000
Retained earnings ...................... 753,000 1,846,000
Less - Treasury stock, at cost,
1,192,000 shares in 1996 and 1997 .... (4,811,000) (4,812,000)
----------- -----------
Total stockholders' investment ......... 2,547,000 3,639,000
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' INVESTMENT .. $ 6,309,000 $ 8,382,000
=========== ===========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these balance sheets.
<PAGE>
<TABLE>
<CAPTION>
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED SEPTEMBER 28, 1996 AND SEPTEMBER 27, 1997
1996 1997
------------ ------------
<S> <C> <C>
REVENUES:
Restaurant food sales ............. $ 9,588,000 $ 9,648,000
Restaurant bar sales .............. 3,220,000 2,888,000
Lounge bar sales .................. 234,000 --
Package goods sales ............... 6,112,000 6,681,000
Franchise-related revenues ........ 629,000 591,000
Owner's fee ....................... 150,000 150,000
Joint venture income .............. 65,000 168,000
Other operating income ............ 186,000 194,000
------------ ------------
20,184,000 20,320,000
------------ ------------
COSTS AND EXPENSES:
Cost of merchandise sold -
restaurants and lounges ......... 4,927,000 4,604,000
package goods ................... 4,499,000 4,887,000
Payroll and related costs ......... 5,574,000 5,580,000
Occupancy costs ................... 949,000 927,000
Selling, general and
administrative expenses .. 3,782,000 3,270,000
------------ ------------
19,731,000 19,268,000
------------ ------------
Income from operations ............ 453,000 1,052,000
------------ ------------
OTHER INCOME (EXPENSE):
Interest expense on obligations
under capital leases ............ (62,000) (54,000)
Interest expense on long-term
debt and damages payable ........ (69,000) (91,000)
Interest income ................... 31,000 43,000
Management fees from
Pennsylvania limited
partnership ..................... 66,000 --
Gain on sale of Pennsylvania
limited partnership ............. 135,000 --
Sale of management rights ......... -- 150,000
Recognition of deferred gains ..... 114,000 6,000
Other, net ........................ 124,000 --
------------ ------------
339,000 54,000
------------ ------------
Income before provision for
income taxes .................... 792,000 1,106,000
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED SEPTEMBER 28, 1996 AND SEPTEMBER 27, 1997
(continued)
1996 1997
---------- ----------
<S> <C> <C>
PROVISION FOR INCOME TAXES ..................... 6,000 13,000
---------- ----------
Net income ............................ $ 786,000 $1,093,000
========== ==========
NET INCOME
PER COMMON SHARE:
Primary ............................... $ .80 $ 1.17
========== ==========
Fully diluted ......................... $ .80 $ 1.08
========== ==========
WEIGHTED AVERAGE SHARES
AND EQUIVALENT SHARES OUTSTANDING:
Primary ............................... 984,000 935,000
========== ==========
Fully diluted ......................... 986,000 1,009,000
========== ==========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
<PAGE>
<TABLE>
<CAPTION>
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT
FOR THE YEARS ENDED SEPTEMBER 28, 1996 AND SEPTEMBER 27, 1997
COMMON STOCK TREASURY STOCK
(Accumulated
Capital in Deficit)
Number of Excess of Retained Number of
Shares Amount Par Value Earnings Shares Amount
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, September 30, 1995 ............... 2,099,000 $ 210,000 $ 6,685,000 $ (33,000) 1,246,000 $ 5,010,000
Net income ................................ -- -- -- 786,000 -- --
Purchase of 39,000 shares of treasury stock -- -- -- -- 39,000 173,000
Exercise of stock options ................. -- -- (290,000) -- (93,000) (372,000)
----------- ----------- ----------- ----------- ----------- -----------
BALANCE, September 28, 1996 ............... 2,099,000 210,000 6,395,000 753,000 1,192,000 4,811,000
Net income ................................ -- -- -- 1,093,000 -- --
Purchase of 160 shares of treasury stock .. -- -- -- -- -- 1,000
----------- ----------- ----------- ----------- ----------- -----------
BALANCE, September 27, 1997 ............... 2,099,000 $ 210,000 $ 6,395,000 $ 1,846,000 1,192,000 $ 4,812,000
=========== =========== =========== =========== =========== ===========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
<PAGE>
<TABLE>
<CAPTION>
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 28, 1996 AND SEPTEMBER 27, 1997
1996 1997
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ............................... $ 786,000 $ 1,093,000
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation and amortization .......... 659,000 619,000
Provision for uncollectible
notes and mortgages receivable ....... 104,000 21,000
Change in provision for potential
uninsured claims ..................... 12,000 (58,000)
Recognition of deferred gains
and other deferred income ............ (114,000) (6,000)
Loss on property, equipment
and liquor licenses .................. 53,000 19,000
Gain on sale of Pennsylvania
limited partnership .................. (135,000) --
Sale of management rights .............. -- (150,000)
Changes in assets and liabilities:
(Increase) decrease in receivables ..... (235,000) 328,000
Increase in inventories ............... (87,000) (175,000)
Decrease (increase) in prepaid expenses 45,000 (5,000)
(Increase) decrease in other assets .... (326,000) 38,000
(Decrease) increase in accounts payable (174,000) 277,000
(Decrease) increase in accrued
and other current liabilities ........ (57,000) 93,000
----------- -----------
Net cash provided by
operating activities ................... 531,000 2,094,000
----------- -----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 28, 1996 AND SEPTEMBER 27, 1997
(continued)
1996 1997
---------- ----------
<S> <C> <C>
CASH FLOWS FROM INVESTING ACTIVITIES:
Net proceeds from sale of property,
equipment, liquor licenses
and management rights .................. 10,000 95,000
Collections on notes and
mortgages receivable ................... 290,000 56,000
Purchase of property and equipment ....... (613,000) (983,000)
Investment in joint ventures ............. (120,000) (428,000)
Proceeds (adjustment) from sale
of Pennsylvania limited partnership .... 156,000 (31,000)
---------- ----------
Net cash used in
investing activities ................... (277,000) (1,291,000)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings of long-term debt ............. -- 423,000
Payments of long-term debt ............... (60,000) (33,000)
Payments of obligations under
capital leases ......................... (54,000) (59,000)
Payments of damages payable on
terminated or rejected leases .......... (241,000) (248,000)
Change in amount due to Pennsylvania
limited partnership .................... 303,000 (348,000)
Purchase of treasury stock ............... (173,000) (1,000)
Proceeds from exercise of options ........ 82,000 --
---------- ----------
Net cash used in
financing activities ................... (143,000) (266,000)
---------- ----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 28, 1996 AND SEPTEMBER 27, 1997
(continued)
1996 1997
---------- ----------
<S> <C> <C>
NET INCREASE IN CASH AND
CASH EQUIVALENTS ............................ 111,000 537,000
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR ........................... 686,000 797,000
---------- ----------
CASH AND CASH EQUIVALENTS,
END OF YEAR ................................. $ 797,000 $1,334,000
========== ==========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest .................................. $ 131,000 $ 142,000
Income taxes .............................. 6,000 18,000
Noncash Activities:
Retirement of fully depreciated
equipment ................................. $ 51,000 $ 235,000
Exchange of note receivable
for liquor license ........................ $ 50,000 $ --
Exchange of note receivable
for sale of management rights ............. $ -- $ 100,000
Investment in joint ventures .............. $ -- $ 439,000
Write-off of fully reserved
mortgage receivable ....................... $ -- $ 60,000
Exchange of note payable
for purchase of land ...................... $ -- $ 485,000
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
<PAGE>
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 28, 1996 AND SEPTEMBER 27, 1997
(1) NATURE OF OPERATIONS:
Incorporated in 1959, Flanigan's Enterprises, Inc. ("Flanigan's" or the
"Company") began operations in South Florida as a chain of small cocktail
lounges and package liquor stores. At September 27, 1997, the Company owns
and/or operates five full-service restaurants, four package liquor stores, four
combination full-service restaurants and package liquor stores in Florida, and
one club in Georgia, for which Flanigan's receives an owner's fee pursuant to a
management agreement. The Company's restaurants are operated under the
"Flanigan's Seafood Bar and Grill" servicemark while the Company's package
stores are operated under the "Big Daddy's Liquors" servicemark. Additionally,
the Company holds interests in seven franchised units.
(2) PETITION IN BANKRUPTCY:
On November 4, 1985, Flanigan's Enterprises, Inc., not including any of
its subsidiaries, filed a voluntary petition in the United States Bankruptcy
Court for the Southern District of Florida seeking to reorganize under Chapter
11 of the Federal Bankruptcy Code. Flanigan's was authorized to continue in the
management and control of its business and property as debtor-in- possession
under the Bankruptcy Code. On May 5, 1987, Flanigan's Plan of Reorganization, as
amended and modified (the "Plan"), was confirmed by the Bankruptcy Court. On
December 28, 1987, Flanigan's was officially discharged from bankruptcy.
The Bankruptcy Code allows the debtor-in-possession to either assume or
reject certain liabilities, leases, or other executory contracts subject to
court approval. Lessors or other parties to contracts, which are rejected are
entitled to file claims for losses or damages sustained as a result of the
rejection. In fiscal 1986, Flanigan's recorded estimated damages of $4,278,000
for claims for losses as a result of rejected leases. Because the damage
payments were to be made over nine years, the total amount due was discounted at
a rate of 9.25%, Flanigan's then effective borrowing rate. During fiscal 1991
and 1992, Flanigan's renegotiated the payment of this obligation to extend
through fiscal 2002, which effectively reduced the discount rate to 3.71%.
Remaining liabilities for damage payments are included as "Damages Payable on
Terminated or Rejected Leases" in the accompanying consolidated balance sheets.
Based on the borrowing rates currently available to the Company for bank loans
with similar terms and average maturities, the fair value of damages payable on
terminated or rejected leases is approximately $1,114,000. The fair value of all
other financial instruments approximates the carrying value on the balance
sheets, due to their short-term nature or market rates of interest.
<PAGE>
As of September 27, 1997, damages payable on terminated or rejected
leases, including imputed interest, mature as follows:
Fiscal Amount
------ ------
1998 $ 300,000
1999 300,000
2000 300,000
2001 300,000
2002 120,000
---------
1,320,000
Less - Amount representing
interest (107,000)
----------
$1,213,000
==========
(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
(a) Basis of Consolidation -
The consolidated financial statements include the accounts of
Flanigan's Enterprises, Inc. and its subsidiaries, all of which are wholly
owned. All significant intercompany transactions and balances have been
eliminated in consolidation. The Company's fiscal year ends on the Saturday
nearest September 30.
(b) Cash and Cash Equivalents -
The Company considers all highly liquid debt instruments with a
maturity of three months or less at the date of purchase to be cash equivalents.
(c) Inventories -
Inventories are stated at lower of cost (first in, first out) or
market.
(d) Liquor Licenses -
Liquor licenses purchased prior to October 31, 1970 (the date
Accounting Principles Board ("APB") Opinion No. 17 became effective), amounted
to $145,000 at September 28, 1996 and September 27, 1997, and are not amortized
unless an impairment in value is indicated. The cost of liquor licenses acquired
subsequent to October 31, 1970, is amortized over a period of 40 years.
<PAGE>
(e) Property and Equipment -
For financial reporting, the Company uses the straight-line method for
providing depreciation and amortization on property and equipment. Property and
equipment at September 28, 1996 and September 27, 1997, consisted of the
following:
<TABLE>
<CAPTION>
Useful
Lives 1996 1997
---------- ----------- -----------
<S> <C> <C> <C>
Land and land improvements N/A $ - $ 630,000
Furniture and equipment 3 -7 years 4,548,000 4,839,000
Leasehold interests and
improvements See below 4,595,000 4,929,000
--------- ---------
9,143,000 10,398,000
Less - accumulated
depreciation and
amortization (6,509,000) (6,854,000)
--------- ---------
$ 2,634,000 $ 3,544,000
=========== ===========
</TABLE>
Leasehold interests are amortized over the minimum term of the lease.
Leasehold improvements are amortized over the life of the lease up to a maximum
of 10 years. If the locations are sold or abandoned before the end of the
amortization period, the unamortized cost is expensed.
(f) Investment in Joint Ventures-
The equity method of accounting is used when the Company has a twenty
percent to fifty percent interest in other companies, joint ventures, and
partnerships, and can exercise significant influence. Under the equity method,
original investments are recorded at cost and are adjusted by dividends and the
Company's share of undistributed earnings or losses.
(g) Newly Issued Accounting Pronouncement-
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per
Share". SFAS No. 128 supersedes the previous standard (Accounting Principles
Board Opinion No. 15), modifies the methodology for calculating earnings per
share, and is effective for annual and interim periods ending after December 15,
1997; early adoption is not permitted. Upon adoption in its interim financial
statements for the quarter ending December 27, 1997, the Company will be
required to restate previously reported earnings per share data to conform with
the requirements of SFAS No. 128. Had the provisions of SFAS No. 128 been
applicable to the accompanying consolidated financial statements, basic and
diluted earnings per share would have been $.87 and $.86 in 1996, respectively
and $1.21 and $1.18 in 1997, respectively.
<PAGE>
(h) Use of Estimates in the Preparation of Financial Statements-
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(i) Stock-based Compensation-
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation," ("SFAS No. 123") encourages, but does not require
companies to record compensation plans using a fair value based method. The
Company has chosen to continue to account for stock-based compensation using the
intrinsic value based method prescribed in APB Opinion No. 25, "Accounting for
Stock issued to Employees". Accordingly, compensation cost for stock options is
measured as the excess, if any, of the quoted market price of the corporation's
stock at the date of the grant over the amount an employee must pay to acquire
the stock.
(j) Long-Lived Assets-
The Company continually evaluates whether events and circumstances have
occurred that may warrant revision of the estimated life of its intangible
assets and other long-lived assets or whether the remaining balance of its
intangible assets and other long-lived assets should be evaluated for possible
impairment. When such factors, events or circumstances indicate that intangible
assets should be evaluated for possible impairment, the Company uses an estimate
of undiscounted cash flow over the remaining lives of the intangible assets in
measuring their recoverability.
(4) INCOME TAXES:
The Company accounts for its income taxes using SFAS No. 109,
"Accounting for Income Taxes". Under this method, deferred tax assets and
liabilities are determined based on the difference between the financial
statement and tax bases of assets and liabilities, using enacted tax rates in
effect for the year in which the differences are expected to reverse.
The components of the Company's provision for income taxes, which is
all current, for the fiscal years ended 1996 and 1997 are as follows:
1996 1997
--------- ---------
Federal $ 1,000 $ 8,000
State 5,000 5,000
-------- --------
$ 6,000 $ 13,000
======== ========
<PAGE>
A reconciliation of income tax computed at the statutory federal rate
to income tax expense is as follows:
<TABLE>
<CAPTION>
1996 1997
--------- ---------
<S> <C> <C>
Tax provision at the
statutory rate of 34% .................... $ 269,000 $ 376,000
State income taxes, net of
federal income tax benefit ............... 3,000 3,000
Benefit of operating loss
carryforward ............................. (251,000) (383,000)
Other ...................................... (15,000) 17,000
--------- ---------
$ 6,000 $ 13,000
========= =========
</TABLE>
In fiscal 1991 and prior years, the Company generated loss
carryforwards for both financial statement and tax purposes. At September 27,
1997, the available tax loss carryforward is approximately $3,075,000, which
expires between 2002 and 2006.
In addition to net operating loss carryforwards, the Company has
deferred tax assets amounting to approximately $427,000 at September 27, 1997,
which arise primarily due to depreciation recorded at different rates for tax
and book purposes, and capital leases, allowances for uncollectible amounts and
accruals for potential uninsured claims, all recorded for financial reporting
purposes but not recognized for tax purposes. Because realization of the total
amount of available net deferred tax assets, including net operating loss
carryforwards, is not "more likely than not", a valuation allowance has been
provided as follows:
Deferred tax item
<TABLE>
<CAPTION>
Tax Effect Tax Effect
1996 1997
----------- -----------
<S> <C> <C>
Book/tax differences in
property and equipment ................... $ 275,000 $ 268,000
Receivable allowances ...................... 55,000 42,000
Leases, capitalized for books only ......... 86,000 77,000
Accruals for potential
uninsured claims ......................... 54,000 34,000
Discount on damages payable ................ (54,000) (37,000)
Other, net ................................. 117,000 43,000
Net operating loss carryforward,
tax effected ............................. 1,428,000 1,045,000
Valuation allowance ........................ (1,961,000) (1,472,000)
----------- -----------
$ --- $ ---
=========== ===========
</TABLE>
<PAGE>
(5) LEASES:
The Company leases a substantial portion of the land and buildings used
in its operations under leases with initial terms expiring between 1997 and
2049. Renewal options are available on many of the leases. In certain instances,
lease rentals are subject to cost-of-living increases or fair market rental
appraisals and/or sales overrides. Certain properties are subleased through
various expiration dates.
Leased property under capital leases is amortized on a straight-line
basis over the lease term, and interest expense (which is based on the Company's
incremental borrowing rate at the inception of the lease) is accrued on the
basis of the outstanding capital lease obligation. Rentals relating to operating
leases are expensed currently.
Future minimum lease payments under capital leases and noncancellable
operating leases, including leases under which the Company is contingently
liable, and noncancellable sublease income are as follows:
<TABLE>
<CAPTION>
Capital Operating Sublease
Leases Leases Income
---------- ------------- -----------
<S> <C> <C> <C>
1998 $ 118,000 $ 1,312,000 $ 740,000
1999 109,000 1,178,000 598,000
2000 77,000 924,000 549,000
2001 55,000 454,000 352,000
2002 32,000 261,000 180,000
Thereafter 233,000 2,298,000 1,491,000
---------- ------------- -----------
Total $ 624,000 $ 6,427,000 $ 3,910,000
============= ===========
Less - Amount representing
interest (235,000)
----------
Present value of minimum
lease payments $ 389,000
==========
</TABLE>
Total rent expense for all operating leases (including those with an
initial term of less than one year and net of subleases) was $634,000 and
$622,000 in 1996 and 1997, respectively, and is included in "Occupancy costs" in
the accompanying consolidated statements of income.
Aggregate annual rentals under leases with related parties, net of
applicable sublease income, were approximately $251,000 in 1996 and 1997.
Remaining rental commitments included in future minimum rental payments required
under these leases are approximately $656,000 as of September 27, 1997.
<PAGE>
(6) RECEIVABLES:
Receivables, net of allowances for uncollectible amounts and deferred
gains, consists of the following at September 28, 1996 and September 27, 1997:
<TABLE>
<CAPTION>
1996 1997
--------- ----------
<S> <C> <C>
Notes and mortgages receivable from unrelated parties, bearing interest
at rates ranging from 9% to 15% and due in varying installments
through 2002 $ 365,000 $ 129,000
Notes and mortgages receivable from related parties, bearing interest
at rates ranging from 10% to 14% and due
in varying installments through 2001 3,000 221,000
Various noninterest-bearing
receivables currently due 466,000 124,000
--------- ---------
834,000 474,000
Less - Deferred gains (109,000) (102,000)
Allowance for
uncollectible amounts (163,000) (124,000)
-------- ---------
562,000 248,000
Amount representing current portion 486,000 80,000
--------- ---------
$ 76,000 $ 168,000
========= =========
</TABLE>
The majority of the notes and mortgages receivable represent amounts
owed to the Company for store operations which were sold. Unless a significant
amount of cash is received on the sale, a pro rata portion of the gain is
deferred and recognized only as payments on the notes and mortgages are received
by the Company. Any losses on sales of stores are recognized currently. During
fiscal 1996 and 1997, $114,000 and $6,000, respectively, of deferred gains were
recognized on collections of such notes receivable.
Receivables at September 27, 1997 mature as follows:
1998 $ 174,000
1999 41,000
2000 45,000
2001 47,000
2002 53,000
Thereafter 114,000
---------
$ 474,000
=========
(7) INVESTMENT IN JOINT VENTURES:
During the first quarter of fiscal year 1996, the Company began
operating a restaurant in Miami, Florida, under the "Flanigan's Seafood Bar and
Grill" servicemark as general partner and fifty percent owner of a limited
partnership established for such purpose.
<PAGE>
During the third quarter of fiscal year 1997, a related party formed a
limited partnership to own a certain franchise in Fort Lauderdale, Florida,
through which it raised the necessary funds to renovate the restaurant. The
Company is a twenty-five percent limited partner in the franchise, and other
related parties, including but not limited to, officers and directors of the
Company and their families, are also investors.
During the fourth quarter of fiscal year 1997, the Company formed a
limited partnership and raised funds through a private offering to purchase the
assets of a restaurant in Surfside, Florida and renovate the same for operation
under the "Flanigan's Seafood Bar and Grill" servicemark. The Company acts as
general partner of the limited partnership and is also a forty percent limited
partner. Other related parties, including but not limited to officers and
directors of the Company and their families are also investors.
The following is a summary of condensed unaudited financial information
pertaining to the Company's joint venture investments:
<TABLE>
<CAPTION>
9/28/96 9/27/97
---------- ----------
<S> <C> <C>
Current assets ........................... $ 66,000 $1,374,000
Noncurrent assets ........................ 249,000 1,936,000
Current liabilities ...................... 82,000 176,000
Noncurrent liabilities ................... -- 629,000
Revenues ................................. 1,976,000 3,258,000
Income from operations ................... 1,254,000 2,118,000
Net income ............................... 135,000 419,000
</TABLE>
(8) ACCRUED AND OTHER CURRENT LIABILITIES:
Accrued and other current liabilities consist of the following at
September 28, 1996 and September 27, 1997:
<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
Property taxes ........................... $ 94,000 $ 72,000
Salaries and wages ....................... 253,000 340,000
Franchisee advance funds ................. 67,000 57,000
Potential uninsured claims ............... 159,000 101,000
Investment in joint venture .............. -- 439,000
Other .................................... 247,000 295,000
---------- ----------
$ 820,000 $1,304,000
========== ==========
</TABLE>
Franchisee advance funds represent cash balances held by the Company on
behalf of franchisees (see Note 11) for inventory purchases to be made as part
of the Company-sponsored cooperative buying program.
<PAGE>
(9) LONG-TERM DEBT:
<PAGE>
Long-term debt consists of the following at September 28, 1996 and
September 27, 1997:
<TABLE>
<CAPTION>
1996 1997
--------- ---------
<S> <C> <C>
Mortgages payable, secured by land, bearing interest at 8% payable in
monthly installments of principal and interest,
maturing in April 2007 $ - $ 480,000
Note payable to various employees, related and unrelated parties,
secured by various receivables, bearing interest at 12%, payable in
monthly installments of principal and interest, maturing in
July 2002 - 366,000
Note payable, secured by vehicles,
bearing interest at 8.5%, payable
in monthly installments of principal
and interest, maturing in September 2000 - 50,000
<CAPTION>
1996 1997
--------- ----------
<S> <C> <C>
Other notes payable, bearing interest at
rates ranging from 7-1/4% to 10%, due in
varying installments through 1997 .......... 21,000 --
--------- ---------
21,000 896,000
Less - Current portion ....................... (16,000) (84,000)
--------- ---------
$ 5,000 $ 812,000
========= =========
</TABLE>
Long-term debt at September 27, 1997 matures as follows:
Year Amount
---- ---------
1998 $ 84,000
1999 95,000
2000 106,000
2001 98,000
2002 94,000
Thereafter 419,000
-------
$896,000
========
<PAGE>
(10) COMMITMENTS AND CONTINGENCIES:
Guarantees
The Company is contingently liable for annual rentals in the amount of
approximately $556,000 at September 27, 1997, for lease obligations in
connection with the assignment of leases on stores sold. In the event of default
under any of these agreements, the Company will have the right to repossess the
premises.
Employment Agreement
On June 3, 1987, the Company entered into an employment agreement (the
"Employment Agreement") with the Chairman of the Board, which was ratified by
the stockholders at the Company's 1988 annual meeting. The Employment Agreement
provides, among other things, for annual compensation of $150,000, through
December 31, 1997, renewable annually, as well as a bonus based on the Company's
cash flow, as defined. Subsequent to year end, the Employment Agreement was
renewed through December 31, 1998. This Employment Agreement was amended in
January 1997 to redefine a bonus equal to 15% of the Company's annual pre-tax
income in excess of $650,000 and to grant stock options (discussed in Note 13).
For fiscal year 1996, no bonus was earned under the Employment Agreement. For
fiscal year 1997, a bonus of $78,000 was earned under the amended Employment
Agreement. The Employment Agreement further provides that in the event of
termination, the Chairman of the Board would be entitled to a maximum payment of
$450,000.
Litigation
The Company is a party to various litigation matters incidental to its
business. Certain claims, suits and complaints arising in the ordinary course of
business have been filed or are pending against the Company.
Certain states have "liquor liability" laws which allow a person
injured by an "intoxicated person" to bring a civil suit against the business
(or social host) who had served intoxicating liquors to an already "obviously
intoxicated person". The Company has general liability insurance which
incorporates a semi-self-insured plan under which the Company assumes the full
risk of the first $50,000 of exposure per occurrence. The Company's insurance
carrier is responsible for $1,000,000 coverage per occurrence above the
Company's self-insured deductible, up to a maximum aggregate of $2,000,000, per
year. The Company is self-insured against liability claims in excess of
$1,000,000. The extent of this coverage varies by year.
Certain liquor liability suits are still in the discovery stage, and
the potential liability to the Company has not been determined. The Company has
accrued for potential losses based on estimates received from legal counsel and
historical experience. Such accrual is included in "Accrued and other current
liabilities" in the accompanying consolidated financial statements.
(11) FRANCHISE PROGRAM:
At September 27, 1997, seven stores were operated under franchise
agreements. Under the franchise agreements, the Company agrees to provide
guidance, advice and management assistance to the franchisees. The Company also
agrees to sponsor and manage cooperative buying groups on behalf of the
<PAGE>
franchisees for the purchase of inventory. The franchise agreements provide for
fees to the Company of approximately 3% of gross sales. Of the seven franchised
stores, five are owned or operated by related parties. When received, initial
franchise fees are deferred and recognized ratably as payments are received on
the related notes. The Company is not currently offering or accepting new
franchises.
(12) DUE TO PENNSYLVANIA LIMITED PARTNERSHIP:
Through September 20, 1996, the Company operated a club in Pennsylvania
through a limited partnership (the "Partnership") in which the Company acted as
the general partner. The Company recorded management fee income related to this
agreement of $66,000 in 1996, included as "Management fees from Pennsylvania
limited partnership" in the accompanying 1996 consolidated statement of income.
On September 20, 1996, the Partnership's assets were sold for
approximately $500,000. Such proceeds were received by the Company. Accordingly,
the accompanying consolidated balance sheet at September 28, 1996 reflects a
liability of $430,000, which includes the limited partners' proceeds from the
sale of the Partnership's assets, the limited partners' distributions for 1996
operations, and a reserve for the Partnership's remaining liabilities.
Liabilities to the limited partners and remaining liabilities of the Partnership
are included as "Due to Pennsylvania limited partnership" in the accompanying
consolidated balance sheets. The Company recognized a gain of $135,000 in 1996
on the sale of the Partnership's assets; the gain is included as "Gain on sale
of Pennsylvania limited partnership" in the accompanying 1996 consolidated
statement of income.
(13) STOCK OPTION PLANS:
Employment Agreement - Chairman of the Board
The Employment Agreement provides for the issuance of stock options to
purchase up to 93,092 shares of the Company's common stock. In December 1989,
the Chairman's option exercise prices were reduced from a range of $4.00 to
$4.125 to $.875, an exercise price in excess of the then fair market value of
the Company's common stock. In fiscal 1996, these options were exercised.
During fiscal 1992, additional options to purchase up to 46,540 shares
were granted to the Chairman at an exercise price of $2.25 per share which
expired February 27, 1997. Exercise prices at the dates of grant equaled the
then fair market value of the Company's common stock; therefore, no related
compensation expense was recorded. On February 25, 1994, the Chairman's option
exercise prices on the additional options were increased from $2.25 to $6.50,
and the expiration date was extended to February 27, 2002.
In January 1997, the Company amended the Chairman's Employment
Agreement. The amendment grants the Chairman an additional option to acquire
4.99% of the common stock of the Company outstanding as of the date of exercise,
but not less than 45,350 shares, at the option price of $4.95 per share. The
options expire December 31, 2001.
Key Employee Incentive Stock Option Plan
In December 1993, the Board of Directors approved a Key Employee
Incentive Stock Option Plan, which reserved and authorized the issuance of
100,000 shares of the Company's common stock to eligible employees. At the
Company's 1994 annual meeting, the stockholders approved this plan.
<PAGE>
At September 27, 1997, options for all of the shares of common stock
that were reserved for issuance to the Key Employee Incentive Stock Option Plan
had been issued.
Changes in outstanding incentive stock options for common stock are as
follows:
<TABLE>
<CAPTION>
1996 1997
-------- --------
<S> <C> <C>
Outstanding at beginning of year .......... 191,632 146,540
Options granted ........................... 48,000 45,350
Options exercised ......................... (93,092) --
-------- --------
Outstanding at end of year ................ 146,540 191,890
-------- --------
Exercisable at end of year ................ 146,540 191,890
</TABLE>
Weighted average option exercise price information for fiscal years
1996 and 1997 is as follows:
<TABLE>
<CAPTION>
1996 1997
-------- --------
<S> <C> <C>
Outstanding at beginning of year ............... $ 2.95 $ 4.51
Granted during the year ........................ 3.68 4.95
Exercised during the year ...................... .88 --
-------- --------
Outstanding at end of year ..................... 4.51 4.61
-------- --------
Exercisable at end of year ..................... $ 4.51 $ 4.61
</TABLE>
Significant options groups outstanding at September 27, 1997 and
related weighted average price and life information are as follows:
<TABLE>
<CAPTION>
Grant Options Options Exercise Remaining
Date Outstanding Exercisable Price Life (years)
---- ----------- ----------- ----- ------------
<S> <C> <C> <C> <C>
2/25/94 46,450 46,450 $ 6.50 5 yrs
4/19/94 52,000 52,000 $ 3.50 2 yrs
12/21/95 30,000 30,000 $ 3.25 3 yrs
3/14/96 18,000 18,000 $ 4.38 4 yrs
1/08/97 45,350 45,350 $ 4.95 4 yrs
</TABLE>
<PAGE>
The Company applies APB No. 25 and related interpretations in
accounting for its stock-based compensation plans. Accordingly, no compensation
cost has been recognized for its stock option plans. Had compensation for the
Company's stock-based compensation plans been determined pursuant to SFAS No.
123, the Company's net income and earnings per share would have decreased
accordingly. Using the Black-Scholes option pricing model for all options
granted after January 1, 1995, the Company's pro forma weighted average fair
value of options granted, with related assumptions, are as follows:
<TABLE>
<CAPTION>
1996 1997
-------- --------
<S> <C> <C>
Pro forma net income $ 711 $ 1,017
Pro forma earnings
per share (primary) $ .72 $ 1.09
Pro forma earnings
per share (fully diluted) $ .72 $ 1.01
Pro forma weighted average fair
value of options granted $ 1.58 $ 1.81
Expected life (years) 5 5
Risk-free interest rate 5.5% 5.9%
Expected volatility 39% 39%
</TABLE>
Because the SFAS No. 123 method of accounting has not been applied to
options granted prior to January 1, 1995, the resulting pro forma compensation
cost may not be representative of that to be expected in future years.
(14) INCOME PER COMMON SHARE:
Net income per common share is calculated by dividing net income by the
weighted average number of shares and share equivalents outstanding.
<TABLE>
<CAPTION>
---------------------------------------------------------
1996 1997
-------------------------- ------------------------
Fully Fully
Primary Diluted Primary Diluted
------- ------- ------- -------
<S> <C> <C> <C> <C>
Weighted average shares outstanding 897,000 897,000 907,000 907,000
Incremental shares after
application of the treasury
stock method or modified
treasury stock method, as
applicable 87,000 89,000 28,000 102,000
--------- --------- --------- ---------
Shares used in calculation of
net income per common share 984,000 986,000 935,000 1,009,000
========= ========= ========= ==========
</TABLE>
<PAGE>
(15) RELATED PARTY TRANSACTIONS:
In fiscal 1990, the Company's Chairman and a relative formed a
corporation to manage one of the Company's franchised stores. The corporation
continues to manage the franchised store.
During fiscal 1996 and 1997, the Company incurred legal fees of
approximately $96,000 (in salary) for services provided by a member of the Board
of Directors.
Effective September 30, 1996, one franchised combination package store
and restaurant terminated its franchise agreement. The franchise was sold to a
related third party (the "First Purchaser"), with the Company's agreement to
manage the franchise for this related party. Subsequent to the sale of the
franchise, the Company accepted the offer of another franchisee (the "Manager"),
also a related party, to purchase the Company's right to manage the franchise
for the sum of $150,000, consisting of $50,000 cash and a $100,000 note
receivable. Additionally, the Manager formed a limited partnership which
purchased the franchise from the First Purchaser. The Company recognized
$150,000 of income in fiscal 1997, which is included in "Sale of management
rights" in the accompanying 1997 consolidated statement of income. The Company
also purchased a 25% interest in the limited partnership.
Also see Notes 5, 6, 7, 9, 10, 11 and 13 for additional related party
transactions.
(16) BUSINESS SEGMENTS:
The Company operates principally in two segments - retail package
stores and restaurants. The operation of package stores consists of retail
liquor sales. The restaurant operations include bar sales from cocktail lounges
(in 1996), restaurant bar sales and food sales.
Information concerning the revenues and operating income for the years
ended September 28, 1996 and September 27, 1997, and identifiable assets for the
two segments in which the Company operates, are shown in the following table.
Operating income is total revenue less cost of merchandise sold and operating
expenses relative to each segment. In computing operating income, none of the
following items have been included: interest expense, other non-operating income
and expense and income taxes. Identifiable assets by segment are those assets
that are used in the Company's operations in each segment. Corporate assets are
principally cash and notes and mortgages receivable. The Company does not have
any operations outside of the United States and intersegment transactions are
not material.
<PAGE>
<TABLE>
<CAPTION>
1996 1997
------------ ------------
<S> <C> <C>
OPERATING REVENUES:
Retail package stores ......... $ 6,112,000 $ 6,681,000
Restaurants ................... 13,042,000 12,535,000
Other revenues ................ 1,030,000 1,104,000
------------ ------------
Total operating revenues ............... $ 20,184,000 $ 20,320,000
============ ============
INCOME FROM OPERATIONS RECONCILED TO
INCOME BEFORE INCOME TAXES:
Operating income:
Retail package stores ......... $ 303,000 $ 448,000
Restaurants ................... 1,220,000 1,224,000
------------ ------------
1,523,000 1,672,000
Corporate expenses,
net of other revenues ....... (1,070,000) (620,000)
------------ ------------
Operating income ....................... 453,000 1,052,000
Interest expense .............. (131,000) (101,000)
Other ......................... 470,000 155,000
------------ ------------
Income before income taxes ............. $ 792,000 $ 1,106,000
============ ============
IDENTIFIABLE ASSETS:
Retail package stores ......... $ 1,622,000 $ 1,944,000
Restaurants ................... 2,260,000 2,969,000
------------ ------------
3,882,000 4,913,000
Corporate ..................... 2,427,000 3,469,000
------------ ------------
Consolidated totals .................... $ 6,309,000 $ 8,382,000
============ ============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
CAPITAL EXPENDITURES:
Retail package stores ............. $ 199,000 $ 85,000
Restaurants ....................... 350,000 1,288,000
---------- ----------
549,000 1,373,000
Corporate ......................... 64,000 95,000
---------- ----------
Total capital expenditures ................. $ 613,000 $1,468,000
========== ==========
DEPRECIATION AND AMORTIZATION:
Retail package stores ............. $ 114,000 $ 97,000
Restaurants ....................... 428,000 416,000
---------- ----------
542,000 513,000
Corporate ......................... 117,000 106,000
---------- ----------
Total depreciation and amortization ........ $ 659,000 $ 619,000
========== ==========
</TABLE>
(17) OTHER, NET:
Other, net in the consolidated statements of income consist of the
following for the years ended September 28, 1996 and September 27,
1997:
<TABLE>
<CAPTION>
1996 1997
--------- ---------
<S> <C> <C>
Non-franchise related rental income ........ $ 32,000 $ 32,000
Loss on retirement of fixed assets ......... (79,000) (19,000)
Gain on repossession of store .............. 50,000 --
Gain on sale of liquor licenses ............ 26,000 --
Insurance recovery ......................... 53,000 13,000
Adjustment on sale of Pennsylvania
limited partnership ............... -- (31,000)
Miscellaneous .............................. 42,000 5,000
--------- ---------
$ 124,000 $ --
========= =========
</TABLE>
(18) SUBSEQUENT EVENTS:
In December 1997, the Company borrowed $500,000 from Barnett Bank. The
loan is fully amortized over three years with interest accruing at the prime
rate charged by Barnett Bank to its commercial customers. The loan is payable in
twelve equal quarterly installments of principal, commencing March 31, 1998,
with interest payable monthly. The Company has pledged twelve liquor licenses as
collateral.
<PAGE>
During fiscal year 1996, the Company's franchise agreement with a
member of Mr. Flanigan's family expired and the Company declined to offer the
franchisee the option of executing its new franchise agreement. During the first
quarter of fiscal year 1997, the Company filed suit against the franchisee for
servicemark infringement, seeking injunctive relief and monetary damages.
Subsequent to the end of fiscal 1997, a Stipulated Agreed Order of Dismissal
Upon Mediation was issued whereby the Company received $110,000 and the former
franchisee agreed to cease all use of the "Flanigan's" servicemark and other
trade dress features common to the Company owned and/or franchised restaurants.
Subsequent to yearend the Company received written notification from a
landlord that an oral month to month lease agreement for a package liquor store
the Company is currently operating, will terminate as of December 31, 1997. The
Company does not expect to recognize any gain or loss on the closing of this
store.
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE II
FLANIGAN'S ENTERPRISES, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED SEPTEMBER 28, 1996 AND SEPTEMBER 27, 1997
Col. A Col. B Col. C Col. D Col. E
Additions
Balance at Charged to Balance at
Beginning Cost and Amounts End of
Description of Period Expenses Written off Period
----------- --------- -------- ----------- ------
<S> <C> <C> <C> <C>
FOR THE YEAR ENDED SEPTEMBER 28, 1996
Allowance for uncollectible
notes and mortgages receivable $ 291,000 $ 104,000 $ (232,000) $ 163,000
========= ========== ========== =========
FOR THE YEAR ENDED SEPTEMBER 27, 1997
Allowance for uncollectible
notes and mortgages receivable $ 163,000 $ 21,000 $ (60,000) $ 124,000
========= ========== ========= =========
</TABLE>
EXHIBIT 10(u)
LIMITED PARTNERSHIP CERTIFICATE AND AGREEMENT
THIS LIMITED PARTNERSHIP CERTIFICATE AND AGREEMENT, (the
"Agreement"), made and entered into this _____ day of February, 1997, by and
among B.D. 15 CORP., a Florida corporation, (the "General Partner"), and all
other parties who shall execute this Agreement or any counterpart thereof,
collectively, (the "Limited Partners"). The Limited Partners, as constituted
from time to time, and the General Partner are sometimes herein collectively
referred to as the "Partners".
W I T N E S S E T H :
WHEREAS, the Partners desire to form a limited partnership (the
"Partnership") pursuant to the Uniform Limited Partnership Act of the State of
Florida upon the terms and conditions hereinafter set forth;
NOW THEREFORE, intending to be legally bound hereby, the Partners agree
as follows:
ARTICLE I
DEFINITIONS
The following terms used in this Agreement shall (unless otherwise
expressly provided herein or unless the context clearly requires otherwise) have
the following meanings:
1.1 Additional Capital Balance. The Additional Capital Contributions,
if any, of the General Partner, as reduced from time to time by all cash
distributions to such General Partner which, pursuant to the terms of this
Agreement, are in reduction of the General Partner's Additional Capital Balance,
and as increased from time to time by any contributions of the General Partner
which are Additional Capital Contributions.
1.2 Additional Capital Contributions. Any additional cash contributions
of the General Partner to the capital of the Partnership pursuant to Section 3.5
hereof.
1.3 Agreement. This Limited Partnership Certificate and Agreement.
1.4 Capital Balance. The Initial Capital Contribution made by a Partner
in cash and the fair market value of any contributions in kind, (as set forth in
this Agreement), as reduced from time to time by all cash distributions to such
Partner which, pursuant to the terms of this Agreement, are in reduction of a
Partner's Capital Balance.
1.5 Capital Commitment. The Capital Commitment with respect to any
Limited Partner is his obligation to contribute the aggregate amount to be paid
for the Units (computed at the rate of $5,000.00 per Unit) subscribed for by him
pursuant to his Subscription Agreement and set opposite his name on the
signature page attached to this Agreement, and with respect to the General
Partner, is its obligation to make its original Capital Contribution pursuant to
Section 3.1 hereof.
1.6 Initial Capital Contribution. The Contribution made by each Partner
pursuant to its Capital Commitment.
1.7 Code. The Internal Revenue Code of 1954, as amended.
1.8 General Partner. The General Partner is B.D. 15 Corp. or any
successor general partner as provided herein.
1.9 General Partner's Capital. The combined total Capital Balance and
Additional Capital Balance of the General Partner.
1.10 Law. The Uniform Limited Partnership Act of the State of Florida
in effect from time to time during the term hereof.
<PAGE>
1.11 Limited Partner. The Limited Partners hereunder and any such
persons admitted to the Partnership as substituted Limited Partners.
1.12 Limited Partners' Capital. The total of the Capital Balance of all
Limited Partners.
1.13 Limited Partner Percentage. In respect of any Limited Partner the
percentage obtained by converting to a percentage the fraction having the
Initial Capital Contribution of such Limited Partner as its numerator and having
the Limited Partners' Capital as its denominator.
1.14 Net Cash Flow. Net Cash Flow of the Partnership, with respect to a
fiscal period, shall mean Net Income of the Partnership for such period, reduced
by (i) any repayments of principal on loans of the Partnership, (excluding
General Partner's Loans, the principal amounts of which are payable out of Net
Cash Flow as stated in Article VIII hereof), (ii) any capital expenditures and
prepaid expenses to the extent not included in the determination of Net Income,
(iii) any Net Sale Proceeds to the extent included in the determination of Net
Income, and (iv) reasonable additions to a reserve, (as determined in the sole
discretion of the General Partner); and increased by any receipts by the
Partnership which are not included in the determination of Net Income.
1.15 Net Income. Net Income of the Partnership with respect to any
fiscal period shall mean the excess of the gross sales for such period over all
operating expenses for such period, as those terms are defined herein,
determined on an accrual basis and determined without regard to amounts deducted
by the Partnership for cost recovery of tangible assets or amortization of
capitalized or other capital accounts.
1.16 Net Loss. Net Loss of the Partnership with respect to any fiscal
period shall mean that excess of all operating expenses for such period over the
gross sales for such period, as those terms are defined herein, determined on an
accrual basis and determined without regard to amounts deducted by the
Partnership for cost recovery of tangible assets or amortization of capitalized
expenditures or other capital accounts.
1.17 Net Sale Proceeds. The proceeds realized by the Partnership upon
the sale, exchange or other disposition of all or any substantial part of the
Partnership property, net of expenses incident to such sale, the payment of any
Partnership indebtedness secured by or related to any such assets and
satisfaction of any right of any creditor of the partnership (other than a
Partner) to receive such proceeds.
1.18 Participation Percentage. Throughout the term of this Agreement,
the Participation Percentage of the Limited Partners is fifty percent (50%)
(allocated to each Limited Partner in proportion to his Limited Partnership
Percentage) and the Participation Percentage of the General Partner is fifty
percent (50%).
1.19 General Partner's Loans. All amounts loaned by the General Partner
to the Partnership pursuant to Section 3.5 hereof.
1.20 Subscription Agreement. The Instrument by which each prospective
Limited Partner agrees to purchase Units.
1.21 Substitute Limited Partner. A person admitted to all of the rights
of a Limited Partner who has died or assigned his interest in the Partnership,
or in the case of a Limited Partner that is a partnership, joint venture,
association, corporation or trust, that has been dissolved or assigned its
interest in the Partnership.
1.22 Unit. A Unit means an interest of a Limited Partner in the Limited
Partners' Capital of the Partnership with an original subscription value of
$5,000.00.
<PAGE>
ARTICLE II
THE LIMITED PARTNERSHIP
2.1 Formation of Partnership. The parties hereto agree to form and by
execution of this Agreement do hereby enter into a limited partnership pursuant
to Chapter 620, et seq., of the Florida Statutes, entitled "Uniform Limited
Partnership Act" ("Law") which Law shall govern the rights and liabilities of
the parties hereto, except as otherwise herein expressly stated.
2.2 Partnership Name. The name of the Partnership is CIC INVESTORS #15,
LTD. The General Partner, in its sole discretion, may change the name of the
Partnership at any time and from time to time. The General Partner and the
Limited Partners hereto shall promptly execute and the General Partner shall
file and record with the proper offices in each state, including any political
subdivision thereof, in which the Partnership does, or elects to do, business
and publish such certificates or other statements or instruments as are required
by the Limited Partnership Law, Beverage Regulations, Fictitious Name Law,
Assumed Name Law or any other similar statute in effect from time to time in
such state or political subdivision in order to validly conduct the business of
the Partnership therein as a limited partnership.
2.3 Character of Business and Purpose of the Partnership. The business
and purpose of the Partnership shall be to own, renovate and operate a
restaurant located at 1479 East Commercial Boulevard, Fort Lauderdale, Florida
33304 and most recently operating as "BARRACUDA BOB'S", as a franchise of
FLANIGAN'S ENTERPRISES, INC., (the "Business"), but specifically excludes any
interest of any kind in the building and property owned by the landlord.
2.4 Principal Place of Business. The principal place of business of the
Partnership shall be at 2841 West Cypress Creek Road, Fort Lauderdale, Florida
33309. The General Partner may change the principal place of business or
establish such other place or places of business for the Partnership as it may,
from time to time, deem necessary or appropriate, provided however, that the
General Partner shall give the Limited Partners notice of any change of address
of the principal place of business of the Partnership at least ten (10) days
prior to any such change.
2.5 Term of Partnership. The Partnership shall commence on the date
that this Agreement has been filed in accordance with the provision of the Law
and shall continue until the earlier of the following:
(i) Failure of the Partners to have a liquor license issued for
the Business by the Division of Alcoholic Beverages and
Tobacco within ninety (90) days of the date of this Agreement;
or
(ii) Revocation of the liquor license for the Business by the
Division of Alcoholic Beverage and Tobacco followed by the
inability of the Partners, after the exercise of their best
efforts, to cause such liquor license to be reinstated within
a ninety (90) day period; or
(iii) Dissolution or termination pursuant to the provisions of
Article X of this Agreement.
2.6 Names and Residences of Partners.
A. The name and address of the General Partner is:
B.D. 15, Corp.
2841 West Cypress Creek Road
Fort Lauderdale, Florida 33309
<PAGE>
B. The names and places of residences of the Limited
Partners are set forth on the signature pages
attached hereto together with those persons who may,
from time to time, be admitted by the General Partner
as Substitute Limited Partners in accordance with the
terms of this Agreement.
2.7 Nature of Partners' Interests. The interests of the Partners in the
Partnership shall be personal property for all purposes. All property owned by
the Partnership, whether real or personal, tangible or intangible, shall be
owned by the Partnership as an entity and no Partner, individually, shall have
any ownership of such property.
2.8 Non-Partition. No Partner shall be entitled to seek partition of
any Partnership property.
ARTICLE III
CAPITAL CONTRIBUTIONS;
ADDITIONAL CAPITAL CONTRIBUTIONS;
GENERAL PARTNER'S LOANS; AND
REIMBURSEMENT OF EXCESS CAPITAL CONTRIBUTION
3.1 General Partner. The General Partner shall contribute to the
Partnership cash in an amount equal to one percent (1%) of the total Initial
Contributions of the Partners and other property as set opposite its name on the
signature page attached to this Agreement.
3.2 Limited Partners. The Limited Partners' Capital shall be measured
in terms of Units and a Limited Partner shall contribute $5,000.00 for each Unit
purchased. Each Limited Partner shall purchase a minimum of one (1) Unit. Each
Limited Partner shall contribute to the Partnership as his Initial Capital
Contribution an amount equal to the amount of his Capital Commitment as set
forth in the Subscription Agreement executed by him or her and set opposite his
name on the signature page attached to this Agreement. The amount of Capital
Commitment shall be paid in cash by the Limited Partner upon execution and
delivery of the Subscription Agreement.
3.3 Capital Accounts. The Partnership will maintain for each Partner an
account to be designated "Capital Account", to which will be added the Partner's
Initial Capital Contribution, Additional Capital Contributions and distributive
share of the profits of the Partnership, and against which will be deducted the
Partner's distributive share of the losses of the Partnership and all
distributions made to the Partner. A Partner's Capital Account may, at any point
in time, be the same as or different from such Partner's Capital Balance and may
have a negative balance resulting from the Partner's share of distributions and
losses in excess of the Partner's Initial Capital Contribution and Additional
Capital Contributions.
3.4 Use of Capital Contributions and Loans. The Initial Capital
Contributions of the Partners, all proceeds of Partnership borrowings, and any
Additional Capital Contributions or General Partner's Loans made pursuant to
this Agreement, shall be used to change and convert the business premises of the
Business to the General Partner's "Piranha Pat's II" restaurant concept and as
working capital.
3.5 Additional Capital Contributions and General Partner's Loans.
A. Other than as expressly set forth in this Article III, no
Limited Partner shall be required or permitted to make any Additional Capital
Contributions, Partner's Loans, or other contributions, loans or advances to the
Partnership; however, the General Partner may make, in its sole discretion,
Additional Capital Contributions, Loans, or advances to the Partnership.
<PAGE>
B. If the General Partner advances any funds to the
Partnership after the date of this Agreement (except in the case of Additional
Capital Contributions), such advances will be treated as General Partner's
Loans, will not increase the General Partner's Participation Percentage, and the
amount thereof will be a debt due from the Partnership to the General Partner,
entitled to the priorities described in Sections 8.1 and 8.2 hereof, to be
repaid with such interest as provided.
3.6 Withdrawal of Capital. Prior to the dissolution and liquidation of
the Partnership, no Partner shall have the right, during the term of the
Partnership, to require the return of all or any portion of his or her/its
Initial Capital Contribution, except that distributions made in accordance with
Article VIII may represent in whole or in part a return of capital. Upon any
return of partnership capital this Agreement shall be amended as provided by the
Law.
3.7 Interest on Capital Contributions. No interest shall be payable
with respect to any capital contributed to the Partnership.
3.8 No Priority Among Limited Partners. No Limited Partner shall have
any priority over any other Limited Partner as to the return of his Initial
Capital Contribution or as to compensation by way of income or as to allocation
of profits and losses or distributions of cash.
3.9 Excess Capital Contribution. In the event that the cost to change
and convert the business premises of the Business, including both cash and the
fair market value of any property contributed in kind, reasonable reserves and
organizational costs hereof do not equal or exceed Four Hundred Thousand Dollars
($400,000.00), any excess shall be returned to the Limited Partners, pro-rata,
as a partial refund of their Initial Capital Contribution. Upon any return of
partnership capital, this Agreement shall be amended as required by Law.
ARTICLE IV
LIMITED PARTNERS
4.1 Limited Liability of Limited Partners. No Limited Partner shall be
liable for any of the losses, debts or obligations of the Partnership beyond the
amount of his Capital Commitment or be required to contribute any capital beyond
his Capital Commitment, or be required to lend any funds to the Partnership,
except that a Limited Partner may be required by law to return any or all of
that portion of his Initial Capital Contribution which has been distributed to
him, with interest, if necessary to discharge Partnership liabilities to all
creditors who extended credit or whose claims arose prior to such return of
capital.
4.2 Restrictions on Limited Partners.
A. No Limited Partner shall participate in the management and control
of the business of the Partnership, transact any business for the Partnership,
or attempt to do so; and
B. No Limited Partner shall have the power to represent, sign for or
bind the General Partner or the Partnership.
4.3 Rights and Powers of Limited Partners.
A. Any Limited Partner may engage in or own an interest in any other
business ventures which may be engaged in the same or similar businesses as that
of the Partnership.
B. Each Limited Partner shall be entitled to participate in meetings
regarding the affairs of the Partnership and to do all other things with respect
to the business and affairs of the Partnership permitted by the Law.
<PAGE>
4.4 Admission of Additional Limited Partners. No additional Limited
Partners shall be admitted to the Partnership; provided however, that the
General Partner may admit Substitute Limited Partners at any time pursuant to
Article IX.
ARTICLE V
GENERAL PARTNER
5.1 Rights and Powers.
A. The General Partner shall have the full and exclusive discretion,
right and power to manage, control and operate the Partnership and to do all
things necessary to operate the Business. The General Partner shall change and
convert the existing facility to its "Piranha Pat's" restaurant concept. During
the term of this Agreement and while the General Partner continues to act in the
capacity of General Partner of the Partnership, but not thereafter, the General
Partner shall permit the Partnership to use the servicemark "Piranha Pat's II"
for the Business and shall supervise the day to day operation of the same under
the same format and standards as used in the existing "Piranha Pat's"
restaurant. The Business shall include exclusive management of the restaurant
located within the business premises for the service of lunch and dinner each
day.
B. The General Partner is specifically authorized and empowered, on
behalf of the Partnership, and without any further consent of the Limited
Partners, to do any act or execute any document or enter into any contract or
any agreement of any nature necessary or desirable, in the sole discretion of
the General Partner, in pursuance of the business and purposes of the
Partnership, including but not limited to the operation of the Business. Without
limiting the generality of the foregoing, and subject to the provisions of
Section 5.2, the General Partner shall have the following rights and powers to
act on behalf of the Partnership, which it may exercise at the cost, expense and
risk of the Partnership:
(i) Purchase such furniture, fixtures and equipment and make such
leasehold improvements as are required by the General Partner
for the renovation of the business premises of the Business.
(ii) Place record title to, or the right to use, the property or
other assets of the Partnership in the name or names of a
nominee or nominees for any purpose convenient or beneficial
to the Partnership.
(iii) Execute contracts, leases, licenses, options to lease or
purchase, rental agreements, concession agreements, use
agreements and the like, of and with respect to Partnership
property.
(iv) Make elections under the tax laws of the United States or any
state as to the treatment of Partnership income, gains, loss,
deduction and credit, and as to all relevant matters.
<PAGE>
(v) Provide or contract for such management services as may be
required for the operation of the Business, including but not
limited to full payroll services, all accounting and
bookkeeping services for the operation of the Business, as an
expense of the Business, (including the preparation and
forwarding of monthly sales tax returns, monthly liquor excise
taxes and annual federal partnership returns), and prompt
payment of all bills incurred in the normal operation of the
Business.
(vi) Establish overall business policy and objectives.
(vii) Provide overall executive supervision of operations of the
Business.
(viii) Generally supervise employees and others performing services
for the benefit of and in the operation of the Business.
(ix) Provide advise and arrange for advertising, display and sales
promotion of the
Business.
(x) Oversee the operation of the Business in the areas of
management, sales and
purchasing.
(xi) Arrange for the supervision of the daily operations of the
Business with responsibility for (1) hiring and firing
employees and other service personnel, (2) salary
administration and compensation policies, (3) incentive
programs, (4) inventory purchase and control, (5) pricing of
all goods and services, (6) business procedures, and (7)
controlling daily operational expenses.
(xii) Keep the Business insured against liability claims arising out
of the operation of the restaurant, as an operating expense of
the Business, with insurance coverage in an amount not less
than One Million Dollars ($1,000.000.00), combined single
limit, including liquor liability and products liability. The
General Partner shall cause the Limited Partnership and
itself, to be named as additional insureds on the liability
insurance policy and provide the Limited Partnership and
itself with Certificates of Insurance as evidence of its
compliance with the provisions hereof.
(xiii) Purchase and maintain worker's compensation insurance for the
employees of the Business, as an operating expense of the
Business.
(xiv) Keep the personal property, fixtures and equipment of the
Business reasonably insured against damage by fire and other
casualty, in an amount equal to its highest insurable value,
with replacement cost endorsement, as an expense of the
Business.
(xv) Keep the Business reasonably insured against loss of business
due to fire and other casualty with business interruption
insurance, in an amount to be determined by the General
Partner, as an expense of the Business.
<PAGE>
(xvi) Arrange and pay all charge for telephone services, all
utilities, including without limitation, electrical, gas and
water, and cable or other electronic transmission necessary
for operation of the Business, as an expense of the Business.
(xvii) Arrange for trash collection and removal from the Business, as
an expense of the Business.
(xviii) Make all normal repairs and replacements to the kitchen
equipment and interior, non-structural repairs and
replacements of the Business only, in order to keep the same
in good condition and good working order to the extent that
the General Partner deems it necessary.
(xix) To pay, collect, compromise, arbitrate, resort to legal action
or otherwise adjust claims or demands of or against the
Partnership.
(xx) To borrow money for any Partnership purpose and to make all
required payments of principal and interest with respect
thereto.
(xxi) To timely comply with and abide by all of those obligations,
terms, covenants and conditions imposed upon the Partnership
as lessee of the Sublease Agreement for the business premises
of the Business, including but not limited to the timely
payment of rent, as an expense of the Business.
(xxii) To timely comply with and abide by all of those obligations,
terms, covenants and conditions imposed upon the Partnership
as franchisee of the Franchise Agreement with Flanigan's
Enterprises, Inc., including the timely payment of all royalty
fees, franchise fees and advertising contributions.
(xxiii) To promptly comply with, execute and fulfill all governmental
statutes, ordinances and regulations applicable to the
Partnership in connection with the Business, including without
limitation, all orders and requirements imposed by the Board
of Health, sanitation, fire and police departments including
without exception those for the correction, prevention and
abatement of nuisances in or upon or connected with the
business premises of the Business, as an expense of the
Business.
The General Partner shall be responsible for the procurement and hiring
of all employees, agents and independent contractors required for on site
operation on a day to day basis including, but not limited to, a manager. The
General Partner shall control all of the day to day operations of the Business
and shall handle all negotiations, complaints, objections and other matters
involving the operation of the Business, the patrons of the Business, and the
employees and staff or any sublessee of or operator of any portion of the
Business in connection with activities at the Business. The General Partner
shall hire, instruct, maintain and supervise personnel to properly staff the
Business and shall maintain the Business, the interior, non-structural portion
of the building it occupies, its fixtures and its premises in a reasonable
<PAGE>
manner and condition, keeping it clean and serviceable, including arranging for
janitorial services as an expense of the Business. The General Partner shall
have the full responsibility to collect for all services and sales from the
Business, except as hereinafter provided, to daily deposit all receipts in bank
account(s) designated by the General Partner, shall arrange for advertising for
the Business to the extent deemed desirable by the General Partner and maintain
all necessary licenses, including liquor license, and permits required in
connection with the operation of the Business. The cost of such activities,
including license renewal fees, incurred for the Business shall be borne by the
Business.
In discharging the foregoing duties, the General Partner shall act and
conduct the Business in a reasonable manner. In order for the General Partner to
have the greatest opportunity to discharge such duties and to maximize profits
from the Business, the Limited Partner shall cooperate fully with the General
Partner and shall promptly provide the General Partner with all information and
assistance as the General Partner may reasonably request pursuant to this
Agreement. The General Partner shall devote such time to the Business as, in its
judgment, the supervision of the Business shall reasonably require, but shall
not be obligated to do or perform any act or thing in connection with the
Business not expressly set forth herein.
5.2 Certain Limitations. In addition to other acts expressly prohibited
by this Agreement or by the Law, the General Partner shall not have any
authority to:
A. Do any act in contravention of this Agreement;
B. Do any act which would make it impossible to operate the Business or
to otherwise carry on the ordinary business of the Partnership or any phase
thereof, except as expressly provided in this Agreement;
C. Assign the rights of the Partnership in specific property for other
than a Partnership purpose;
D. Admit a person or entity as a General Partner or as a Limited
Partner, except as otherwise provided in this Agreement;
E. Knowingly or willingly do any act which would cause the Partnership
to become an association taxable as a corporation;
5.3 Contracts with Affiliates. Except as herein specified, all services
which the General Partner is not obligated to perform under the terms of this
Agreement and the materials necessary for the operation of the Business may be
provided by the General Partner, or any entity affiliated with the General
Partner, and the General Partner shall be compensated for such services or
materials on such terms and conditions no less favorable than those obtainable
in the marketplace, and such amounts shall be deemed to be operating expenses of
the Business.
5.4 Liability of General Partner. The General Partner shall be liable
to the Limited Partners for willful misconduct, bad faith or gross negligence,
but shall not be liable for errors in judgment or for any acts or omissions that
do not constitute willful misconduct, bad faith or gross negligence. In all
transactions for or with the Partnership, the General Partner shall act in good
faith and for the benefit of the Partnership. The Limited Partners shall look
solely to the assets of the Partnership for the return of their Initial Capital
Contributions and if the assets of the Partnership remaining after payment or
discharge of the debts and liabilities of the Partnership are insufficient to
return such Initial Capital Contributions, they shall have no recourse against
<PAGE>
the General Partner for such purpose. The doing of any act or the failure to do
any act by the General Partner, the effect of which may cause or result in loss
or damage of the Partnership, if done pursuant to advise of legal counsel or
accountants employed by the General Partner on behalf of the Partnership, shall
be conclusively presumed not to constitute willful misconduct, bad faith or
gross negligence on the part of the General Partner.
5.5 Indemnification. The General Partner, including any employee of the
General Partner, shall not be liable for, and to the extent of its assets, the
Partnership shall indemnify the General Partner or any such employee, against
liabilities arising out of their activities as or for the General Partner
resulting from errors in judgment or any acts or omissions, whether or not
disclosed, unless caused by willful misconduct, bad faith or gross negligence;
provided, however, that this provision shall not constitute a waiver by the
Limited Partners of any rights it may have under applicable securities laws.
ARTICLE VI
ALLOCATION OF PROFITS AND LOSSES
6.1 General. All Partnership items of income, gain, loss, deduction,
credits, or tax preference items, (the "Tax Incidents"), shall be determined as
of the end of each fiscal year. As between a Partner and his transferee, Tax
Incidents for any fiscal year (or portion thereof, as the case may be) shall be
apportioned in accordance with the ratio that the number of days in the
Partnership fiscal year prior to the effective date of transfer bears to the
number of such days thereafter (including the effective date of the transfer).
6.2 Allocation. The Tax Incidents shall be allocated as follows:
A. Cost recovery deductions, amortization expense (including
amortization of organizational expenses, start up costs, intangible assets, or
other capital accounts), investment tax credits (including recapture of
investment tax credits), and tax preference items shall be allocated ninety-nine
percent (99%) to the Limited Partners and one percent (1%) to the General
Partner (in proportion to each Partner's Initial Capital Contribution), if
incurred with respect to the expenditure by the Partnership of the aggregate
Initial Capital Contributions of the Partners, (which shall be deemed expended
prior to any other amounts available to the Partnership), otherwise to the
Partners in accordance with their respective Participation Percentages.
B. Gains and losses from (i) sale, exchange or other disposition of all
or any substantial part of the Partnership property, or (ii) from liquidation of
the Partnership property following dissolution, as the case may be, shall be
allocated on an asset by asset basis, as follows:
(1) Gains, to the extent of cost recovery deductions or
amortization expense claimed by the Partnership with respect
to the particular Partnership assets which are sold, exchanged
or otherwise disposed of, shall be allocated ninety-nine
percent (99%) to the Limited Partners and one percent (1%) to
the General Partner (in proportion to each Partner's Initial
Capital Contribution), if realized with respect to an asset
acquired by the Partnership through the expenditure of the
aggregate Initial Capital Contributions of the Partners,
(which shall be deemed expended prior to any other amounts
available to the Partnership), otherwise to the Partners in
accordance with their respective Participation Percentages;
<PAGE>
(2) Gains in excess of cost recovery deductions or amortization
expense claimed by the Partnership with respect to the
particular Partnership assets which are sold, exchanged or
otherwise disposed of, shall be allocated to all Partners in
the same proportion that the Partners actually receive
distributions of proceeds from Net Sale Proceeds as provided
in Section 8.2 hereof, (except distributions pursuant to
Section 8.2(a)); and
(3) All losses shall be allocated ninety-nine percent (99%) to the
Limited Partners and one percent (1%) to the General Partner
(in proportion to each Partner's Initial Capital
Contribution), if realized with respect to an asset acquired
by the Partnership through the expenditure of the aggregate
Initial Capital Contributions of the Partners, (which shall be
deemed expended prior to any other amounts available to the
Partnership), otherwise to the Partners in accordance with
their respective Participation Percentages.
C. All Tax Incidents other than those specifically allocated by
subparagraph (A) and (B), ("Other Tax Incidents"), shall be allocated to the
Partners in the same proportion that the Partners actually receive in that same
fiscal year cash distributions from Net Cash Flow as provided in Section 8.2
hereof, (except cash distributions pursuant to Section 8.2(a)), (the "Cash
Distributions"), provided nevertheless as follows:
(1) Other Tax Incidents shall be allocated in any fiscal year to
the Partners so receiving Cash Distributions in the same
proportion that such Cash Distributions actually are received
only if such Cash Distributions actually distributed equal or
are greater than the Partnership's Net Income for the same
fiscal year;
(2) To the extent the Partnership's Net Income for that same
fiscal year exceeds such Cash Distributions, Other Tax
Incidents shall be allocated to the Partners in accordance
with their respective Participation Percentages, except that
(i) Net Income, in an amount equal to Cash Distributions
actually received, shall be allocated to the Partners so
receiving such Cash Distributions in the same proportion
that such Cash Distributions actually are received, and (ii)
any excess of Net Income over Cash Distributions actually
received shall be allocated to the Partners in accordance with
their respective Participation Percentages;
(3) In the absence of any such Cash Distributions the Other Tax
Incidents shall be allocated to the Partners in accordance
with their respective Participation Percentages; and
(4) Notwithstanding clauses (1) and (2) of this Subparagraph (C),
Net Loss, (whether or not Cash Distributions are actually
made), shall be allocated to the Partners in accordance with
their respective Participation Percentages.
<PAGE>
ARTICLE VII
ACCOUNTING
7.1 Accounting and Bookkeeping. The General Partner shall prepare and
keep, for a period of not less than three (3) years, generally accepted
accounting records, including cash registers having cumulative totals, bank
books and duplicate deposit slips, records showing inventories and receipts of
merchandise and other records from the operation of the Business which would
normally be required to be kept or examined by an independent accountant
pursuant to generally accepted auditing standards. The Limited Partners shall at
all times during normal business hours have free access to and the right to
inspect and copy the accounting records of the Business and/or Partnership, at
the principal place of business of the Partnership.
The General Partner, as an expense of the Business, shall prepare for
the Partnership and provide the Limited Partners with a complete monthly
accounting of the operation of the Business on a form similar to that attached
hereto as Exhibit "C", within thirty (30) days of the end of each month during
the term hereof. The monthly report shall also contain a statement of cumulative
gross sales from the operation of the Business for the current year of this
Agreement for purposes of determining any distributions pursuant to Article VIII
below. The General Partner shall also provide copies of such other accounting
records as may be reasonably requested by the Limited Partners and the Limited
Partners may inspect the originals thereof at any reasonable time.
The General Partner shall mail within seventy five (75) days after the
close of each fiscal year, an annual report to the Limited Partners, which
annual report shall constitute the accounting of the Partnership for such year.
The annual report shall contain unaudited financial statements, certified by the
Treasurer of the General Partner as accurate and correct, and shall otherwise be
in such form and have such content as the General Partner deems proper. Such
annual report shall include from every source, including net gains from
disposition or sale of Partnership properties.
Subject to the right of the Limited Partners to receive their share of
the distributions pursuant to Article VIII hereof, all receipts from the
operation of the Business, deposited into an account of the Partnership and/or
the General Partner at a bank designated by the General Partner, shall only be
withdrawn upon the direction of the General Partner, but cannot be unreasonably
withheld. The Partners anticipate that payment of liquor purchases, payroll and
general operations may be made from one or more additional accounts at one or
more banks, selected by the General Partner. Funds from those accounts shall
only be withdrawn by or at the direction of the General Partner.
7.2 Fiscal Year and Method of Accounting. The fiscal year of the
Partnership shall be a calendar year and the books of the Partnership for income
tax and accounting purposes shall be kept on the accrual method. All financial
determinations hereunder made by the General Partner with respect to the
calculation of profits and losses, all distributions pursuant to Article VIII
and other accounting decisions shall be determined by the General Partner in
accordance with generally accepted accounting principles consistently applied by
the General Partner in making said determinations.
7.3 Audit. The Limited Partners shall have the right from time to time,
upon two (2) business days prior notice to the General Partner, to cause a
complete audit to be made of the business affairs conducted at the Business, and
all of the books and records referred to in Article VII hereof. Such audit shall
be performed by any person designated, selected and paid for by the Limited
Partners, except as otherwise provided herein. The General Partner shall make
all records and books relevant in any manner to the operation at the Business
and/or Partnership available for audit at 2841 West Cypress Creek Road, Fort
Lauderdale, Florida 33309. If the results of such audit show that the "Net
Income" for any month or year have been understated, the General Partner shall
<PAGE>
immediately pay to the Limited Partners the additional amount due and if such
understatement amounts to three percent (3%) or more of "Net Income", then the
General Partner shall pay the cost of such audit, in addition to any deficiency
payment required. If the audit shows that the General Partner has overpaid or
the Limited Partners have received overpayment of any amount, the Limited
Partners shall immediately repay such amount to the General Partner. Any
accounting deficiencies revealed by such audit, which accounting deficiencies
shall be defined as any accounting practices not in accordance with generally
accepted accounting principles consistently applied, shall be corrected by the
General Partner within fifteen (15) days of its receipt of notice of such
deficiency.
7.4 Definitions.
A. "Gross Sales" shall mean the gross income, price, money, cover
charges, or other consideration charged or received from the operation of the
Business, whether in cash, on credit, barter, exchange, or otherwise.
Gross sales as used herein shall not include, and the General Partner
shall deduct from its calculations of gross sales, to the extent it has been
included:
(i) Any sales or excise tax imposed by any governmental authority
upon customers and added to the price of a sale or service and
collected from the customer and in turn paid to such
governmental authority;
(ii) The amount of any credit or refund for any merchandise
returned or exchanged or any allowance made for loss of or
damage to merchandise sold but not in excess of original cost;
(iii) Fees or discounts paid to bona fide credit card agencies;
(iv) Amounts paid to third party vending machine and coin operated
devise operators as their share of proceeds from such machines
and device; and
(v) Complimentary and/or discounted sales made at the direction of
the General Partner, including but not limited to discounted
sales to the employees of the Business.
B. "Operating Expenses" shall mean all cash expenses and liabilities
incurred in the operation of the Business, and shall include, by way of example
and without limitation hereby, rent, franchise royalties, franchise fees,
personal property taxes on personal property, fixtures and equipment used in the
Business; liability insurance; real estate taxes; hazard insurance; trash
collections; cleaning services; accounting and bookkeeping fees; advertising;
telephone charges; utilities, including but not limited to electric, water and
gas; cable; salaries for personnel employed at the business premises only;
repairs and maintenance of kitchen equipment, furniture, fixtures, equipment and
personal property used in the Business; repairs and maintenance of the interior
of the business premises and parking areas; cost of inventory; liquor license
renewal fees; but excluding any allocation of salaries and expenses of
"off-site" personnel of the General Partner.
<PAGE>
7.5 Tax Matters.
A. The General Partner shall cause, as a part of its bookkeeping and
accounting responsibilities, to be prepared and filed all income tax returns for
the Partnership on an accrual basis. Necessary tax information shall be provided
to the Limited Partners.
B. In connection with the assignment of a Limited Partner's interest in
the Partnership permitted by Article X hereof, the General Partner, (in its sole
discretion), shall have the right, but shall not be obligated, on behalf of the
Partnership and at the time and in the manner provided by Section 754 of the
Code, (or any successor section thereto), and the Regulations thereunder, to
make an election to adjust the basis of Partnership property in the manner
provided in Sections 734(b) and 743(b) of the Code, (or any successor sections
thereto).
7.6 Contracting for Accounting Services. The General Partner may, as an
expense of the Business, contract with FLANIGAN'S ENTERPRISES, INC. to provide
the accounting and bookkeeping services provided in this Article VII at the same
rate charged to its other franchisees.
ARTICLE VIII
DISTRIBUTIONS
8.1 Distributions of Net Cash Flow. All Net Cash Flow, if any, realized
by or available to the Partnership shall first be applied or added to a
reasonable reserve retained for working capital needs or to provide funds for
contingencies and expenses of the Partnership, (all as determined in the sole
discretion of the General Partner or as required by any loan agreement or
instrument of the Partnership), and the balance, if any, shall be distributed,
(from time to time in the sole discretion of the General Partner, but in the
event, no less frequently than quarterly), in the following order of priority to
the extent available:
A. To the General Partner in repayment of the entire principal amounts
of any outstanding General Partner's loans, together with all accrued but unpaid
interest thereon, first on account of interest accrued thereon and then on
account of the principal amounts thereof;
B. To the General Partner in reduction of its then outstanding
Additional Capital Balance; and
C. To the Limited Partners until such time as the Limited Partners have
received the aggregate sum of Four Hundred Thousand Dollars ($400,000.00), which
aggregate sum shall be reduced by an amount equal to the amount of initial
working capital returned by the Partnership to the Limited Partners, a sum equal
to the amount necessary to increase the aggregate distribution to the Limited
Partners for the fiscal year to One Hundred Thousand Dollars ($100,000.00) shall
be paid to the Limited Partners. Thereafter, any remaining amounts shall be
distributed to the Partners in accordance with their respective Participation
Percentages; and
D. Once the Limited Partners have received the aggregate sum of Four
Hundred Thousand Dollars ($400,000.00), which aggregate sum shall be reduced by
an amount equal to the amount of initial working capital returned by the
Partnership to the Limited Partners, any remaining amounts shall be distributed
to the Partners in accordance with their respective Participation Percentages.
<PAGE>
8.2 Distributions of Net Sale Proceeds. All Net Sale Proceeds, if any,
realized by or available to the Partnership shall first be applied or added to a
reasonable reserve or escrow account retained to provide funds for contingencies
and expenses of the Partnership, (all as determined by the General Partner or as
required by any loan, escrow or other agreement or instrument of the
Partnership), and the balance, if any, shall be distributed in the following
order of priority to the extent available:
A. To the General Partner, in repayment of the entire principal amounts
of any outstanding General Partner's loans, together with all accrued but unpaid
interest thereon, first on account of interest accrued thereon and then on
account of the principal amounts thereof;
B. To the General Partner in reduction of its then outstanding
Additional Capital Balance, except as provided in Subparagraph E. of this
section;
C. To the Partners in reduction of their then outstanding Capital
Balances, (in proportion to the respective amounts of any such Capital
Balances), except as provided in Subparagraph E. of this section;
D. Any remaining amounts (i) fifty one percent (51%) thereof to the
Limited Partners and (ii) forty nine percent (49%) to the General Partner; and
E. Notwithstanding anything to the contrary in the above priority
order, if there is an insufficient balance available to fully return to each
Partner an amount equal to his then outstanding Capital Balance, the balance, if
any, shall be distributed to the Partners in proportion to the combined amount
of their then outstanding Capital Balance.
ARTICLE IX
TRANSFER OF PARTNERSHIP INTERESTS
9.1 General Partner.
A. The General Partner shall not sell, assign, or otherwise dispose of
all or any portion of its interest as General Partner in the Partnership, or
enter into any agreement as a result of which any person, firm or corporation
shall become interested with it in its interest in the Partnership without the
prior consent in writing of the Limited Partners. No person shall be admitted as
a substitute or additional General Partner without the prior written consent of
the General Partner and the Limited Partners as set forth herein. The General
Partner may not retire or withdraw as a General Partner unless it designates a
nominee willing to serve as a General Partner which shall be an individual or
corporation having the capacity to serve as such and who is able to meet any
requirements then imposed by the Code or any rulings or regulations thereunder
with respect to general partners or limited partnerships in order that the
Partnership not become an association taxable as a corporation. Subject to the
foregoing, the General Partner shall give the Limited Partners at least ninety
(90) days notice of its proposed retirement or withdrawal as General Partner, in
which event the Partnership shall be dissolved and terminated as provided in
Article X hereof unless the Limited Partners select a new General Partner within
said ninety (90) day period. Such new General Partner may be, but need not be,
the nominee designated by the retiring or withdrawing General Partner.
B. The General Partner shall immediately be removed and cease to be a
General Partner upon the dissolution of the General Partner.
<PAGE>
9.2 Substitute Limited Partner. A Limited Partner or the transferee of
a Limited Partner may transfer all, but not a part of his Unit(s) to a
Substitute Limited Partner provided:
A. That the transferee, if an individual, is at least 21 years of age;
B. That the transferee executes an instrument satisfactory to the
General Partner accepting and adopting the provisions and agreements set forth
herein and pays any reasonable expenses in connection with his admission as a
Substitute Limited Partner; and
C. That the General Partner shall consent to such transfer, which
consent may be given or withheld in the General Partner's sole discretion, and
shall be withheld if:
(1) In the opinion of counsel for the Partnership such transfer
would result in the close of the Partnership's taxable year
with respect to all Partners, in the termination of the
Partnership within the meaning of Section 708(b) of the Code,
or in the termination of its status as a partnership under the
Code; or
(2) In the opinion of such counsel such transfer would be in
violation of the Securities Act of 1933, as amended, or the
securities laws of any other jurisdiction.
9.3 Death, etc. of a Limited Partner. Upon the death, bankruptcy, legal
incompetency or insolvency of a Limited Partner, (or, in the case of a Limited
Partner that is a partnership, joint venture, association, corporation or trust,
the dissolution of such Limited Partner), the personal representative, guardian
or other successor in interest of such Limited Partner shall have the right of
the Limited Partner for the sole purpose of settling the estate of such person
pursuant to the provisions of Section 9.2, but such assignee may become a
Substitute Limited Partner in the Partnership only in accordance with the
provisions of Section 9.2.
9.4 Effective Date of Transfers. Permissible transfers of a Limited
Partner's Units shall be effective for purposes of allocations of distributions,
profits and losses on the first day of the fiscal quarter following compliance
with Section 9.2 and following amendment of this Agreement as required by the
Law. Until such effective date, the General Partner may act and proceed as if no
transfer had been made.
9.5 Transfers Oth er Than in Accordance Herewith. No transfers of Units
or any part thereof which is in violation of this Article IX shall be valid or
effective, and the Partnership shall not recognize the same for the purposes of
making allocations or distributions of profits, losses, return of Capital
Contribution or other distribution with respect to such Units or part thereof.
The Partnership may enforce this provision either directly or indirectly or
through its agents by entering an appropriate stop-transfer order on its books
or otherwise refusing to register or transfer or permit the registration or
transfer on its books of any proposed transfers not in accordance with this
Article IX.
<PAGE>
ARTICLE X
DISSOLUTION AND SUCCESSOR PARTNERSHIP
10.1 Dissolution of Partnership. The Partnership shall be dissolved
upon the earlier occurrence of any of the following events:
A. The bankruptcy, insolvency, liquidation or dissolution of the
General Partner;
B. Upon the written consent of all Partners;
C. The sale of all or substantially all of the assets of the
Partnership;
D. Pursuant to the provisions of Article II and IX hereof; or
E. Otherwise by operation of law.
10.2 Successor Partnership. If the Partnership is dissolved or to be
dissolved for any reason specified in Section 10.1, and any Limited Partner
shall deliver to each of the other Limited Partners within thirty (30) days of
such event, a written notice demanding that a meeting of Limited Partners be
held at the principal place of business of the Partnership at the time set forth
in such notice (which shall be not less than ten (10) nor more than thirty (30)
days after the date of such notice) the Limited Partners shall hold such
meeting. Limited Partners attending such meeting, either in person or by proxy,
and having an aggregate Limited Partner Percentage of not less than one hundred
percent (100%) may continue the business of the Partnership and reconstitute the
Partnership as a successor limited partnership with a new General Partner having
the capacity to serve as such and who is able to meet any requirements then
imposed by the Code or any rulings or regulations thereunder with respect to
general partners of limited partnerships in order that the Partnership not
become an association taxable as a corporation. If such Limited Partners shall
exercise such right to continue the business of the Partnership, the person
appointed by them as the new General Partner and each of the Limited Partners
shall execute, acknowledge and file a Limited Partnership Certificate and
Agreement. The Limited Partnership Certificate and Agreement shall contain
substantially the same provisions as those contained herein, except that the new
General Partner shall be allocated such share of the profits, losses and
distributions of the Partnership as the Limited Partners appointing such new
General Partner shall determine. Such new General Partner shall indicate his
acceptance of the appointment by the execution of such Limited Partnership
Certificate and Agreement.
10.3 Procedure. Unless the Business of the Partnership is continued
pursuant to Section 10.2, upon the dissolution of the Partnership, the General
Partner or the person required by law to wind up the Partnership's affairs shall
cause the cancellation of this Agreement and shall liquidate the assets of the
Partnership and apply the proceeds of such liquidation in the order of priority
provided in Article VIII of this Agreement, unless the law requires distribution
be made in a different order in which case the assets of the Partnership shall
be distributed in accordance with the law.
ARTICLE XII
LIMITED POWER OF ATTORNEY
12.1 Appointment. Each Limited Partner hereby makes, constitutes and
appoints the General Partner his true and lawful attorney-in-fact for him and in
his name, place and stead and for his use and benefit, from time to time:
<PAGE>
A. To make all agreements amending this Agreement, as now or hereafter
amended, that may be appropriate to reflect or effect, as the case may be, the
following:
(1) A change of the name or the location of the principal place of
business of the Partnership;
(2) The transfer or acquisition of any Units by a Limited Partner
in any manner permitted by this Agreement;
(3) A person becoming a Substitute Limited Partner of the
Partnership as permitted by this Agreement;
(4) A change in any provision of this Agreement effected by the
exercise by any person of any right or rights hereunder;
(5) The dissolution of the Partnership pursuant to this Agreement;
(6) Such amendments which are of an inconsequential nature and do
not affect the rights of the Limited Partners in any material
respect;
(7) To execute such certificates, instruments and documents as may
be required or may be appropriate in connection with the use
of the name of the Partnership by the Partnership; and/or
(8) To execute such certificates, instruments and documents as may
be required, or as may be appropriate for the Limited Partner
to make to reflect:
(a) A change in the name or address of such Limited
Partner;
(b) Any changes in or amendments of this Agreement, or
pertaining to the Partnership, of any kind referred
to in this Section 12.1; and
(c) Any other changes in or amendments of this Agreement
but only if and when the consent thereto has been
obtained from the General Partner and Limited
Partners, having the aggregate Limited Partnership
Percentage required by Section 13.6 hereof.
B. Each of the agreements, certificates, instruments and documents made
pursuant to Section 12.1(A) shall be in such form as the General Partner and
counsel for the Partnership shall deem appropriate. The powers conferred by
Section 12.1(A) to execute agreements, certificates, instruments and documents,
shall be deemed to include without limitation the powers to sign, acknowledge,
swear to, verify, deliver, file, record or publish the same.
C. Each Limited Partner authorizes the General Partner as such
attorney-in-fact to take any further action which the General Partner shall
consider necessary or advisable in connection with any action taken pursuant to
this Section 12.1 hereby giving the General Partner as such attorney-in-fact
full power and authority to do and perform each and every act or thing
whatsoever requisite or advisable to be done in and about any action taken
pursuant to this Section 12.1 as fully as such Limited Partner might or could do
if personally present, and hereby ratifying and confirming all that the General
Partner as such attorney-in-fact shall lawfully do or cause to be done by virtue
of this Section.
<PAGE>
12.2 Irrevocability; Manner of Exercise. The power of attorney granted
pursuant to Section 12.1:
A. Is a special power of attorney coupled with an interest and is
irrevocable;
B. May be exercised by the General Partner as such attorney-in-fact by
listing all of the Limited Partners executing any agreement, certificate,
instrument or document with the single signature of the President or any Vice
President of the General Partner acting as attorney-in-fact for all of them; and
C. Shall survive the transfer by a Limited Partner of all or a portion
of his interest in the Partnership, except that where the purchaser, transferee
or assignee thereof with the consent of the General Partner is admitted as a
Substitute Limited Partner, the power of attorney shall survive the transfer for
the sole purpose of enabling such attorney-in-fact to execute, acknowledge and
file any such agreement, certificate, instrument or document necessary to effect
such substitution.
ARTICLE XIII
MISCELLANEOUS PROVISIONS
13.1 Notices. All notices or other communications required or permitted
to be given pursuant to the Agreement shall in the case of notices or
communications required or permitted to be given to Limited Partners, be in
writing and shall be considered as properly given or made if personally
delivered or if mailed by United States certified or registered mail, return
receipt requested, postage prepaid, or if sent by prepaid telegram, and
addressed to such Limited Partner's address for notices as it appears on the
records of the Partnership, and in the case of notices or communications
required or permitted to be given to the General Partner, shall be in writing
and shall be considered as properly given or made if personally delivered or if
mailed by United States certified or registered mail, return receipt requested,
postage prepaid, addressed to the General Partner at the principal place of
business of the Partnership. Any Limited Partner may change his address for
notices by giving notice in writing, stating his new address for notices, to the
General Partner, and the General Partner may change its address for notices by
giving such notice to all Limited Partners. Commencing on the tenth (10th) day
after the giving of such notice, such newly designated address shall be such
Partner's address for the purpose of all notices or other communications
required or permitted to be given pursuant to the Agreement.
13.2 Choice of Law. This Agreement and all rights and liabilities of
the parties hereto with reference to the Partnership shall be subject to,
construed in accordance with and governed by the laws of the State of Florida.
To the extent that any provision hereof is in contravention with the Law, as in
effect from time to time, the provisions of the Law shall supersede and replace
any provision herein which is in contravention thereof. Additionally, the
appropriate forum and jurisdiction for any legal action shall be the Courts of
the County of Broward, State of Florida, and each party consents to such
jurisdiction.
13.3 Titles and Captions. All article, section and subsection titles or
captions contained in this Agreement are inserted for convenience only and are
not deemed part of the text hereof.
13.4 Sole Agreement. This Agreement constitutes the entire
understanding of the parties hereto with respect to the subject matter hereof.
<PAGE>
13.5 Execution in Counterparts. This Agreement may be executed in any
number of counterparts with the same effect as if all parties had all signed the
same document. All counterparts shall be construed together and shall constitute
one (1) agreement.
13.6 Amendments. The General Partner may submit to the Partners in
writing the text of any proposed amendment to this Agreement and a statement by
the proposer of the purpose of such amendment. The General Partner shall include
in any submission its view as to the proposed amendment. Any such amendment
shall be adopted if, within ninety (90) days after the notice of such amendment
is given to all Partners, the General Partner shall have approved such amendment
in writing and shall have received written approval thereof from Limited
Partners having a Limited Partnership Percentage aggregating eight percent (80%)
or more. A written approval may not be withdrawn or voided once it is filed with
the General Partner. A Limited Partner filing a written objection may thereafter
file a valid written approval. The date of adoption of an amendment pursuant to
this Section 13.6 shall be the date on which the General Partner shall have
received the requisite written approvals. Any proposed amendment which is not
adopted may be resubmitted. In the event any proposed amendment is not adopted,
any written approval received with respect thereto shall become void and shall
not be effective with respect to any resubmission of the proposed amendment.
Notwithstanding the foregoing provisions of this Section 13.6, no amendment may,
without the prior written approval of all Partners;
A. Enlarge the obligations of any Partner under this Agreement;
B. Enlarge the liability of the General Partner to the Limited
Partners;
C. Amend this Article 13.6;
D. Alter the Partnership in such manner as will result in the
Partnership no longer being classified as a limited
partnership for Federal income tax purposes; or
E. Reduce any requirements for the prior approval of Substitute
Limited Partners set forth in this Agreement.
13.7 Waiver of Action for Partition. Each of the parties hereto
irrevocably waives during the term of the Partnership any right that he may have
to maintain any action for partition with respect to the property of the
Partnership.
13.8 Assignability. Subject to the restrictions on transferability
contained herein, each and all of the covenants, terms, provisions and
agreements herein contained shall be binding upon and inure to the benefit of
the successors, assigns and legal representatives of the respective parties
hereto.
13.9 Independent Activities. Except as otherwise provided herein, the
General Partner and its affiliates, and its (and its affiliates'), officers,
directors, shareholders and employees, and each Limited Partner may,
notwithstanding the existence of this Agreement, engage in whatever activities
they choose, whether the same be competitive with the Business of the
Partnership or otherwise, without having or incurring any obligation to offer
any interest in such activities to any party hereto. Neither this Agreement nor
any activity undertaken pursuant hereto shall prevent such persons from engaging
in such activities, and as a material part of the consideration for the General
<PAGE>
Partner's execution hereof, each Limited Partner hereby waives, relinquishes and
renounces any such right or claim of participation. Nothing in the foregoing,
however, shall be deemed to reduce any of the liabilities of the General Partner
under this Agreement.
13.10 Right to Rely on Authority of General Partner. No person dealing
with the General Partner shall be required to determine its authority to make
any undertaking on behalf of the Partnership, nor to determine any fact or
circumstance bearing upon the existence of its authority.
13.11 Arbitration. Except as otherwise provided in this Agreement, any
dispute or controversy arising out of or relating to this Agreement shall be
determined and settled by arbitration in the City of Fort Lauderdale, Florida,
in accordance with the rules of the American Arbitration Association then in
effect, and judgment upon the award rendered by the arbitrator(s) may be entered
in any court of competent jurisdiction. Except as set forth in Sections 5.4 and
5.5, the expenses of the arbitration shall be borne equally by the parties to
the arbitration.
13.12 Gender and Number. Whenever the context requires, the gender of
all words used herein shall include the masculine, feminine and neuter and the
singular and plural of all words shall include the singular and plural.
13.13 Meetings. The Partnership shall hold an annual meeting in each
fiscal year of its existence on such date and at such place and time as the
General Partner shall determine, notice of the date and time to be given to all
Limited Partners whose addresses are on record with the General Partner not
later than fourteen (14) days prior to such date. Notwithstanding the foregoing,
at any time or from time to time, Limited Partners having a Limited Partner
Percentage aggregating fifty percent (50%) may by written notice to the General
Partner specifying in general terms the subject to be considered require the
General Partner to call, or the General Partner may on its own motion call, a
special meeting of the Limited Partners and the General Partner shall within ten
(10) days after any such notice is given, give notice of such special meeting in
the same manner as is required for the annual meeting including in such notice a
copy of the notice requiring the call. Any Limited Partner shall have the right,
upon notice in writing, to require the General Partner to furnish by mail a list
of the names, addresses and respective interest in the Partnership of all other
Limited Partners in the Partnership as shown on the records of the Partnership
at the time of the notice. Any Limited Partner, or his representative, shall
have the right to inspect and copy the names and addresses of all other Limited
Partners in the Partnership.
13.14 Severability. If any provision of this Agreement, or the
application thereof, shall, for any reason and to any extent, be invalid or
unenforceable, or contrary to law, the remainder of this Agreement and the
application of such provision to other persons or circumstances shall not be
affected thereby, but rather shall be enforced to the maximum extent permissible
under applicable law.
<PAGE>
IN WITNESS WHEREOF, this Limited Partnership Certificate and Agreement
has been sworn to and executed as of the date above written.
GENERAL PARTNER:
B.D. 15 CORP.
________________________________ By: _______________________________
Patrick J. Flanigan, President
- --------------------------------
STATE OF FLORIDA )
) ss:
COUNTY OF BROWARD )
The foregoing instrument was acknowledged before me this date by
PATRICK J. FLANIGAN, as President of B.D. 15 CORP. on behalf of the said
corporation. He is well known to me or produced ________________ as
identification.
WITNESS my hand and official seal on this the _____ day of February,
1997.
----------------------------------
NOTARY PUBLIC - State of Florida
My commission expires:
SEE SIGNATURE PAGES FOR LIMITED PARTNERS ATTACHED HERETO
<PAGE>
EXHIBIT "C"
SIGNATURE PAGE FOR
CIC INVESTORS #15, LTD. - INDIVIDUAL(S)
(a Florida limited partnership)
The undersigned agrees to become a limited partner in the above
referenced limited partnership and shall be bound by the terms of the Limited
Partnership Certificate and Agreement of the above referenced limited
partnership.
<TABLE>
<CAPTION>
Amount of
Name of Limited Partner(s) Capital Commitment Date Signed
- -------------------------- ------------------ -----------
<S> <C> <C>
/s/Gerard E. Arsenault $5,000.00 02/19/97
/s/Michael R. Bailine $5,000.00 02/25/97
/s/Leslie Blane $5,000.00 03/12/97
/s/Augie Bucci $5,000.00 03/20/97
/s/John J. Carroll $10,000.00 02/19/97
/s/CIC Investors #15, Inc. $60,000.00 02/28/97
by Joseph G. Flanigan, President
/s/Xavier Exilus $5,000.00 02/20/97
/s/Jack A. Fitts $5,000.00 03/11/97
/s/Michael Flanigan $15,000.00 03/17/97
/s/Patrick Flanigan $105,000.00 03/12/97
/s/Flanigan's Enterprises, Inc. $100,000.00 03/19/97
by Jeffrey D. Kastner, Asst. Sec.
/s/Joseph F. Griffin, Jr. $5,000.00 02/24/97
/s/Elizabeth J. House $5,000.00 02/19/97
/s/Bruce Irwin and $5,000.00 02/20/97
Celeste C. Irwin
/s/Jeffrey D. Kastner and $10,000.00 02/28/97
Leslie Fredye C. Kastner
/s/Patrick King $5,000.00 02/21/97
/s/Arthur Krasnick and $5,000.00 03/27/97
Roberta Firtell
/s/Michael Medina $5,000.00 02/24/97
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Amount of
Name of Limited Partner(s) Capital Commitment Date Signed
- -------------------------- ------------------ -----------
<S> <C> <C>
/s/James Motta and $10,000.00 03/24/97
Patricia Motta
/s/Nickolas Patton $5,000.00 03/19/97
/s/Jean Picard and $5,000.00 03/13/97
France Picard
/s/Leon C. Pults and $5,000.00 03/20/97
Gale Pults
/s/Faline Roberts $5,000.00 03/21/97
/s/Susan S. Storelli $5,000.00 02/25/97
/s/David N. Zaden $5,000.00 02/20/97
</TABLE>
<PAGE>
EXHIBIT 10(v)
LIMITED PARTNERSHIP CERTIFICATE AND AGREEMENT
THIS LIMITED PARTNERSHIP CERTIFICATE AND AGREEMENT, (the
"Agreement"), made and entered into this _____ day of June, 1997, by and among
FLANIGAN'S ENTERPRISES, INC., a Florida corporation, (the "General Partner"),
and all other parties who shall execute this Agreement or any counterpart
thereof, collectively, (the "Limited Partners"). The Limited Partners, as
constituted from time to time, and the General Partner are sometimes herein
collectively referred to as the "Partners".
W I T N E S S E T H :
WHEREAS, the Partners desire to form a limited partnership (the
"Partnership") pursuant to the Uniform Limited Partnership Act of the State of
Florida upon the terms and conditions hereinafter set forth;
NOW THEREFORE, intending to be legally bound hereby, the Partners agree
as follows:
ARTICLE I
DEFINITIONS
The following terms used in this Agreement shall (unless otherwise
expressly provided herein or unless the context clearly requires otherwise) have
the following meanings:
1.1 Additional Capital Balance. The Additional Capital Contributions,
if any, of the General Partner, as reduced from time to time by all cash
distributions to such General Partner which, pursuant to the terms of this
Agreement, are in reduction of the General Partner's Additional Capital Balance,
and as increased from time to time by any contributions of the General Partner
which are Additional Capital Contributions.
1.2 Additional Capital Contributions. Any additional cash contributions
of the General Partner to the capital of the Partnership pursuant to Section 3.5
hereof.
1.3 Agreement. This Limited Partnership Certificate and Agreement.
1.4 Capital Balance. The Initial Capital Contribution made by a Partner
in cash and the fair market value of any contributions in kind, (as set forth in
this Agreement), as reduced from time to time by all cash distributions to such
Partner which, pursuant to the terms of this Agreement, are in reduction of a
Partner's Capital Balance.
1.5 Capital Commitment. The Capital Commitment with respect to any
Limited Partner is his obligation to contribute the aggregate amount to be paid
for the Units (computed at the rate of $5,000.00 per Unit) subscribed for by him
pursuant to his Subscription Agreement and set opposite his name on the
signature page attached to this Agreement, and with respect to the General
Partner, is its obligation to make its original Capital Contribution pursuant to
Section 3.1 hereof.
1.6 Initial Capital Contribution. The Contribution made by each Partner
pursuant to its Capital Commitment.
1.7 Code. The Internal Revenue Code of 1954, as amended.
1.8 General Partner. The General Partner is FLANIGAN'S ENTERPRISES,
INC. or any successor general partner as provided herein.
1.9 General Partner's Capital. The combined total Capital Balance and
Additional Capital Balance of the General Partner.
1.10 Law. The Uniform Limited Partnership Act of the State of Florida
in effect from time to time during the term hereof.
<PAGE>
1.11 Limited Partner. The Limited Partners hereunder and any such
persons admitted to the Partnership as substituted Limited Partners.
1.12 Limited Partners' Capital. The total of the Capital Balance of all
Limited Partners.
1.13 Limited Partner Percentage. In respect of any Limited Partner the
percentage obtained by converting to a percentage the fraction having the
Initial Capital Contribution of such Limited Partner as its numerator and having
the Limited Partners' Capital as its denominator.
1.14 Net Cash Flow. Net Cash Flow of the Partnership, with respect to a
fiscal period, shall mean Net Income of the Partnership for such period, reduced
by (i) any repayments of principal on loans of the Partnership, (excluding
General Partner's Loans, the principal amounts of which are payable out of Net
Cash Flow as stated in Article VIII hereof), (ii) any capital expenditures and
prepaid expenses to the extent not included in the determination of Net Income,
(iii) any Net Sale Proceeds to the extent included in the determination of Net
Income, and (iv) reasonable additions to a reserve, (as determined in the sole
discretion of the General Partner); and increased by any receipts by the
Partnership which are not included in the determination of Net Income.
1.15 Net Income. Net Income of the Partnership with respect to any
fiscal period shall mean the excess of the gross sales for such period over all
operating expenses for such period, as those terms are defined herein,
determined on an accrual basis and determined without regard to amounts deducted
by the Partnership for cost recovery of tangible assets or amortization of
capitalized or other capital accounts.
1.16 Net Loss. Net Loss of the Partnership with respect to any fiscal
period shall mean that excess of all operating expenses for such period over the
gross sales for such period, as those terms are defined herein, determined on an
accrual basis and determined without regard to amounts deducted by the
Partnership for cost recovery of tangible assets or amortization of capitalized
expenditures or other capital accounts.
1.17 Net Sale Proceeds. The proceeds realized by the Partnership upon
the sale, exchange or other disposition of all or any substantial part of the
Partnership property, net of expenses incident to such sale, the payment of any
Partnership indebtedness secured by or related to any such assets and
satisfaction of any right of any creditor of the partnership (other than a
Partner) to receive such proceeds.
1.18 Participation Percentage. Throughout the term of this Agreement,
the Participation Percentage of the Limited Partners is fifty percent (50%)
(allocated to each Limited Partner in proportion to his Limited Partnership
Percentage) and the Participation Percentage of the General Partner is fifty
percent (50%).
1.19 General Partner's Loans. All amounts loaned by the General Partner
to the Partnership pursuant to Section 3.5 hereof.
1.20 Subscription Agreement. The Instrument by which each prospective
Limited Partner agrees to purchase Units.
1.21 Substitute Limited Partner. A person admitted to all of the rights
of a Limited Partner who has died or assigned his interest in the Partnership,
or in the case of a Limited Partner that is a partnership, joint venture,
association, corporation or trust, that has been dissolved or assigned its
interest in the Partnership.
1.22 Unit. A Unit means an interest of a Limited Partner in the Limited
Partners' Capital of the Partnership with an original subscription value of
$5,000.00.
<PAGE>
ARTICLE II
THE LIMITED PARTNERSHIP
2.1 Formation of Partnership. The parties hereto agree to form and by
execution of this Agreement do hereby enter into a limited partnership pursuant
to Chapter 620, et seq., of the Florida Statutes, entitled "Uniform Limited
Partnership Act" ("Law") which Law shall govern the rights and liabilities of
the parties hereto, except as otherwise herein expressly stated.
2.2 Partnership Name. The name of the Partnership is CIC INVESTORS #60,
LTD. The General Partner, in its sole discretion, may change the name of the
Partnership at any time and from time to time. The General Partner and the
Limited Partners hereto shall promptly execute and the General Partner shall
file and record with the proper offices in each state, including any political
subdivision thereof, in which the Partnership does, or elects to do, business
and publish such certificates or other statements or instruments as are required
by the Limited Partnership Law, Beverage Regulations, Fictitious Name Law,
Assumed Name Law or any other similar statute in effect from time to time in
such state or political subdivision in order to validly conduct the business of
the Partnership therein as a limited partnership.
2.3 Character of Business and Purpose of the Partnership. The business
and purpose of the Partnership shall be to own, renovate and operate a
restaurant located at 9516 Harding Avenue, Surfside, Dade County, Florida and
most recently operating as "DANNY'S RESTAURANT", (the "Business"), but
specifically excludes any interest of any kind in the building and property
owned by the landlord.
2.4 Principal Place of Business. The principal place of business of the
Partnership shall be at 2841 West Cypress Creek Road, Fort Lauderdale, Florida
33309. The General Partner may change the principal place of business or
establish such other place or places of business for the Partnership as it may,
from time to time, deem necessary or appropriate, provided however, that the
General Partner shall give the Limited Partners notice of any change of address
of the principal place of business of the Partnership at least ten (10) days
prior to any such change.
2.5 Term of Partnership. The Partnership shall commence on the date
that this Agreement has been filed in accordance with the provision of the Law
and shall continue until the earlier of the following:
(i) Failure of the Partners to have a liquor license issued for
the Business by the Division of Alcoholic Beverages and
Tobacco within ninety (90) days of the date of this
Agreement; or
(ii) Revocation of the liquor license for the Business by the
Division of Alcoholic Beverage and Tobacco followed by the
inability of the Partners, after the exercise of their best
efforts, to cause such liquor license to be reinstated within
a ninety (90) day period; or
(iii) Dissolution or termination pursuant to the provisions of
Article X of this Agreement.
<PAGE>
2.6 Names and Residences of Partners.
A. The name and address of the General Partner is:
Flanigan's Enterprises, Inc.
2841 West Cypress Creek Road
Fort Lauderdale, Florida 33309
B. The names and places of residences of the Limited
Partners are set forth on the signature pages
attached hereto together with those persons who may,
from time to time, be admitted by the General Partner
as Substitute Limited Partners in accordance with the
terms of this Agreement.
2.7 Nature of Partners' Interests. The interests of the Partners in the
Partnership shall be personal property for all purposes. All property owned by
the Partnership, whether real or personal, tangible or intangible, shall be
owned by the Partnership as an entity and no Partner, individually, shall have
any ownership of such property.
2.8 Non-Partition. No Partner shall be entitled to seek partition of
any Partnership property.
ARTICLE III
CAPITAL CONTRIBUTIONS;
ADDITIONAL CAPITAL CONTRIBUTIONS;
GENERAL PARTNER'S LOANS; AND
REIMBURSEMENT OF EXCESS CAPITAL CONTRIBUTION
3.1 General Partner. The General Partner shall contribute to the
Partnership cash in an amount equal to one percent (1%) of the total Initial
Contributions of the Partners and other property as set opposite its name on the
signature page attached to this Agreement.
3.2 Limited Partners. The Limited Partners' Capital shall be measured
in terms of Units and a Limited Partner shall contribute $5,000.00 for each Unit
purchased. Each Limited Partner shall purchase a minimum of one (1) Unit. Each
Limited Partner shall contribute to the Partnership as his Initial Capital
Contribution an amount equal to the amount of his Capital Commitment as set
forth in the Subscription Agreement executed by him and set opposite his name on
the signature page attached to this Agreement. The amount of Capital Commitment
shall be paid in cash by the Limited Partner upon execution and delivery of the
Subscription Agreement.
3.3 Capital Accounts. The Partnership will maintain for each Partner an
account to be designated "Capital Account", to which will be added the Partner's
Initial Capital Contribution, Additional Capital Contributions and distributive
share of the profits of the Partnership, and against which will be deducted the
Partner's distributive share of the losses of the Partnership and all
distributions made to the Partner. A Partner's Capital Account may, at any point
in time, be the same as or different from such Partner's Capital Balance and may
have a negative balance resulting from the Partner's share of distributions and
losses in excess of the Partner's Initial Capital Contribution and Additional
Capital Contributions.
3.4 Use of Capital Contributions and Loans. The Initial Capital
Contributions of the Partners, all proceeds of Partnership borrowings, and any
Additional Capital Contributions or General Partner's Loans made pursuant to
this Agreement, shall be used to change and convert the business premises of the
Business to the General Partner's "Flanigan's Seafood Bar and Grill" restaurant
concept and as working capital.
<PAGE>
3.5 Additional Capital Contributions and General Partner's Loans.
A. Other than as expressly set forth in this Article III, no
Limited Partner shall be required or permitted to make any Additional Capital
Contributions, Partner's Loans, or other contributions, loans or advances to the
Partnership; however, the General Partner may make, in its sole discretion,
Additional Capital Contributions, Loans, or advances to the Partnership.
B. If the General Partner advances any funds to the
Partnership after the date of this Agreement (except in the case of Additional
Capital Contributions), such advances will be treated as General Partner's
Loans, will not increase the General Partner's Participation Percentage, and the
amount thereof will be a debt due from the Partnership to the General Partner,
entitled to the priorities described in Sections 8.1 and 8.2 hereof, to be
repaid with such interest as provided.
3.6 Withdrawal of Capital. Prior to the dissolution and liquidation of
the Partnership, no Partner shall have the right, during the term of the
Partnership, to require the return of all or any portion of his Initial Capital
Contribution, except that distributions made in accordance with Article VIII may
represent in whole or in part a return of capital. Upon any return of
partnership capital this Agreement shall be amended as provided by the Law.
3.7 Interest on Capital Contributions. No interest shall be payable
with respect to any capital contributed to the Partnership.
3.8 No Priority Among Limited Partners. No Limited Partner shall have
any priority over any other Limited Partner as to the return of his Initial
Capital Contribution or as to compensation by way of income or as to allocation
of profits and losses or distributions of cash.
3.9 Excess Capital Contribution. In the event that the cost to change
and convert the business premises of the Business, including both cash and the
fair market value of any property contributed in kind, reasonable reserves and
organizational costs hereof do not equal or exceed One Million Eight Hundred
Seventy Five Thousand Dollars ($1,875,000.00), any excess shall be returned to
the Limited Partners, pro-rata, as a partial refund of their Initial Capital
Contribution. Upon any return of partnership capital, this Agreement shall be
amended as required by Law.
ARTICLE IV
LIMITED PARTNERS
4.1 Limited Liability of Limited Partners. No Limited Partner shall be
liable for any of the losses, debts or obligations of the Partnership beyond the
amount of his Capital Commitment or be required to contribute any capital beyond
his Capital Commitment, or be required to lend any funds to the Partnership,
except that a Limited Partner may be required by law to return any or all of
that portion of his Initial Capital Contribution which has been distributed to
him, with interest, if necessary to discharge Partnership liabilities to all
creditors who extended credit or whose claims arose prior to such return of
capital.
4.2 Restrictions on Limited Partners.
A. No Limited Partner shall participate in the management and control
of the business of the Partnership, transact any business for the Partnership,
or attempt to do so; and
B. No Limited Partner shall have the power to represent, sign for or
bind the General Partner or the Partnership.
<PAGE>
4.3 Rights and Powers of Limited Partners.
A. Any Limited Partner may engage in or own an interest in any other
business ventures which may be engaged in the same or similar businesses as that
of the Partnership.
B. Each Limited Partner shall be entitled to participate in meetings
regarding the affairs of the Partnership and to do all other things with respect
to the business and affairs of the Partnership permitted by the Law.
4.4 Admission of Additional Limited Partners. No additional Limited
Partners shall be admitted to the Partnership; provided however, that the
General Partner may admit Substitute Limited Partners at any time pursuant to
Article IX.
ARTICLE V
GENERAL PARTNER
5.1 Rights and Powers.
A. The General Partner shall have the full and exclusive discretion,
right and power to manage, control and operate the Partnership and to do all
things necessary to operate the Business. The General Partner shall change and
convert the existing facility to its "Flanigan's Seafood Bar and Grill"
restaurant concept. During the term of this Agreement and while the General
Partner continues to act in the capacity of General Partner of the Partnership,
and while the Partnership continues to pay a servicemark fee equal to three (3%)
percent of gross sales from the Business, as provided in Section VII hereof, but
not thereafter, the General Partner shall permit the Partnership to use the
servicemark "Flanigan's Seafood Bar and Grill" for the Business and shall
supervise the day to day operation of the same under the same format and
standards as used in its existing "Flanigan's Seafood Bar and Grill"
restaurants. The Business shall include exclusive management of the restaurant
located within the business premises for the service of breakfast, lunch and
dinner each day.
B. The General Partner is specifically authorized and empowered, on
behalf of the Partnership, and without any further consent of the Limited
Partners, to do any act or execute any document or enter into any contract or
any agreement of any nature necessary or desirable, in the sole discretion of
the General Partner, in pursuance of the business and purposes of the
Partnership, including but not limited to the operation of the Business. Without
limiting the generality of the foregoing, and subject to the provisions of
Section 5.2, the General Partner shall have the following rights and powers to
act on behalf of the Partnership, which it may exercise at the cost, expense and
risk of the Partnership:
(i) Purchase such furniture, fixtures and equipment and make such
leasehold improvements as are required by the General Partner
for the renovation of the business premises of the Business.
(ii) Place record title to, or the right to use, the property or
other assets of the Partnership in the name or names of a
nominee or nominees for any purpose convenient or beneficial
to the Partnership.
<PAGE>
(iii) Execute contracts, leases, licenses, options to lease or
purchase, rental agreements, concession agreements, use
agreements and the like, of and with respect to Partnership
property.
(iv) Make elections under the tax laws of the United States or any
state as to the treatment of Partnership income, gains, loss,
deduction and credit, and as to all relevant matters.
(v) Provide or contract for such management services as may be
required for the operation of the Business, including but not
limited to full payroll services, all accounting and
bookkeeping services for the operation of the Business, as an
expense of the Business, (including the preparation and
forwarding of monthly sales tax returns, monthly liquor excise
taxes and annual federal partnership returns), and prompt
payment of all bills incurred in the normal operation of the
Business.
(vi) Establish overall business policy and objectives.
(vii) Provide overall executive supervision of operations of the
Business.
(viii) Generally supervise employees and others performing services
for the benefit of and in the operation of the Business.
(ix) Provide advise and arrange for advertising, display and sales
promotion of the Business.
(x) Oversee the operation of the Business in the areas of
management, sales and purchasing.
(xi) Arrange for the supervision of the daily operations of the
Business with responsibility for (1) hiring and firing
employees and other service personnel, (2) salary
administration and compensation policies, (3) incentive
programs, (4) inventory purchase and control, (5) pricing of
all goods and services, (6) business procedures, and (7)
controlling daily operational expenses.
(xii) Keep the Business insured against liability claims arising out
of the operation of the restaurant, as an operating expense of
the Business, with insurance coverage in an amount not less
than One Million Dollars ($1,000.000.00), combined single
limit, including liquor liability and products liability. The
General Partner shall cause the Partnership, itself and the
landlord of the business premises, to be named as additional
insureds on the liability insurance policy and provide the
Partnership, itself and the landlord of the business premises
with Certificates of Insurance as evidence of its compliance
with the provisions hereof.
(xiii) Purchase and maintain worker's compensation insurance for the
employees of the Business, as an operating expense of the
Business.
<PAGE>
(xiv) Keep the business premises reasonably insured against damage
by fire and other casualty and maintain insurance in
accordance with the provisions of the Lease for the business
premises. The General Partner shall cause the Partnership,
itself and the landlord of the business premises to be named
as additional insureds on the property insurance policy and
provide the Partnership, itself and the landlord of the
business premises with Certificates of Insurance as evidence
of its compliance with the provisions hereof.
(xv) Keep the personal property, fixtures and equipment of the
Business reasonably insured against damage by fire and other
casualty, in an amount equal to its highest insurable value,
with replacement cost endorsement, as an expense of the
Business.
(xvi) Keep the Business reasonably insured against loss of business
due to fire and other casualty with business interruption
insurance, in an amount to be determined by the General
Partner, as an expense of the Business.
(xvii) Arrange and pay all charges for telephone services, all
utilities, including without limitation, electrical, gas and
water, and cable or other electronic transmission necessary
for operation of the Business, as an expense of the Business.
(xviii) Arrange for trash collection and removal from the Business, as
an expense of the Business.
(xix) Make all normal repairs and replacements to the kitchen
equipment and interior, external, non-structural and
structural repairs and replacements of the Business and the
business premises, in order to keep the same in good condition
and good working order to the extent that the General Partner
deems it necessary and in accordance with the provisions of
the Lease for the business premises.
(xx) To pay, collect, compromise, arbitrate, resort to legal action
or otherwise adjust claims or demands of or against the
Partnership.
(xxi) To borrow money for any Partnership purpose and to make all
required payments of principal and interest with respect
thereto.
(xxii) To timely comply with and abide by all of those obligations,
terms, covenants and conditions imposed upon the Partnership
as tenant of the Lease for the business premises of the
Business, including but not limited to the timely payment of
rent, as an expense of the Business.
(xxiii) To promptly comply with, execute and fulfill all governmental
statutes, ordinances and regulations applicable to the
Partnership in connection with the Business, including without
limitation, all orders and requirements imposed by the Board
of Health, sanitation, fire and police departments including
without exception those for the correction, prevention and
abatement of nuisances in or upon or connected with the
business premises of the Business, as an expense of the
Business.
<PAGE>
The General Partner shall be responsible for the procurement and hiring
of all employees, agents and independent contractors required for on site
operation on a day to day basis including, but not limited to, a manager. The
General Partner shall control all of the day to day operations of the Business
and shall handle all negotiations, complaints, objections and other matters
involving the operation of the Business, the patrons of the Business, and the
employees and staff or any sublessee of or operator of any portion of the
Business in connection with activities at the Business. The General Partner
shall hire, instruct, maintain and supervise personnel to properly staff the
Business and shall maintain the Business, the interior, exterior, non-structural
and structural portions of the building it occupies, its fixtures and its
premises in a reasonable manner and condition, keeping it clean and serviceable,
including arranging for janitorial services as an expense of the Business. The
General Partner shall have the full responsibility to collect for all services
and sales from the Business, except as hereinafter provided, to daily deposit
all receipts in bank account(s) designated by the General Partner, shall arrange
for advertising for the Business to the extent deemed desirable by the General
Partner and maintain all necessary licenses, including liquor license, and
permits required in connection with the operation of the Business. The cost of
such activities, including license renewal fees, incurred for the Business shall
be borne by the Business.
In discharging the foregoing duties, the General Partner shall act and
conduct the Business in a reasonable manner. In order for the General Partner to
have the greatest opportunity to discharge such duties and to maximize profits
from the Business, the Limited Partners shall cooperate fully with the General
Partner and shall promptly provide the General Partner with all information and
assistance as the General Partner may reasonably request pursuant to this
Agreement. The General Partner shall devote such time to the Business as, in its
judgment, the supervision of the Business shall reasonably require, but shall
not be obligated to do or perform any act or thing in connection with the
Business not expressly set forth herein.
5.2 Certain Limitations. In addition to other acts expressly prohibited
by this Agreement or by the Law, the General Partner shall not have any
authority to:
A. Do any act in contravention of this Agreement;
B. Do any act which would make it impossible to operate the Business or
to otherwise carry on the ordinary business of the Partnership or any phase
thereof, except as expressly provided in this Agreement;
C. Assign the rights of the Partnership in specific property for other
than a Partnership purpose;
D. Admit a person or entity as a General Partner or as a Limited
Partner, except as otherwise provided in this Agreement;
E. Knowingly or willingly do any act which would cause the Partnership
to become an association taxable as a corporation;
5.3 Contracts with Affiliates. Except as herein specified, all services
which the General Partner is not obligated to perform under the terms of this
Agreement and the materials necessary for the operation of the Business may be
provided by the General Partner, or any entity affiliated with the General
Partner, and the General Partner shall be compensated for such services or
materials on such terms and conditions no less favorable than those obtainable
in the marketplace, and such amounts shall be deemed to be operating expenses of
the Business.
<PAGE>
5.4 Liability of General Partner. The General Partner shall be liable
to the Limited Partners for willful misconduct, bad faith or gross negligence,
but shall not be liable for errors in judgment or for any acts or omissions that
do not constitute willful misconduct, bad faith or gross negligence. In all
transactions for or with the Partnership, the General Partner shall act in good
faith and for the benefit of the Partnership. The Limited Partners shall look
solely to the assets of the Partnership for the return of their Initial Capital
Contributions and if the assets of the Partnership remaining after payment or
discharge of the debts and liabilities of the Partnership are insufficient to
return such Initial Capital Contributions, they shall have no recourse against
the General Partner for such purpose. The doing of any act or the failure to do
any act by the General Partner, the effect of which may cause or result in loss
or damage of the Partnership, if done pursuant to advise of legal counsel or
accountants employed by the General Partner on behalf of the Partnership, shall
be conclusively presumed not to constitute willful misconduct, bad faith or
gross negligence on the part of the General Partner.
5.5 Indemnification. The General Partner, including any employee of the
General Partner, shall not be liable for, and to the extent of its assets, the
Partnership shall indemnify the General Partner or any such employee, against
liabilities arising out of their activities as or for the General Partner
resulting from errors in judgment or any acts or omissions, whether or not
disclosed, unless caused by willful misconduct, bad faith or gross negligence;
provided, however, that this provision shall not constitute a waiver by the
Limited Partners of any rights it may have under applicable securities laws.
ARTICLE VI
ALLOCATION OF PROFITS AND LOSSES
6.1 General. All Partnership items of income, gain, loss, deduction,
credits, or tax preference items, (the "Tax Incidents"), shall be determined as
of the end of each fiscal year. As between a Partner and his transferee, Tax
Incidents for any fiscal year (or portion thereof, as the case may be) shall be
apportioned in accordance with the ratio that the number of days in the
Partnership fiscal year prior to the effective date of transfer bears to the
number of such days thereafter (including the effective date of the transfer).
6.2 Allocation. The Tax Incidents shall be allocated as follows:
A. Cost recovery deductions, amortization expense (including
amortization of organizational expenses, start up costs, intangible assets, or
other capital accounts), investment tax credits (including recapture of
investment tax credits), and tax preference items shall be allocated ninety-nine
percent (99%) to the Limited Partners and one percent (1%) to the General
Partner (in proportion to each Partner's Initial Capital Contribution), if
incurred with respect to the expenditure by the Partnership of the aggregate
Initial Capital Contributions of the Partners, (which shall be deemed expended
prior to any other amounts available to the Partnership), otherwise to the
Partners in accordance with their respective Participation Percentages.
B. Gains and losses from (i) sale, exchange or other disposition of all
or any substantial part of the Partnership property, or (ii) from liquidation of
the Partnership property following dissolution, as the case may be, shall be
allocated on an asset by asset basis, as follows:
<PAGE>
(1) Gains, to the extent of cost recovery deductions or
amortization expense claimed by the Partnership with respect
to the particular Partnership assets which are sold, exchanged
or otherwise disposed of, shall be allocated ninety-nine
percent (99%) to the Limited Partners and one percent (1%) to
the General Partner (in proportion to each Partner's Initial
Capital Contribution), if realized with respect to an asset
acquired by the Partnership through the expenditure of the
aggregate Initial Capital Contributions of the Partners,
(which shall be deemed expended prior to any other amounts
available to the Partnership), otherwise to the Partners in
accordance with their respective Participation Percentages;
(2) Gains in excess of cost recovery deductions or amortization
expense claimed by the Partnership with respect to the
particular Partnership assets which are sold, exchanged or
otherwise disposed of, shall be allocated to all Partners in
the same proportion that the Partners actually receive
distributions of proceeds from Net Sale Proceeds as provided
in Section 8.2 hereof, (except distributions pursuant to
Section 8.2(a)); and
(3) All losses shall be allocated ninety-nine percent (99%) to the
Limited Partners and one percent (1%) to the General Partner
(in proportion to each Partner's Initial Capital
Contribution), if realized with respect to an asset acquired
by the Partnership through the expenditure of the aggregate
Initial Capital Contributions of the Partners, (which shall be
deemed expended prior to any other amounts available to the
Partnership), otherwise to the Partners in accordance with
their respective Participation Percentages.
C. All Tax Incidents other than those specifically allocated by
subparagraph (A) and (B), ("Other Tax Incidents"), shall be allocated to the
Partners in the same proportion that the Partners actually receive in that same
fiscal year cash distributions from Net Cash Flow as provided in Section 8.2
hereof, (except cash distributions pursuant to Section 8.2(a)), (the "Cash
Distributions"), provided nevertheless as follows:
(1) Other Tax Incidents shall be allocated in any fiscal year to
the Partners so receiving Cash Distributions in the same
proportion that such Cash Distributions actually are received
only if such Cash Distributions actually distributed equal or
are greater than the Partnership's Net Income for the same
fiscal year;
(2) To the extent the Partnership's Net Income for that same
fiscal year exceeds such Cash Distributions, Other Tax
Incidents shall be allocated to the Partners in accordance
with their respective Participation Percentages, except that
(i) Net Income, in an amount equal to Cash Distributions
actually received, shall be allocated to the Partners so
receiving such Cash Distributions in the same proportion that
such Cash Distributions actually are received, and (ii) any
excess of Net Income over Cash Distributions actually received
shall be allocated to the Partners in accordance with their
respective Participation Percentages;
<PAGE>
(3) In the absence of any such Cash Distributions the Other Tax
Incidents shall be allocated to the Partners in accordance
with their respective Participation Percentages; and
(4) Notwithstanding clauses (1) and (2) of this Subparagraph (C),
Net Loss, (whether or not Cash Distributions are actually
made), shall be allocated to the Partners in accordance with
their respective Participation Percentages.
ARTICLE VII
ACCOUNTING
7.1 Accounting and Bookkeeping. The General Partner shall prepare and
keep, for a period of not less than three (3) years, generally accepted
accounting records, including cash registers having cumulative totals, bank
books and duplicate deposit slips, records showing inventories and receipts of
merchandise and other records from the operation of the Business which would
normally be required to be kept or examined by an independent accountant
pursuant to generally accepted auditing standards. The Limited Partners shall at
all times during normal business hours have free access to and the right to
inspect and copy the accounting records of the Business and/or Partnership, at
the principal place of business of the Partnership.
The General Partner, as an expense of the Business, shall prepare for
the Partnership and provide the Limited Partners with a complete monthly
accounting of the operation of the Business on a form similar to that attached
hereto as Exhibit "C", within thirty (30) days of the end of each month during
the term hereof. The monthly report shall also contain a statement of cumulative
gross sales from the operation of the Business for the current year of this
Agreement for purposes of determining any distributions pursuant to Article VIII
below. The General Partner shall also provide copies of such other accounting
records as may be reasonably requested by the Limited Partners and the Limited
Partners may inspect the originals thereof at any reasonable time.
The General Partner shall mail within seventy five (75) days after the
close of each fiscal year, an annual report to the Limited Partners, which
annual report shall constitute the accounting of the Partnership for such year.
The annual report shall contain unaudited financial statements, certified by the
Treasurer of the General Partner as accurate and correct, and shall otherwise be
in such form and have such content as the General Partner deems proper. Such
annual report shall include from every source, including net gains from
disposition or sale of Partnership properties.
Subject to the right of the Limited Partners to receive their share of
the distributions pursuant to Article VIII hereof, all receipts from the
operation of the Business, deposited into an account of the Partnership and/or
the General Partner at a bank designated by the General Partner, shall only be
withdrawn upon the direction of the General Partner, but cannot be unreasonably
withheld. The Partners anticipate that payment of liquor purchases, payroll and
general operations may be made from one or more additional accounts at one or
more banks, selected by the General Partner. Funds from those accounts shall
only be withdrawn by or at the direction of the General Partner.
7.2 Fiscal Year and Method of Accounting. The fiscal year of the
Partnership shall be a calendar year and the books of the Partnership for income
tax and accounting purposes shall be kept on the accrual method. All financial
determinations hereunder made by the General Partner with respect to the
calculation of profits and losses, all distributions pursuant to Article VIII
and other accounting decisions shall be determined by the General Partner in
accordance with generally accepted accounting principles consistently applied by
the General Partner in making said determinations.
<PAGE>
7.3 Audit. The Limited Partners shall have the right from time to time,
upon two (2) business days prior notice to the General Partner, to cause a
complete audit to be made of the business affairs conducted at the Business, and
all of the books and records referred to in Article VII hereof. Such audit shall
be performed by any person designated, selected and paid for by the Limited
Partners, except as otherwise provided herein. The General Partner shall make
all records and books relevant in any manner to the operation at the Business
and/or Partnership available for audit at 2841 West Cypress Creek Road, Fort
Lauderdale, Florida 33309. If the results of such audit show that the "Net
Income" for any month or year have been understated, the General Partner shall
immediately pay to the Limited Partners the additional amount due and if such
understatement amounts to three percent (3%) or more of "Net Income", then the
General Partner shall pay the cost of such audit, in addition to any deficiency
payment required. If the audit shows that the General Partner has overpaid or
the Limited Partners have received overpayment of any amount, the Limited
Partners shall immediately repay such amount to the General Partner. Any
accounting deficiencies revealed by such audit, which accounting deficiencies
shall be defined as any accounting practices not in accordance with generally
accepted accounting principles consistently applied, shall be corrected by the
General Partner within fifteen (15) days of its receipt of notice of such
deficiency.
7.4 Definitions.
A. "Gross Sales" shall mean the gross income, price, money, cover
charges, or other consideration charged or received from the operation of the
Business, whether in cash, on credit, barter, exchange, or otherwise.
Gross sales as used herein shall not include, and the General Partner
shall deduct from its calculations of gross sales, to the extent it has been
included:
(i) Any sales or excise tax imposed by any governmental authority
upon customers and added to the price of a sale or service and
collected from the customer and in turn paid to such
governmental authority;
(ii) The amount of any credit or refund for any merchandise
returned or exchanged or any allowance made for loss of or
damage to merchandise sold but not in excess of original cost
and only to the extent that it was previously included in the
calculation of gross sales;
(iii) Fees or discounts paid to bona fide credit card agencies;
(iv) Amounts paid to third party vending machine and coin operated
devise operators as their share of proceeds from such machines
and device; and
(v) Complimentary and/or discounted sales made at the direction of
the General Partner, including but not limited to discounted
sales to the employees of the Business.
B. "Operating Expenses" shall mean all cash expenses and liabilities
incurred in the operation of the Business, and shall include, by way of example
and without limitation hereby, rent, servicemark fee, personal property taxes on
personal property, fixtures and equipment used in the Business; liability
<PAGE>
insurance; real estate taxes; hazard insurance; trash collections; cleaning
services; accounting and bookkeeping fees; advertising; telephone charges;
utilities, including but not limited to electric, water and gas; cable; salaries
for personnel employed at the business premises only; repairs and maintenance of
kitchen equipment, furniture, fixtures, equipment and personal property used in
the Business; repairs and maintenance of the interior and exterior of the
business premises; cost of inventory; liquor license renewal fees; but excluding
any allocation of salaries and expenses of "off-site" personnel of the General
Partner.
7.5 Tax Matters.
A. The General Partner shall cause, as a part of its bookkeeping and
accounting responsibilities, to be prepared and filed all income tax returns for
the Partnership on an accrual basis. Necessary tax information shall be provided
to the Limited Partners.
B. In connection with the assignment of a Limited Partner's interest in
the Partnership permitted by Article X hereof, the General Partner, (in its sole
discretion), shall have the right, but shall not be obligated, on behalf of the
Partnership and at the time and in the manner provided by Section 754 of the
Code, (or any successor section thereto), and the Regulations thereunder, to
make an election to adjust the basis of Partnership property in the manner
provided in Sections 734(b) and 743(b) of the Code, (or any successor sections
thereto).
7.6 Contracting for Accounting Services. The General Partner shall, as
an expense of the Business, provide the accounting and bookkeeping services
provided in this Article VII at the same rate charged to its other franchisees.
ARTICLE VIII
DISTRIBUTIONS
8.1 Distributions of Net Cash Flow. All Net Cash Flow, if any, realized
by or available to the Partnership shall first be applied or added to a
reasonable reserve retained for working capital needs or to provide funds for
contingencies and expenses of the Partnership, (all as determined in the sole
discretion of the General Partner or as required by any loan agreement or
instrument of the Partnership), and the balance, if any, shall be distributed,
(from time to time in the sole discretion of the General Partner, but in the
event, no less frequently than quarterly), in the following order of priority to
the extent available:
A. To the General Partner in repayment of the entire principal amounts
of any outstanding General Partner's loans, together with all accrued but unpaid
interest thereon, first on account of interest accrued thereon and then on
account of the principal amounts thereof;
B. To the General Partner in reduction of its then outstanding
Additional Capital Balance;
C. To the Limited Partners, until such time as the Limited Partners
have received the aggregate sum of One Million Eight Hundred Seventy Five
Thousand Dollars ($1,875,000.00), which aggregate sum shall be reduced by an
amount equal to the amount of initial working capital returned by the
Partnership to the Limited Partners, a sum equal to the amount necessary to
<PAGE>
increase the aggregate distribution to the Limited Partners for the fiscal year
to Four Hundred Sixty Eight Thousand Seven Hundred Fifty Dollars ($468,750.00)
shall be paid to the Limited Partners. Thereafter, any remaining amounts shall
be distributed to the Partners in accordance with their respective Participation
Percentages; and
D. Once the Limited Partners have received the aggregate sum of One
Million Eight Hundred Seventy Five Thousand Dollars ($1,875,000.00), which
aggregate sum shall be reduced by an amount equal to the amount of initial
working capital returned by the Partnership to the Limited Partners, any
remaining amounts shall be distributed to the Partners in accordance with their
respective Participation Percentages.
8.2 Distributions of Net Sale Proceeds. All Net Sale Proceeds, if any,
realized by or available to the Partnership shall first be applied or added to a
reasonable reserve or escrow account retained to provide funds for contingencies
and expenses of the Partnership, (all as determined by the General Partner or as
required by any loan, escrow or other agreement or instrument of the
Partnership), and the balance, if any, shall be distributed in the following
order of priority to the extent available:
A. To the General Partner, in repayment of the entire principal amounts
of any outstanding General Partner's loans, together with all accrued but unpaid
interest thereon, first on account of interest accrued thereon and then on
account of the principal amounts thereof;
B. To the General Partner in reduction of its then outstanding
Additional Capital Balance, except as provided in Subparagraph E. of this
section;
C. To the Partners in reduction of their then outstanding Capital
Balances, (in proportion to the respective amounts of any such Capital
Balances), except as provided in Subparagraph E. of this section;
D. Any remaining amounts (i) fifty one percent (51%) thereof to the
Limited Partners and (ii) forty nine percent (49%) to the General Partner; and
E. Notwithstanding anything to the contrary in the above priority
order, if there is an insufficient balance available to fully return to each
Partner an amount equal to his then outstanding Capital Balance, the balance, if
any, shall be distributed to the Partners in proportion to the combined amount
of their then outstanding Capital Balance.
ARTICLE IX
TRANSFER OF PARTNERSHIP INTERESTS
9.1 General Partner.
A. The General Partner shall not sell, assign, or otherwise dispose of
all or any portion of its interest as General Partner in the Partnership, or
enter into any agreement as a result of which any person, firm or corporation
shall become interested with it in its interest in the Partnership without the
prior consent in writing of the Limited Partners. No person shall be admitted as
a substitute or additional General Partner without the prior written consent of
the General Partner and the Limited Partners as set forth herein. The General
Partner may not retire or withdraw as a General Partner unless it designates a
<PAGE>
nominee willing to serve as a General Partner which shall be an individual or
corporation having the capacity to serve as such and who is able to meet any
requirements then imposed by the Code or any rulings or regulations thereunder
with respect to general partners or limited partnerships in order that the
Partnership not become an association taxable as a corporation. Subject to the
foregoing, the General Partner shall give the Limited Partners at least ninety
(90) days notice of its proposed retirement or withdrawal as General Partner, in
which event the Partnership shall be dissolved and terminated as provided in
Article X hereof unless the Limited Partners select a new General Partner within
said ninety (90) day period. Such new General Partner may be, but need not be,
the nominee designated by the retiring or withdrawing General Partner.
B. The General Partner shall immediately be removed and cease to be a
General Partner upon the dissolution of the General Partner.
9.2 Substitute Limited Partner. A Limited Partner or the transferee of
a Limited Partner may transfer all, but not a part of his Unit(s) to a
Substitute Limited Partner provided:
A. That the transferee, if an individual, is at least 21 years of age;
B. That the transferee executes an instrument satisfactory to the
General Partner accepting and adopting the provisions and agreements set forth
herein and pays any reasonable expenses in connection with his admission as a
Substitute Limited Partner; and
C. That the General Partner shall consent to such transfer, which
consent may be given or withheld in the General Partner's sole discretion, and
shall be withheld if:
(1) In the opinion of counsel for the Partnership such transfer
would result in the close of the Partnership's taxable year
with respect to all Partners, in the termination of the
Partnership within the meaning of Section 708(b) of the Code,
or in the termination of its status as a partnership under the
Code; or
(2) In the opinion of such counsel such transfer would be in
violation of the Securities Act of 1933, as amended, or the
securities laws of any other jurisdiction.
9.3 Death, etc. of a Limited Partner. Upon the death, bankruptcy, legal
incompetency or insolvency of a Limited Partner, (or, in the case of a Limited
Partner that is a partnership, joint venture, association, corporation or trust,
the dissolution of such Limited Partner), the personal representative, guardian
or other successor in interest of such Limited Partner shall have the right of
the Limited Partner for the sole purpose of settling the estate of such person
pursuant to the provisions of Section 9.2, but such assignee may become a
Substitute Limited Partner in the Partnership only in accordance with the
provisions of Section 9.2.
9.4 Effective Date of Transfers. Permissible transfers of a Limited
Partner's Units shall be effective for purposes of allocations of distributions,
profits and losses on the first day of the fiscal quarter following compliance
with Section 9.2 and following amendment of this Agreement as required by the
Law. Until such effective date, the General Partner may act and proceed as if no
transfer had been made.
<PAGE>
9.5 Transfers Other Than in Accordance Herewith. No transfers of Units
or any part thereof which is in violation of this Article IX shall be valid or
effective, and the Partnership shall not recognize the same for the purposes of
making allocations or distributions of profits, losses, return of Capital
Contribution or other distribution with respect to such Units or part thereof.
The Partnership may enforce this provision either directly or indirectly or
through its agents by entering an appropriate stop-transfer order on its books
or otherwise refusing to register or transfer or permit the registration or
transfer on its books of any proposed transfers not in accordance with this
Article IX.
ARTICLE X
DISSOLUTION AND SUCCESSOR PARTNERSHIP
10.1 Dissolution of Partnership. The Partnership shall be dissolved
upon the earlier occurrence of any of the following events:
A. The bankruptcy, insolvency, liquidation or dissolution of the
General Partner;
B. Upon the written consent of all Partners;
C. The sale of all or substantially all of the assets of the
Partnership;
D. Pursuant to the provisions of Article II and IX hereof; or
E. Otherwise by operation of law.
10.2 Successor Partnership. If the Partnership is dissolved or to be
dissolved for any reason specified in Section 10.1, and any Limited Partner
shall deliver to each of the other Limited Partners within thirty (30) days of
such event, a written notice demanding that a meeting of Limited Partners be
held at the principal place of business of the Partnership at the time set forth
in such notice (which shall be not less than ten (10) nor more than thirty (30)
days after the date of such notice) the Limited Partners shall hold such
meeting. Limited Partners attending such meeting, either in person or by proxy,
and having an aggregate Limited Partner Percentage of not less than one hundred
percent (100%) may continue the business of the Partnership and reconstitute the
Partnership as a successor limited partnership with a new General Partner having
the capacity to serve as such and who is able to meet any requirements then
imposed by the Code or any rulings or regulations thereunder with respect to
general partners of limited partnerships in order that the Partnership not
become an association taxable as a corporation. If such Limited Partners shall
exercise such right to continue the business of the Partnership, the person
appointed by them as the new General Partner and each of the Limited Partners
shall execute, acknowledge and file a Limited Partnership Certificate and
Agreement. The Limited Partnership Certificate and Agreement shall contain
substantially the same provisions as those contained herein, except that the new
General Partner shall be allocated such share of the profits, losses and
distributions of the Partnership as the Limited Partners appointing such new
General Partner shall determine. Such new General Partner shall indicate his
acceptance of the appointment by the execution of such Limited Partnership
Certificate and Agreement.
<PAGE>
10.3 Procedure. Unless the Business of the Partnership is continued
pursuant to Section 10.2, upon the dissolution of the Partnership, the General
Partner or the person required by law to wind up the Partnership's affairs shall
cause the cancellation of this Agreement and shall liquidate the assets of the
Partnership and apply the proceeds of such liquidation in the order of priority
provided in Article VIII of this Agreement, unless the law requires distribution
be made in a different order in which case the assets of the Partnership shall
be distributed in accordance with the law.
ARTICLE XII
LIMITED POWER OF ATTORNEY
12.1 Appointment. Each Limited Partner hereby makes, constitutes and
appoints the General Partner his true and lawful attorney-in-fact for him and in
his name, place and stead and for his use and benefit, from time to time:
A. To make all agreements amending this Agreement, as now or hereafter
amended, that may be appropriate to reflect or effect, as the case may be, the
following:
(1) A change of the name or the location of the principal place of
business of the Partnership;
(2) The transfer or acquisition of any Units by a Limited Partner
in any manner permitted by this Agreement;
(3) A person becoming a Substitute Limited Partner of the
Partnership as permitted by this Agreement;
(4) A change in any provision of this Agreement effected by the
exercise by any person of any right or rights hereunder;
(5) The dissolution of the Partnership pursuant to this Agreement;
(6) Such amendments which are of an inconsequential nature and do
not affect the rights of the Limited Partners in any material
respect;
(7) To execute such certificates, instruments and documents as may
be required or may be appropriate in connection with the use
of the name of the Partnership by the Partnership; and/or
(8) To execute such certificates, instruments and documents as may
be required, or as may be appropriate for the Limited Partner
to make to reflect:
(a) A change in the name or address of such Limited
Partner;
(b) Any changes in or amendments of this Agreement, or
pertaining to the Partnership, of any kind referred
to in this Section 12.1; and
(c) Any other changes in or amendments of this Agreement
but only if and when the consent thereto has been
obtained from the General Partner and Limited
Partners, having the aggregate Limited Partnership
Percentage required by Section 13.6 hereof.
<PAGE>
B. Each of the agreements, certificates, instruments and documents made
pursuant to Section 12.1(A) shall be in such form as the General Partner and
counsel for the Partnership shall deem appropriate. The powers conferred by
Section 12.1(A) to execute agreements, certificates, instruments and documents,
shall be deemed to include without limitation the powers to sign, acknowledge,
swear to, verify, deliver, file, record or publish the same.
C. Each Limited Partner authorizes the General Partner as such
attorney-in-fact to take any further action which the General Partner shall
consider necessary or advisable in connection with any action taken pursuant to
this Section 12.1 hereby giving the General Partner as such attorney-in-fact
full power and authority to do and perform each and every act or thing
whatsoever requisite or advisable to be done in and about any action taken
pursuant to this Section 12.1 as fully as such Limited Partner might or could do
if personally present, and hereby ratifying and confirming all that the General
Partner as such attorney-in-fact shall lawfully do or cause to be done by virtue
of this Section.
12.2 Irrevocability; Manner of Exercise. The power of attorney granted
pursuant to Section 12.1:
A. Is a special power of attorney coupled with an interest and is
irrevocable;
B. May be exercised by the General Partner as such attorney-in-fact by
listing all of the Limited Partners executing any agreement, certificate,
instrument or document with the single signature of the President or any Vice
President of the General Partner acting as attorney-in-fact for all of them; and
C. Shall survive the transfer by a Limited Partner of all or a portion
of his interest in the Partnership, except that where the purchaser, transferee
or assignee thereof with the consent of the General Partner is admitted as a
Substitute Limited Partner, the power of attorney shall survive the transfer for
the sole purpose of enabling such attorney-in-fact to execute, acknowledge and
file any such agreement, certificate, instrument or document necessary to effect
such substitution.
ARTICLE XIII
MISCELLANEOUS PROVISIONS
13.1 Notices. All notices or other communications required or permitted
to be given pursuant to the Agreement shall in the case of notices or
communications required or permitted to be given to Limited Partners, be in
writing and shall be considered as properly given or made if personally
delivered or if mailed by United States certified or registered mail, return
receipt requested, postage prepaid, or if sent by prepaid telegram, and
addressed to such Limited Partner's address for notices as it appears on the
records of the Partnership, and in the case of notices or communications
required or permitted to be given to the General Partner, shall be in writing
and shall be considered as properly given or made if personally delivered or if
mailed by United States certified or registered mail, return receipt requested,
postage prepaid, addressed to the General Partner at the principal place of
business of the Partnership. Any Limited Partner may change his address for
notices by giving notice in writing, stating his new address for notices, to the
<PAGE>
General Partner, and the General Partner may change its address for notices by
giving such notice to all Limited Partners. Commencing on the tenth (10th) day
after the giving of such notice, such newly designated address shall be such
Partner's address for the purpose of all notices or other communications
required or permitted to be given pursuant to the Agreement.
13.2 Choice of Law. This Agreement and all rights and liabilities of
the parties hereto with reference to the Partnership shall be subject to,
construed in accordance with and governed by the laws of the State of Florida.
To the extent that any provision hereof is in contravention with the Law, as in
effect from time to time, the provisions of the Law shall supersede and replace
any provision herein which is in contravention thereof. Additionally, the
appropriate forum and jurisdiction for any legal action shall be the Courts of
the County of Broward, State of Florida, and each party consents to such
jurisdiction.
13.3 Titles and Captions. All article, section and subsection titles or
captions contained in this Agreement are inserted for convenience only and are
not deemed part of the text hereof.
13.4 Sole Agreement. This Agreement constitutes the entire
understanding of the parties hereto with respect to the subject matter hereof.
13.5 Execution in Counterparts. This Agreement may be executed in any
number of counterparts with the same effect as if all parties had all signed the
same document. All counterparts shall be construed together and shall constitute
one (1) agreement.
13.6 Amendments. The General Partner may submit to the Partners in
writing the text of any proposed amendment to this Agreement and a statement by
the proposer of the purpose of such amendment. The General Partner shall include
in any submission its view as to the proposed amendment. Any such amendment
shall be adopted if, within ninety (90) days after the notice of such amendment
is given to all Partners, the General Partner shall have approved such amendment
in writing and shall have received written approval thereof from Limited
Partners having a Limited Partnership Percentage aggregating eight percent (80%)
or more. A written approval may not be withdrawn or voided once it is filed with
the General Partner. A Limited Partner filing a written objection may thereafter
file a valid written approval. The date of adoption of an amendment pursuant to
this Section 13.6 shall be the date on which the General Partner shall have
received the requisite written approvals. Any proposed amendment which is not
adopted may be resubmitted. In the event any proposed amendment is not adopted,
any written approval received with respect thereto shall become void and shall
not be effective with respect to any resubmission of the proposed amendment.
Notwithstanding the foregoing provisions of this Section 13.6, no amendment may,
without the prior written approval of all Partners;
A. Enlarge the obligations of any Partner under this Agreement;
B. Enlarge the liability of the General Partner to the Limited
Partners;
C. Amend this Article 13.6;
D. Alter the Partnership in such manner as will result in the
Partnership no longer being classified as a limited partnership for Federal
income tax purposes; or
E. Reduce any requirements for the prior approval of Substitute Limited
Partners set forth in this Agreement.
<PAGE>
13.7 Waiver of Action for Partition. Each of the parties hereto
irrevocably waives during the term of the Partnership any right that he may have
to maintain any action for partition with respect to the property of the
Partnership.
13.8 Assignability. Subject to the restrictions on transferability
contained herein, each and all of the covenants, terms, provisions and
agreements herein contained shall be binding upon and inure to the benefit of
the successors, assigns and legal representatives of the respective parties
hereto.
13.9 Independent Activities. Except as otherwise provided herein, the
General Partner and its affiliates, and its (and its affiliates'), officers,
directors, shareholders and employees, and each Limited Partner may,
notwithstanding the existence of this Agreement, engage in whatever activities
they choose, whether the same be competitive with the Business of the
Partnership or otherwise, without having or incurring any obligation to offer
any interest in such activities to any party hereto. Neither this Agreement nor
any activity undertaken pursuant hereto shall prevent such persons from engaging
in such activities, and as a material part of the consideration for the General
Partner's execution hereof, each Limited Partner hereby waives, relinquishes and
renounces any such right or claim of participation. Nothing in the foregoing,
however, shall be deemed to reduce any of the liabilities of the General Partner
under this Agreement.
13.10 Right to Rely on Authority of General Partner. No person dealing
with the General Partner shall be required to determine its authority to make
any undertaking on behalf of the Partnership, nor to determine any fact or
circumstance bearing upon the existence of its authority.
13.11 Arbitration. Except as otherwise provided in this Agreement, any
dispute or controversy arising out of or relating to this Agreement shall be
determined and settled by arbitration in the City of Fort Lauderdale, Florida,
in accordance with the rules of the American Arbitration Association then in
effect, and judgment upon the award rendered by the arbitrator(s) may be entered
in any court of competent jurisdiction. Except as set forth in Sections 5.4 and
5.5, the expenses of the arbitration shall be borne equally by the parties to
the arbitration.
13.12 Gender and Number. Whenever the context requires, the gender of
all words used herein shall include the masculine, feminine and neuter and the
singular and plural of all words shall include the singular and plural.
13.13 Meetings. The Partnership shall hold an annual meeting in each
fiscal year of its existence on such date and at such place and time as the
General Partner shall determine, notice of the date and time to be given to all
Limited Partners whose addresses are on record with the General Partner not
later than fourteen (14) days prior to such date. Notwithstanding the foregoing,
at any time or from time to time, Limited Partners having a Limited Partner
Percentage aggregating fifty percent (50%) may by written notice to the General
Partner specifying in general terms the subject to be considered require the
General Partner to call, or the General Partner may on its own motion call, a
special meeting of the Limited Partners and the General Partner shall within ten
(10) days after any such notice is given, give notice of such special meeting in
the same manner as is required for the annual meeting including in such notice a
copy of the notice requiring the call. Any Limited Partner shall have the right,
upon notice in writing, to require the General Partner to furnish by mail a list
of the names, addresses and respective interest in the Partnership of all other
Limited Partners in the Partnership as shown on the records of the Partnership
at the time of the notice. Any Limited Partner, or his representative, shall
have the right to inspect and copy the names and addresses of all other Limited
Partners in the Partnership.
<PAGE>
13.14 Severability. If any provision of this Agreement, or the
application thereof, shall, for any reason and to any extent, be invalid or
unenforceable, or contrary to law, the remainder of this Agreement and the
application of such provision to other persons or circumstances shall not be
affected thereby, but rather shall be enforced to the maximum extent permissible
under applicable law.
<PAGE>
IN WITNESS WHEREOF, this Limited Partnership Certificate and Agreement
has been sworn to and executed as of the date above written.
GENERAL PARTNER:
FLANIGAN'S ENTERPRISES, INC.
________________________________ By: _______________________________
Joseph G. Flanigan, President
- --------------------------------
STATE OF FLORIDA )
) ss:
COUNTY OF BROWARD )
The foregoing instrument was acknowledged before me this date by JOSEPH
G. FLANIGAN, as President of FLANIGAN'S ENTERPRISES, INC. on behalf of the said
corporation. He is well known to me or produced ________________ as
identification.
WITNESS my hand and official seal on this the _____ day of June, 1997.
----------------------------------
NOTARY PUBLIC - State of Florida
My commission expires:
SEE SIGNATURE PAGES FOR LIMITED PARTNERS ATTACHED HERETO
<PAGE>
EXHIBIT "C"
SIGNATURE PAGE FOR
CIC INVESTORS #60, LTD. - INDIVIDUAL(S)
(a Florida limited partnership)
The undersigned agrees to become a limited partner in the above
referenced limited partnership and shall be bound by the terms of the Limited
Partnership Certificate and Agreement of the above referenced limited
partnership.
<TABLE>
<CAPTION>
Amount of
Name of Limited Partner(s) Capital Commitment Date Signed
- -------------------------- ------------------ -----------
<S> <C> <C>
/s/Bailine, Michael 15,000.00 06/26/97
/s/Bell, Germaine and Thomas 5,000.00 07/02/97
/s/Benson, Robert 5,000.00 06/10/97
/s/Bernstein, Ilene 10,000.00 06/24/97
/s/Bezecny, George 20,000.00 06/30/97
/s/Bezecny, George, Jr. 10,000.00 06/30/97
/s/Blane, Leslie 10,000.00 06/05/97
/s/Bucci, August 10,000.00 07/21/97
/s/Chisolm, Edward 5,000.00 07/10/97
/s/Deininger, Judith 5,000.00 07/07/97
/s/Firtell, Roberta 10,000.00 07/02/97
/s/Fitts, Jack A. 10,000.00 06/03/97
/s/Flanigan, Edward 10,000.00 06/27/97
/s/Flanigan, James 50,000.00 07/07/97
/s/Flanigan, Michael B. 85,000.00 07/07/97
/s/Flanigan, Joseph G. 250,000.00 06/26/97
/s/Flanigan, Patrick 25,000.00 06/19/97
/s/Goldstein, Danny 10,000.00 08/12/97
/s/Govoni, Jeffrey and Pamela 20,000.00 06/09/97
/s/Griffin, Joseph 5,000.00 07/07/97
/s/Hipskind, Richard, Trustee 5,000.00 07/07/97
/s/Richard E. Hipskind Revocable Trust, dated 12/18/90
/s/Hollister, Jean K. 25,000.00 06/26/97
/s/Jones, Kathleen 5,000.00 06/30/97
/s/Kastner, Dana (minor) 5,000.00 06/28/97
/s/Kastner, Gitta 25,000.00 05/31/97
/s/Kastner, Leslie and Jeffrey 25,000.00 06/28/97
/s/Kastner, Eileen Wendy 25,000.00 07/01/97
/s/Kastner, Shaun (minor) 5,000.00 06/28/97
/s/Kauffman, Clare 5,000.00 06/30/97
/s/King, Patrick 20,000.00 06/24/97
/s/Krasnick, Art 10,000.00 07/02/97
/s/LaMotta, Jake, Jr. 40,000.00 06/23/97
/s/Marsh, June and Stephen 10,000.00 05/31/97
/s/Moody, John 50,000.00 06/10/97
/s/Moretti, Davene 20,000.00 06/19/97
/s/Motta, Patricia and James 75,000.00 07/03/97
/s/Motta, Tanner (minor) 5,000.00 07/17/97
/s/Motta, Travis (minor) 5,000.00 07/17/97
/s/Motta, Tucker (minor) 5,000.00 07/17/97
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Amount of
Name of Limited Partner(s) Capital Commitment Date Signed
- -------------------------- ------------------ -----------
<S> <C> <C>
/s/O'Hara, Ed 25,000.00 07/15/97
/s/Patton, Gloria and William 10,000.00 06/24/97
/s/Picard, France and Jean 10,000.00 06/10/97
/s/Pults, Gale and Leon 35,000.00 06/04/97
/s/Quast, Janice 5,000.00 06/26/97
/s/Roberts, Faline 10,000.00 06/12/97
/s/Ross, Beverly and Emanuel 10,000.00 06/26/97
/s/Ruwitch, Robert 25,000.00 06/10/97
/s/Scott, Susan 25,000.00 07/15/97
/s/Yardley, Herbert 25,000.00 07/14/97
/s/Zimmerman, Rick and Sharyn 10,000.00 07/14/97
/s/Flanigan's Enterprises, Inc. 750,000.00 06/30/97
by Jeffrey D. Kastner, Asst. Sec.
</TABLE>
<PAGE>
EXHIBIT 10(w)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
Palm Beach Division
FLANIGAN'S ENTERPRISES, INC., a Florida ) CASE NO. 96-7484
corporation ) CIV-HURLEY
)
Plaintiff, ) Magistrate Lynch
)
vs. )
)
QUARTERDECK OF FORT LAUDERDALE, INC )
a Florida corporation, QUARTERDECK )
MANAGEMENT, L.C. a Florida limited company )
and PAUL B. FLANIGAN, and individual, )
)
Defendants. )
- ------------------------------------------------)
STIPULATED ORDER OF DISMISSAL PURSUANT TO MEDIATION
Upon the Mediator's Report, it is hereby ORDERED AND ADJUDGED as
follows:
1. Defendants shall pay to Plaintiff the sum of $110,000.00 within ten
(10) business days of the date hereof.
2. Defendants and each of their officers, directors, shareholders,
agents, successors, assigns, licensees, and franchises, except as to Paul B.
Flanigan's interests in Plaintiff or Plaintiff's franchises, are enjoined from
use of:
a. Any and all publicly visible or audible (in ads, menus,
etc.,) use of the "Flanigan" or "Flanigan's name/mark, including but not limited
to public displays of the name "Paul B. Flanigan" and "Flanigan Family," except
as part of private corporate documents and the like or in response to an
ownership inquiry.
<PAGE>
CASE NO. 96-7484 CIV-HURLEY
b. Any green awning or mansard roof, except awning with green,
white (or yellow), and any other colors together (three colors or more) in
vertical striping of three colors or more, if green is one of three colors, in
proportions and frequency not to exceed green striping on and overall
substantially similar to Exhibit A, from 1996 Annual Report of Brinker
International, Inc.
c. Any green striping or accents except existing or
replacement door frames, window frames and trim.
d. Any green neon accents, except that green neon may be used
for the lettering of the "Quarterdeck" name and interior or patio beer-neon
signs and clocks.
e. Any tabletop/countertop surfaces bearing nautical maps.
f. Any display of fishing and/or diving equipment, i.e., rods,
lures, lobster traps or skin diving tanks.
g. Any "award-winning" demarkation unless there is a bona-fide
award.
h. More than 10 photographs per 1,000 square leasable gross
feet depicting fishing or skindiving activities as dead or alive trophy fish
catches shown and/or fishing equipment in use.
i. Any photographs of Joseph G. Flanigan and/or his wife,
sons, daughters, and their spouses.
j. Any menu or daily special having a name similar to "Mexican
Monday," "C.B.S Night," "Wing-it Wednesday," " Chicken Out" or "Steak Out."
2
<PAGE>
CASE NO. 96-7484 CIV-HURLEY
k. Any specials offered or featuring: free nachos with first
pitcher of beer on Monday, clams-beer-shrimp combo on Tuesday, free chicken
wings with every pitcher of beer on Wednesday.
l. If a customer asks for Quarterdeck to honor a Flanigan's
special, the customer will be made aware that the special is Flanigan's, not
Quarterdeck's and they are not affiliated; however, Quarterdeck may honor the
Flanigan's special at the customer's request.
3. Defendants shall have 120 days from the date hereof to effect all
changes called for by paragraph 2, except as to awnings Defendants shall have
180 day from the date hereof to make the changes provided for herein. Upon
expiration of such period, Defendants shall deliver to Plaintiff all existing
(on-order shall be canceled) nautical tables and counters (approximately 75)
from Defendant's locations in good condition in exchange for the sum of
$20,000.00 made payable to Quarterdeck of Fort Lauderdale, Inc.
4. The parties each release each other, their officers, directors,
shareholders, agents, attorneys, successors, assigns, licensees, franchisees,
and affiliates from all claims and counterclaims that have been brought or could
have been brought, including claims and counterclaims for franchise issues,
securities issues, attorney conflict-of-interest issues, and all other claims
related to this litigation existing as of the date hereof.
5. This case is dismissed, each party bearing its own attorneys fees
and costs, and the parties may not bring contempt motions for alleged violations
of the terms hereof.
3
<PAGE>
CASE NO. 96-7484 CIV-HURLEY
6. Any and all press release(s) concerning the subject litigation shall
be joint and shall be approved in advance by Plaintiff and Defendants.
So Stipulated and Agreed to:
MALLOY & MALLOY, P.A. TEW & BEASLEY, LLP
2800 S.W. Third Avenue 201 S. Biscayne Boulevard
Miami, Florida 33129 Miami Center - Suite 2600
Miami, Florida 33131
By: /s/JOHN CYRIL MALLOY By: /s/MARK F. RAYMOND
-------------------- ------------------
John Cyril Malloy, III, Esq. Mark F. Raymond, Esq.
Plaintiff: Defendants:
By; /s/JOSEPH G. FLANIGAN By: /s/PAUL B. FLANIGAN, Pres.
--------------------- --------------------------
Joseph G. Flanigan, President Paul B. Flanigan, President
DONE AND ORDERED this 30th day of October, 1997
/s/DANIEL T. K. HURLEY
----------------------
DISTRICT COURT JUDGE
Daniel T. K. Hurley
Copies Furnished To:
Mark F. Raymond, Esq
John Cyril Malloy, III, Esq.
4
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-27-1997
<PERIOD-END> SEP-27-1997
<CASH> 1,334,000
<SECURITIES> 0
<RECEIVABLES> 248,000
<ALLOWANCES> (124,000)
<INVENTORY> 1,253,000
<CURRENT-ASSETS> 3,000,000
<PP&E> 11,270,000
<DEPRECIATION> (7,565,000)
<TOTAL-ASSETS> 8,382,000
<CURRENT-LIABILITIES> 2,658,000
<BONDS> 2,085,000
0
0
<COMMON> 210,000
<OTHER-SE> 3,429,000
<TOTAL-LIABILITY-AND-EQUITY> 8,382,000
<SALES> 19,219,000
<TOTAL-REVENUES> 20,320,000
<CGS> 9,491,000
<TOTAL-COSTS> 19,268,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 21,000
<INTEREST-EXPENSE> 145,000
<INCOME-PRETAX> 1,106,000
<INCOME-TAX> 13,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,093,000
<EPS-PRIMARY> 1.17
<EPS-DILUTED> 1.08
</TABLE>
