SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (FEE REQUIRED) For the fiscal year ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
Commission File No. 0-14311
FAMILY STEAK HOUSES OF FLORIDA, INC.
(exact name of registrant as specified in its charter)
Florida No. 59-2597349
(State of Incorporation) (I.R.S. Employer
Identification)
2113 Florida Boulevard
Neptune Beach, Florida 32266
(Address of Principal Executive Offices)
Registrant's telephone number, including area code: (904) 249-4197
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 Par Value
(Title of Class)
------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
YES [ ] NO [X]
As of March 5, 1998, 2,367,768 shares of Common Stock of the registrant were
outstanding. The aggregate market value of such voting Common Stock (based upon
the closing sale price of the registrant's Common Stock on the NASDAQ National
Market System on March 5, 1998, as reported in The Wall Street Journal) held by
non-affiliates of the registrant was approximately $3,462,823.
Documents Incorporated by Reference
Portions of the registrant's 1997 Annual Report to Shareholders are incorporated
by reference into Part II. Portions of the Proxy Statement for the registrant's
1998 Annual Meeting of Shareholders are incorporated by reference into Part III.
<PAGE>
PART I
ITEM 1. BUSINESS
General
Family Steak Houses of Florida, Inc. ("Family" or the "Company"), is the
sole franchisee of Ryan's Family Steak House restaurants ("Ryan's restaurants")
in the State of Florida.
The Company's first Ryan's restaurant was opened in Jacksonville, Florida,
in May 1982. As of December 31, 1997, the Company operated 25 Ryan's restaurants
in Florida, including nine in north Florida and sixteen in central and west
Florida.
A Ryan's restaurant is a family-oriented restaurant serving high-quality,
reasonably-priced food in a casual atmosphere with server-assisted service.
Ryan's restaurants serve lunch and dinner seven days a week and offer a variety
of charbroiled entrees, including various cuts of beef, chicken, and seafood.
Most of the restaurants serve a brunch on weekends only. Each restaurant
features a diverse selection of items from either a series of "scatter bars" or
a 65-foot, self-service, all-you-can-eat Mega Bartm, and a separate fresh bakery
and dessert bar. In addition to traditional salad bar items, the scatter bars or
Mega Barstm offer hot meats, pre-made salads, soups, baked potatoes with
toppings, cheeses and a variety of vegetables.
The Company believes that its operating strategy of selling top-quality
meals at reasonable prices, at food costs to the Company which are higher than
the industry average, creates a perception of value to its customers.
The Company operates its Ryan's restaurants under a Franchise Agreement
with Ryan's Family Steak Houses, Inc., ("Ryan's", or the "Franchisor") which
grants the Company the exclusive right to operate Ryan's Family Steak House
restaurants throughout North and Central Florida.
Company History
The Company was formed by the combination, effective February 1986, of six
limited partnerships, each of which owned and operated a Ryan's restaurant
franchise. In April 1986, the Company issued 4,266,000 shares of its common
stock in exchange for the assets and liabilities of the predecessor partnerships
and 1,134,000 shares of its common stock to Eddie L. Ervin, Jr., in
consideration for Mr. Ervin assigning to the Company all of his rights under the
-2-
<PAGE>
Franchise Agreement, as defined below. The Company completed its initial public
offering of 4,500,000 shares of its common stock in 1986 resulting in net
proceeds to the Company of approximately $4,145,000.
Franchise Agreement
The Company operates its Ryan's restaurants under a Franchise Agreement
between the Company and the Franchisor dated as of September 16, 1987, which
Franchise Agreement amended and consolidated all previous franchise agreements
(as amended, the "Franchise Agreement"). The Franchise Agreement extends through
December 31, 2010 and provides for two additional ten-year renewal options. The
renewal options are subject to certain conditions, including the condition that
the Company has fully and faithfully performed its obligations under the
Franchise Agreement during its original term. Under the terms of the Franchise
Agreement, the Company has the right to use the registered mark "Ryan's Family
Steak House" and the right to use the Franchisor's techniques in the operation
of Ryan's Family Steak House restaurants.
In 1996, the Company and the Franchisor amended the Franchise Agreement.
The amended agreement requires the Company to pay a royalty fee of 3.0% through
December 2001 and 4.0% thereafter on the gross receipts of each Ryan's Family
Steak House restaurant. Total royalty fee expenses were $1,108,400, $1,138,600,
and $1,263,200, for the fiscal years ended December 31, 1997, January 1, 1997,
and January 3, 1996, respectively.
The Franchise Agreement requires the Company to operate a minimum number of
Ryan's restaurants on December 31 of each year. The Company has listed six
restaurants for sale. Failure to operate the minimum number of restaurants could
result in the loss of exclusivity rights to the Ryan's concept in the Company's
north and central Florida territory. The following schedule outlines the number
of Ryan's restaurants required to be operated by the Company on December 31 of
each year under the Franchise Agreement:
Number of
Restaurants Required to
End of Fiscal Year be in Operation
- ------------------ ---------------
1997 25
1998 26
1999 27
2000 28
2001 and subsequent years Increases by one each year
-3-
<PAGE>
Prior to July 1994, the Company held exclusive franchise rights to build
Ryan's restaurants in the State of Florida, with the exception of Panama City,
Florida and Escambia County, Florida, where the Franchisor has the right to
operate Ryan's restaurants. In July 1994 the Company relinquished the franchise
rights to most counties in northwest Florida and south Florida in exchange for
forgiveness of $500,000 in past due royalty fees. The Company has the right to
repurchase the exclusive franchise rights to these counties for $500,000 at any
time prior to June 30, 1998. In addition, the Franchisor agreed not to develop
any Ryan's restaurants in the south Florida territory prior to June 30, 1996.
Ryan's has not developed any restaurants in Florida as of March 13, 1998.
The Franchise Agreement contains provisions relating to the operation of
the Company's Ryan's restaurants. Upon the Company's failure to comply with such
provisions, the Franchisor may terminate the Franchise Agreement if such default
is not cured within 30 days of notice from the Franchisor. Termination of the
Franchise Agreement would result in the loss of the Company's right to use the
"Ryan's Family Steak House" name and concept and could result in the sale of the
physical assets of the Company to the Franchisor pursuant to a right of first
refusal. Termination of the Company's rights under the Franchise Agreement may
result in the disruption, and possibly the discontinuance, of the Company's
operations. The Company believes that it has operated and maintained each of its
Ryan's Family Steak House restaurants in accordance with the operational
procedures and standards set forth in the Franchise Agreement, as amended.
Operations of Ryan's Restaurants
Format. As of March 5, 1998, 24 of the Company's Ryan's restaurants are
located in free-standing buildings which vary in size from 7,500 to 12,000
square feet. One of the Company's Ryan's restaurants is located in a mall. Each
restaurant is constructed of brick or stucco walls, interior and exterior, with
exposed woodwork. The interior of each Ryan's restaurant contains a dining room,
a customer ordering area, and a kitchen. The dining rooms seat a total of
between 270 and 500 persons and highlight centrally located, illuminated scatter
bars or Mega Barstm and a fresh bakery bar. Each Ryan's restaurant has parking
for approximately 100 to 175 cars on lots of overall size of approximately
50,000 to 70,000 square feet.
The Ryan's restaurants operate seven days a week. Typical hours of
operation are from 11:00 a.m. to 9:00 p.m., Sunday through Thursday, and from
11:00 a.m. to 10:00 p.m.,
-4-
<PAGE>
Friday and Saturday. Restaurants that serve brunch open at 8:00 a.m. Saturday
and Sunday. In a Ryan's restaurant, the customer enters the restaurant, orders
from the menu, and then enters the dining room. Beverages are brought to the
table by servers. Entrees are cooked to order. The customer ordering the salad
bar is given unlimited access to the scatter bars or Mega Barstm and the bakery
dessert bar. Customers receive table service of the entree and beverage refills.
For the fiscal year ended December 31, 1997, the average weekly customer count
per restaurant was approximately 4,730 and the average meal price (including
beverage) was approximately $6.00.
Restaurant Management and Supervision. The Company manages the Ryan's
restaurants pursuant to a standardized operating and control system together
with comprehensive recruiting and training of personnel to maintain food and
service quality. In each Ryan's restaurant, the management group consists of a
general manager, a manager and one to three assistant managers, depending on
sales volume. The Company requires at least two members of the management group
on duty during all peak serving periods. Management-level personnel usually
begin employment at the manager trainee or assistant manager level, depending on
prior restaurant management experience. All new management-level personnel must
complete the Company's six-week training period prior to being placed in a
management position.
Each restaurant management group reports to a supervisor. Presently, the
supervisors each oversee the operations of six to seven restaurants. The
supervisors report directly to the Director of Operations. Communication and
support from all departments in the Company are designed to assist the
supervisors in responding promptly to local problems and opportunities.
All restaurant managers and supervisors participate in incentive programs
based upon the profitability of their restaurants and upon the achievement of
certain pre-set goals. The Company believes these incentive programs enable it
to operate more efficiently and to attract qualified managers.
Purchasing, Quality and Cost Control. The Company has a centralized
purchase control program which is designed to ensure uniform product quality in
all restaurants. The program also helps to maintain reduced food, beverage, and
supply costs. The Company purchases approximately 95% of the products used by
the Company's restaurants through the centralized purchase control program. USDA
choice grain-fed beef, the Company's primary commodity, is closely monitored by
the Company for advantageous purchasing and quality control. The Company
purchases beef through various producers and brokers both on a contract basis
and on a spot
-5-
<PAGE>
basis. Beef and other products are generally delivered directly to the
restaurants three times weekly, except for fresh produce, which is delivered
three to five times per week. The Company believes that satisfactory sources of
supply are available for all the items it regularly uses.
The Franchise Agreement requires that all suppliers to Ryan's restaurants
are subject to approval by the Franchisor. Through its relationship with the
Franchisor, the Company has obtained favorable pricing on the purchase of food
products from several suppliers. In June 1995, the Company renewed its agreement
with Kraft Foodservice, Inc. to serve as its primary supplier. Kraft was
subsequently purchased by Alliant Foodservice, Inc. The Alliant agreement has a
five-year term and is cancellable at any time with 60 days notice.
The Company maintains centralized financial and accounting controls for its
restaurants. On a daily basis, restaurant managers forward customer counts,
sales information and supplier invoices to Company headquarters. On a weekly
basis, restaurant managers forward summarized sales reports and payroll data.
Physical inventories of all food and supply items are taken weekly, and meat is
inventoried daily.
Development
General. The Company operated 25 Ryan's restaurants as of March 17, 1998.
Site Location and Construction. The Company considers the specific location
of a restaurant to be important to its long-term success. The site selection
process focuses on a variety of factors, including trade area demographics (such
as population density and household income level), an evaluation of site
characteristics (such as visibility, accessibility, and traffic volume), and an
analysis of the potential competition. In addition, site selection is influenced
by the general proximity of a site to other Ryan's restaurants in order to
improve the efficiency of the Company's field supervisors and potential
marketing programs. The Company generally locates its restaurants near or
adjacent to residential areas in an effort to capitalize on repeat business from
such areas as opposed to transient business.
The Company generally constructs its Ryan's restaurants using its
contracting subsidiary. For a new restaurant scheduled to be opened in 1998, the
Company may engage the Franchisor to serve as its general contractor to enable
the Company to take advantage of the Franchisor's purchasing power with respect
to construction material, and labor and its expertise in restaurant
construction. Management
-6-
<PAGE>
believes that by performing site selection and restaurant construction
internally or through the Franchisor, the Company can maintain better control of
site selection, real estate cost and construction performance. While the Company
has not required performance and payment bonds, it undertakes to closely
supervise and monitor all construction and confirm payment of subcontractors and
suppliers. New Ryan's restaurants generally are completed within three months of
the date on which construction is commenced.
Management of New Restaurants. When a new Ryan's restaurant is opened, the
principal restaurant management positions are staffed with personnel who have
prior experience in a management position at another of the Company's
restaurants and who have undergone special training. Prior to opening, all staff
personnel at the new location undergo one week of intensive training conducted
by a training team. Such training includes preopening drills in which test meals
are served to the invited public. Both the staff at the new location and
personnel experienced in store openings at other locations participate in the
training and drills.
Joint Venture
In December 1994, the Company formed a new subsidiary, Family Steak JV,
Inc. which aquired a 50% ownership in a Florida limited liability company, Cross
Creek Barbeqe, L.C. ("Cross Creek"), for the purpose of opening a new
restaurant. The Company contributed certain furnishings, fixtures, and equipment
owned by its Wrangler's Roadhouse, Inc. subsidiary ("Wrangler's") to Cross Creek
and the other 50% owner of Cross Creek contributed the cash necessary to remodel
and open the new Cross Creek restaurant. As a result of unsatisfactory
operational performance, the Company sold its interest in the Cross Creek
restaurant in July 1995. Wrangler's leased the land and building to Cross Creek
until May 1996, when it sold them at a gain of approximately $5,000.
Proprietary Trade Marks
The name "Ryan's Family Steak House," along with all ancillary signs,
building design and other symbols used in conjunction with the name, and the
name "Mega Bar", are the primary trademarks and service marks of the Franchisor.
Such marks are registered in the United States. All of these registrations and
the goodwill associated with the Franchisor's trademarks are of material
importance to the Company's business and are licensed to the Company under the
Franchise Agreement.
-7-
<PAGE>
Competition
The food service business in Florida is highly competitive and is often
affected by changes in the taste and eating habits of the public, economic
conditions affecting spending habits, local demographics, traffic patterns and
local and national economic conditions. The principal bases of competition in
the industry are the quality and price of the food products offered. Location,
speed of service and attractiveness of the facilities are also important
factors. The Company's restaurants are in competition with restaurants operated
or franchised by national, regional and local restaurant companies offering a
similar menu, many of which have greater resources than the Company. The Company
also is in competition with specialty food outlets and other vendors of food.
The amount of new competition near Company restaurants increased
significantly in 1997. The increased competition had a significant negative
impact on sales in 1997. Management has developed a plan to attempt to reduce
the negative impact on sales from new competition, but there can be no assurance
that sales trends will improve. In addition, the Franchisor has the right to
operate restaurants in several other west Florida and south Florida counties.
Employees
As of December 31, 1997, the Company employed approximately 1,300 persons,
of whom approximately 50% are considered by management as part-time employees.
No labor unions currently represent any of the Company's employees. The Company
has not experienced any work stoppages attributable to labor disputes and
considers employee relations to be good.
Executive Officers
The following persons were executive officers of the Company effective
December 31, 1997:
Lewis E. Christman, Jr., age 78, has been President and Chief Executive
Officer of the Company since April 1994. Mr. Christman was hired as a consultant
to oversee and direct the Company's purchasing program in January 1994 and has
been a Director of the Company since May 1993. In addition, Mr. Christman serves
as President of each of the Company's subsidiaries. Mr. Christman has been a
partner in East Coast Marketing since 1990. From 1979 to 1989, Mr. Christman
served as Chairman of the Board of Neptune Marketing, Inc., a food brokerage
company.
Edward B. Alexander, age 39, has been Vice President of Finance since
December 1996, and was Secretary and Treasurer
-8-
<PAGE>
of the Company from November 1990 to December 1996. In addition, Mr. Alexander
was appointed to the Board of Directors in May 1996, and serves as Secretary of
each of the Company's subsidiaries. Mr. Alexander served as controller of the
Company from January 1989 to April 1990. From April 1985 until December 1988,
Mr. Alexander was employed as controller for Mac Papers, Inc., a wholesale paper
products distributor. Prior to April 1985, Mr. Alexander served as a senior
accountant for the accounting firm of Touche Ross & Co.
Government Regulation
The Company is subject to the Fair Labor Standards Act which governs such
matters as minimum wage requirements, overtime and other working conditions. A
large number of the Company's restaurant personnel are paid at or slightly above
the federal minimum wage level and, accordingly, any change in such minimum wage
will affect the Company's labor costs. The Company is also subject to the Equal
Employment Opportunity Act and a variety of federal and state statutes and
regulations. The Company's restaurants are constructed to meet local and state
building requirements and are operated in accordance with state and local
regulations relating to the preparation and service of food.
The Company believes that it is in substantial compliance with all
applicable federal, state and local statutes, regulations and ordinances and
that compliance has had no material effect on the Company's capital
expenditures, earnings or competitive position, and such compliance is not
expected to have a material adverse effect upon the Company's operations. The
Company, however, cannot predict the impact of possible future legislation or
regulation on its operations.
Sources and Availability of Raw Materials
The Company procures its food and other products from a variety of
suppliers, and follows a policy of obtaining its food and products from several
major suppliers under competitive terms. A substantial portion of the beef used
by the Company is obtained from one supplier, although the Company believes
comparable beef meeting its specifications is available in adequate quantities
from other suppliers. To ensure against interruption in the flow of food
supplies due to unforeseen or catastrophic events, to take advantage of
favorable purchasing opportunities, and to insure that meat received by the
Company is properly aged, the Company maintains a two to six week supply of
beef.
-9-
<PAGE>
Working Capital Requirements
Substantially all of the Company's revenues are derived from cash sales.
Inventories are purchased on credit and are converted rapidly to cash. The
Company does not maintain significant receivables and inventories. Therefore,
with the exception of debt service, working capital requirements for continuing
operations are not significant.
In December 1996, the Company entered into a Loan Agreement with FFCA
Mortgage Corporation ("FFCA"). The Loan Agreement governs eighteen Promissory
Notes payable to FFCA totaling $14,681,400 at December 31, 1997. Each note is
secured by a mortgage on a Company restaurant property. The Promissory Notes
provide for a term of twenty years and an interest rate equal to the thirty-day
LIBOR rate plus 3.75%, adjusted monthly. In November 1997, the Company prepaid
one of the Notes in full in the amount of approximately $440,000. The Loan
Agreement provides for various covenants, including the maintenance of
prescribed debt service coverages.
The Company used the proceeds of the Promissory Notes to retire its notes
with Cerberus Partners, L.P. ("Cerberus") and its loan with the Daiwa Bank
Limited and SouthTrust Bank of Alabama, N.A. The Company realized a discount on
the retirement of the Cerberus notes, which was partially offset by unamortized
debt issuance costs. The resulting gain of $348,500 net of income taxes, was
accounted for in 1996 as an extraordinary item. In addition, the Company retired
warrants for 210,000 shares of the Company's common stock previously held by
Cerberus. Cerberus continues to hold warrants to purchase 140,000 shares of the
Company's common stock at an exercise price of $2.00 per share.
Also in December 1996, the Company entered into a separate loan agreement
with FFCA under which it may borrow up to an additional $4,640,000. This
additional financing would be evidenced by four additional Promissory Notes
secured by mortgage on four Company restaurant properties. The terms and
interest rate of this loan agreement are identical to the loan agreement
described above. The Company borrowed $1,290,000 under this agreement in
February 1998, secured by a mortgage on one restaurant property. The
availability of new borrowings under this agreement is currently scheduled to
expire in June 1998.
Seasonality
The Company's operations are subject to some seasonal fluctuations.
Revenues per restaurant generally increase from January through April and
decline from September through December.
-10-
<PAGE>
Research
The Company relies primarily on the Franchisor to maintain ongoing research
programs relating to the development of new products and evaluation of marketing
activities. Although research and development activities are important to the
Company, no expenditures for research and development have been incurred by the
Company.
Customers
No material part of the Company's business is dependent upon a single
customer or a few customers.
Information as to Classes of Similar Products or Services
The Company operates in only one industry segment. All significant revenues
and pre-tax earnings relate to retail sales of food to the general public
through restaurants owned and operated by the Company. The Company has no
operations outside the continental United States.
ITEM 2. PROPERTIES
Location Date Opened
-------- -----------
Jacksonville May 1982
Jacksonville May 1983
Jacksonville November 1983
Orange Park May 1984
Jacksonville May 1985
Jacksonville July 1985
Ocala September 1986
Neptune Beach November 1986
Lakeland February 1987
Lakeland March 1987
Winter Haven August 1987
Apopka September 1987
Gainesville December 1987
Hudson February 1988
New Port Richey May 1988
-11-
<PAGE>
Tampa June 1988
Tallahassee August 1988
Daytona Beach September 1988
Tampa November 1988
Orlando January 1989
Orlando February 1989
Clearwater August 1989
Melbourne November 1989
Lake City March 1991
Brooksville January 1997
In January 1998, the Company entered into a lease agreement for a new
restaurant expected to be opened in June 1998. The Company has also entered into
an agreement, subject to its ability to obtain a building permit, to purchase
land for $590,000 for another restaurant scheduled to open sometime in 1998.
As of March 17, 1998, the Company operated 25 Ryan's restaurants. The
specific rate at which the Company is able to open new restaurants will be
determined by its ability to locate suitable sites on satisfactory terms, raise
the necessary capital, secure appropriate governmental permits and approvals and
recruit and train management personnel.
As of December 31, 1997, the Company owned the real property on which 22 of
its restaurants were located. Seventeen of these properties were subject to
mortgages securing the FFCA notes.
The Company leases the real property on which three of its restaurants are
located. Those restaurants are located in Jacksonville, Clearwater and
Brooksville, Florida. The Company also leases two buildings in Jacksonville,
Florida for its executive offices.
On May 13, 1997, the Company received notice from Aetna Life Insurance
Company, the mortgage holder of the mall property at which the Company's
Clearwater, Florida restaurant is located, that Aetna intended to foreclose on
the property due to a default by the landlord on the mortgage. In September
1997, Aetna was granted a Motion for
-12-
<PAGE>
Summary Judgement of Foreclosure by the Circuit Court of the Sixth Judicial
Court in Pinellas County. This Motion indicates that Aetna's rights under the
mortgage are superior to the Company's leasehold interest. It is uncertain
whether this action could allow Aetna to evict the Company from the Clearwater
location. An eviction would result in a write-off of approximately $350,000 of
leasehold improvements. The Company intends to vigorously defend its interest in
this matter. However, there can be no assurance that the Company will be
successful in this defense.
ITEM 3. LEGAL PROCEEDINGS
The Company is subject to various pending legal proceedings arising in the
normal course of business. In the opinion of management, based on the advice of
legal counsel, the ultimate disposition of currently pending claims and
litigation will not have material adverse effect on the financial position or
results of operations of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) On February 24, 1998, the Company held a Special Meeting of
Shareholders to approve a one-for-five reverse split of the Company's
Common Stock.
(b) The following table sets forth the number of votes for, against or
withheld regarding the proposal:
For Against Abstain
6,930,517 1,162,674 38,377
The proposal obtained a majority vote of the Company's outstanding
shares, and therefore was passed.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The information contained under the caption "Common Stock Data" in the
Company's 1997 Annual Report to Shareholders is incorporated herein by
reference.
-13-
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The information contained under the caption "Five-Year Financial Summary"
in the Company's 1997 Annual Report to Shareholders is incorporated herein by
reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information contained under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in the Company's 1997
Annual Report to Shareholders is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements of the Company and the Report of
Independent Certified Public Accountants as contained in the Company's 1997
Annual Report to Shareholders are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information regarding directors contained under the caption "Election
of Directors" in the Company's Proxy Statement for the 1998 Annual Meeting of
Shareholders, which will be filed with the Securities and Exchange Commission
prior to April 30, 1998, is incorporated herein by reference.
The information regarding executive officers is set forth in Item 1 of this
report under the caption "Executive Officers."
The information regarding reports required under section 16(a) of the
Securities Exchange Act of 1934 contained under caption "Section 16(a)
Beneficial Ownership Reporting Compliance" in the Company's proxy statement for
the 1998 Annual Meeting of Shareholders, which will be filed with Securities and
Exchange Commission prior to April 10, 1998 is incorporated herein by reference.
-14-
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
The information contained under the caption "Executive Pay" in the
Company's Proxy Statement for the 1998 Annual Meeting of Shareholders, which
will be filed with the Securities and Exchange Commission prior to April 30,
1998, is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information contained under the caption "Security Ownership of Certain
Beneficial Owners and Management" in the Company's Proxy Statement for the 1998
Annual Meeting of Shareholders, which will be filed with the Securities and
Exchange Commission prior to April 30, 1998, is incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information contained under the caption "Election of Directors Certain
Relationships and Related Transactions" in the Company's Proxy Statement for the
1998 Annual Meeting of Shareholders, which will be filed with the Securities and
Exchange Commission prior to April 30, 1998, is incorporated herein by
reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a)1. The financial statements listed below are filed with this report on
Form 10-K or are incorporated herein by reference from the Company's
1997 Annual Report to Shareholders. With the exception of the pages
listed below, the 1997 Annual Report to Shareholders is not deemed
"filed" as a part of this report on Form 10-K.
Page
Reference
----------------------
Form 1997
10-K Annual Report
---- -------------
Consent of Independent Certified
Public Accountants F-1
Independent Auditors Report 27
Consolidated Statements of Operations 10
Consolidated Balance Sheets 11
-15-
<PAGE>
Consolidated Statements of Share-
holders' Equity 12
Consolidated Statements of Cash Flows 13
Notes to Consolidated Financial
Statements 14
(a)2. No financial statement schedules have been included since the required
information is not applicable or the information required is included
in the financial statements or the notes thereto.
(a)3. The following exhibits are filed as part of this report on Form 10-K,
and this list comprises the Exhibit Index.
No. Exhibit
--- -------
3.01 Articles of Incorporation of Family Steak Houses of Florida,
Inc. (Exhibit 3.01 to the Company's Registration Statement
on Form S-1, Registration No. 33-1887, is incorporated
herein by reference.)
3.02 Bylaws of Family Steak Houses of Florida, Inc. (Exhibit 3.02
to the Company's Registration Statement on Form S-1,
Registration No. 33-1887, is incorporated herein by
reference.)
3.03 Articles of Amendment to the Articles of Incorporation of
Family Steak Houses of Florida, Inc. (Exhibit 3.03 to the
Company's Registration Statement on Form S-1, Registration
No. 33-1887, is incorporated herein by reference.)
3.04 Articles of Amendment to the Articles of Incorporation of
Family Steak Houses of Florida, Inc. (Exhibit 3.04 to the
Company's Registration Statement on Form S-1, Registration
No. 33-1887, is incorporated herein by reference.)
3.05 Amended and Restated Bylaws of Family Steak Houses of
Florida, Inc. (Exhibit 4 to the Company's Form 8-A, filed
with the Commission on March 19, 1997, is incorporated
herein by reference.)
3.06 Shareholder Rights Agreement, dated March 19, 1997, by and
between Family Steak Houses of Florida, Inc. and Chase
Mellon Shareholder Services, LLC (Exhibit 1 to the Company's
Form 8-A, filed with the Commission on March 19, 1997, is
incorporated herein by reference.)
-16-
<PAGE>
3.07 Articles of Amendment to the Articles of Incorporation of
Family Steak Houses of Florida, Inc. (Exhibit 3 to the
Company's Form 8-A filed with the Commission on March 19,
1997, is incorporated herein by reference.)
3.08 Articles of Amendment to the Articles of Incorporation of
Family Steak Houses of Florida, Inc.
4.01 Specimen Stock Certificate for shares of the Company's
Common Stock (Exhibit 4.01 to the Company's Registration
Statement on Form S-1, Registration No. 33-1887, is
incorporated herein by reference.)
10.01 Amended Franchise Agreement between Family Steak Houses of
Florida, Inc. and Ryan's Family Steak Houses, Inc., dated
September 16, 1987. (Exhibit 10.01 to the Company's
Registration Statement on Form S-1, filed with the
Commission on October 2, 1987, Registration No. 33-17620, is
incorporated herein by reference.)
10.02 Lease regarding the restaurant located at 3549 Blanding
Boulevard, Jacksonville, Florida (Exhibit 10.03 to the
Company's Registration Statement on Form S-1, Registration
No. 33-1887, is incorporated herein by reference.)
10.03 Lease, dated May 18, 1989, between the Company and
Stoneybrook Associates, Ltd., for a restaurant located in
Clearwater, Florida. (Exhibit 10.25 to the Company's
Registration Statement on Form S-1, filed with the
Commission on September 29, 1989, Registration No. 33-17620,
is incorporated herein by reference.)
10.04 Amended and Restated Warrant to Purchase Shares of Common
Stock, void after October 1, 2003, which represents warrants
issued to The Phoenix Insurance Company, The Travelers
Indemnity Company, and The Travelers Insurance Company,
(subsequently transferred to Cerberus Partners, L.P.)
(Exhibit 10.07 to the Company's Annual Report on Form 10-K,
filed with the Commission on March 28, 1995, is incorporated
herein by reference).
10.05 Warrant to Purchase Shares of Common Stock, void after
October 1, 2003, which represents warrants issued to The
Phoenix Insurance Company, The Travelers Indemnity Company,
and The Travelers Insurance Company. (subsequently
transferred to
-17-
<PAGE>
Cerberus Partners, L.P.) (Exhibit 10.08 to the Company's
Annual Report on Form 10-K, filed with the Commission on
March 28, 1995, is incorporated herein by reference).
10.06 Amendment of Franchise Agreement between Ryan's Family Steak
Houses, Inc. and the Company dated July 11, 1994. (Exhibit
10.17 to the Company's Annual Report on Form 10-K, filed
with the Commission on March 28, 1995, is incorporated
herein by reference).
10.07 Agreement between the Company and Kraft Foodservice, Inc.,
as the Company's primary food product distribution. (Exhibit
10.06 to the Company's Quarterly Report on Form 10-Q, filed
with the Commission on August 9, 1995, is incorporated
herein by reference).
10.08 Lease Agreement between the Company and CNL American
Properties Fund, Inc., dated as of September 18, 1996.
(Exhibit 10.02 to the Company's Quarterly Report on Form
10-Q, filed with the Commission on November 18, 1996 is
hereby incorporated by reference).
10.09 Rent Addendum to Lease Agreement between the Company and CNL
American Properties Fund, Inc., dated as of September 18,
1996. (Exhibit 10.04 to the Company's Quarterly Report on
Form 10-Q, filed with the Commission on November 18, 1996 is
hereby incorporated by reference).
10.10 Amendment of Franchise Agreement between the Company and
Ryan's Family Steak Houses, Inc. dated October 3, 1996.
(Exhibit 10.15 to the Company's Annual Report on Form 10-K,
filed with the Commission on April 1, 1997 is hereby
incorporated by reference).
10.11 $15.36m Loan Agreement, between the Company and FFCA
Mortgage Corporation, dated December 18, 1996. (Exhibit
10.18 to the Company's Annual Report on Form 10-K, filed
with the Commission on April 1, 1997 is hereby incorporated
by reference).
10.12 $4.64m Loan Agreement, between the Company and FFCA Mortgage
Corporation, dated December 18, 1996. (Exhibit 10.19 to the
Company's Annual Report on Form 10-K, filed with the
Commission on April 1, 1997 is hereby incorporated by
reference).
-18-
<PAGE>
10.13 Form of Promissory Note between the Company and FFCA
Mortgage Corporation, dated December 18, 1996. (Exhibit
10.20 to the Company's Annual Report on Form 10-K, filed
with the Commission on April 1, 1997 is hereby incorporated
by reference).
10.14 Form of Mortgage between the Company and FFCA Mortgage
Corporation, dated December 18, 1996 (Exhibit 5 to the
Company's Schedule 14D-9, filed with the Commission on March
19, 1997 is hereby incorporated by reference).
10.15 Form of Mortgage between the Company and FFCA Mortgage
Corporation, dated March 18, 1996. (Exhibit 10.22 to the
Company's Annual Report on Form 10-K, filed with the
Commission on April 1, 1997 is hereby incorporated by
reference).
10.16 Employment agreement between the Company and Edward B.
Alexander, dated as of January 26, 1998.
10.17 Employment agreement between the Company and Lewis E.
Christman, Jr., dated as of January 26, 1998.
10.18 Standstill and Settlement Agreement between the Company and
Bisco Industries, Inc. (and affiliates) dated February 24,
1998. (The Company's Form 8-K filed with the Commission on
March 6, 1998 is hereby incorporated by reference).
10.19 Lease agreement dated January 29, 1998 between the Company
and Excel Realty Trust, Inc. for a new restaurant scheduled
to be opened in 1998.
10.20 Contract dated April 29, 1997 between the Company and
sellers for purchase of land for a new restaurant scheduled
to be opened in 1998.
13.01 1997 Annual Report to Shareholders.
21.01 Family Rustic Investments, Inc., a Florida corporation,
Steak House Construction Corporation, a Florida corporation,
Wrangler's Roadhouse, Inc., a Florida corporation and Steak
House Realty Corporation, a Florida corporation, are wholly
owned subsidiaries of the Company.
23.0l Consent of Independent Certified Public Accountants -
Deloitte & Touche LLP.
27.00 Financial data schedules (electronic filing only).
-19-
<PAGE>
(b) None.
(c) See (a)3. above for a list of all exhibits filed herewith and the Exhibit
Index.
(d) None.
<PAGE>
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS' CONSENT
We consent to the incorporation by reference in this Annual Report of Family
Steak Houses of Florida, Inc. on Form 10-K of our report dated March 6, 1998,
appearing in the 1997 Annual Report to Shareholders of Family Steak Houses of
Florida, Inc.
We additionally consent to the incorporation by reference in Registration
Statement No. 33-11684 pertaining to the 1986 Employee Incentive Stock Option
Plan of Family Steak Houses of Florida, Inc. on Form S-8 of our report dated
March 6, 1998 appearing in and incorporated by reference in this Annual Report
on Form 10-K of Family Steak Houses of Florida, Inc. for the year ended December
31, 1997.
We further consent to the incorporation by reference in Registration Statement
No. 33-12556 pertaining to the 1986 Stock Option Plan for Non-Employee Directors
of Family Steak Houses of Florida, Inc. on Form S-8 of our report dated March 6,
1998 appearing in and incorporated by reference in this Annual Report on Form
10-K of Family Steak Houses of Florida, Inc. for the year ended December 31,
1997.
We further consent to the incorporation by reference in Registration Statement
No. 33-62101 pertaining to the 1996 Long Term Incentive Plan of Family Steak
Houses of Florida, Inc. on Form S-8 of our report dated March 6, 1998 appearing
in and incorporated by reference in this Annual Report on Form 10-K of Family
Steak Houses of Florida, Inc. for the year ended December 31, 1997.
Deloitte & Touche LLP
Jacksonville, Florida
March 30, 1998
F-1
<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.
FAMILY STEAK HOUSES OF FLORIDA, INC.
Date: March 26, 1998 BY: /s/ Lewis E. Christman, Jr.
---------------------------
Lewis E. Christman, Jr., President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of the Registrant in the
capacities and on the date indicated.
Signature Title Date
- --------- ----- ----
/s/ Lewis E. Christman, Jr. President (Principal March 26, 1998
- --------------------------- Executive Officer
Lewis E. Christman, Jr. and Director)
/s/ Edward B. Alexander Vice President and Director March 26, 1998
- ----------------------- (Principal Financial and
Edward B. Alexander Accounting Officer)
/s/ Robert J. Martin Director March 26, 1998
- --------------------
Robert J. Martin
/s/ Joseph M. Glickstein, Jr. Director March 26, 1998
- -----------------------------
Joseph M. Glickstein, Jr.
<PAGE>
/s/ Richard M. Gray Director March 26, 1998
- -------------------
Richard M. Gray
/s/ Glen F. Ceiley Director March 26, 1998
- ------------------
Glen F. Ceiley
/s/ Jay Conzen Director March 26, 1998
- --------------
Jay Conzen
ARTICLES OF AMENDMENT
TO ARTICLES OF INCORPORATION OF
FAMILY STEAK HOUSES OF FLORIDA, INC.
FAMILY STEAK HOUSES OF FLORIDA, INC., pursuant to Section 607.1006, Florida
Statutes, does hereby file the following Articles of Amendment and state:
1. That the name of the Corporation is FAMILY STEAK HOUSES OF FLORIDA, INC.
2. That Article IV(A) of the Articles of Incorporation of FAMILY STEAK
HOUSES OF FLORIDA, INC. is hereby amended to read as follows:
ARTICLE IV
A. Common Stock. Four Million (4,000,000) shares of Common Stock having a
par value of one cent ($.01) per share. The whole or part of the common
Stock of this corporation shall be payable in lawful money of the United
States of America, or in property, labor or services at a just valuation to
be fixed by the Board of Directors.
3. That the foregoing amendment will result in an exchange of issued shares
and the provisions for implementing the amendment are as follows:
A. On the Effective Date, each five shares of Common Stock outstanding
prior to the Effective Date ("Pre-Split Shares of Common Stock") will
automatically be combined and changed into one share of Common Stock
("Post-Split Share of Common Stock"). No additional action on the part of
the Corporation or any shareholder will be required in order to effect the
reverse split implemented by this Amendment to the Articles of
Incorporation ("Reverse Split") and, beginning on the Effective Date, each
certificate representing Pre-Split Shares of Common Stock will represent
for all purposes one fifth of that number of Post-Split Shares of Common
Stock. Shareholders will be requested to exchange their certificates
representing shares of Common Stock held prior to the Reverse Split for new
certificates representing Shares of Common Stock issued as a result of the
Reverse Split. The Corporation's transfer agent, ChaseMellon Shareholder
Services, LLC, will act as the Corporation's exchange agent in implementing
the exchange of stock certificates.
B. Shareholders will be furnished the necessary materials and instructions
to effect such exchange promptly following the Effective Date. Certificates
representing Pre-Split Shares of Common Stock subsequently presented for
transfer will not be transferred on the books and records of the
Corporation but either will be returned to the tendering person for
exchange or processed as a transfer of Post-Split shares of Common Stock.
<PAGE>
C. No scrip or fractional Post-Split Shares of Common Stock will be issued
to any shareholder in connection with the Reverse Split. In lieu of
issuance of any fractional shares that would otherwise result from the
Reverse Split, the Corporation will issue to any shareholder that would
otherwise receive fractional shares one (1) additional share of Common
Stock.
D. Shareholders are encouraged to surrender their certificates for
certificates evidencing whole Post-Split Shares of Common Stock as promptly
as possible after receipt of instructions from the Corporation's exchange
agent.
4. That the foregoing amendment was approved by a majority of the
outstanding shares of Common Stock entitled to vote on this amendment at a
special meeting of shareholders held on February 24, 1998, and the number of
votes cast was sufficent for approval.
5. The Effective Date of this Amendment shall be March 4, 1998, 12:01 a.m.
IN WITNESS WHEREOF, the undersigned President and Secretary of this
corporation have executed these Articles of Amendment on the 25th day of
February, 1998.
FAMILY STEAK HOUSES OF FLORIDA, INC.
By: /s/ LEWIS E. CHRISTMAN, JR.
----------------------------
Lewis E. Christman, Jr.
President
Attest:
/s/ MICHAEL J. WALTERS
- ------------------------------
Michael J. Walters, Secretary
-2-
EMPLOYMENT AGREEMENT
THIS AGREEMENT between FAMILY STEAK HOUSES OF FLORIDA, INC., a Florida
corporation (the "Company"), and EDWARD B. ALEXANDER (the "Executive"), is made
and entered into as of the 26th day of January, 1998.
P R E A M B L E :
The Company, on behalf of itself and its shareholders, wishes to attract
and retain well-qualified executives and key personnel and to assure itself of
the continuity of its management. The Executive currently holds the position of
Chief Financial Officer, and is a member of the Company's Management Executive
Committee. The Company recognizes that the Executive is a valuable resource of
the Company and the Company desires to be assured of the continued services of
the Executive.
The Company is concerned that in the event of a possible or threatened
change in control of the Company, uncertainties necessarily arise and the
Executive may have concerns about the continuation of his employment status and
responsibilities and may be approached by others offering competing employment
opportunities, and the Company therefore desires to provide the Executive
assurance as to the continuation of his employment status and responsibilities
in such event. The Company further desires to assure that, if a possible or
threatened change in control should arise and the Executive should be involved
in deliberations or negotiations in connection therewith, the Executive would be
in a secure position to consider and participate in such transaction as
objectively as possible in the best interests of the Company and, to this end,
desires to protect the Executive from any direct or implied threat to his
financial well being.
The Executive is willing to continue to serve as such but desires assurance
that in the event of such a change in control he will continue to have the
employment status and responsibilities he could reasonably expect absent such
event and in the event of a change in control he will have fair and reasonable
severance protection on the basis of his service to the Company to that time.
ACCORDINGLY, it is hereby agreed by and between the parties as follows:
1. Operation of Agreement. This Agreement shall constitute a valid and
binding contract between the parties immediately upon its execution and
supersedes any and all prior employment agreements (excluding any indemnity
agreements between the parties).
2. Change in Control. The date on which a Change in Control of the Company
shall occur shall be the "Trigger Date" for purposes of this Agreement. The term
"Change in Control" of the Company shall mean, and be deemed to have occurred on
the date of, the first to occur of any of the following:
(a) there occurs a change in control of the Company of a nature that
would be required to be reported in response to Item 6(e) of Schedule 14A
promulgated under the
<PAGE>
Securities Exchange Act of 1934 as in effect on the date of this Agreement
(the "'34 Act") or, if Item 6(e) is no longer in effect, any regulations
issued by the Securities and Exchange Commission pursuant to the '34 Act
which serve similar purposes;
(b) any "person" (as such term is used in Sections 13(d) and 14(d)(2)
of the '34 Act) is or becomes a beneficial owner, directly or indirectly,
of securities of the Company representing 20% or more of the combined
voting power of the Company's then outstanding securities;
(c) there occurs a change in control of the Board of Directors of the
Company, such that the individuals who were members of the Board of
Directors of the Company, or of any class into which it is divided,
immediately prior to a meeting of the shareholders of the Company involving
a contest for the election of directors shall not constitute a majority of
the Board of Directors, or of such class, following such election unless
the election, or the nomination and election of the new director was
approved by a vote of at least two-thirds of the directors then still in
office who were directors at the beginning of the period;
(d) the Company becomes a subsidiary of another corporation or shall
have merged into or consolidated with another corporation, or merged
another corporation into the Company, on a basis whereby less than 50% of
the total voting power of the surviving corporation is represented by
shares held by former shareholders of the Company prior to such merger or
consolidation; or
(e) the Company shall have sold all or substantially all of its assets
to another corporation or other entity or person.
3. Employment Prior to Trigger Date.
(a) The Company hereby agrees to employ the Executive as the Chief
Financial Officer of the Company and Executive hereby accepts such
employment and agrees to devote his best efforts and as much time as may be
necessary, during or after the regular working hours of the Company, to
perform his duties hereunder.
(b) During the term of this Agreement, the Executive shall perform the
duties typically performed by the Chief Financial Officer of the Company,
subject to direction of, and according to such policies and procedures as
may be adopted from time to time by, the Board of Directors. The Executive
shall report directly to the Chief Executive Officer of the Company.
Executive's duties and responsibilities shall not be diminished or reduced,
without the consent of Executive.
(c) During the term of this Agreement, the Company may from time to
time grant him options to acquire shares of the Company's common stock. The
award of any options shall be evidenced by an agreement containing usual
and customary provisions.
2
<PAGE>
(d) This Agreement shall have an initial term of two years from the
date hereof.
(e) The initial annual salary of Executive shall be Ninety Thousand
Dollars ($90,000) per annum payable in bi-weekly installments, subject to
increase at any time as determined by the Chief Executive Officer of the
Company. Executive shall be entitled to receive bi-weekly reimbursement
for, or seek direct payment by the Company of, such reasonable expenses
incurred by Executive as are consistent with specific policies of the
Company in the performance of his duties under this Agreement, provided
that Executive accounts therefor in writing and that such expenses are
ordinary and necessary business expenses of the Company for federal income
tax purposes.
(f) Executive shall be entitled to reasonable paid vacation in
accordance with the policies of the Company, and such other employee
benefits as the Board may fix from time to time; provided, however, that,
in the Executive's case, such employee benefits shall include comprehensive
medical, hospitalization and disability insurance and other reasonable
medical benefits in accordance with the policies of the Company, including
the cost of an annual physical examination.
4. Post-Trigger Date Employment.
(a) Upon a Change in Control, the Executive, at his option, may resign
at any time within six (6) months following the Trigger Date and receive
the Termination Payments (as hereinafter defined) described in Section 7,
as if Executive had been terminated on the Trigger Date, or Executive may
elect to continue in the employ of the Company. If the Executive so elects,
the Company hereby agrees to continue the Executive in its employ, and the
Executive hereby agrees to remain in the employ of the Company, for the
period commencing on the Trigger Date and ending on the last day of the
month in which occurs the second anniversary of the Trigger Date (the
"Post-Trigger Employment Period"), subject to the Executive's
aforementioned right to resign in the six (6) month period following the
Trigger Date.
(b) During the Post-Trigger Employment Period, Executive shall
exercise such position and authority and perform such duties as are
commensurate with the position and authority being exercised and duties
being performed by the Executive immediately prior to the Trigger Date,
which services shall be performed at the location where the Executive was
employed immediately prior to the Trigger Date or at such other location as
the Company may require not more than 20 miles from the present location.
The position, authority, duties and responsibilities of the Executive shall
be regarded as not commensurate if, as a result of a Change of Control, (i)
the Company becomes a direct or indirect subsidiary of another corporation
or corporations or becomes controlled, directly or indirectly, by one or
more unincorporated entities (such other corporation or unincorporated
entity owning or controlling, directly or indirectly, the Company is
hereinafter referred to as a "parent company") or (ii) all or substantially
all of the assets
3
<PAGE>
of the Company are acquired by another corporation or unincorporated entity
or group of corporations or unincorporated entities owned or controlled,
directly or indirectly, by another corporation or unincorporated entity
(such other acquiring or controlling corporation or unincorporated entity
is hereinafter referred to as a "successor"), unless, in the case of either
(i) or (ii), Section 14 of this Agreement shall have been complied with and
the Executive's position, authority, duties and responsibilities with such
parent company or successor, as the case may be, are at least commensurate
in all material respects with those held, exercised and assigned with the
Company immediately prior to the Trigger Date.
(c) Excluding periods of vacation and sick leave to which the
Executive is entitled, the Executive agrees that during the Post-Trigger
Employment Period he shall devote his full business time to his
responsibilities as described herein and shall perform such
responsibilities faithfully and efficiently. Notwithstanding the foregoing,
the Executive may (i) serve on corporate, civic or charitable boards or
committees, (ii) deliver lectures, fulfill speaking engagements or teach at
educational institutions and (iii) manage personal investments, so long as
such activities do not materially interfere with the performance of the
Executive's duties and responsibilities. It is expressly understood and
agreed that to the extent that any such activities have been conducted by
the Executive prior to the Trigger Date, such prior conduct of activities,
and any subsequent conduct of activities similar in nature and scope, shall
not thereafter be deemed to interfere with the performance of the
Executive's responsibilities to the Company; provided, however, that the
provisions of this sentence shall in no manner be construed as limiting or
restricting the Executive to the conduct of such activities conducted
immediately prior to the Trigger Date.
5. Post-Trigger Compensation and Benefits. During the Post-Trigger
Employment Period, the Executive shall receive the following compensation and
benefits:
(a) He shall receive an annual base salary which is not less than his
annual base salary immediately prior to the Trigger Date. During the
Post-Trigger Employment Period, the Executive's annual base salary shall be
reviewed at least annually and shall be increased from time to time to
reflect increases in the cost of living and such other increases as shall
be consistent with increases in annual base salary awarded in the ordinary
course of business to other key executives. Any increase in annual base
salary shall not limit or reduce any other obligation to the Executive
under this Agreement. In no case shall the annual base salary be reduced.
(b) He shall receive an annual bonus (either pursuant to a bonus or
incentive plan or program of the Company or otherwise) in cash at least
equal to the highest bonus paid or payable to the Executive in respect of
any of the three (3) fiscal years of the Company (annualized with respect
to any such fiscal year for which the Executive has been employed only for
a portion thereof) immediately prior to the fiscal year in which the
Trigger Date occurs. The annual bonus shall be payable within 30 days after
the end
4
<PAGE>
of each fiscal year, unless the Executive shall otherwise elect to defer
the receipt of such annual bonus.
(c) He shall be eligible to participate on a reasonable basis, and to
continue his existing participation, in annual incentive, stock option,
restricted stock, long-term incentive performance, and any other incentive
compensation plan which provides opportunities to receive compensation in
addition to his annual base salary which are the greater of (i) the
opportunities provided by the Company for executives with comparable duties
or (ii) the opportunities under any such plans in which he was
participating immediately prior to the Trigger Date.
(d) He shall be entitled to receive and participate in salaried
employee benefits (including, but not limited to, medical, life and
accident insurance, automobile allowance, stock ownership, and disability
benefits) and perquisites which are the greater of (i) the employee
benefits and perquisites provided by the Company to executives with
comparable duties or (ii) the employee benefits and perquisites to which he
was entitled or in which he participated immediately prior to the Trigger
Date.
(e) He shall be entitled to continue to accrue credited service for
retirement benefits and to be entitled to receive retirement benefits under
and pursuant to the terms of any retirement plan or agreement in effect on
the Trigger Date in respect of his retirement, whether or not a qualified
plan or agreement, so that his aggregate monthly retirement benefit from
all such plans and agreements (regardless when he begins to receive such
benefit) will be not less than it would be had all such plans and
agreements in effect immediately prior to the Trigger Date continued to be
in effect without change until and after he begins to receive such benefit.
6. Termination. The term "Termination" shall mean termination, after the
Trigger Date and prior to the expiration of the Post-Trigger Employment Period,
of the employment of the Executive with the Company for any reason other than
death, disability (as described below), cause (as described below), or voluntary
resignation (as described below). Any termination of Executive's employment
shall be communicated by a written Notice of Termination to the other party to
this Agreement specifying the "Termination Date".
(a) The term "disability" means physical or mental incapacity
qualifying the Executive for long-term disability under the Company's
long-term disability plan.
(b) The term "cause" means (i) the willful and continued failure of
the Executive substantially to perform his duties with the Company (other
than any failure due to physical or mental incapacity) after a demand for
substantial performance is delivered to him by the Board of Directors which
specifically identifies the manner in which the board believes he has not
substantially performed his duties or (ii) willful misconduct materially
and demonstrably injurious to the Company. No act or failure to act by the
Executive shall be considered willful unless done or omitted to be done by
him
5
<PAGE>
not in good faith and without reasonable belief that his action or omission
was in the best interests of the Company. The unwillingness of the
Executive to accept any or all of a change in the nature or scope of his
position, authorities or duties, a reduction in his total compensation or
benefits, a relocation that he deems unreasonable in light of his personal
circumstances, or other action by or request of the Company in respect of
his position, authority, or responsibility that he reasonably deems to be
contrary to this Agreement, may not be considered by the Board of Directors
to be a failure to perform or misconduct by the Executive. Notwithstanding
the foregoing, the Executive shall not be deemed to have been terminated
for cause for purposes of this Agreement unless and until there shall have
been delivered to him a copy of a resolution, duly adopted by a vote of a
majority of the entire Board of Directors of the Company at a meeting of
the Board called and held (after reasonable notice to the Executive and an
opportunity for the Executive and his counsel to be heard before the Board)
for the purpose of considering whether the Executive has been guilty of
such a willful failure to perform or such willful misconduct as justifies
termination for cause hereunder, finding that in the good faith opinion of
the Board, the Executive has been guilty thereof and specifying the
particulars thereof.
(c) The resignation of the Executive shall be deemed "voluntary" if it
is for any reason other than one or more of the following:
(i) The Executive's resignation or retirement is requested by the
Company other than for cause;
(ii) Any diminution in the nature or scope of the Executive's
position, authorities or duties from those described in Section 4 or
the assignment to Executive of any duties inconsistent with
Executive's current position, duties and responsibilities;
(iii) Any other reduction in his total compensation or benefits
from that provided in Section 5;
(iv) The breach by the Company of any provision of this
Agreement;
(v) The Executive resigns within six (6) month of the Trigger
Date pursuant to Section 4(a); or
(vi) The determination by the Executive that, as a result of a
Change in Control and a change in circumstances thereafter
significantly affecting his position, he is unable to exercise the
authorities and responsibilities attached to his position and
contemplated by Section 4.
For purposes of this Section 6(c), any good faith determination by the
Executive that any event set forth in clauses (i) - (vi) has occurred
above shall be conclusive.
6
<PAGE>
(d) Termination that entitles the Executive to the payments and
benefits provided in Section 7 shall not be deemed or treated by the
Company as the termination of the Executive's employment or the forfeiture
of his participation, award, or eligibility for the purpose of any plan,
practice or agreement of the Company referred to in Section 5.
7. Termination Payments and Benefits. In the event of Termination, and
within 30 days following the Termination Date, unless this Section has been
previously amended pursuant to Section 13 hereof, the Company shall pay to the
Executive the following (the "Termination Payments"):
(a) His base salary and all other benefits due him through the
Termination Date, less applicable withholding taxes and other authorized
payroll deductions;
(b) The amount equal to the highest annual bonus paid to the Executive
in any of the previous three (3) fiscal years prior to the fiscal year in
which Termination occurs, reduced pro rata for that portion of the fiscal
year not completed as of the end of the month in which Termination occurs;
provided, however, that if the Executive has deferred his award for such
year, the payment due the Executive under this paragraph (b) shall be paid
in accordance with the terms of the deferral; and
(c) A lump sum severance allowance in an amount which is equal to the
sum of the amounts determined in accordance with the following
subparagraphs (i) and (ii):
(i) An amount equivalent to the Calculation Number (as defined
below) multiplied by his annual base salary at the rate in effect
immediately prior to Termination; and
(ii) An amount equivalent to the Calculation Number multiplied by
the highest amount of the annual incentive compensation, including
annual bonus, received or deferred by the Executive for the three (3)
fiscal years immediately prior to the fiscal year in which Termination
occurs.
As used herein, the term "Calculation Period" shall mean two (2) fiscal years or
a period equal in length to that number of fiscal years, as the context shall
require, and the term Calculation Number shall mean two and one-half (2.5).
In addition to the foregoing, the Company shall pay or otherwise provide to the
Executive all of the following:
(d) The Company shall pay, distribute, and otherwise provide to the
Executive the amount and value of his entire plan account and interest
under any investment plan or stock ownership plan, and all employer
contributions made or payable to any such plan for his account prior to the
end of the month in which Termination occurs shall be
7
<PAGE>
deemed vested and payable to him. Such payment or distribution shall be in
accordance with the elections made by the Executive in respect of
distributions in accordance with the plan as if the Executive's employment
in the Company terminated at the end of the month in which Termination
occurs.
(e) During a period equal to the Calculation Period, the Company shall
pay the Executive pursuant to the terms of any long-term incentive
performance plan in which he was participating at the time of Termination
as if he continued to be a participant in the plan during that period, and
if pursuant to the terms of such plan no distributions therefrom become
vested until after the expiration of the Post-Trigger Employment Period,
then whenever distributions thereunder become vested, the Company shall pay
the Executive the amount or other distribution to which he would have been
entitled had his participation in the plan continued until the time
distributions become vested and are made pursuant to the plan.
(f) During a period equal to the Calculation Period, the Executive
shall continue to be deemed and treated as if he were an eligible employee
under the provisions of all stock option, stock appreciation right,
restricted stock, and other incentive compensation plans of the Company
under which he held options or awards or in which he participated at the
time of Termination, and he may exercise options and rights, and shall
receive payments and distributions accordingly.
(g) During a period equal to the Calculation Period, the Executive
shall continue to participate in and be entitled to all benefits and
credited service for benefits under the benefit plans, programs and
arrangements described in Sections 5(d) and 5(e) as if he remained employed
by the Company at the compensation levels referred to in this Section 7
during such period, exclusive however of disability benefits and any
aforesaid investment plan or stock ownership plan.
(h) Upon the expiration of the Post-Trigger Employment Period, the
Executive shall be deemed to have retired from the Company and he shall be
entitled at that time, or at such later time as he may elect in order to
avoid or minimize any applicable early pension reduction provision, to
commence to receive the total combined retirement benefit to which he is
entitled hereunder.
(i) Section 5 shall be applicable in determining the payments and
benefits due the Executive under this Section 7, and if Termination occurs
after a reduction (which reduction occurs after the Trigger Date) in all or
any part of the Executive's total compensation or benefits, the monthly
severance allowance and other compensation and benefits payable to him
pursuant to this Section 7 shall be based upon his compensation and
benefits before the reduction.
(j) If any provision of this Section 7 cannot, in whole or in part, be
implemented and carried out under the terms of the applicable compensation,
benefit, or
8
<PAGE>
other plan or arrangement of the Company because the Executive has ceased
to be an actual employee of the Company, because he has insufficient or
reduced credited service based upon his actual employment by the Company,
because the plan or arrangement has been terminated or amended after the
Trigger Date of this Agreement, or for any other reason, the Company itself
shall pay or otherwise provide the equivalent of such rights, benefits, and
credits for such benefits to the Executive, his dependents, beneficiaries
and estate.
(k) The Company's obligation under this Section 7 to continue to pay
or provide health care and life and accident insurance to the Executive
during a period equal to the Calculation Period shall be reduced when and
to the extent any of such benefits are paid or provided to the Executive by
another employer, provided that the Executive shall have all rights
afforded to retirees to convert group insurance coverage to individual
insurance coverage as, to the extent of, and whenever his group insurance
coverage under this Section 7 is reduced or expires. Apart from this
paragraph (k), the Executive shall have and be subject to no obligation to
mitigate.
(l) The Company shall deduct applicable withholding taxes in
performing its obligations under this Section 7.
Nothing in this Section 7 is intended, or shall be deemed or interpreted, to be
an amendment to any compensation, benefit, or other plan of the Company. To the
extent the Company's performance under this Section 7 includes the performance
of the Company's obligations to the Executive under any such plan or under
another agreement between the Company and the Executive, the rights of the
Executive under such plan or other agreement, as well as under this Agreement,
are discharged, surrendered, or released pro tanto.
8. Gross-Up of Termination Payments. In the event that the Executive
becomes entitled to the Termination Payments, if any of such payments are or
become subject to the tax (the "Excise Tax") imposed by Section 4999 of the
Internal Revenue Code of 1986, or any successor statute, rule or regulation of
similar effect (the "Code"), the Company shall pay the Executive within 30 days
of the Termination Date an additional amount (the "Gross-Up Payment") such that
the net amount retained by the Executive, after deduction of any Excise Tax on
the Termination Payments and the sum of any federal, state and local income tax
and Excise Tax upon the payment provided by this Section, shall be equal to the
Termination Payments. For the purposes of determining whether any of the
Termination Payments will be subject to the Excise Tax and the amount of such
Excise Tax, the following shall apply:
(a) any other payments or benefits received or to be received by the
Executive from the Company or one of its benefit plans in connection with a
Change in Control or in connection with Termination (from whatever source)
shall be treated as "parachute payments" within the meaning of Section
280G(b)(2) of the Code;
9
<PAGE>
(b) all "excess parachute payments" within the meaning of Section
280G(b)(1) of the Code shall be treated as subject to the Excise Tax,
unless, in the opinion of tax counsel selected by the Company's independent
auditors and acceptable to the Executive, such other payments or benefits
(in whole or in part) described in clause (a) above do not constitute
parachute payments, or such excess parachute payments (in whole or in part)
represent reasonable compensation for services actually rendered within the
meaning of Section 280G(b)(4) of the Code;
(c) the amount of the Termination Payments which shall be treated as
subject to the Excise Tax shall be equal to the lesser of:
(i) the total amount of the Termination Payments; and
(ii) the amount of excess parachute payments within the meaning
of Sections 280G(b)(1) and (4) (after applying clauses (a) and (b)
above).
(d) the value of any non-cash benefits or any deferred payment or
benefit shall be determined by the Company's independent auditors in
accordance with the principles of Sections 280G(d)(3) and (4) of the Code;
(e) the Executive shall be deemed to pay federal income taxes, and
state and local income taxes in the state and locality of the Executive's
residence on the date of Termination, at the highest marginal rate of
income taxation in effect in the calendar year in which the Gross-Up
Payment is to be made, net of the maximum reduction in federal income taxes
which could be obtained from deduction of such state and local income
taxes; and
(f) in the event the Excise Tax is subsequently determined to be less
than the amount taken into account hereunder at the time of the payment of
the Termination Payments, the Executive shall repay the Company the portion
of the Gross-Up Payment attributable to such reduction, or in the event
that the Excise Tax is subsequently determined to exceed the amount taken
into account hereunder at the time of the payment of the Termination
Payments (including by reason of any payment the existence or amount of
which cannot be determined at the time of the Gross-Up Payment), the
Company shall make an additional gross-up payment in respect of such
excess, in each case, payment to be made within 30 days after the final
determination of the amount of the reduction or excess, as the case may be,
together with interest thereon at the rate provided in Section
1274(b)(2)(B) of the Code.
9. Arrangements Not Exclusive or Limiting. The specific arrangements
referred to herein are not intended to exclude or limit the Executive's
participation in other benefits available to executive personnel generally, or
to preclude or limit other compensation or benefits as may be authorized by the
Board of Directors of the Company at any time, or to limit or reduce any
compensation or benefit to which the Executive would be entitled but for this
Agreement.
10
<PAGE>
10. Enforcement Costs. The Company is aware that upon the occurrence of a
Change in Control, the Board of Directors or a stockholder of the Company may
then cause or attempt to cause the Company to refuse to comply with its
obligations under this Agreement, or may cause or attempt to cause the Company
to institute, or may institute, litigation seeking to have this Agreement
declared unenforceable, or may take, or attempt to take, other action to deny
the Executive the benefits intended under this Agreement. In these
circumstances, the purpose of this Agreement could be frustrated. It is the
intent of the parties that the Executive not be required to incur the legal fees
and expenses associated with the protection or enforcement of his rights under
this Agreement by litigation or other legal action because such costs would
substantially detract from the benefits intended to be extended to the Executive
hereunder, nor be bound to negotiate any settlement of his rights hereunder
under threat of incurring such costs. Accordingly, if at any time after the
Trigger Date, it should appear to the Executive that the Company is or has acted
contrary to or is failing or has failed to comply with any of its obligations
under this Agreement for the reason that it regards this Agreement to be void or
unenforceable or for any other reason, or that the Company has purported to
terminate his employment for cause or is in the course of doing so in either
case contrary to this Agreement, or in the event that the Company or any other
person takes any action to declare this Agreement void or unenforceable, or
institutes any litigation or other legal action designed to deny, diminish or to
recover from the Executive the benefits provided or intended to be provided to
him hereunder, and the Executive has acted in good faith to perform his
obligations under this Agreement, the Company irrevocably authorizes the
Executive from time to time to retain counsel of his choice at the expense of
the Company to represent him in connection with the protection and enforcement
of his rights hereunder, including without limitation representation in
connection with termination of his employment contrary to this Agreement or with
the initiation or defense of any litigation or other legal action, whether by or
against the Executive or the Company or any director, officer, stockholder or
other person affiliated with the Company, in any jurisdiction. The reasonable
fees and expenses of counsel selected from time to time by the Executive as
hereinabove provided shall be paid or reimbursed to the Executive by the Company
on a regular, periodic basis upon presentation by the Executive of a statement
or statements prepared by such counsel in accordance with its customary
practices. Counsel so retained by the Executive may be counsel representing
other officers or key executives of the Company in connection with the
protection and enforcement of their rights under similar agreements between them
and the Company, and, unless in his sole judgement use of common counsel could
be prejudicial to him or would not be likely to reduce the fees and expenses
chargeable hereunder to the Company, the Executive agrees to use his best
efforts to agree with such other officers or executives to retain common
counsel.
11. Notices. Any notices, requests, demands and other communications
provided for by this Agreement shall be in writing and personally delivered by
hand or sent by registered or certified mail, if to the Executive, to him at the
last address he has filed in writing with the Company or, if to the Company, to
its corporate secretary at its principal executive offices.
12. Non-Alienation. The Executive shall not have any right to pledge,
hypothecate, anticipate, or in any way create a lien upon any amounts provided
under this Agreement, and
11
<PAGE>
no payments or benefits due hereunder shall be assignable in anticipation of
payment either by voluntary or involuntary acts or by operation of law. So long
as the Executive lives, no person, other than the parties hereto, shall have any
rights under or interest in this Agreement or the subject matter hereof.
13. Entire Agreement; Amendment. This Agreement constitutes the entire
agreement of the parties in respect of the subject matter hereof. Except as
hereinafter provided in this Section 13, no provision of this Agreement may be
amended, waived or discharged except by the mutual written agreement of the
parties. Notwithstanding the foregoing, Executive acknowledges and agrees that
the Board of Directors, at any time prior to a Change in Control, may in its
sole discretion, unilaterally amend this Agreement to modify or deny Termination
Payments pursuant to Section 7 hereof. The consent of any other person to any
such amendment, waiver or discharge shall not be required.
14. Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the Company, its successors or assigns, by operation of law or
otherwise, including without limitation any corporation or other entity or
person which shall succeed (whether directly or indirectly, by purchase, merger,
consolidation, or otherwise) to all or substantially all of the business and/or
assets of the Company, and the Company will require any parent company or
successor, by agreement in form and substance satisfactory to the Executive,
expressly to assume and agree to perform, or (in the case of a parent company)
to guarantee the performance of, this Agreement. Except as otherwise provided
herein this Agreement shall be binding upon and inure to the benefit of the
Executive and his legal representatives, heirs, and assigns, provided, however,
that in the event of the Executive's death prior to payment or distribution of
all amounts, distributions, and benefits due him hereunder, each such unpaid
amount and distribution shall be paid in accordance with this Agreement to the
person or persons designated by the Executive to the Company to receive such
payment or distribution and in the event the Executive has made no applicable
designation, to the persons or persons designated by the Executive as the
residuary beneficiaries of his estate if he dies testate or to his heirs at law
under the intestate succession laws of his state of domicile if he dies
intestate.
15. Withholding of Taxes. The Company may withhold from any benefits
payable under this Agreement all federal, state, city or other taxes as shall be
required pursuant to any law or governmental regulation or ruling.
16. Governing Law. The validity, interpretation, and enforcement of this
Agreement shall be governed by the laws of the State of Florida.
17. Severability. In the event that any provision or portion of this
Agreement shall be determined to be invalid or unenforceable for any reason, the
remaining provisions of this Agreement shall be unaffected thereby and shall
remain in full force and effect.
12
<PAGE>
18. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together constitute one and the same instrument.
IN WITNESS WHEREOF, the Executive has hereunto set his hand and, pursuant
to the authorization from its Board of Directors, the Company has caused these
presents to be executed in its name on its behalf, and its corporate seal to be
hereunto affixed and attested by its Secretary or Assistant Secretary, all as of
the day and year first shown above written.
FAMILY STEAK HOUSES OF FLORIDA, INC.
ATTEST:
By: /s/ MICHAEL J. WALTERS /s/ LEWIS E. CHRISTMAN, JR.
--------------------------- ---------------------------
Michael J. Walters Lewis E. Christman, Jr.
Secretary President and CEO
EXECUTIVE
/s/ EDWARD B. ALEXANDER
---------------------------
Edward B. Alexander
13
EMPLOYMENT AGREEMENT
THIS AGREEMENT between FAMILY STEAK HOUSES OF FLORIDA, INC., a Florida
corporation (the "Company"), and LEWIS E. CHRISTMAN, JR. (the "Executive"), is
made and entered into as of the 26th day of January, 1998.
P R E A M B L E :
The Company, on behalf of itself and its shareholders, wishes to attract
and retain well-qualified executives and key personnel and to assure itself of
the continuity of its management. The Executive currently holds the position of
Chief Executive Officer, and is a member of the Company's Management Executive
Committee. The Company recognizes that the Executive is a valuable resource of
the Company and the Company desires to be assured of the continued services of
the Executive.
The Company is concerned that in the event of a possible or threatened
change in control of the Company, uncertainties necessarily arise and the
Executive may have concerns about the continuation of his employment status and
responsibilities and may be approached by others offering competing employment
opportunities, and the Company therefore desires to provide the Executive
assurance as to the continuation of his employment status and responsibilities
in such event. The Company further desires to assure that, if a possible or
threatened change in control should arise and the Executive should be involved
in deliberations or negotiations in connection therewith, the Executive would be
in a secure position to consider and participate in such transaction as
objectively as possible in the best interests of the Company and, to this end,
desires to protect the Executive from any direct or implied threat to his
financial well being.
The Executive is willing to continue to serve as such but desires assurance
that in the event of such a change in control he will continue to have the
employment status and responsibilities he could reasonably expect absent such
event and in the event of a change in control he will have fair and reasonable
severance protection on the basis of his service to the Company to that time.
ACCORDINGLY, it is hereby agreed by and between the parties as follows:
1. Operation of Agreement. This Agreement shall constitute a valid and
binding contract between the parties immediately upon its execution and
supersedes any and all prior employment agreements (excluding any indemnity
agreements between the parties).
2. Change in Control. The date on which a Change in Control of the Company
shall occur shall be the "Trigger Date" for purposes of this Agreement. The term
"Change in Control" of the Company shall mean, and be deemed to have occurred on
the date of, the first to occur of any of the following:
(a) there occurs a change in control of the Company of a nature that
would be required to be reported in response to Item 6(e) of Schedule 14A
promulgated under the
<PAGE>
Securities Exchange Act of 1934 as in effect on the date of this Agreement
(the "'34 Act") or, if Item 6(e) is no longer in effect, any regulations
issued by the Securities and Exchange Commission pursuant to the '34 Act
which serve similar purposes;
(b) any "person" (as such term is used in Sections 13(d) and 14(d)(2)
of the '34 Act) is or becomes a beneficial owner, directly or indirectly,
of securities of the Company representing 20% or more of the combined
voting power of the Company's then outstanding securities;
(c) there occurs a change in control of the Board of Directors of the
Company, such that the individuals who were members of the Board of
Directors of the Company, or of any class into which it is divided,
immediately prior to a meeting of the shareholders of the Company involving
a contest for the election of directors shall not constitute a majority of
the Board of Directors, or of such class, following such election unless
the election, or the nomination and election of the new director was
approved by a vote of at least two-thirds of the directors then still in
office who were directors at the beginning of the period;
(d) the Company becomes a subsidiary of another corporation or shall
have merged into or consolidated with another corporation, or merged
another corporation into the Company, on a basis whereby less than 50% of
the total voting power of the surviving corporation is represented by
shares held by former shareholders of the Company prior to such merger or
consolidation;
(e) the Company shall have sold all or substantially all of its assets
to another corporation or other entity or person; or
(f) the liquidation of the Company.
3. Employment Prior to Trigger Date.
(a) The Company hereby agrees to employ the Executive as the Chief
Executive Officer of the Company and Employee hereby accepts such
employment and agrees to devote his best efforts and as much time as may be
necessary, during or after the regular working hours of the Company, to
perform his duties hereunder.
(b) During the term of this Agreement, the Executive shall perform the
duties typically performed by the Chief Executive Officer of the Company,
subject to direction of, and according to such policies and procedures as
may be adopted from time to time by, the Board of Directors. The Executive
shall report directly to the Board of Directors. Executive's duties and
responsibilities shall not be diminished or reduced, without the consent of
Executive.
2
<PAGE>
(c) During the term of this Agreement, the Company may from time to
time grant him options to acquire shares of the Company's common stock. The
award of any options shall be evidenced by an agreement containing usual
and customary provisions.
(d) This Agreement shall have an initial term of one year from the
date hereof.
(e) The initial annual salary of Executive shall be One Hundred Thirty
Thousand Dollars ($130,000) per annum payable in semi-monthly installments,
subject to increase at any time as determined by a majority of the
disinterested members of the Compensation Committee of the Board of
Directors of the Company. Executive shall be entitled to receive bi-weekly
reimbursement for, or seek direct payment by the Company of, such
reasonable expenses incurred by Executive as are consistent with specific
policies of the Company in the performance of his duties under this
Agreement, provided that Executive accounts therefor in writing and that
such expenses are ordinary and necessary business expenses of the Company
for federal income tax purposes.
(f) Executive shall be entitled to reasonable paid vacation in
accordance with the policies of the Company, and such other employee
benefits as the Board may fix from time to time; provided, however, that,
in the Executive's case, such employee benefits shall include comprehensive
medical, hospitalization and disability insurance and other reasonable
medical benefits in accordance with the policies of the Company, including
the cost of an annual physical examination. In addition, the Company shall
provide a bi- annual allowance of up to Twenty Thousand Dollars ($20,000)
(the "Allowance Amount") for the Executive's purchase of a new or used
automobile. The automobile shall be titled in the name of Executive and
shall remain Executive's property upon any termination of this Agreement.
If the automobile selected by Executive has a purchase price in excess of
the Allowance Amount, Executive shall be responsible for all amounts in
excess of the Allowance Amount. Furthermore, during the term of this
Agreement, the Company shall pay the expense of reasonable insurance for
such automobile (including, but not limited to collision, liability,
comprehensive and uninsured motorist coverage).
4. Post-Trigger Date Employment.
(a) Upon a Change in Control, the Executive, at his option, may resign
at any time within six (6) months following the Trigger Date and receive
the Termination Payments (as hereinafter defined) described in Section 7,
as if Executive had been terminated on the Trigger Date, or Executive may
elect to continue in the employ of the Company. If the Executive so elects,
the Company hereby agrees to continue the Executive in its employ, and the
Executive hereby agrees to remain in the employ of the Company, for the
period commencing on the Trigger Date and ending on the last day of the
month in which occurs the second anniversary of the Trigger Date (the
"Post-Trigger
3
<PAGE>
Employment Period"), subject to the Executive's aforementioned right to
resign in the six (6) month period following the Trigger Date.
(b) During the Post-Trigger Employment Period, Executive shall
exercise such position and authority and perform such duties as are
commensurate with the position and authority being exercised and duties
being performed by the Executive immediately prior to the Trigger Date,
which services shall be performed at the location where the Executive was
employed immediately prior to the Trigger Date or at such other location as
the Company may require not more than 20 miles from the present location.
The position, authority, duties and responsibilities of the Executive shall
be regarded as not commensurate if, as a result of a Change of Control, (i)
the Company becomes a direct or indirect subsidiary of another corporation
or corporations or becomes controlled, directly or indirectly, by one or
more unincorporated entities (such other corporation or unincorporated
entity owning or controlling, directly or indirectly, the Company is
hereinafter referred to as a "parent company") or (ii) all or substantially
all of the assets of the Company are acquired by another corporation or
unincorporated entity or group of corporations or unincorporated entities
owned or controlled, directly or indirectly, by another corporation or
unincorporated entity (such other acquiring or controlling corporation or
unincorporated entity is hereinafter referred to as a "successor"), unless,
in the case of either (i) or (ii), Section 14 of this Agreement shall have
been complied with and the Executive's position, authority, duties and
responsibilities with such parent company or successor, as the case may be,
are at least commensurate in all material respects with those held,
exercised and assigned with the Company immediately prior to the Trigger
Date.
(c) Excluding periods of vacation and sick leave to which the
Executive is entitled, the Executive agrees that during the Post-Trigger
Employment Period he shall devote his full business time to his
responsibilities as described herein and shall perform such
responsibilities faithfully and efficiently. Notwithstanding the foregoing,
the Executive may (i) serve on corporate, civic or charitable boards or
committees, (ii) deliver lectures, fulfill speaking engagements or teach at
educational institutions and (iii) manage personal investments, so long as
such activities do not materially interfere with the performance of the
Executive's duties and responsibilities. It is expressly understood and
agreed that to the extent that any such activities have been conducted by
the Executive prior to the Trigger Date, such prior conduct of activities,
and any subsequent conduct of activities similar in nature and scope, shall
not thereafter be deemed to interfere with the performance of the
Executive's responsibilities to the Company; provided, however, that the
provisions of this sentence shall in no manner be construed as limiting or
restricting the Executive to the conduct of such activities conducted
immediately prior to the Trigger Date.
5. Post-Trigger Compensation and Benefits. During the Post-Trigger
Employment Period, the Executive shall receive the following compensation and
benefits:
4
<PAGE>
(a) He shall receive an annual base salary which is not less than his
annual base salary immediately prior to the Trigger Date. During the
Post-Trigger Employment Period, the Executive's annual base salary shall be
reviewed at least annually and shall be increased from time to time to
reflect increases in the cost of living and such other increases as shall
be consistent with increases in annual base salary awarded in the ordinary
course of business to other key executives. Any increase in annual base
salary shall not limit or reduce any other obligation to the Executive
under this Agreement. In no case shall the annual base salary be reduced.
(b) He shall receive an annual bonus (either pursuant to a bonus or
incentive plan or program of the Company or otherwise) in cash at least
equal to the highest bonus paid or payable to the Executive in respect of
any of the three (3) fiscal years of the Company (annualized with respect
to any such fiscal year for which the Executive has been employed only for
a portion thereof) immediately prior to the fiscal year in which the
Trigger Date occurs. The annual bonus shall be payable within 30 days after
the end of each fiscal year, unless the Executive shall otherwise elect to
defer the receipt of such annual bonus.
(c) He shall be eligible to participate on a reasonable basis, and to
continue his existing participation, in annual incentive, stock option,
restricted stock, long-term incentive performance, and any other incentive
compensation plan which provides opportunities to receive compensation in
addition to his annual base salary which are the greater of (i) the
opportunities provided by the Company for executives with comparable duties
or (ii) the opportunities under any such plans in which he was
participating immediately prior to the Trigger Date.
(d) He shall be entitled to receive and participate in salaried
employee benefits (including, but not limited to, medical, life and
accident insurance, automobile allowance, stock ownership, and disability
benefits) and perquisites which are the greater of (i) the employee
benefits and perquisites provided by the Company to executives with
comparable duties or (ii) the employee benefits and perquisites to which he
was entitled or in which he participated immediately prior to the Trigger
Date.
(e) He shall be entitled to continue to accrue credited service for
retirement benefits and to be entitled to receive retirement benefits under
and pursuant to the terms of any retirement plan or agreement in effect on
the Trigger Date in respect of his retirement, whether or not a qualified
plan or agreement, so that his aggregate monthly retirement benefit from
all such plans and agreements (regardless when he begins to receive such
benefit) will be not less than it would be had all such plans and
agreements in effect immediately prior to the Trigger Date continued to be
in effect without change until and after he begins to receive such benefit.
5
<PAGE>
6. Termination. The term "Termination" shall mean termination, prior to the
expiration of the Post-Trigger Employment Period, of the employment of the
Executive with the Company for any reason other than death, disability (as
described below), cause (as described below), or voluntary resignation (as
described below). Any termination of Executive's employment shall be
communicated by a written Notice of Termination to the other party to this
Agreement specifying the "Termination Date".
(a) The term "disability" means physical or mental incapacity
qualifying the Executive for long-term disability under the Company's
long-term disability plan.
(b) The term "cause" means (i) the willful and continued failure of
the Executive substantially to perform his duties with the Company (other
than any failure due to physical or mental incapacity) after a demand for
substantial performance is delivered to him by the Board of Directors which
specifically identifies the manner in which the board believes he has not
substantially performed his duties or (ii) willful misconduct materially
and demonstrably injurious to the Company. No act or failure to act by the
Executive shall be considered willful unless done or omitted to be done by
him not in good faith and without reasonable belief that his action or
omission was in the best interests of the Company. The unwillingness of the
Executive to accept any or all of a change in the nature or scope of his
position, authorities or duties, a reduction in his total compensation or
benefits, a relocation that he deems unreasonable in light of his personal
circumstances, or other action by or request of the Company in respect of
his position, authority, or responsibility that he reasonably deems to be
contrary to this Agreement, may not be considered by the Board of Directors
to be a failure to perform or misconduct by the Executive. Notwithstanding
the foregoing, the Executive shall not be deemed to have been terminated
for cause for purposes of this Agreement unless and until there shall have
been delivered to him a copy of a resolution, duly adopted by a vote of a
majority of the entire Board of Directors of the Company at a meeting of
the Board called and held (after reasonable notice to the Executive and an
opportunity for the Executive and his counsel to be heard before the Board)
for the purpose of considering whether the Executive has been guilty of
such a willful failure to perform or such willful misconduct as justifies
termination for cause hereunder, finding that in the good faith opinion of
the Board, the Executive has been guilty thereof and specifying the
particulars thereof.
(c) The resignation of the Executive shall be deemed "voluntary" if it
is for any reason other than one or more of the following:
(i) The Executive's resignation or retirement is requested by the
Company other than for cause;
(ii) Any diminution in the nature or scope of the Executive's
position, authorities or duties from those described in Section 4 or
the assignment to Executive of any duties inconsistent with
Executive's existing position, duties and responsibilities;
6
<PAGE>
(iii) Any other reduction in his total compensation or benefits
from that provided in Section 5;
(iv) The breach by the Company of any provision of this
Agreement;
(v) The Executive resigns within six (6) month of the Trigger
Date pursuant to Section 4(a); or
(vi) The determination by the Executive that, as a result of a
Change in Control and a change in circumstances thereafter
significantly affecting his position, he is unable to exercise the
authorities and responsibilities attached to his position and
contemplated by Section 4.
For purposes of this Section 6(c), any good faith determination by the
Executive that any event set forth in clauses (i) - (vi) has occurred above
shall be conclusive.
(d) Termination that entitles the Executive to the payments and
benefits provided in Section 7 shall not be deemed or treated by the
Company as the termination of the Executive's employment or the forfeiture
of his participation, award, or eligibility for the purpose of any plan,
practice or agreement of the Company referred to in Section 5.
7. Termination Payments and Benefits. In the event of Termination, and
within 30 days following the Termination Date, unless this Section has been
previously amended pursuant to Section 13 hereof, the Company shall pay to the
Executive the following (the "Termination Payments"):
(a) His base salary and all other benefits due him through the
Termination Date, less applicable withholding taxes and other authorized
payroll deductions;
(b) The amount equal to the highest annual bonus paid to the Executive
in any of the previous three (3) fiscal years prior to the fiscal year in
which Termination occurs, reduced pro rata for that portion of the fiscal
year not completed as of the end of the month in which Termination occurs;
provided, however, that if the Executive has deferred his award for such
year, the payment due the Executive under this paragraph (b) shall be paid
in accordance with the terms of the deferral; and
(c) A lump sum severance allowance in an amount which is equal to the
sum of the amounts determined in accordance with the following
subparagraphs (i) and (ii):
(i) An amount equivalent to the Calculation Number (as defined
below) multiplied by his annual base salary at the rate in effect
immediately prior to Termination; and
7
<PAGE>
(ii) An amount equivalent to the Calculation Number multiplied by
the highest amount of the annual incentive compensation, including
annual bonus, received or deferred by the Executive for the three (3)
fiscal years immediately prior to the fiscal year in which Termination
occurs.
As used herein, the term "Calculation Period" shall mean two (2) fiscal years or
a period equal in length to that number of fiscal years, as the context shall
require, and the term Calculation Number shall mean two and one-half (2.5).
In addition to the foregoing, the Company shall pay or otherwise provide to the
Executive all of the following:
(d) The Company shall pay, distribute, and otherwise provide to the
Executive the amount and value of his entire plan account and interest
under any investment plan or stock ownership plan, and all employer
contributions made or payable to any such plan for his account prior to the
end of the month in which Termination occurs shall be deemed vested and
payable to him. Such payment or distribution shall be in accordance with
the elections made by the Executive in respect of distributions in
accordance with the plan as if the Executive's employment in the Company
terminated at the end of the month in which Termination occurs.
(e) During a period equal to the Calculation Period, the Company shall
pay the Executive pursuant to the terms of any long-term incentive
performance plan in which he was participating at the time of Termination
as if he continued to be a participant in the plan during that period, and
if pursuant to the terms of such plan no distributions therefrom become
vested until after the expiration of the Post-Trigger Employment Period,
then whenever distributions thereunder become vested, the Company shall pay
the Executive the amount or other distribution to which he would have been
entitled had his participation in the plan continued until the time
distributions become vested and are made pursuant to the plan.
(f) During a period equal to the Calculation Period, the Executive
shall continue to be deemed and treated as if he were an eligible employee
under the provisions of all stock option, stock appreciation right,
restricted stock, and other incentive compensation plans of the Company
under which he held options or awards or in which he participated at the
time of Termination, and he may exercise options and rights, and shall
receive payments and distributions accordingly.
(g) During a period equal to the Calculation Period, the Executive
shall continue to participate in and be entitled to all benefits and
credited service for benefits under the benefit plans, programs and
arrangements described in Sections 5(d) and 5(e) as if he remained employed
by the Company at the compensation levels referred to in this Section 7
during such period, exclusive however of disability benefits and any
aforesaid investment plan or stock ownership plan.
8
<PAGE>
(h) Upon the expiration of the Post-Trigger Employment Period, the
Executive shall be deemed to have retired from the Company and he shall be
entitled at that time, or at such later time as he may elect in order to
avoid or minimize any applicable early pension reduction provision, to
commence to receive the total combined retirement benefit to which he is
entitled hereunder.
(i) Section 5 shall be applicable in determining the payments and
benefits due the Executive under this Section 7, and if Termination occurs
after a reduction (which reduction occurs after the Trigger Date) in all or
any part of the Executive's total compensation or benefits, the monthly
severance allowance and other compensation and benefits payable to him
pursuant to this Section 7 shall be based upon his compensation and
benefits before the reduction.
(j) If any provision of this Section 7 cannot, in whole or in part, be
implemented and carried out under the terms of the applicable compensation,
benefit, or other plan or arrangement of the Company because the Executive
has ceased to be an actual employee of the Company, because he has
insufficient or reduced credited service based upon his actual employment
by the Company, because the plan or arrangement has been terminated or
amended after the Trigger Date of this Agreement, or for any other reason,
the Company itself shall pay or otherwise provide the equivalent of such
rights, benefits, and credits for such benefits to the Executive, his
dependents, beneficiaries and estate.
(k) The Company's obligation under this Section 7 to continue to pay
or provide health care and life and accident insurance to the Executive
during a period equal to the Calculation Period shall be reduced when and
to the extent any of such benefits are paid or provided to the Executive by
another employer, provided that the Executive shall have all rights
afforded to retirees to convert group insurance coverage to individual
insurance coverage as, to the extent of, and whenever his group insurance
coverage under this Section 7 is reduced or expires. Apart from this
paragraph (k), the Executive shall have and be subject to no obligation to
mitigate.
(l) The Company shall deduct applicable withholding taxes in
performing its obligations under this Section 7.
Nothing in this Section 7 is intended, or shall be deemed or interpreted, to be
an amendment to any compensation, benefit, or other plan of the Company. To the
extent the Company's performance under this Section 7 includes the performance
of the Company's obligations to the Executive under any such plan or under
another agreement between the Company and the Executive, the rights of the
Executive under such plan or other agreement, as well as under this Agreement,
are discharged, surrendered, or released pro tanto.
9
<PAGE>
8. Gross-Up of Termination Payments. In the event that the Executive
becomes entitled to the Termination Payments, if any of such payments are or
become subject to the tax (the "Excise Tax") imposed by Section 4999 of the
Internal Revenue Code of 1986, or any successor statute, rule or regulation of
similar effect (the "Code"), the Company shall pay the Executive within 30 days
of the Termination Date an additional amount (the "Gross-Up Payment") such that
the net amount retained by the Executive, after deduction of any Excise Tax on
the Termination Payments and the sum of any federal, state and local income tax
and Excise Tax upon the payment provided by this Section, shall be equal to the
Termination Payments. For the purposes of determining whether any of the
Termination Payments will be subject to the Excise Tax and the amount of such
Excise Tax, the following shall apply:
(a) any other payments or benefits received or to be received by the
Executive from the Company or one of its benefit plans in connection with a
Change in Control or in connection with Termination (from whatever source)
shall be treated as "parachute payments" within the meaning of Section
280G(b)(2) of the Code;
(b) all "excess parachute payments" within the meaning of Section
280G(b)(1) of the Code shall be treated as subject to the Excise Tax,
unless, in the opinion of tax counsel selected by the Company's independent
auditors and acceptable to the Executive, such other payments or benefits
(in whole or in part) described in clause (a) above do not constitute
parachute payments, or such excess parachute payments (in whole or in part)
represent reasonable compensation for services actually rendered within the
meaning of Section 280G(b)(4) of the Code;
(c) the amount of the Termination Payments which shall be treated as
subject to the Excise Tax shall be equal to the lesser of:
(i) the total amount of the Termination Payments; and
(ii) the amount of excess parachute payments within the meaning
of Sections 280G(b)(1) and (4) (after applying clauses (a) and (b)
above).
(d) the value of any non-cash benefits or any deferred payment or
benefit shall be determined by the Company's independent auditors in
accordance with the principles of Sections 280G(d)(3) and (4) of the Code;
(e) the Executive shall be deemed to pay federal income taxes, and
state and local income taxes in the state and locality of the Executive's
residence on the date of Termination, at the highest marginal rate of
income taxation in effect in the calendar year in which the Gross-Up
Payment is to be made, net of the maximum reduction in federal income taxes
which could be obtained from deduction of such state and local income
taxes; and
10
<PAGE>
(f) in the event the Excise Tax is subsequently determined to be less
than the amount taken into account hereunder at the time of the payment of
the Termination Payments, the Executive shall repay the Company the portion
of the Gross-Up Payment attributable to such reduction, or in the event
that the Excise Tax is subsequently determined to exceed the amount taken
into account hereunder at the time of the payment of the Termination
Payments (including by reason of any payment the existence or amount of
which cannot be determined at the time of the Gross-Up Payment), the
Company shall make an additional gross-up payment in respect of such
excess, in each case, payment to be made within 30 days after the final
determination of the amount of the reduction or excess, as the case may be,
together with interest thereon at the rate provided in Section
1274(b)(2)(B) of the Code.
9. Arrangements Not Exclusive or Limiting. The specific arrangements
referred to herein are not intended to exclude or limit the Executive's
participation in other benefits available to executive personnel generally, or
to preclude or limit other compensation or benefits as may be authorized by the
Board of Directors of the Company at any time, or to limit or reduce any
compensation or benefit to which the Executive would be entitled but for this
Agreement.
10. Enforcement Costs. The Company is aware that upon the occurrence of a
Change in Control, the Board of Directors or a stockholder of the Company may
then cause or attempt to cause the Company to refuse to comply with its
obligations under this Agreement, or may cause or attempt to cause the Company
to institute, or may institute, litigation seeking to have this Agreement
declared unenforceable, or may take, or attempt to take, other action to deny
the Executive the benefits intended under this Agreement. In these
circumstances, the purpose of this Agreement could be frustrated. It is the
intent of the parties that the Executive not be required to incur the legal fees
and expenses associated with the protection or enforcement of his rights under
this Agreement by litigation or other legal action because such costs would
substantially detract from the benefits intended to be extended to the Executive
hereunder, nor be bound to negotiate any settlement of his rights hereunder
under threat of incurring such costs. Accordingly, if at any time after the
Trigger Date, it should appear to the Executive that the Company is or has acted
contrary to or is failing or has failed to comply with any of its obligations
under this Agreement for the reason that it regards this Agreement to be void or
unenforceable or for any other reason, or that the Company has purported to
terminate his employment for cause or is in the course of doing so in either
case contrary to this Agreement, or in the event that the Company or any other
person takes any action to declare this Agreement void or unenforceable, or
institutes any litigation or other legal action designed to deny, diminish or to
recover from the Executive the benefits provided or intended to be provided to
him hereunder, and the Executive has acted in good faith to perform his
obligations under this Agreement, the Company irrevocably authorizes the
Executive from time to time to retain counsel of his choice at the expense of
the Company to represent him in connection with the protection and enforcement
of his rights hereunder, including without limitation representation in
connection with termination of his employment contrary to this Agreement or with
the initiation or defense of any litigation or other legal action, whether by or
against the Executive or the Company or any director, officer, stockholder or
other person affiliated with the
11
<PAGE>
Company, in any jurisdiction. The reasonable fees and expenses of counsel
selected from time to time by the Executive as hereinabove provided shall be
paid or reimbursed to the Executive by the Company on a regular, periodic basis
upon presentation by the Executive of a statement or statements prepared by such
counsel in accordance with its customary practices. Counsel so retained by the
Executive may be counsel representing other officers or key executives of the
Company in connection with the protection and enforcement of their rights under
similar agreements between them and the Company, and, unless in his sole
judgement use of common counsel could be prejudicial to him or would not be
likely to reduce the fees and expenses chargeable hereunder to the Company, the
Executive agrees to use his best efforts to agree with such other officers or
executives to retain common counsel.
11. Notices. Any notices, requests, demands and other communications
provided for by this Agreement shall be in writing and personally delivered by
hand or sent by registered or certified mail, if to the Executive, to him at the
last address he has filed in writing with the Company or, if to the Company, to
its corporate secretary at its principal executive offices.
12. Non-Alienation. The Executive shall not have any right to pledge,
hypothecate, anticipate, or in any way create a lien upon any amounts provided
under this Agreement, and no payments or benefits due hereunder shall be
assignable in anticipation of payment either by voluntary or involuntary acts or
by operation of law. So long as the Executive lives, no person, other than the
parties hereto, shall have any rights under or interest in this Agreement or the
subject matter hereof.
13. Entire Agreement; Amendment. This Agreement constitutes the entire
agreement of the parties in respect of the subject matter hereof. Except as
hereinafter provided in this Section 13, no provision of this Agreement may be
amended, waived or discharged except by the mutual written agreement of the
parties. Notwithstanding the foregoing, Executive acknowledges and agrees that
the Board of Directors, at any time prior to a Change in Control, may in its
sole discretion, unilaterally amend this Agreement to modify or deny Termination
Payments pursuant to Section 7 hereof. The consent of any other person to any
such amendment, waiver or discharge shall not be required.
14. Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the Company, its successors or assigns, by operation of law or
otherwise, including without limitation any corporation or other entity or
person which shall succeed (whether directly or indirectly, by purchase, merger,
consolidation, or otherwise) to all or substantially all of the business and/or
assets of the Company, and the Company will require any parent company or
successor, by agreement in form and substance satisfactory to the Executive,
expressly to assume and agree to perform, or (in the case of a parent company)
to guarantee the performance of, this Agreement. Except as otherwise provided
herein this Agreement shall be binding upon and inure to the benefit of the
Executive and his legal representatives, heirs, and assigns, provided, however,
that in the event of the Executive's death prior to payment or distribution of
all amounts, distributions, and benefits due him hereunder, each such unpaid
amount and distribution shall be paid in accordance with this Agreement to the
person or persons designated by the
12
<PAGE>
Executive to the Company to receive such payment or distribution and in the
event the Executive has made no applicable designation, to the persons or
persons designated by the Executive as the residuary beneficiaries of his estate
if he dies testate or to his heirs at law under the intestate succession laws of
his state of domicile if he dies intestate.
15. Withholding of Taxes. The Company may withhold from any benefits
payable under this Agreement all federal, state, city or other taxes as shall be
required pursuant to any law or governmental regulation or ruling.
16. Governing Law. The validity, interpretation, and enforcement of this
Agreement shall be governed by the laws of the State of Florida.
17. Severability. In the event that any provision or portion of this
Agreement shall be determined to be invalid or unenforceable for any reason, the
remaining provisions of this Agreement shall be unaffected thereby and shall
remain in full force and effect.
18. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together constitute one and the same instrument.
IN WITNESS WHEREOF, the Executive has hereunto set his hand and, pursuant
to the authorization from its Board of Directors, the Company has caused these
presents to be executed in its name on its behalf, and its corporate seal to be
hereunto affixed and attested by its Secretary or Assistant Secretary, all as of
the day and year first shown above written.
FAMILY STEAK HOUSES OF FLORIDA, INC.
ATTEST:
By: /s/ MICHAEL J. WALTERS /s/ EDWARD B. ALEXANDER
----------------------------- -------------------------
Michael J. Walters Edward B. Alexander
Secretary Chief Financial Officer
EXECUTIVE:
/s/ LEWIS E. CHRISTMAN
-------------------------------
Lewis E. Christman, Jr.
13
- --------------------------------------------------------------------------------
Lease Agreement
================================================================================
- --------------------------------------------------------------------------------
LEESBURG SQUARE FAMILY STEAKHOUSE OF FLORIDA, INC.
- --------------------------------------------------------------------------------
Shopping Center Name Tenant's Name
Table of Contents
PAGE #
SECTION 1.0: BASIC LEASE SUMMARY 2
SECTION 2.0: RENT 4
SECTION 3.0: CLEANING AND REPAIR OF DEMISED PREMISES 6
SECTION 4.0: CONDUCT OF BUSINESS 6
SECTION 5.0: COMMON AREA USE 7
SECTION 6.0: ALTERATIONS, LIENS AND SIGNS 7
SECTION 7.0: MAINTENANCE OF DEMISED PREMISES, SURRENDER AND RULES 8
SECTION 8.0: INSURANCE AND INDEMNITY 10
SECTION 9.0: UTILITIES 11
SECTION 10.0: PRIORITY OF LEASE 11
SECTION 11.0: ASSIGNMENT AND SUBLETTING 11
SECTION 12.0: WASTE, GOVERNMENTAL AND INSURANCE REQUIREMENTS, AND
HAZARDOUS SUBSTANCE 12
SECTION 13.0: PROMOTIONAL FUND 13
SECTION 14.0: DESTRUCTION OF DEMISED PREMISES 13
SECTION 15.0: EMINENT DOMAIN 14
SECTION 16.0: DEFAULT OF TENANT 14
SECTION 17.0: ACCESS BY LANDLORD 15
SECTION 18.0: TENANT'S PROPERTY 15
SECTION 19.0: HOLDING OVER; SUCCESSORS 16
SECTION 20.0: QUIET ENJOYMENT 16
SECTION 21.0: MISCELLANEOUS 16
SECTION 22.0: SECURITY AND RENT DEPOSITS 18
SECTION 23.0: TENANT COVENANTS; EASEMENTS 19
ADDENDUM 20
EXHIBIT "A" SITE PLAN
EXHIBIT "B" DESCRIPTION OF LANDLORD'S WORK AND TENANT'S WORK
EXHIBIT "C" INTENTIONALLY OMITTED
EXHIBIT "D" INTENTIONALLY OMITTED
EXHIBIT "E" SIGN SPECIFICATIONS
EXHIBIT "F" TENANT'S ESTOPPEL CERTIFICATE FORM
1
<PAGE>
- --------------------------------------------------------------------------------
Lease Agreement
================================================================================
THIS LEASE AGREEMENT ("Lease") is made and entered into as of the 29th day
of January, 1998, ("Execution Date") by and between Excel Realty Trust, Inc., a
Maryland corporation ("Landlord"), and Family Steakhouse of Florida, Inc., a
Florida corporation ("Tenant").
WHEREAS, Landlord desires to lease certain space to Tenant, and Tenant
desires to take and lease the space from Landlord, which space is more fully
described in Section 1.01(d); and
WHEREAS, that certain space being the building or a portion thereof
("Demised Premises") is located within the Leesburg Square ("Shopping Center"),
in the City of Leesburg, County of Lake, State of Florida.
NOW, THEREFORE, and in consideration of the rents and covenants hereinafter
set forth to be kept and performed by the parties, Landlord hereby rents,
demises and leases to Tenant, and Tenant takes and leases from Landlord, the
Demised Premises upon the following terms and conditions:
Section 1.0
BASIC LEASE SUMMARY
1.01 This Lease is entered into pursuant to the following terms and conditions,
more particularly set forth herein:
<TABLE>
<S> <C> <C>
a. Shopping Center Name: Leesburg Square
Address: 2259 N. Citrus Boulevard
City: Leesburg County: Lake State: Florida
b. Landlord's Address for Notices: Landlord's Address for Rent Payments:
Excel Realty Trust, Inc. Excel Realty Trust, Inc.
16955 Via Del Campo, Suite 110 Post Office Box 501428
San Diego, California 92127 San Diego, California 92150-1428
Attention: Vice President, Director of Leasing
Phone: 619-485-9400
c. Tenant's Address for Notices: Tenant's Address for Billing:
Family Steakhouse of Florida, Inc. Family Steakhouse of Florida, Inc.
Trade Name: Ryan's Family Steakhouse Address: 2259 N. Citrus Boulevard
Address: 2113 Florida Boulevard City, State, Zip: Leesburg, FL 32748
City, State, Zip: Neptune, FL 32233 Attention: Edward Alexander
Attention: Edward Alexander ----------------
----------------
Phones: Office:(904) 249-4197 Store: TBD Other:
</TABLE>
d. Demised Premises. Commonly referred to as 2259 N. Citrus Boulevard,
Major Anchor "C", containing approximately 10,191 sq. ft. with
dimensions of 114' (frontage) x 89'5", as depicted on Exhibit "A"
attached hereto and made a part hereof.
e. Estimated Delivery Date: 2/1/98
Lease Commencement Date: 2/1/98
Rent Commencement Date: the earlier of (i) one hundred twenty (120)
days after Landlord delivers the Demised Premises to Tenant or
(ii) when Tenant opens for business.
Lease Expiration Date: 01/31/08
If the "Actual Delivery Date" is earlier or later than the "Estimated
Delivery Date" hereinabove by more than fifteen (15) days, then, in
order to establish a new Lease Commencement Date, Rent Commencement
Date and Expiration Date, Landlord and Tenant shall enter into written
agreement within ten (10) days after the "Actual Delivery Date".
f. Lease Term: Ten (10) Years
Options: One (1) Five Year
g. Rent Due Date & Late Fee.
Due Date: 1st of Month Late Date: 10th of Month
Late Fee: 5% Interest Rate: 1.5% per month
h. Minimum Annual Rental.
Period Annual Month Annual PSF
Years 1- 10 $81,528.00 $6,794.00 $8.00
Option Period
Years 11-15 $105,986.40 $8,832.20 $10.40
2
<PAGE>
<TABLE>
<S> <C> <C> <C>
i Additional Rent.
CAM & Insurance (See Section 5.02): $1,070.05 Estimate
Taxes (See Section 2.07): $569.00 Estimate
Promotions (See Section 13.01): n/a Estimate
Privilege/Sales and Use Tax (See Section 2.07(c): $590.31 Estimate
---------
Total Monthly Estimate for Minimum
Annual Rental and Additional Rent: $9,023.36 First Year
Privilege Tax: 7%
Percentage Rents (See Section 2.02). None
Due Date: n/a
Reporting Frequency: n/a
Payment Frequency: n/a
Percentage: n/a Initial Breakpoint: n/a
</TABLE>
j. Security Deposit (See Section 22.01). $0
Rent Deposit (See Section 22.03). $0
k. Tenant's Insurance Requirements.
Public Liability and Property Damage: $1,000,000.00 CSL
Personal Property: Full replacement
Other: Plate Glass, Liquor Liability,
if applicable.
l. Signs. Drawings and specifications shall be completed in accordance
with Exhibit "E" attached hereto and made a part hereof and have been
submitted to Landlord for its written approval prior to installation
of exterior signs. Tenant agrees that its signage must comply with
applicable governmental regulations and requirements. Landlord agrees
to grant Tenant the right, subject to any and all governmental
approvals, to have signage (i) on the Shopping Center pylon at U.S.
441 in space previously occupied by Fashion Bug, (ii) on the Shopping
Center pylon at County Road Bypass in space previously occupied by
Fashion Bug, (iii) on the front elevation of the Demised Premises, and
(iv) on the north wall of space "19". All costs and expenses to secure
signage will be borne by Tenant. In the event of any conflict between
Exhibit "E-1" and Exhibits "E-2" through "E-5", Exhibits "E-2" through
"E-5" shall be controlling.
m. Permitted Use. Tenant shall use the Demised Premises solely for the
purpose of conducting the business of a steakhouse and buffet with
steak and beef as its primary menu items, Tenant will not use or
permit any part of the Demised Premises to be used for any other
purpose.
n. Broker: Jon Rose - Charles Wayne Properties and Bernie Hoone - Tyre
and Taylor
o. Condition of Demised Premises. Upon delivery of the Demised Premises
by Landlord, Tenant shall accept the Demised Premises in |x| "As Is"
condition or |_| upon substantial completion of Landlord's Work, as
set forth in Section I of Exhibit "B", or |_| upon substantial
completion of Landlord's Work, as set forth in Section II of Exhibit
"B", attached hereto and made a part hereof.
p. Guarantor(s) -- (include spouse of individual guarantors, home address
and business address). None
q. Other Lease Notes. See attached Addendum.
r. Special Conditions of Lease. Tenant agrees to keep all terms and
conditions of tile Lease confidential and not discuss rents, terms or
conditions of the Lease with any existing or future tenants. Breach of
confidentiality shall be deemed a default under the Lease. Landlord
may pursue any and all default remedies available under the Lease
against Tenant, including any legal remedies.
s. Tenant agrees to operate its business during normal business hours
opening for business no later than 7:30 a.m. and closing no earlier
than 11:00 p.m., seven (7) days per week, holidays excluded.
t. Effect of Reference to the Basic Lease Summary. Each of the provisions
contained in the Basic Lease Summary herein shall be construed to
incorporate references contained thereto in other provisions in the
Lease and shall be limited by such provisions. Each reference in the
Lease to any of the provisions in this Section 1.01 shall be construed
to incorporate all of the terms provided under each such provision. In
the event of any conflict between Section 1.01 and the Lease, the
Lease shall be controlling.
1.02 Demised Premises & Use of Common Area. Landlord hereby leases to
Tenant, and Tenant hereby leases from Landlord, at the rental and upon the
covenants and conditions hereinafter set forth, the Demised Premises,
crosshatched in red on Exhibit "A". The use and occupancy by Tenant of the
Demised Premises shall include the right to use, in common with others entitled
thereto, the Common Area, as defined in Section 5.03, employee parking areas,
service roads, loading facilities, sidewalks and customer parking areas of the
Shopping Center, and such other facilities as may be designated from time to
time by Landlord, subject, however, to the terms and conditions of the Lease.
Landlord may designate certain portions of the parking areas as reserved for use
of certain tenants or customers of certain tenants at Landlord's sole
discretion. All parking rights are subject to applicable governmental ordinances
and regulations. See Addendum
3
<PAGE>
1.04 Commencement of Rental and Other Charges. Tenant's obligation to pay
Minimum Annual Rental shall commence on the Rent Commencement Date, as set forth
in Section 1.01(e) unless Landlord is to perform Landlord's Work, in which
event the Rent Commencement Date shall be the earlier of (i) thirty (30) days
after Landlord notifies Tenant in writing that the Demised Premises are
substantially complete and are delivered to Tenant ("Delivery Date") or (ii)
Tenant opens for business to the public. The term "substantially complete" as
used in the Lease shall mean that the work, if any, to be performed by Landlord
as described in Exhibit "B", attached hereto and made a part hereof, has been
completed with the exception of minor items which can be completed without
material interference with the installation of fixtures or improvements for
Tenant's business. Tenant, prior to the Lease Commencement Date, shall with the
prior consent of Landlord be permitted to install fixtures and equipment. Any
work done by Tenant prior to completion of Landlord's Work shall be done In a
manner as will not interfere with the progress of Landlord's Work. Landlord
shall have no liability or responsibility for loss or damage to fixtures,
equipment or other property of Tenant so installed or placed in the Demised
Premises.
1.05 Lease Term. The Lease shall become fully effective and binding as of
the Execution Date. The "Lease Term" shall mean that period commencing upon the
Lease Commencement Date and continuing through the Lease Expiration Date, unless
sooner terminated as provided under the Lease or by law.
1.06 Tenant's Work. Tenant shall make all necessary improvements to the
Demised Premises to operate Tenant's business, including Tenant's Work, as set
forth in Exhibit "B". Tenant's Work shall comply with all applicable statutes,
ordinances, regulations, and codes and shall strictly comply with the
requirements of Section 6.0. Tenant may not enter upon or puncture the roof or
interfere with the sprinkler system without the prior written consent of
Landlord, as required under Section 6.01. Tenant agrees, at its sole cost and
expense, to obtain and maintain public liability insurance and worker's
compensation insurance to fully protect Landlord as well as Tenant from and
against any and all liability for death or injury to person, or damage to
property, caused by the construction of Tenant's Work.
1.07 Shopping Center Provisions. No rights or remedies shall accrue to
Tenant arising out of the failure of Landlord to construct or lease any other
parts of the Shopping Center or from any changes in occupancy by tenants in the
Shopping Center except as otherwise provided in the Exclusive Use covenant to
Tenant as stated in the Addendum. It is understood that Exhibit "A" sets forth
the general layout of the Shopping Center but shall not be deemed as a warranty,
representation or agreement on the part of Landlord that the Shopping Center
layout will be or continue to be exactly as depicted thereon. Landlord reserves
the right from time to time, at its sole discretion, and without the consent of
Tenant to (i) change the number, size, height (including additional stories) or
locations of the buildings or Common Area In the Shopping Center as Landlord may
deem appropriate provided access and parking materially remains the same; (ii)
change or modify any means of ingress or egress; (iii) construct building(s)
and/or kiosk(s) on or in the Common Area; or (iv) add additional land or
buildings or both to the Shopping Center.
1.08 Tenant's Proportionate Share. Tenant shall pay its proportionate share
of operating expenses including taxes, insurance and Common Area maintenance
expenses ("Additional Rent"), as more particularly set forth in the Lease. As
used in the Lease, the term "Proportionate Share" shall be equal to a fraction,
the numerator of which shall be the number of square feet of leasable floor area
in the Demised Premises and the denominator of which shall be the number of
square feet of leasable floor area in the Shopping Center, whether leased,
vacant or occupied. Provided, however, if a tenant in the Shopping Center
maintains its own premises or separately meters its utilities or separates its
parcel or insures its own premises, the denominator shall be adjusted
accordingly. Tenant's Proportionate Share as of the Execution Date is eleven
percent (11%), which is subject to adjustment in the event floor area should
change.
Section 2.0
RENT
2.01 Minimum Annual Rental. Effective upon the Rent Commencement Date,
Minimum Annual Rental hereunder shall be as set forth in Section 1.01(h) and
payable in monthly installments in advance, without set off, on the first day of
each month throughout the Lease Term at the office of Landlord, as set forth in
Section 1.01(b), or at such other place designated by Landlord, without any
prior demand. Minimum Annual Rental for any fractional month shall be prorated
and payable in advance. A Fifty Dollar ($50.00) handling fee will be imposed on
all Tenant checks returned to Landlord for insufficient funds, and all future
payments due shall be made with certified funds or a cashiers check.
4
<PAGE>
2.07 Taxes. Effective upon the Rent Commencement Date, Tenant shall pay to
Landlord as Additional Rent its Proportionate Share of all real estate taxes,
special taxes and governmental assessments for the Shopping Center (excluding
any tenants separately taxed), at least thirty (30) days prior to delinquency.
The initial estimate shall be as set forth in Section 1.01(i). Landlord, at its
option, may obtain separate taxable status for the Demised Premises, and in such
event, Tenant's tax contribution shall be based thereon.
5
<PAGE>
(a) Right to Contest Assessments. Landlord may contest any and all such
real estate taxes. If the result of any such contest shall be a reduction in the
amount so contested, that portion of any refund, reduction, credit or recovery
from the taxing authorities with respect to such real estate taxes which is in
the same proportion of the total refund or recovery as Tenant's share of taxes,
shall belong to Tenant, and the balance shall belong to Landlord. The cost of
any such contest shall be paid as Additional Rent in the same Proportionate
Share as the real estate taxes are paid.
(b) Real Estate Tax. Real estate taxes shall mean (i) any fee, license fee,
license tax, business license fee, commercial rental tax, levy, charge,
assessment, penalty or tax imposed by any taxing or judicial authority against
the Shopping Center Improvements or land upon which the Shopping Center is
located, together with all taxes levied upon or assessed against the personal
property of Tenant; (ii) any tax on Landlord's right to receive, or the receipt
of, rent or income from the Shopping Center or against Landlord's business of
leasing the Shopping Center; (iii) any tax or charge for fire protection,
streets, sidewalks, road maintenance, refuse or other services provided to the
Shopping Center by any governmental agency; (iv) any tax imposed upon this
transaction, or based upon a re-assessment of the Shopping Center due to a
change In ownership or transfer of all or part of Landlord's interest in the
Shopping Center; and (v) any charge or fee replacing any tax previously included
within the definition of real property tax.
(c) Privilege Tax. Tenant shall pay to Landlord the Privilege Tax, as set
forth in Section 1.01(i), which shall be a percentage of the Minimum Annual
Rental and Additional Rent paid by Tenant to Landlord.
"Privilege Tax" shall mean any assessment, tax, levy or charge allocable to
or measured by the area of the Demised Premises leased by Tenant or the Minimum
Annual Rental and Additional Rent payable by Tenant, including but not limited
to, any gross Income tax with respect to the receipt of such Minimum Annual
Rental, or upon or concerning the possession, leasing, operation, management,
maintenance, alteration, repair, use or occupancy of the Demised Premises by
Tenant.
2.08 Late Charges. All past due Minimum Annual Rental, Additional Rent or
other charges due under the Lease shall be assessed a five percent (5%) late
charge. Such charge shall be deemed Additional Rent and Landlord may in its sole
discretion, deduct such charge from the Security Deposit. Additionally, all past
due Minimum Annual Rental, Additional Rent and other charges due under the Lease
shall accrue interest at 1.5% per month or the maximum amount permitted by law,
whichever is greater, and may likewise be deducted by Landlord from the Security
Deposit.
Section 3.0
CLEANING AND REPAIR OF DEMISED PREMISES
3.01 Landlord's Obligations. Landlord shall deliver the Demised Premises to
Tenant in broom clean condition, with the HVAC, plumbing, electrical systems and
equipment in good condition. Landlord expressly agrees that the HVAC equipment
will be serviced prior to the delivery of the demised premises to tenant. Except
as set forth herein, the respective obligations of Landlord and Tenant regarding
maintenance and repairs are governed by Section 7.0.
Section 4.0
CONDUCT OF BUSINESS
4.01 Use of Demised Premises. Tenant shall use the Demised Premises solely
for the purpose set forth in Section 1.01(m) and shall operate under the trade
name set forth in Section 1.01(c), and for no other business or purpose or under
any other name without the prior written consent of Landlord. Said consent may
be subject to conditions as Landlord deems appropriate, at its sole and absolute
discretion.
4.02 Operation of Business. Tenant shall continuously operate and keep open
to the public the entire Demised Premises during the Lease Term and any renewal
thereof with due diligence and efficiency, maintain adequate personnel for
efficiently accommodating its customers. The Demised Premises shall not be used
in any manner that would necessitate (in accordance with any requirement of law
or of any public authority) the making of an addition or alteration in or to the
Demised Premises by Landlord. Tenant shall, at a minimum, keep the store open
during normal business hours as described in Section 1.01(s).
4.03 Duties and Prohibited Conduct. Tenant shall not use the Demised
Premises, or permit or fail to prevent the Demised Premises to be used (i) for
any purpose or in any manner that violates any legal requirement and/or the
requirements of the insurance underwriter(s) of the Shopping Center; (ii) for
the sale, rental or display of pornography, nudity, graphic violence, drug
paraphenalia, or any goods and/or services that, in the sole and absolute
discretion of Landlord, are inconsistent with the image of a community or
family-oriented shopping center; (iii) as a massage parlor, adult bookstore or
second-hand store; (iv) to conduct an auction, distress, fire, bankruptcy or
going-out-of-business sale or similar sales; (v) to operate any video, pinball
or other gaming machines except for one skill crane toy machine which may be
installed in the demised premises; or (vi) to keep live animals of any kind
unless otherwise permitted by the Lease. Tenant shall keep the Demised Premises,
and every part thereof, in a clean and wholesome condition, free from any
objectionable noises, loud music, odors or nuisances. If the Permitted Use
includes the sale and/or preparation of food, Tenant shall at all times maintain
a health department rating of "A" (or such other highest department or similar
rating as is available). Tenant shall not violate any existing "exclusive" or
"restrictive" Lease covenants of any tenant(s) in the Shopping Center. Landlord
covenants with Tenant that Tenant's Permitted Use does not violate any existing
"exclusive" or "restrictive" lease covenants of any tenant(s) in the Shopping
Center.
6
<PAGE>
Section 5.0
COMMON AREA USE
5.01 Control of Common Area by Landlord. The Common Area shall at all times
be subject to the exclusive control and management of Landlord, and Landlord
shall have the right from time to time to establish, revoke, modify and enforce
reasonable rules and regulations with respect to all or any part of said Common
Area, provided, however, said rules and regulations do not materially effect the
amount of parking spaces for Tenant's customers and employees or materially
alter access to the Demised Premises. Landlord shall also have the right to
close all or any portion of said Common Area to such extent as may, in the
opinion of Landlord's counsel, be legally sufficient to prevent a dedication
thereof or the accrual of any rights to any person or the public therein; and to
do and perform such other acts in and to said Common Area and improvements,
and/or revise and develop the same, as Landlord shall determine to be advisable,
with a view to the improvement of the convenience and use thereof by the tenants
of the Shopping Center and their customers, provided adequate, and reasonably
comparable, access to and parking for the Demised Premises is maintained.
5.02 Common Area Maintenance Contribution. During each calendar year or any
portion thereof during the Lease Term and any renewal thereof, Tenant will pay
to Landlord as Additional Rent its Proportionate Share of the Common Area
maintenance expenses ("CAM"); however, if any CAM expense is increased because
of Tenant's use, Tenant shall pay said additional expense within thirty (30)
days after receipt of a detailed statement from Landlord. Tenant's share of such
costs shall be estimated by Landlord on an annual basis for each calendar twelve
(12) month period ending on December 31, prorating any partial Lease Year. The
initial estimate shall be as set forth in Section 1.01(i) which Tenant shall pay
in monthly installments on the first day of each month in advance. If Tenant's
Proportionate Share of such CAM expenses for any Lease Year shall exceed
Tenant's payments, then within thirty (30) days after Tenant's receipt of a
detailed statement, Tenant shall pay the difference to Landlord. If the
statement indicates an overpayment by Tenant, then Tenant shall be entitled to
offset such overpayment against obligations next accruing under the Lease.
5.03 Operating Costs. For the purpose of this Section 5.03, "CAM" shall
mean the total costs and expense incurred in operating, managing, maintaining,
repairing, relocating, modifying, renovating and replacing the Common Area,
including without limitation the property management fee, costs of maintaining
and repairing the roof (excepting the replacement thereof), detention ponds,
porches, sprinkler system, utility lines, resurfacing or patching parking areas,
line painting, sidewalks and curbs, security and traffic control, security alarm
systems, gardening, watering and landscaping, lighting, maintenance of sanitary
control, Common Area utilities, snow and ice removal, drainage, rubbish and
other refuse, including any required recycling costs, costs to remedy and/or
comply with governmental matters, repair or installation of equipment for
energy-saving or safety purposes, reserves for future maintenance and repair
work, to be used as necessary at Landlord's reasonable discretion, costs
associated with any merchants' association, depreciation on equipment and
machinery used in maintenance, cost of personnel and management required to
provide such services, any Capital Expenditures, as hereinafter defined,
insurance which shall include public liability and umbrella insurance, fire and
extended coverage, all risk, including flood and earthquake, and such other
items of cost and expense which relate to proper maintenance of the Common Area,
including those made in a tenant's premises but for the benefit of all tenants
in the Shopping Center plus ten percent (10%) of all of the foregoing costs to
cover the administrative cost relative to the Common Area ("Administrative
Fee").
"Common Area" shall mean all areas, space, equipment, and special services
provided by Landlord for common or joint use and benefit of the tenants, their
employees, agents, servants, customers and invitees, including without
limitation roofs, walls, parking areas, access roads, driveways, retaining
walls, landscaped and vacant areas, loading facilities, pedestrian malls,
walkways, ramps, wash rooms, fountains, shelters, signs, security, lighting
fixtures and equipment, cost of utility service, and the facilities appurtenant
to each of the aforesaid, and any other facilities maintained for the benefit of
the Shopping Center. Landlord shall have the right to modify, expand or reduce
the Common Area from time to time as deemed reasonable by Landlord.
"Capital Expenditures" shall mean an expenditure which in accordance with
generally accepted accounting practices are not fully chargeable to current
expense in the year the expenditure is incurred. Charges for capital
expenditures shall be limited to the replacement of Common Area. Amortization
may be, in lieu of the full cost of such item amortized, over its useful life.
5.04 Extended Hours Services. If Tenant desires to operate its business in
the Demised Premises for more than ten (10) hours beyond the normal Shopping
Center hours of operation, Tenant shall request Landlord's permission to do so,
which request shall be subject to Landlord's approval. Thereafter, Tenant shall
notify Landlord of any changes in the times or dates of the extended hours of
operation. Landlord will provide those extended hours services that it deems
necessary provided, however, in time event Tenant requires in excess of ten (10)
additional hours of extended hours services, beyond Tenant's standard business
hours, as set forth in Section 1.01(s). Tenant shall reimburse Landlord for the
increased costs incurred by Landlord for such extended hours services, including
without limitation, lighting, security, utilities and Landlord's Administrative
Fee with respect to all such expenses. Tenant shall pay such Increased costs as
part of Additional Rent in accordance with Section 5.03.
5.05 Security Officers. Tenant acknowledges that if Landlord provides
security officers for the Common Area, Landlord does not represent, guarantee or
assume responsibility that Tenant will be secure from any claims relating to
such security officers. Landlord shall have no obligation to hire, maintain or
provide such services, which may be withdrawn or charged at any time with or
without notice to Tenant or any other person and without liability to Landlord.
Section 6.0
ALTERATIONS, LIENS AND SIGNS
6.01 Alterations. The requirements of this Section 6.01 shall apply to
Tenant's Work as described in Section 1.06 and any alterations thereafter.
Tenant shall not, without Landlord's prior written consent, either make or cause
to be made any alterations, including additions and Improvements, to the Demised
Premises or to any exterior signs,
7
<PAGE>
shades or awnings. Landlord's consent shall be at its sole and absolute
discretion. Any alterations consented by Landlord shall be made at Tenant's sole
expense. Tenant shall provide its own trash containers for construction debris
and use service entrances to the Demised Premises, if any. Tenant shall secure
any and all governmental permits, approvals or authorizations required in
connection with any such work and shall hold Landlord harmless from any and all
liability, costs, damages, expenses (including attorney's fees) and liens
resulting therefrom. All alterations (expressly including all light fixtures and
floor coverings, except trade fixtures, appliances and equipment that do not
become a part of the Demised Premises), shall immediately become the property of
Landlord. At Landlord's request, Tenant shall utilize only contractors or
subcontractors who have contracts in effect at the time the improvements are
made with the respective building trade unions which traditionally and normally
perform the work of the crafts involved in such work. Upon completion of any
such work, Tenant shall provide Landlord with "as built" plans,
6.02 Tenant Shall Discharge All Liens. Tenant shall promptly pay its
contractors and materialmen for all work performed by Tenant, so as to prevent
the assertion or imposition of liens, encumbrances or charges upon or against
the Demised Premises, and shall, upon request, provide Landlord with lien
waivers. In the event any lien or notice of lien shall be asserted or filed,
Tenant shall bond against or discharge the same within ten (10) days after
written request by Landlord. In the event Tenant fails to remove said lien
within said ten (10) day period, Landlord may, at its sole option, elect to
satisfy and remove the lien by paying the full amount claimed or otherwise,
without investigating the validity thereof, and Tenant shall pay Landlord upon
demand the amount paid out by Landlord on Tenant's behalf, including Landlord's
costs and expenses incurred with interest at the maximum legal rate or Tenant
shall be in default hereunder. Landlord's election to discharge liens as
provided hereunder shall not be construed to be a waiver or cure of Tenant's
default hereunder.
Tenant covenants and agrees to keep the Demised Premises free of mechanic's
and materialmen's liens and other liens of like nature other than liens created
or claimed by reason of any work done by the Landlord or its agent, and at all
times to fully protect and indemnify Landlord against all attorney's fees and
other costs and expenses arising out of or incurred by reason of or on account
of such claim or lien. Landlord shall have the right to post and maintain on the
Demised Premises a notice of non-responsibility, and to such other things as may
in Landlord's judgement be necessary to protect against such mechanic's and
materialmen's liens as are provided for In the law of the state in which the
Demised Premises is located.
6.03 Signs, Awnings and Canopies. Tenant will not, without Landlord's prior
written consent at Landlord's sole discretion, place or suffer to be placed or
maintained upon the roof or on any exterior door, wall or window of the Demised
Premises, any sign, awning or canopy, or advertising matter or other thing of
any kind, and will not without such consent place or maintain any decoration,
lettering or advertising matter on the glass of any window or door of the
Demised Premises. All signs, awnings, canopies, decorations, lettering,
advertising matter or other thing so installed by Tenant shall at all times be
maintained by Tenant, at its expense, in good condition and repair. Landlord
reserves the exclusive right to use for any purpose whatsoever the roof and
exterior of the walls of the Demise Premises of the building of which the
Demised Premises are a part. If Tenant installs any sign that does not meet
Landlord's sign criteria, Landlord shall have the authority without liability to
remove and store the subject sign and repair all damage caused by the removal of
the sign. All expenses Landlord incurs shall be immediately paid by Tenant
Landlord reserves the right to remove Tenant's sign during any period when
Landlord repairs, restores, constructs or renovates the Demised Premises of the
building of which the Demised Premises are a part, provided, however, Landlord
shall re-install Tenant's signage at Landlord's sole expense.
Section 7.0
MAINTENANCE OF DEMISED PREMISES, SURRENDER AND RULES
7.01 Maintenance, Repair, and Replacement by Tenant. Tenant shall, at its
sole cost and expense, at all times repair, maintain, and replace (i) the
interior of the Demised Premises, together with exterior entrances, all glass
and all window moldings; (ii) all fixtures, partitions, ceilings, floor
coverings and utility lines within the Demised Premises, and all plumbing and
sewage facilities within the Demised Premises including free flow up to utility
owned sewer lines; and (iii) all doors, door openers, equipment, machinery,
appliances, signs and appurtenances thereof (including lighting, heating, air
conditioning, and plumbing equipment and fixtures within the Demised Premises,
in conformity with governmental regulations and all rules and regulations of the
Board of Fire Underwriters, in good order, condition, maintenance and repair. If
any item which Tenant is obligated to repair cannot be fully repaired, Tenant
shall promptly replace such item, regardless of whether the benefit of such
replacement extends beyond the Lease Term and any renewal thereof.
7.02 Performance of Work by Landlord. If Tenant refuses or neglects to
repair, replace, or maintain the Demised Premises, or any part thereof, in a
manner reasonably satisfactory to Landlord, Landlord shall have the right but
not the obligation, upon giving Tenant ten (10) days written notice of its
election to do so except in the case of an emergency where notice is not
practical, to enter the Demised Premises and make such repairs or perform such
maintenance or replacements on behalf and for the account of Tenant. Nothing
herein contained shall imply any duty of Landlord to do work that Tenant is
required to do under the Lease, nor shall Landlord's performance of any repairs
on behalf of Tenant constitute a waiver of Tenant's default in failing to do the
same. No exercise by Landlord of any rights herein reserved shall entitle Tenant
to any compensation, damages or rent abatement from Landlord for any injury or
inconvenience occasioned thereby. If Landlord performs any maintenance or other
obligations that Tenant is required to perform under the Lease, Tenant shall
upon demand pay to Landlord the costs and expenses incurred by Landlord in doing
same or deposit with the Landlord the anticipated amounts thereof, plus the
Administrative Fee.
Service Contracts. Tenant shall contract with a qualified Heating,
Ventilation and Air Conditioning ("HVAC") service company approved by Landlord
for the monthly maintenance and the repair and replacement, as necessary, of the
HVAC within the Demised Premises. Tenant shall contract with a qualified service
company for the cleaning and maintenance of any grease traps which are Tenant's
responsibility to maintain. Tenant shall provide Landlord with a copy of any
contract required hereunder within thirty (30) days after the Lease Commencement
Date, together with a copy of any subsequent
8
<PAGE>
contracts within ten (10) days after their execution, including all contract
renewals. If Tenant fails to provide copies of said service contracts or
maintain as required, Landlord shall have the option to obtain a service
contract, at Tenant's expense.
7.04 Landlord's Obligations. Subject to Section 14.0, the structural
portions of the Demised Premises, the roof (excepting maintenance and repair),
exterior walls and the foundations, plumbing, electrical and utility connections
to the Demised Premises, shall be maintained and/or replaced by Landlord, except
when the condition requiring such repairs shall result from Tenant's act or the
fault of Tenant, its officers, agents, customers or employees. In the event
Landlord fails to commence repairs it is obligated hereunder to make within
thirty (30) days after written notice from Tenant specifying the necessary
repairs and providing that the repairs are actually necessary, Tenant may make
such repairs and be entitled to credit the next accruing Minimum Annual Rental
from Landlord for the reasonable costs of said repairs.
7.05 Surrender of Demised Premises. At the expiration of the tenancy hereby
created, Tenant shall peaceably surrender the Demised Premises, including all
alterations, additions, improvements, decorations and repairs made thereto (but
excluding all trade fixtures, equipment, signs and other personal property
installed by Tenant, provided that in no event shall Tenant remove any of the
following materials or equipment without Landlord's prior written consent: any
freestanding signs, any power wiring or power panels; lighting or lighting
fixtures; wall coverings; drapes, blinds or other window coverings; carpets or
other floor coverings; or other similar building operating equipment and
decorations), broom clean and in good condition and repair, reasonable wear and
tear excepted, without any damage, injury or disturbance. Tenant shall remove
all its personal property not required to be surrendered to Landlord before
surrendering the Demised Premises as aforesaid and shall repair any damage to
the Demised Premises caused thereby. Any personal property remaining in the
Demised Premises at the expiration of the Lease Term shall be deemed abandoned
by Tenant, and Landlord may claim the same and shall in no circumstances have
any liability to Tenant therefor. Upon expiration, Tenant shall also surrender
all keys for the Demised Premises to Landlord and, if applicable, inform
Landlord of any combinations of locks or safes in the Demised Premises. If the
Demised Premises are not surrendered at the end of the Lease Term as set forth
hereunder, Tenant shall indemnify Landlord against loss or liability resulting
from delay by Tenant in so surrendering the Demised Premises, including without
limitation, claims made by any succeeding tenant founded on such delay. Tenant's
obligation to observe or perform this covenant shall survive the expiration or
other termination of the Lease Term.
7.06 Rules and Regulations. Tenant agrees as follows:
(a) The delivery or shopping of goods, merchandise, supplies and fixtures
to and from the Demised Premises shall be subject to such rules and regulations
as in the judgment of Landlord are necessary for the proper operation of the
Shopping Center.
(b) No loud speakers, televisions, phonographs, radios or other devices
shall be used in a manner so as to be heard or seen outside the Demised Premises
without the prior written consent of Landlord.
(c) Tenant shall not place or permit any obstructions or merchandise on the
sidewalk or in the outside areas immediately adjoining the Demised Premises or
other common facilities and shall not use such areas for business purposes other
than for ingress and egress.
(d) Tenant and its employees shall park their cars only in those portions
of the parking area designated by Landlord.
(e) Tenant shall have full responsibility for protecting the Demised
Premises and the property located therein from theft and robbery.
(f) Tenant shall not permit on the Demised Premises any act or practice
which is unlawful, immoral, or which might injure the reputation of the Shopping
Center. Furthermore, Tenant shall not display, sell, or store, any sexually
explicit materials and/or drug paraphernalia in or about the Demised Premises.
(g Tenant, its employees, agents and invitees shall not solicit business In
the parking or Common Area nor shall Tenant distribute or place handbills or
other advertising matter in or on automobiles parked in the parking or Common
Area.
(h) Tenant shall not conduct any auction, fire, bankruptcy sales or close
out sales in the Demised Premises.
(i) Tenant shall keep the Demised Premises free and clear of rodents, bugs
and vermin. Tenant shall use, at its cost and at such intervals as Landlord
shall reasonable require, a reputable pest extermination contractor to provide
extermination services in the Demised Premises.
(j) Tenant shall keep the Demised Premises and adjacent area orderly, neat,
clean and free from rubbish and trash at all times and to permit no refuse to
accumulate around the exterior of the Demised Premises. Tenant shall not burn
any trash, rubbish or garbage in or about the Demised Premises. Trash shall be
stored in a sanitary and inoffensive manner inside the Demised Premises or In
screened areas approved by Landlord, and Tenant shall cause the same to be
removed at reasonable intervals.
(k) The Demised Premises shall be open for business Monday through
Saturday, except legal holidays, during the minimum hours established by
Landlord as set forth In Section 1.01(s).
(l) To use or permit the use of the Common Area by others to whom Landlord
may grant or may have granted such rights in such manner as Landlord may from
time to time designate, including but not limited to truck and trailer sales and
special promotional events.
9
<PAGE>
(m) Tenant shall not display any banners or signs outside the Demised
Premises nor conduct any sidewalk sales or displays except as part of a
coordinated promotional program throughout the Shopping Center.
Landlord reserves the right from time to time to amend or supplement the
foregoing rules and regulations and to adopt and promulgate reasonable
additional rules and regulations applicable to the Demised Premises. Notice of
such rules and regulations and amendments and supplements thereto, if any, shall
be given to Tenant in writing. Tenant agrees to comply with all such rules and
regulations, and Tenant shall be responsible for the observance of these rules
and regulations by Tenant's employees, agents and invitees. The foregoing rules
are solely for the benefit of Landlord, and Landlord shall have no obligation to
enforce such rules for the benefit of Tenant. Landlord, at its option, may waive
certain rules with respect to individual tenants. If Tenant violates any rule,
Landlord may notify Tenant that Tenant is in default.
Section 8.0
INSURANCE AND INDEMNITY
8.01 Property Insurance. Tenant shall at all times keep and maintain in
full force and effect, at its sole cost and expense, all risk property insurance
coverage, which shall include fire and extended coverage, flood and earthquake
protecting Tenant from loss, damage or injury by whatever means, with respect to
Tenant's improvements, furniture, fixtures, machinery, equipment, stock or
trade, and all other items kept, used, or maintained by Tenant in, on, or about
the Demised Premises providing protection to the extent of 100% replacement
value.
8.02 Waiver of Subrogation. Landlord and Tenant, and all parties claiming
under them mutually release each other party from all claims or liability for
damage due to any act or neglect of the other party (except as hereinafter
provided) occasioned to property owned by said parties which is or might be
incidental to or the result of a fire or any other casualty against loss from
which either of the parties is now carrying or hereafter may carry insurance.
Provided, however, that the releases herein contained shall not apply to any
loss or damage occasioned by the willful acts of either of the parties hereto.
The parties further covenant that any insurance obtained on their respective
properties shall contain an appropriate provision whereby the insurance company
or companies consent(s) to the mutual release of liability contained in this
Section 8.02.
8.03 Increase in Insurance Premiums. Tenant agrees not to keep, use, sell
or offer for sale, in or upon the Demised Premises, any articles or goods which
may cause the insurance premiums to increase. Tenant agrees to pay upon demand
any increase in premium resulting from the use of the Demised Premises by
Tenant, whether or not Landlord has consented to such use.
8.04 Liability Insurance. Tenant shall keep in full force and effect, at
its sole cost and expense, a policy of public liability and property damage
Insurance with respect to the Demised Premises and the business operated by
Tenant for the joint benefit of Tenant and Landlord, naming Landord as
additional insured. The limits of coverage shall not be less than $1,000,000 per
occurrence for bodily and/or personal injuries and $1,000,000 per occurrence for
property damage liability or a combined single limited of $1,000,000. Further,
Tenant shall obtain, at its own expense, all insurance coverages required by law
to operate its business, including workers compensation insurance.
8.05 Indemnification of Landlord. Tenant will protect, indemnify, defend
and save harmless Landlord, its agents and servants, from and against all
claims, demands, liabilities and expense (including costs and attorney fees) in
connection with loss of life, bodily injury, personal injury and/or damage to
property of whatever kind or character, howsoever caused, arising from or out of
any occurrence in, upon or about the Demised Premises, or in the occupancy or
use by Tenant of the Demised Premises.
8.06 Plate Glass Insurance. Tenant shall keep and maintain in force during
the Lease Term or any renewal thereof, plate glass Insurance upon windows and
doors in the Demised Premises.
8.07 Liquor Liability Insurance. In the event that at any time during the
Lease Term or any renewal thereof, beer, wines or other alcoholic liquors or
beverages are sold or given away upon or from the Demised Premises (it being
understood and agreed, however, that the foregoing provisions shall not
authorize the use of the Demised Premises for such purposes without the express
consent of Landlord being set forth otherwise in the Lease), Tenant shall, at
its sole expense, obtain, maintain and keep in force, adequate liquor liability
insurance protecting both Tenant and Landlord in connection therewith within
policy limits acceptable to Landlord. In the event Tenant shall fail to procure
such Insurance where applicable, Landlord may procure the same at Tenant's
expense. In the event such insurance is not carried, sales of the foregoing
products shall be suspended until such coverage is in force.
8.08 Insurance Policy. The insurance required in this Section 8.0 shall be
in form approved by Landlord, shall name Landlord and Tenant as the insured, and
shall contain a clause that the insurer will not cancel, materially modify or
fail to renew the insurance without first giving Landlord thirty (30) days prior
written notice. The insurance shall be with an insurance company approved by
Landlord, authorized to do business In the state and have a policyholder's
rating of no less than "A-1" in the most current edition of Best's Insurance
Reports. A Certificate of Insurance shall be delivered to Landlord prior to
delivery of the Demised Premises by Landlord to Tenant and at each renewal
thereafter. The policy shall insure Tenant's performance of the indemnity
provisions of Section 8.05 hereof. It is hereby understood and agreed that
Tenant's insurance coverages shall be primary and that any insurance coverages
of the Landlord shall be non-contributing.
10
<PAGE>
Section 9.0
UTILITIES
9.01 Utility Charges. Tenant shall be solely responsible for and promptly
pay all charges for heat, water, gas, sewer, electricity, or any other utilities
or services attributable to the Demised Premises. Landlord may elect to furnish
any one or more of the above utility services in which event Tenant shall accept
and use such services as furnished by Landlord. Landlord's charges therefor
shall not exceed the rates charged by local public utility companies to retail
customers for similar services. In no event shall Landlord be liable for an
interruption or failure in the supply of any such utilities or services supplied
by Landlord because of necessary repairs or improvements or for any cause beyond
Landlord's control nor shall any such interruption or failure relieve Tenant of
the performance of any of its obligations hereunder.
Section 10.0
PRIORITY OF LEASE
10.01 Subordination Landlord shall have the right to transfer, mortgage,
assign, pledge, and convey in whole or in part the Demised Premises, Shopping
Center, Lease and all rights of Landlord existing or to exist, and rents and
amounts payable under the provisions hereof; and nothing herein contained shall
limit or restrict any such right. The rights of Tenant under the Lease shall be
subject and subordinate to all instruments executed or to be executed in
connection with the exercise of any such right of Landlord, including, but not
limited to, the lien of any mortgage, deed of trust or security agreement now or
hereafter placed upon the Demised Premises and the Shopping Center and to all
renewals, modifications, and extensions thereof. Tenant agrees to execute and
deliver upon request instruments subordinating the Lease to the lien of any such
mortgage, deed of trust or security agreement as shall be requested by Landlord
and/or any mortgage, proposed mortgagee or holder of any security agreement,
provided, however, that said mortgagee or holder shall agree that Tenant's
peaceable, possession of the Demised Premises or as rights under the Lease will
not be disturbed or diminished on account thereof, provided, Tenant is not in
default hereunder. Tenant hereby irrevocably appoints Landlord as its
attorney-in-fact to execute and deliver any such instrument for and in the name
of Tenant but only in the event Tenant fails to execute an agreement in
accordance with the terms set forth herein. Notwithstanding anything set out in
the Lease to the contrary, in the event the holder of any mortgage or deed of
trust elects to have the Lease superior to its mortgage or deed of trust, then,
upon Tenant being notified to that effect by such encumbrance holder, the Lease
shall be deemed prior to the lien of said mortgage or deed of trust, whether the
Lease is adopted prior to or subsequent to the date of said mortgage or deed of
trust. Landlord represents and warrants that Landlord is the current fee simple
owner of the Shopping Center of which the Demised Premises is a part subject
only to these certain items as follows: NONE.
10.02 Notice to Landlord of Default. In the event of any act or omission by
Landlord which would give Tenant the right to terminate the Lease or claim a
partial or total eviction, or make any claim against Landlord for the payment of
money, Tenant will not make such claim or exercise such right until it has given
thirty (30) days written notice of such act or omission to (i) Landlord; and
(ii) the holder of any mortgage, deed of trust or other security instrument as
to whom Landlord has instructed Tenant to give copies of all of Tenant's notices
to Landlord and said thirty (30) day period shall have elapsed during which the
parties or any of them has not commenced diligently to remedy such act or
omission or to cause the same to be remedied. Nothing herein contained shall be
deemed to create any rights to Tenant not specifically granted in the Lease or
under applicable provisions of law.
10.03 Estoppel Certificate. Tenant agrees, at anytime, and from time to
time, upon ten (10) days prior written notice by Landlord, to execute,
acknowledge and deliver to Landlord, an estoppel certificate in substantially
the same form as Exhibit "F", attached hereto and made a part hereof, addressed
to Landlord or other party designated by Landlord certifying that the Lease Is
in full force and effect or, if there have been modifications, that the same
is/are in full force and effect as modified and stating the modifications. If
Tenant does not deliver such certificate to Landlord within such ten (10) day
period, Landlord and any prospective purchaser or encumbrancer may conclusively
presume and rely upon the following facts: (i) that the terms and provisions of
the Lease have not been changed except as otherwise represented by Landlord;
(ii) that the Lease has not been canceled or terminated except as otherwise
represented by Landlord; (iii) that not more than one (1) month's Minimum Annual
Rental or other charges have been paid in advance; and (iv) that Landlord is not
In default under the Lease. In such event, Tenant shall be estopped from denying
the truth of such facts. Tenant shall also, if required, give prompt written
notice to any encumbrance holder requested by Landlord in the event of any
default on the part of Landlord under the Lease, and will agree to allow such
encumbrance holder a reasonable length of time after notice, provided, however,
the cure is commenced upon receipt of notice, to cause the default to be cured
before declaring a default under the Lease.
10.04 Attornment. At the option of the holder of any mortgage affecting the
Demised Premises ,Tenant agrees that no foreclosure of a mortgage affecting the
Demised Premises, nor the Institution of any suit, action, summary or other
proceeding against Landlord herein, or any successor Landlord, or any
foreclosure proceeding brought by the holder of any such mortgage to recover
possession of such property, shall by operation of law or otherwise result in
cancellation or termination of the Lease or the obligations of Tenant hereunder,
and upon the request of the holder of any such mortgage, Tenant covenants and
agrees to execute an instrument in writing satisfactory to such party or parties
or to the purchaser of the Demised Premises in foreclosure whereby Tenant
attorns to such successor in Interest.
Section 11.0
ASSIGNMENT AND SUBLETTING (Occupancy Transaction)
11.01 Consent Required. Tenant shall not assign the Lease in whole or in
part, nor sublet all or any part of the Demised Premises without first obtaining
the prior written consent of Landlord in each instance, which consent may be
granted or withheld in Landlord's sole discretion. Landlord may withhold its
consent on any reasonable ground,
11
<PAGE>
including without limitation any of the following situations: (i) the
Transferee's contemplated use of the Demised Premises following the proposed
Occupancy Transaction is not identical to the Permitted Use; (ii) in Landlord's
reasonable business judgement, the Transferee lacks sufficient business
reputation or experience to operate a successful business of the type and
quality permitted under the Lease; (iii) the present net worth and working
capital of the Transferee are less than that of Tenant, or Tenant and Tenant's
Guarantor, as the case may be, at the Execution Date or at the time of the
request, whichever is higher; or (iv) the proposed Occupancy Transaction would
breach any covenant of Landlord respecting radius restriction, location, use or
exclusivity In any other Lease, financing agreement, or other agreement relating
to the Shopping Center. Tenant shall not have the right or power to enter into
an Occupancy Transaction if Tenant shall be in default under any provision of
the Lease. Should Tenant desire to enter into an Occupancy Transaction, Tenant
shall request Landlord's consent to such transaction in writing at least thirty
(30) days before the effective date of any such transaction. Said request shall
include (i) a detailed description of the proposed transaction, including its
nature, effective date, the purchase price, payment terms, allocation among
leasehold interest, personal property, improvements, goodwill, inventory and
other items; (ii) a description of the Identity, financial condition and
previous business experience of tenant or transferee, including, without
limitation, copies of latest income statement, balance sheet and statement of
cash flows (with accompanying notes and disclosures of all material changes
thereto) in audited form, if available, and certified as accurate by tenant or
transferee respectively, together with a statement authorizing Landlord or its
designated representative(s) to Investigate tenant's or transferee's business
experience, credit and financial responsibility; and (iii) a check in the amount
of Five Hundred and No/100 Dollars ($500.00) payable to Landlord for Landlord's
administrative and legal review of said Occupancy Transaction. Within thirty
(30) days after receipt of Tenant's request for consent and all items required
Landlord may consent to the proposed Occupancy Transaction, or refuse to consent
to the Occupancy Transaction. Any consent by Landlord to any Occupancy
Transaction shall be evidenced by an Instrument prepared by Landlord, and
executed by Tenant and Transferee. As a condition to the completion of such
transaction, Transferee shall agree in writing to assume and perform all of the
terms, covenants and conditions of the Lease that are obligations of Tenant,
including any past due or unknown monetary obligations as of the date of
assignment, Tenant shall remain fully liable to perform its duties under the
Lease following the Occupancy Transaction. If Tenant enters into an Occupancy
Transaction, the Minimum Annual Rent then payable and any scheduled increases
thereto shall be increased on the effective date of such transaction to the
greater of (I) the total Minimum Annual Rental payable by the Transferee to
Tenant; (ii) an amount equal to the total of the Minimum Annual Rental plus
Percentage Rent required to be paid by Tenant pursuant to the Lease during the
calendar year immediately preceding such transaction; or (iii) the Minimum
Annual Rental then payable and any scheduled increases thereto, increased in
accordance with the CPI Adjustment Procedures using the Rent Commencement Date
as the base month and the effective date of such transaction as the month of
adjustment. The foregoing shall be construed to include a prohibition against
any voluntary or involuntary assignment or subletting arising by operation of
law.
Notwithstanding any assignment or sublease, Tenant shall remain fully
liable under the Lease and shall not be released from performing any of the
terms, covenants and conditions hereof unless Landlord expressly releases
Tenant.
Landlord shall have the right to sell, convey, transfer or assign all or
any part of its interest In the real property and the buildings of which the
Demised Premises are a part or its interest in the Lease, and Tenant agrees to
attorn to Landlord's purchaser or assignee.
Section 12.0
WASTE, GOVERNMENTAL AND INSURANCE REQUIREMENTS,
AND HAZARDOUS SUBSTANCE
12.01 Waste or Nuisance. Tenant shall not commit or suffer to be committed
any waste upon the Demised Premises or any nuisance or other act which may
disturb the quiet enjoyment of any other tenant in the Shopping Center.
12.02 Governmental and Insurance Requirements. Tenant shall, at its sole
cost and expense, comply with all of the requirements of any insurance carrier
for the Shopping Center and of all county, municipal, state, federal and other
applicable governmental authorities, now in force or which may hereafter be in
force.
12.03 Hazardous Substances. Tenant covenants and warrants that Tenant,
Tenant's Work and any alterations thereto and Tenant's use of the Demised
Premises will at all times comply with and conform to all laws, statutes,
ordinances, rules and regulations of any governmental, quasi-governmental or
regulatory authorities which relate to the transportation, storage, placement,
handling, treatment, discharge, generation, production or disposal (collectively
`Treatment") of any waste, petroleum product, waste products, radioactive waste,
poly-chlorinated biphenyls, asbestos, hazardous materials or substance of any
kind, and any substance which is regulated by any law, statute ordinance, rule
or regulation (collectively "Hazardous Materials"). Tenant further covenants and
warrants that it will not engage in or permit any person or entity to engage in
any treatment of any waste on or which affects the Demised Premises or the
Shopping Center.
Immediately upon receipt of any Notice, Tenant shall deliver to Landlord a
true, correct and complete copy of any written notice. "Notice", as used herein,
shall mean any note, notice or report of any suit, proceeding, investigation,
order, consent order, injunction, writ, award or action related to or affecting
or indicating the treatment of any waste in or affecting the Demised Premises.
Tenant hereby agrees it will indemnify, defend, save and hold harmless
Landlord and Landlord's officers, directors, shareholders, employees, agents,
partners, and their respective heirs, successors and assigns (collectively
"Indemnified Parties") against and from, and reimburse the Indemnified Parties
with respect to, any and all damages, penalties, claims, liabilities, loss,
costs and expense (including, without limitation, litigation costs, attorneys'
fees and
12
<PAGE>
expenses, court costs, administrative costs and costs of appeals), incurred by
or asserted against the Indemnified Parties by reason of or arising out of (i)
the breach of any representation or undertaking of Tenant under this Section
12.03; (ii) all foreseeable and unforeseeable consequential damages, directly or
indirectly, arising out of the presence, use, generation, storage, release,
threatened release or disposal of Hazardous Materials by Tenant, its agents or
contractors; and (iii) including, without limitation, the cost of any required
or necessary repair, cleanup, remediation or detoxification and the preparation
of any closure or other required plans, whether such actions is required or
necessary following the Lease Commencement Date, to the full extent that such
action is attributable, directly or indirectly, to the presence, use,
generation, storage, release, threatened release or disposal of Hazardous
Materials by Tenant, its agents or contractors. Hazardous Materials shall
include but not be limited to substances defined as "hazardous substances",
"hazardous materials" or "toxic substances" in the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended by the Hazardous
Materials Transportation Act, as amended by the Resource Conservation and
Recovery Act, as amended by the Federal Clean Water Act, or any other federal,
state or local environmental law, regulation, ordinance, rule or law, whether
existing as of the date hereof, previously enforced or subsequently enacted.
Landlord has given the right, but not the obligation, to inspect and
monitor the Demised Premises and Tenant's use of the Demised Premises in order
to confirm Tenant's compliance with the terms and representations set forth
herein.
Section 13.0
PROMOTIONAL FUND
Section 14.0
DESTRUCTION OF DEMISED PREMISES
14.01 Partial Destruction. In the event of the partial destruction of the
building or improvements located on the Demised Premises by fire or any other
casualty, Landlord shall restore or repair said building and improvements with
reasonable diligence. Landlord shall expend such sums as required to repair or
restore said buildings and improvements to the condition they were in
Immediately prior to the date of the destruction. An equitable portion of the
Minimum Annual Rental payable by Tenant to the extent that such damage or
destruction renders the Demised Premises untenantable shall abate from the date
of such damage or destruction until repaired or restored.
14.02 Substantial Destruction. If the Demised Premises shall be so damaged
by fire or other casualty or happening as to be substantially destroyed as
determined by Landlord or Tenant, then either party shall have the option to
terminate the Lease by giving written notice to the other party within sixty
(60) days after such destruction effective upon the date of occurrence, and any
unearned rent shall be equitably abated and returned to Tenant for such period
as the Demised Premises were untenantable. If Landlord or Tenant does not elect
to terminate the Lease as aforesaid, then the Lease shall remain in full force
and effect and Landlord shall proceed with reasonable diligence to repair and
replace the Demised Premises to the condition it was in prior to the date of
such destruction, as set forth in Section I of Exhibit "B". During the time the
Demised Premises are so destroyed and totally untenantable, Minimum Annual
Rental shall be equitably abated.
14.03 Partial Destruction of Shopping Center. In the event that sixty
percent (60%) or more of the gross leasable area in the Shopping Center shall be
damaged or destroyed by fire or other cause, notwithstanding that the Demised
Premises may be unaffected by such fire or other cause, Landlord and Tenant
shall have the right, to be exercised by notice in writing delivered to the
other within ninety (90) days after said occurrence, to terminate the Lease.
Upon the giving of such notice the other the Lease Term shall expire by lapse of
time upon the third (3rd) day after such notice
13
<PAGE>
is given, and Tenant shall vacate the Demised Premises and surrender the same to
Landlord pursuant to the terms of the Lease.
Section 15.0
EMINENT DOMAIN
15.01 Condemnation. In the event of any condemnation or conveyance in lieu
thereof of the Demised Premises or the Shopping Center, or both, whether whole
or partial, Landlord may terminate the Lease. In any event, Tenant shall have no
claim against Landlord for the value of the unexpired term, and Tenant shall not
be entitled to any part of the compensation or award, whether paid as
compensation for diminution in value to the Leasehold or to the fee of the
Demised Premises. Tenant hereby waives any right to any part of the compensation
or award and assigning to Landlord its interest therein; provided, however, to
the extent the amount recoverable by Landlord, as herein above set forth, is not
diminished thereby, Tenant shall have the right to claim and recover from the
condemning authority (but not from Landlord) such compensation as may be
separately awarded to Tenant in Tenant's own name and right on account of all
damage to Tenant's business by reason of the condemnation and any cost which
Tenant may incur in removing Tenant's property from the Demised Premises.
Provided, however, Tenant's rights to recover under this Section 15.01 shall be
subordinate to the rights of Landlord's mortgagee.
Section 16.0
DEFAULT OF TENANT
16.01 Default. The following shall constitute an "Event of Default" under
the Lease:
(a) failure of Tenant to make within ten (10) days after receipt of written
notice from Landlord, any payment of Minimum Annual Rental, Additional Rent or
other charges payable by Tenant hereunder or to timely discharge any other
monetary obligation;
(b) Tenant's failure to perform or observe any of the terms, conditions,
covenants, agreements or obligations of the Lease to be observed or performed by
Tenant and such failure continues for thirty (30) days after Tenant's receipt of
written notice from Landlord (except such thirty (30) day period shall be
automatically extended for such additional period of time as is reasonably
necessary to cure such Event of Default, if such Event of Default cannot be
cured within such period, provided Tenant Is in the process of diligently and
continuously pursuing curing same); provided, however, that such right to
written notice shall be non-cumulative and limited to a maximum of two (2) times
during each calendar year of the Lease Term and any renewal thereof;
(c) if Tenant shall become bankrupt or insolvent, or file or have filed
against it any bankruptcy proceedings, or take or have taken against it in any
court pursuant to any statute, either of the United States or of any state, a
petition of bankruptcy or insolvency, or for reorganization or for the
appointment of a receiver or trustee of all or a portion of Tenant's property,
or if Tenant makes an assignment for the benefit of creditors, or petitions for
or enters into an arrangement;
(d) if Tenant shall abandon or vacate the Demised Premises, or suffer the
Lease to be taken under any writ of execution;
(e) if Tenant shall default in the timely payment of Minimum Annual Rental,
Additional Rent, or other charges due or to timely discharge any other monetary
obligation three (3) times In any twelve (12) month period notwithstanding the
fact that any such default shall have been cured;
(f) the falsification by Tenant or any agent of Tenant of any report or
statement required to be furnished to Landlord pursuant to the terms of the
Lease. The falsification of any such document shall be deemed an incurable,
material breach of the Lease and, at Landlord's option, constitutes an Immediate
termination of Tenant's right to possession of the Demised Premises; or
(g) If Tenant fails to continuously operate its business within the Demised
Premises, except for temporary periods of closure caused by casualty, strikes,
lock-outs or similar causes beyond the reasonable control of Tenant or
remodeling, renovation and/or rebuilding the improvements on the Demised
Premises.
Tenant agrees that Tenant shall have no further claim under the Lease and
shall quit and deliver up the possession of the Demised Premises, Including
permanent Improvements to the Demised Premises, when the Lease terminates by
limitation or In any other manner provided for herein.
16.02 Remedies. If an Event of Default occurs, Landlord may:
(a) Elect to re-enter or take possession of the Demised Premises pursuant
to legal proceedings or any notice provided for herein, and may either terminate
the Lease or without terminating the Lease make such alterations and repairs as
may be necessary in order to relet the Demised Premises for a term, rental rate
and conditions as Landlord, in its sole discretion, may deem advisable. Upon
reletting, rentals received by Landlord from such reletting shall be applied
first to the payment of any indebtedness other than Minimum Annual Rental due
hereunder from Tenant; third to the payment of any costs and expenses of such
reletting, Including brokerage fees, attorneys' fees, and costs of alterations
and repairs; second to the payment of the most current Minimum Annual Rental
owed at that time; and the residual, if any, shall be held by Landlord and
applied in payment of future Minimum Annual Rental as the same may become due
and payable a hereunder from Tenant. If such rentals received from such
reletting are less than that to be paid by Tenant, Tenant shall be liable for
the deficiency to Landlord. No such re-entry or taking possession of the Demised
Premises by Landlord shall be construed as an election on its part to terminate
the Lease or to accept a
14
<PAGE>
surrender thereof.
(b) Notwithstanding reletting without termination, Landlord may at any time
thereafter elect to terminate the Lease for such Event of Default. Should
Landlord elect to terminate the Lease in addition to any other remedies Landlord
may have available, Landlord may recover from Tenant all damages incurred by
reason of such breach, including the cost of recovering the Demised Premises.
(c) Tenant agrees that this Lease is a lease of "real property in a
shopping center" and that a debtor in possession and/or trustee in bankruptcy
acting pursuant to the provisions of the revised bankruptcy code, may assume the
Lease only if, in addition to such other conditions of the Lease and applicable
law, said debtor in possession and/or trustee shall provide Landlord with such
written assurances of future performance as are acceptable to Landlord
(d) Landlord shall have at all times a valid lien for Minimum Annual Rental
as well as any and all other sums becoming due by Tenant, upon all goods, wares,
equipment, fixtures, furniture and other personal property of Tenant situated on
the Demised Premises, and such property shall not be removed therefrom without
the consent of Landlord until all arrearage in Minimum Annual Rental as well as
any and all other sums then due to Landlord shall first have been paid and
discharged. Upon the occurrence of an Event of Default, Landlord may, In
addition to any other remedies provided herein or by law or equity, enter upon
the Demised Premises and take possession of all Tenant's improvements, any and
all goods, wares, equipment, fixtures, furniture and other personal property of
Tenant thereon and may remove all persons and property from the Demised Premises
by force, summary action, or otherwise. Said property may be removed and stored
in a public warehouse or elsewhere at the cost and for the account of Tenant,
all without service of notice or resort to legal process, and without being
deemed guilty of trespass or becoming liable for any loss or damage which may be
occasioned thereby. Landlord may sell said property with or without notice at
public or private sale, with or without having such property at the sale, at
which Landlord or its assigns may purchase, and apply the proceeds thereof less
any and all expenses connected with the taking of possession and sale of the
property, as a credit against any sums due by Tenant to Landlord.
(e) Mention in the Lease of any particular remedy shall not preclude
Landlord of any other remedy, in law or in equity.
(f) Tenant hereby expressly waives any and all rights of redemption granted
by or under any present or future laws in the event Tenant is evicted or
dispossessed for any cause, or in the event Landlord obtains possession of the
Demised Premises.
(g) No receipt of monies by Landlord from or for the account of Tenant or
from anyone in possession or occupancy of the Demised Premises after the
termination or after the giving of any notice of termination shall reinstate,
continue or extend the Lease Term or affect any notice given to Tenant prior to
the receipt of such money.
(h) No delay or omission of Landlord to exercise any right or remedy under
the Lease, or in law or in equity shall be construed as a waiver of any such
right or remedy of any Event of Default.
16.03 Failure to Pay: interest. If Tenant at any time shall fail to pay any
taxes, assessments or liens, provide insurance or perform any act or obligation
under the Lease, or fail to pay any charge payable by Tenant or timely discharge
any other monetary obligation of Tenant required under the Lease, Landlord,
without waiving or releasing Tenant from any obligation or default under the
Lease, may, but shall have no obligation, at any time thereafter make such
payment or perform such act for the account and at the expense of Tenant. All
sums so paid by Landlord and all costs and expenses so incurred shall accrue
interest at a rate equal to one and one-half percent (1.5%) per month In no
event to exceed the maximum rate permitted by law, from the date of payment or
incurring thereof by Landlord and shall constitute Additional Rent payable by
Tenant and paid by Landlord by Tenant upon demand.
Section 17.0
ACCESS BY LANDLORD
17.01 Right of Entry. Landlord or Landlord's agents shall have the right to
enter the Demised Premises at all reasonable times and upon prior notice, except
in the event of an emergency, to examine the same and to show to prospective
purchasers or lenders and to make such maintenance, repairs, alterations,
improvements or additions as Landlord may deem necessary or desirable. During
the six (6) months prior to the expiration of the Lease Term or any renewal
thereof, Landlord may exhibit the Demised Premises to prospective tenants or
purchasers and place upon the Demised Premises the usual signage for space
rental. Nothing herein contained, however, shall be deemed or construed to
impose upon Landlord any obligation, responsibility or liability whatsoever for
the care, maintenance or repair of the building or any part thereof, except as
otherwise herein specifically provided.
Section 18.0
TENANT'S PROPERTY
18.01 Taxes on Leasehold. Tenant shall be responsible and pay before
delinquency all municipal, county, or state taxes assessed during the Lease Term
and any renewals thereof against any leasehold interest or personal
15
<PAGE>
property of any kind owned by or placed in, upon, or about the Demised Premises
by Tenant.
18.02 Loss and Damage. All property of Tenant kept or stored on the Demised
Premises shall be so kept or stored at the risk of Tenant only, and Tenant
hereby holds Landlord harmless from any claims arising out of damage to the
same, including subrogation claims by Tenant's insurance carriers, a waiver of
which shall be obtained in advance by Tenant.
18.03 Notice by Tenant. Tenant shall give immediate notice to Landlord in
case of fire or accidents, or damage to or defects in the Demised Premises or in
the building of which the Demised Premises are a part.
Section 19.0
HOLDING OVER; SUCCESSORS
19.01 Holding Over. Any holding over after the expiration of the Lease Term
or renewal thereof shall be construed to be a tenancy from month to month at the
rents herein specified (prorated on a monthly basis) and shall otherwise be on
the terms and conditions herein specified, so far as applicable; provided,
however, any such holding over, with or without Landlord's consent, shall be one
and one half (1.5) times the Minimum Annual Rental due for the last month of the
then current term. Any costs incurred by Landlord, including attorney's fees to
enforce eviction against Tenant, shall be at Tenant's expense.
19.02 Successors and Assigns. Except as otherwise herein provided, the
Lease and all the covenants, terms, provisions and conditions herein contained
shall inure to the benefit and be binding upon the heirs, representatives,
successors and assigns of each party hereto, and all covenants herein contained
shall run with the land and bind any and all successors in title to Landlord and
Tenant.
Section 20.0
QUIET ENJOYMENT
20.01 Landlord's Covenant. Upon payment by Tenant of the rents herein
provided, and upon the observance and performance of all the covenants, terms
and conditions on Tenant's part to be observed and performed, Tenant shall
peaceably and quietly hold and enjoy the Demised Premises for the Lease Term and
any renewal thereof without hindrance or interruption by Landlord or any other
person or persons.
Section 21.0
MISCELLANEOUS
21.01 Waiver. No covenant, term or condition of the Lease shall be deemed
to have been waived by Landlord unless such waiver shall be in writing.
21.02 Accord and Satisfaction. No payment by Tenant or receipt by Landlord
of a lesser amount than the monthly rent installments herein stipulated shall be
deemed to be other than on account of the most current stipulated rent owed at
that time, nor shall any endorsement or statement on any check or any letter
accompanying any check or payment as rent be deemed an accord and satisfaction.
21.03 No Partnership. Landlord does not, in any way or for any purpose,
become a partner of Tenant in the conduct of its business or otherwise, or joint
adventurer or a member of a joint enterprise with Tenant.
21.04 Force Majeure. In the event that either party hereto shall be delayed
or hindered in or prevented from the performance of any act or obligation
required hereunder by reason of strikes, lockouts, labor troubles, inability to
procure materials, failure of power, restrictive governmental laws or
regulations, riots, insurrection, war, or other reason of a like nature not the
fault of the party delayed In performing work or doing acts required under the
terms of the Lease, then the time allowed for performance of such act shall be
extended by a period equivalent to the period of such delay. The provisions of
this Section 21.04 shall not operate to excuse Tenant from the prompt payment of
Minimum Annual Rental, Additional Rent or any other charges required under the
Lease.
21.05 Landlord's Liability. Except as provided herein, if Landlord shall
fail to perform any covenant, term or condition of the Lease upon Landlord's
part to be performed, Tenant may not terminate the Lease, and Tenant's sole
remedies shall be money damages (except as set forth in Section 21.16) and
specific performance. If Tenant shall recover a money judgment against Landlord,
such judgment shall be satisfied only out of the proceeds of sale received upon
execution of such judgment and levy thereon against the right, title and
interest of Landlord in the Shopping Center as the same may then be encumbered
and neither Landlord nor if Landlord be a partnership, any of the partners
comprising such partnership shall be liable for any deficiency. It is understood
that in no event shall Tenant have any right to levy execution against any
property of Landlord other than Its interest in the Shopping Center as herein
before expressly provided. In the event of the sale or other transfer of
Landlord's right, title and interest in the Demised Premises or the Shopping
Center, Landlord shall be released from all liability and obligations hereunder.
21.06 Notices and Payments. Any notice by Tenant to Landlord must be served
by Federal Express or similar overnight delivery service or by certified mail,
postage prepaid, addressed to Landlord at the place designated for the payment
of rent, or at such other address as Landlord may designate from time to time by
written notice. Any notice by Landlord (which may be given by Landlord or
Landlord's attorney or management company) to Tenant must be served by Federal
Express or similar overnight delivery service or by certified mail, postage
prepaid, addressed to 16
16
<PAGE>
Tenant at the Demised Premises, or at such other address as Tenant may designate
from time to time by written notice to Landlord. All notices shall be effective
upon delivery or attempted delivery in accordance with Section 1.01(b) and (c).
27.07 Financial Statements. Tenant represents and warrants to Landlord that
the financial statements delivered to Landlord prior to the Execution Date of
the Lease properly reflect the true and correct value of all the assets and
liabilities of Tenant. Tenant acknowledges that upon execution of the Lease,
Landlord is relying upon such statements and Tenant shall supply Landlord
updated financial statements of Tenant each Lease Year and from time to time as
requested by Landlord.
21.09 Captions, Section Numbers and Headings.. The captions, section
numbers, and headings contained In the Lease are Inserted only as a matter of
convenience and for reference and in no way define, limit, construe or describe
the scope or intent of the Lease nor of any provision herein contained.
21.10 Definitions. The word "Tenant" shall mean each and every person,
firm, partnership, or corporation mentioned as a Tenant herein, be the same one
or more; and if there shall be more than one Tenant, any notice required or
permitted by the terms of the Lease may be given by or to any one thereof, and
it shall have the same force and effect as if given by or to all thereof. If
there shall be more than one Tenant, they shall all be bound jointly and
severally.
21.11 Invalidity. In the event any term, provision, condition or covenant
contained in the Lease, or the application thereof to any person or
circumstance, shall, to any extent, be invalid or unenforceable, or be hold to
be invalid or unenforceable by any court or competent jurisdiction, the
remainder of the Lease, or the application of such term, provision, condition or
covenant to persons or circumstances other than those as to which it is held
invalid or unenforceable, shall not be affected thereby and all such remaining
terms, provisions, conditions and covenants in the Lease shall be deemed to be
valid and enforceable.
21.12 Recording. A certificate or memorandum thereof, may be recorded at
the requesting party's sole cost and expense. Tenant shall execute any such
certificate, short form Lease or memorandum upon demand by Landlord.
21.13 Entire Agreement. The Lease, Exhibits and Addendum, if any, set forth
all the covenants, promises, agreements, conditions and understandings between
Landlord and Tenant concerning the Demised Premises. There are no covenants,
promises, agreements, conditions or understandings either oral or written
between Landlord and Tenant other than as herein set forth.
21.14 Jury Trial: Claims: Survival. To the extent permitted by applicable
law, and acknowledging that the consequences of said waiver are fully
understood, Tenant hereby expressly waives the right to trial by jury in any
action taken with respect to the Lease and waives the right to interpose any
set-off or counterclaim of any nature or description in any action or proceeding
instituted against Tenant pursuant to the Lease. The parties agree that venue
and jurisdiction for any dispute arising out of the Lease will be located in the
County of Lake County, State of Florida.
21.15 Applicable Law. The Lease and the rights and obligations of the
parties arising hereunder shall be construed in accordance with the laws of the
State of Florida.
21.16 Consents and Approvals. Whenever Landlord's consent or approval is
required herein, such consent or approval shall not be deemed given until
Landlord has provided such consent or approval in writing, provided, however, in
the event Landlord's period for review and approval has expired, Landlord's
consent shall be deemed given. Tenant shall pay Landlord's reasonable attorneys'
fees incurred in connection with Tenant's request for Landlord's consent or
approval. Where the consent or approval of Landlord shall be required, such
consent or approval shall be granted in Landlord's sole discretion unless
otherwise expressly provided.
21.17 Authority. Tenant and Landlord hereby covenants and warrants that
each is qualified prior to the date hereof to do business in the State, if
required by law; all franchise and partnership taxes have been paid to date; all
future forms, reports, fees and other documents necessary to comply with
applicable laws will be filed when due; and those entities executing the Lease
on behalf of Tenant and Landlord are duly qualified to bind, and in fact do
bind, the Tenant and Landlord.
21.18 Interpretation. Both parties have read the Lease and had the
opportunity to employ legal counsel and negotiate changes to the Lease. The
Lease Is the joint product of the parties and, in the event of any ambiguity
herein, no inference shall be drawn against a party by reason of document
preparation.
21.19 Brokers. Tenant represents and warrants to Landlord that no broker or
agent negotiated or was instrumental in negotiating or consummating the Lease
excepting only Broker. Broker is representing Landlord on the Lease, and
Broker's commission shall be paid by Landlord. Tenant knows of no other real
estate broker or agent who is or might be entitled to a commission or
compensation In connection with the Lease. All fees, commissions or other
compensation payable to any broker or agent of Tenant shall be paid by Tenant.
21.20 Shopping Center Name Change Landlord reserves the right to change the
name of the Shopping Center at It sole discretion.
21.21 Right to Lease. Landlord shall have the absolute right to lease or
permit the use or occupancy of space in the Shopping Center as Landlord shall
determine in its sole and absolute judgement. Tenant does not rely on the fact,
nor does Landlord represent, that there shall be any specific occupants or
minimum occupancy level of space
17
<PAGE>
in the Shopping Center at any time (including, without limitation, any major
tenants).
21.22 Shopping Center Configuration Tenant acknowledges that Exhibit "A" is
for the purposes of convenience only and that Landlord reserves the right at any
time during initial construction or thereafter to expand, reduce, remove,
demolish, change, renovate or construct any existing or new improvements at the
Shopping Center
21.23 Sale or Mortgage by Landlord. If Landlord, at any time, sells,
conveys, transfers or otherwise divests itself or is divested of its interest
(`Transfer") in the Demised Premises, other than a transfer for security
purposes only, Landlord shall be relieved of all obligations and liabilities
accruing hereunder after the effective date of said transfer, provided that any
Security Deposit or other funds of Tenant then being held by Landlord shall in
fact be delivered to Landlord's successor. The obligations to be performed by
Landlord hereunder shall be binding on Landlord's successors and assigns only
during their respective periods of ownership.
21.24 Security Interest, Tenant hereby grants to Landlord a lien to the
extent permitted by any existing lender of Tenant, and security interest on all
property of Tenant now or hereafter placed in or upon the Demised Premises
including, but not limited to, all fixtures, machinery, equipment, furnishings
and other articles of personal property, and all proceeds of the sale or other
disposition of such property (collectively, the "Collateral") to secure the
payment of all rent to be paid by Tenant pursuant to the Lease. Such lien and
security interest shall be in addition to any Landlord's lien provided by law.
The Lease shall constitute a security agreement under the Commercial Code of the
State so that Landlord shall have and may enforce a security interest in the
Collateral. Tenant agrees to execute as debtor and deliver such financing
statement or statements and any further documents as Landlord may now or
hereafter reasonably request to protect such security interest pursuant to such
code. Landlord may also at any time file a copy of the Lease as a financing
statement. Landlord, as secured party, shall be entitled to all rights and
remedies afforded as secured party under such code, which rights and remedies
shall be in addition to Landlord's liens and rights provided by law or by the
other terms and provisions of the Lease.
21.25 Attorney's Fees. Should either party to the Lease institute any
action or proceeding in court to enforce any provision hereof or for damage by
reason of alleged breach of any provisions of the Lease or for a declaration of
such party's rights or obligations hereunder, or for any other judicial remedy,
the prevailing party shall be entitled to receive from the losing party such
amount as the court may adjudge to be reasonable attorney's fees for the
services rendered the party prevailing In any such action or proceeding.
21 .26 Compliance with Law. Tenant agrees, at its sole cost and expense, to
comply with all laws, ordinances, orders and regulations regarding the interior,
non-structural portions of the Demised Premises and Tenant's Work. Additionally,
if Tenant is required to make any exterior, interior or structural alterations,
additions or improvements to the Demised Premises required by any insurance
carrier or arising from damage caused by Tenant, its employees, servants or
agents, Tenant shall proceed with same at its sole cost and expense after
obtaining the prior written consent of Landlord. Landlord agrees, at its sole
cost and expense, to comply with all laws, ordinances and regulations regarding
the Common Area and Landlord's Work and the structural portions of the Demised
Premises. Tenant agrees not to violate any regulations or requirements of any
insurance underwriter, inspection bureau or similar agency with respect to the
Demised Premises.
Tenant agrees not to (i) permit any illegal practice to be carried on or
committed on the Demised Premises; (ii) make use of or allow the Demised
Premises to be used for any purpose that might invalidate or Increase the rate
of insurance therefor; (iii) keep or use or permit to be kept or used on the
Demised Premises any flammable fluids, gases or explosives without the prior
written permission of Landlord, except for normal cleaning products; (iv) use
the Demised Premises for any purpose whatsoever which might create a nuisance;
(v) deface or injure the building or the Demised Premises; (vi) overload the
floor; (vii) commit or suffer any waste; or (viii) install any electrical
equipment that overloads lines.
Section 22.0
SECURITY AND RENT DEPOSITS
22.01 Amount of Security Deposit. Tenant, contemporaneously with the
execution of the Lease, has deposited with Landlord the sum set forth in Section
1.01(j), the receipt of which is hereby acknowledged by Landlord. ("Security
Deposit"). Said Security Deposit shall be held by Landlord, without liability
for interest, as security for the faithful performance by Tenant of all the
terms, covenants and conditions of the Lease to be kept and performed during the
Lease Term and any renewal thereof. Tenant specifically agrees that any Security
Deposit held hereunder by Landlord may be commingled with any other funds of
Landlord.
22.02 Use and Return of Security Deposit. Should Tenant fail to keep and
perform any of the terms, covenants and conditions of the Lease to be kept and
performed, Landlord may apply the entire Security Deposit, or so much thereof as
may be necessary, to compensate Landlord for loss or damage sustained by
Landlord due to such breach, without prejudice to its further rights and
remedies. Should the entire Security Deposit or any portion thereof be applied
by Landlord for the payment of overdue rent or other sums due from Tenant, then
Tenant shall, upon the written demand of Landlord, remit to Landlord a
sufficient amount in cash to restore said Security Deposit to the original sum
deposited. Should Tenant comply with all the terms, covenants and conditions of
the Lease, the Security Deposit shall be returned to Tenant at the end of the
Lease Term or any renewal thereof or upon its earlier termination.
22.03 Rent Deposit. Tenant, contemporaneously with the execution of the
Lease has deposited with Landlord the sum set forth in Section 1.01(j) ("Rent
Deposit") to be held and applied to the first month's Minimum Annual Rental due
under the Lease.
18
<PAGE>
Section 23.0
TENANT COVENANTS; EASEMENTS
23.01 Easements. The Shopping Center is or may be encumbered and/or
benefited from time to time by certain easements, development and operating
covenants, and similar agreements. Tenant agrees that it shall abide by any such
agreement, including as any such agreement may be amended or terminated from
time to time at Landlord's sole discretion. Landlord shall have the right to
enter into and/or terminate any such agreement in Landlord's sole discretion,
provided, however, Landlord shall not enter into any subsequent agreements or
easements that materially interfere with Tenant's Permitted Use or the rights
granted to Tenant under this Lease.
IN WITNESS WHEREOF, Landlord and Tenant have executed the Lease as of the
day and year first above written.
LANDLORD: TENANT:
EXCEL REALTY TRUST, INC. FAMILY STEAKHOUSE OF FLORIDA, INC.
By: /s/ John Visonsi By: /s/ Edward B. Alexander
------------------------------ -----------------------------
John Visconsi Edward B. Alexander
Vice President
Director of Leasing
Its: Its: Vice-President Finance
------------------------------ -----------------------------
1-28-98
19
<PAGE>
Addendum
to
Lease Agreement, dated 1/29/98, by and between Excel Realty Trust, Inc., a
Maryland corporation, as Landlord, and Family Steakhouse of Florida, Inc., a
Florida corporation as Tenant.
Notwithstanding any other provision to the contrary which may be contained in
the Lease, it is specifically agreed by and between Landlord and Tenant as
follows:
Exclusive Use
Landlord shall not execute any lease or otherwise permit in the Shopping Center,
including outparcels owned by Landlord at the Execution Date, the operation of
any steakhouse and buffet restaurant as its primary use ("Exclusive Use") during
the Lease Term, subject to the following terms:
1. The Exclusive Use is not applicable to any Shopping Center leases entered
into on or before the Execution Date or to any tenants or occupants
existing in the Shopping Center on or before the Execution Date or their
successors or assigns or any new leases or extensions of existing leases
entered into with such existing tenants or occupants or their successors or
assigns for their existing use unless otherwise provided under the tenant's
lease;
2. The Exclusive Use restriction shall automatically terminate if (i) Tenant
fails to continuously operate its business in the entire Demised Premises
in accordance with the terms and conditions of the Lease or (ii) if Tenant
discontinues operating as a steakhouse and buffet restaurant;
3. The Exclusive Use is not applicable to Publix and Waigreens, its successors
or assigns; and
4. The Exclusive Use restrictions shall automatically terminate without notice
to Tenant and be of no further force or effect effective as of the date
which is the earliest of (i) a change in the Use of Premises set forth in
Section 1.01(m); (ii) the effective date of any default by Tenant under the
Lease beyond any applicable cure period; or (iii) the expiration or earlier
termination of the Lease.
Except as set forth hereinabove, Landlord shall cause all subsequent leases for
space in the Shopping Center to prohibit violation of Tenant's exclusive use
right under this Lease and shall take all reasonable actions necessary to
prevent the violation of Tenant's exclusive use rights by any tenant or occupant
in the Shopping Center.
Permits
In the event Tenant has not obtained all necessary Permits, to enable Tenant to
construct its improvements upon the Demised Premises and operate its business
thereon within ninety (90) days after the Execution Date, Tenant shall have the
right to terminate the Lease within ten (10) days after the expiration of said
ninety (90) day period.
Restrictive Parking
Landlord agrees that it will not erect and/or construct any buildings within the
area designated as "Restricted Area" on Exhibit "A-2" attached to the Lease. In
addition, Landlord covenants that it shall not enter into any future covenant
with tenants in the Shopping Center granting restrictive or exclusive parking
rights.
It is specifically understood that the Shopping Center and that portion
designated as "Adjacent Owner" on Exhibit "A-2" is or may be encumbered and/or
benefited from time to time by certain reciprocal easements, development and
operating agreements to the extent that Tenant agrees Landlord shall not be
responsible for actions or performances taken or caused by the "Adjacent Owner".
Tenant lmprovements
Tenant shall have the right to construct at Tenant's sole cost and expense a
meat cooler adjacent to the rear of the Demised Premises which shall be
approximately 11'9" x 9'1" in size, grease traps, a dumpster and a can wash area
which shall be approximately 4' x 4' in size as designated on Exhibit "A-3". The
exact size and location of the meat cooler, grease traps, dumpster and can wash
area shall be approved by Landlord in writing prior to installation. Said area
shall be subject to all terms and conditions of the Lease, including but not
limited to maintenance and insurance of the area.
Free Rent
Provided that Tenant shall not be in default under the Lease, the Minimum Annual
Rental set forth in Section 1.01(h) of the Lease shall be waived for the period
commencing upon the Lease Commencement Date through Rent Commencement Date as
set forth in Section 1.01(e). It is specifically agreed that Additional Rent and
all other charges due under the Lease shall commence upon the Lease Commencement
Date and are not subject to said waiver.
Extension Option
Provided that Tenant is not in default under any of the terms or conditions of
the Lease, Tenant shall have the option to extend the Lease Term for one (1)
period of five (5) years upon the same terms and conditions as provided herein,
except for Minimum Annual Rental as set forth in Section 1.01(h) of the Lease.
Tenant shall exercise its option by delivering to Landlord written notice at
least one hundred eighty (180) days before the expiration of the Lease Term. All
of the terms, covenants, conditions, provisions and agreements applicable to the
Initial Term shall be applicable to the Option Term.
20
<PAGE>
EXHIBIT "A"
SITE PLAN
EXCEL REALTY TRUST, INC.
Leesburg Square
Leesburg, Florida
[FLOOR PLAN]
A-1
<PAGE>
EXCEL REALTY TRUST, INC.
Leesburg Square
Leesburg, Florida
[FLOOR PLAN]
A-2
<PAGE>
TENANT'S IMPROVEMENTS
[FLOOR PLAN]
A-3
<PAGE>
EXHIBIT "B"
SECTION 1
DESCRIPTION OF LANDLORD'S WORK AND TENANT'S WORK
LANDLORD'S WORK
A. STRUCTURE
1. Frame, etc.: The structural frame, columns, beams, floor and roof
slabs shall be constructed with incombustible and/or wood framing, and
the floor and roof slabs shall be designed to carry live loads in
accordance with the governing building codes. Roofs will be insulated
roof deck construction Exterior walls above grade will be concrete
block and/or suitable structural members, with ties for anchorage of
exterior veneers such as brick, stone, and other suitable materials.
If any loads are applied to the roof or structural areas of the
building which, in the opinion of Landlord shall be considered
excessive, any costs for handling these structural changes shall be
borne by Tenant.
2. Space heights: The minimum clear height measured between the floor
slab and the ceiling when finished shall generally be, as follows:
Sales Area As is
-----------------
Stock Areas As is
-----------------
B. STORE FRONTS
1. Design: Store fronts will be designed by Landlord's architect. Special
store front designs may be used if desired by Tenant, at Tenant's
expense, as set out below, provided the same is approved by Landlord
in writing.
C. INTERIOR FINlSH
1. Floors: All floors will be concrete with smooth cement finish.
2. Ceilings: A suspended 2 x 4 grid system and 2 x 4 acoustical tiles
will be installed. At Landlord's option, in any stock areas so
designated by Tenant, such area may either have finished acoustical
ceiling or exposed bar joist.
3. Walls: Interior surfaces of walls enclosing leased areas will be
finished with sheet rock (taped and ready for paint), concrete or
haydite block.
4. Toilet Rooms: One toilet room will be provided in the Demised Premises
with common toilet facilities for men and women. Where the local codes
require more than one toilet, the cost of said second toilet shall be
borne by Tenant.
D. PARKING AREAS AND WALKS
1. Surface: Parking areas will be concrete or asphalt concrete over
crushed rock base on grade at Landlord's option. Walks and malls will
be surfaced with concrete, stone, brick, tile or any other suitable
materials as specified by Landlord's architect.
2. Lighting: Parking areas, walks, and malls will be lighted; the minimum
average maintained lighting level on the surface of the parking areas
will be one (1) foot candle.
E. ELECTRICAL WORK
1. Public and service areas: Electrical wiring, electrical fixtures in
common service areas and public areas will be provided by Landlord.
2. Demised space: Landlord will furnish six (6) duplex wall or duplex
column outlets as set forth on plans. Landlord will provide one (1)
empty 3/4" conduit for any necessary hookups. Landlord will supply
initial installation of fluorescent strip lighting fixtures.
3. Service: Landlord will provide a As is amp As is phase service
entrance, and power will be brought to the Demised Premises and
stubbed in at panel and any increase in power requirements shall be
paid for by Tenant.
F. HEATING AND AIR CONDITIONING
1. Heating: Landlord will provide a heating system which will supply As
is BTU'S, and airconditioning system that is rated at As is tons to be
located as set forth in the plans.
B-1
<PAGE>
G. UTILITIES
1. Water, Gas, Etc.: Normal waste lines shall be brought to the Demised
Premises, stubbed in and connected to the public sewer.
2. In respect to gas, if this utility is available, subject to the sole
discretion of Landlord, it shall be brought to the Demised Premises.
Water and electricity will also be brought to the Demised Premises.
Tenant will be obligated to supply Tenant's own meter, and in the
event that Landlord has supplied a meter, Tenant shall reimburse
Landlord for said cost of the meter. This cost shall be determined as
that amount paid by Landlord to the utility company for the
installation of said meter.
Landlord's Work is limited to the work hereinabove described and specifically
excludes work described as Tenant's Work; all work not classified as Landlord's
Work is Tenant's Work.
TENANT'S WORK
Tenant's Work shall include all other necessary improvements to operate Tenant's
business and shall include, but not be limited to, the purchase and/or
installation end/or performance of the following, and all the following shall be
at Tenant's expense. The plans and specifications, if any are needed, and the
detail and design shall be subject to the written approval of Landlord's
architect.
A. ITEMS TO BE DONE
1. Telephone wiring, devices, arid installation and service costs.
2. Inter-com, radio and TV conduit, devices and wiring.
3. Light covers and other ceilings not standard to the project.
4. Fire protection and detection devices, other than Landlord's sprinkler
system, if any.
5. Store fixtures, furnishings, display devices and special column
treatments.
6. Display window platforms, floors, backs and ceilings, interior or
special rooms.
7. Store signs and special structural stiffeners and anchorage therefor.
8. Tenant shall bear the additional cost of a special store front over
that of the standard "straight" front provided by Landlord, including
installation of automatic doors.
9. Complete plans showing all details of interior design, electrical and
mechanical items which affect Landlord's Work, if required by Landlord
in order to prepare preliminary plans, including special venting or
air handling equipment necessary for Tenant's occupancy and use.
10. All interior walls and curtain wall within the Demised Premises except
as provided by Landlord's Work C(3).
11. All signs in or on the Demised Premises including construction,
furnishing and installation. No sign shall be erected without prior
written approval of Landlord or Landlord's architect.
12. All requirements related to bottled water.
B. CONSTRUCTION
1. All work undertaken by Tenant shall be at Tenant's expense and shall
not damage the building or any part thereof; design and details shall
conform with the standards of the project and shall be approved by
Landlord's architect.
2. Work undertaken by Tenant during general construction shall be handled
in the following manner:
a. Work attached to the structure such as additional plumbing,
electrical work, plastering, terrazzo, etc., may be handled in
any of the following ways:
(i) Awarded by Tenant to his own Contractor, who has been
approved by Landlord's architect.
(ii) Awarded to the Project Contractor through the use of unit
prices which have been established for this type of work by
previous bidding.
b. Store furniture, fixtures, painting, floor covering, etc., may be
let to any contractor approved by Landlord's architect. Tenants
should attempt to allow Contractors who are already on the site
to bid on their work.
PROCEDURE
1. Landlord will provide Tenant, when preliminary plans have been
prepared by Landlord's architect, with scale drawings, showing the
general features of the Demised Premises, together with information on
B-2
<PAGE>
1. Landlord will provide Tenant, when preliminary plans have been
prepared by Landlord's architect, with scale drawings, showing the
general features of the Demised Premises, together with information on
suitable locations for air-handling units, toilet rooms and design.
2. In developing the working drawing, Landlord reserves the right to make
such necessary reasonable changes and adjustments which are the result
of detailed technical development of the preliminary studies.
3. Tenant shall have the right to substitute more expensive items for
items normally provided by Landlord hereunder, in which event Tenant
shall complete such items at Tenant's cost, and Landlord shall give
Tenant an allowance based upon the cost of the item Landlord would
have been required to complete. All such work performed by Tenant
shall be subject to the approval of Landlord's architect.
SECTION II
B-3
<PAGE>
EXHIBIT "E"
SIGN SPECIFICATIONS
The installation of a sign and costs incurred shall be the responsibility of the
Tenant. Sign construction is to be completed in compliance with the
instructions, limitations, and criteria contained herein.
1. It is intended that the signage of the stores in the Shopping Center shall
be developed in an imaginative and varied manner, and although previous and
current signing practice of the Tenant will be considered, they will not
govern signs to be installed in the Shopping Center.
2. Each Tenant will be required to identify its Demised Premises by a sign.
3. Three (3) copies of sign drawings shall be submitted to Landlord for
approval.
4. Sign drawing shall clearly shown graphic as well as construction and
attachment details along with dimensions. Full information regarding
electrical requirements and brightness is to also be included.
5. The wording of signs shall be limited to Tenant's trade name only.
6. Tenant will be permitted one sign only to be located on its storefront.
7. All signs shall have concealed attachment devices, clips, wiring,
transformers, lamp tubes, and ballast.
8. There shall be no flashing, rotating, or moving signs or markers of any
type.
9. There shall be no signs painted on the exterior surfaces of any building.
10. Sign letters or components shall not have exposed neon or other lamps. All
light source shall be internal and concealed consisting of 13 to 15
millimeters of neon tubing. Coordinate fasteners to prevent electrolysis.
11. The height of upper case sign letters and components shall not exceed 24".
The height of lower case letters shall not exceed 16".
12. Tenant's sign shall not exceed 1 1/2 square feet for each linear foot of
Tenant's storefront. No part of such sign shall be closer than 10" to the
side lease lines of the Demised Premises nor closer that 6" to the top and
bottom of the Tenant's sign area. No part of the sign shall hang free of
Tenant's sign area.
13. Tenant's sign shall be mounted on a raceway attached to the canopy fascia
immediately in front of the Demised Premises or such area as designated by
Landlord.
14. Signs shall not project more than 6" beyond the sign panel unless approved
by Landlord.
15. Signs shall be individual metal channel form letters internally neon
illuminated with a plexiglas face.
16. All signs shall be designed to meet local sign ordinances.
17. No banners, posters, or other advertising materials shall be affixed to any
exterior walls on the entire Demised Premises except in the case of
temporary or promotional nature, without Landlord's prior written consent.
18. No signs may be erected without Landlord's prior written approval,
including approval of color.
19. Landlord reserves the right to negotiate a contract for the construction
and erection of shop tenant signs in the Shopping Center as a group with
one sign manufacturing company. Such an arrangement would be done to effect
a lower per-unit cost of signage for all Shopping Center tenants as a
group. In such event, Tenant shall be required to use such sign company and
shall arrange for their individual signs with said company at the group
prices. Landlord shall notify Tenant of such an arrangement along with
pertinent details at least ninety (90) days prior to Landlord's delivery of
the Demised Premises.
E-1
<PAGE>
[GRAPHIC OMITTED--DRAWING OF THE SIGNAGE FOR RYAN'S STEAKHOUSE--VIEW 1]
E-2
<PAGE>
[GRAPHIC OMITTED--DRAWING OF THE SIGNAGE FOR RYAN'S STEAKHOUSE--VIEW 2]
E-3
<PAGE>
[GRAPHIC OMITTED--DRAWING OF THE SIGNAGE FOR RYAN'S STEAKHOUSE--VIEW 3]
E-4
<PAGE>
[GRAPHIC OMITTED--DRAWING OF THE SIGNAGE FOR RYAN'S STEAKHOUSE--VIEW 4]
E-5
<PAGE>
EXHIBIT "F"
TENANT ESTOPPEL CERTIFICATE FORM
TO: Excel Realty Trust, Inc.
RE: Lease Agreement, dated _______________,by Excel Realty Trust, Inc., a
Maryland corporation, as Landlord, and Family Steakhouse of Florida, Inc.,
a Florida corporation, as Tenant, for the Demised Premises containing
approximately 10,260 square feet within the Leesburg Square Shopping Center
(the "Property")
Gentlemen:
Tenant understands that ____________________, a _______________ or its nominee
("Purchaser") is considering the proposed purchase of the Property from
Landlord. In connection therewith and understanding that Purchaser is relying
upon the agreements and certifications referenced or contained herein, Tenant
agrees and certifies to Purchaser, its respective successors and assigns, as
follows:
1. Tenant hereby confirms that Tenant's leasable square footage of the Demised
Premises is approximately ______________ square feet. The Lease constitutes
the entire agreement between Landlord and Tenant with respect to the
Demised Premises and the Property. The Lease is in full force and effect
and has not been amended, modified or assigned, except as set forth above.
2. The term of the Lease commenced on ____________ 19 ,and will expire on
___________________. Tenant has no renewal options to extend the term of
the Lease.
3. The current Minimum Annual Rental payable by Tenant is $______________;
Percentage Rental due as set forth in the Lease; and charges for Common
Area Expenses, Insurance and Real Estate Taxes ("Additional Rent") as set
forth in the Lease. All charges have been paid through ___________. No rent
has been prepaid other than the current month hereof.
4. Tenant is responsible for paying its proportionate share of Common Area
Expenses, Insurance, and Taxes.
5. Landlord is holding a Security Deposit in the amount of $______________ .
Tenant is not entitled to interest accrued thereon pursuant to the terms of
the Lease.
6. There are no known defaults of Landlord or Tenant under the Lease, and
there are no known existing circumstances which with the passage of time,
or giving of notice, or both, would give rise to a default under the Lease.
Landlord and Tenant are in full compliance with their obligations under the
Lease, and the Lease is in good standing and in full force and effect.
7. No breach or violation exists of any of the provisions of the Lease
granting exclusive uses to Tenant or prohibiting or restricting uses of
other tenants.
8. Construction of all improvements required under the Lease and any other
conditions to Tenant's obligations under the Lease, if any, have been
satisfactorily completed by Landlord, and Tenant has accepted and is
occupying the Demised Premises.
9. Tenant has no charge, lien, claim of set-off, abatement or defense against
rents or other charges due or to become due under the Lease or otherwise
under any of the terms, conditions, and covenants contained therein. Tenant
is not currently entitled to any concessions, rebates, allowances or other
considerations for free or reduced rent.
10. There are no attachments, executions, assignments for the benefit of
creditors, receiverships, conservatorships, or voluntary or involuntary
proceedings in bankruptcy or pursuant to any other laws for relief of
debtors contemplated or filed by Tenant or pending against Tenant.
11. Tenant has not subleased all or any portion of the Demised Premises or
assigned any of its rights under the Lease, nor pledged any interest
therein, except as follows: (if none, so state).
12. Tenant does not have any rights or options to purchase the Property, or any
portion thereof.
13. If the Lease is guaranteed, the Guaranty is unmodified and in full force
and effect. There are no attachments, executions, assignments for the
benefit of creditors, receiverships, conservatorships, or voluntary or
involuntary proceedings in bankruptcy or pursuant to any other laws for
relief of
F-1
<PAGE>
debtors contemplated or filed by any Guarantor or pending against any
Guarantor.
14. Except as set forth below, Tenant does not have any options, rights of
first refusal, rights of first offer or similar rights to other space
within the Property, and such rights, if any, are subject to all
preexisting rights accorded to other tenants: (if none, so state).
15. Upon being notified of the closing of the proposed purchase, sale and
assignment, Tenant agrees to recognize Purchaser as Landlord under the
Lease and to send all rental payments and communications permitted or
required under the Lease to such address as Landlord may, in writing,
direct.
16. This Tenant Estoppel Certificate Form shall inure to the benefit of and be
binding upon, and may be relied upon and be enforced by the Purchaser, its
respective successors and/or assigns. To the extent that the matters set
forth in this Tenant Estoppel Certificate Form vary or conflict with the
terms and conditions of the Lease, the matters contained herein shall
supersede those contained in the Lease.
17. The person(s) whose signature(s) appear(s) below is duly and fully
authorized to execute this Tenant Estoppel Certificate Form and has full
knowledge of the facts and statements recited herein and acknowledge(s)
full and proper execution of the Lease.
IN WITNESS WHEREOF, the Tenant has executed and delivered this Tenant
Estoppel Certificate Form this ____ day of __________________, 19.
TENANT:
By:_______________________________________
Its:______________________________________
GUARANTOR:
(If Applicable)
By:_______________________________________
Its:______________________________________
F-2
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT, made and effective as of the later date
on which the Buyer or Seller execute this Agreement as indicated by the dates of
their respective signatures as shown on the execution page hereof (the
"Effective Date"), between FAMILY STEAK HOUSES OF FLORIDA, INC., ("Buyer"), and
WYMAN B. ATKINS and ROBERT L. EDENS, JR., and /or any entity in which either or
both of them own a majority interest, ("Seller").
W I T N E S S E T H:
Seller is the owner of certain real property in Volusia County, Florida.
Buyer desires to purchase and Seller is willing to sell such property, subject
to the terms of this Purchase and Sale Agreement.
IT IS THEREFORE AGREED between the parties as follows:
1. DEFINITIONS.
The following terms shall have the following meanings:
(a) "Brokers" shall mean THE STZ COMPANY, whose address is 405
Lancaster Avenue, P. O. Box 100, Greer, South Carolina 29652 and
BAUMGARTNER and BENNETT REALTY, whose address is 101 North Woodland
Boulevard, Suite 600, Deland, Florida 32720;
(b) "Buyer's Notice Address" shall mean 2113 Florida Boulevard,
Neptune Beach, Florida 32266, with a copy to J. Michael Hughes, Hughes &
Lane, P. A. 4190 Belfort Road, Suite 351, Jacksonville, Florida 32216;
(c) "Closing Date" shall mean the date provided for in paragraph 9
hereof;
(d) "Deposit" shall mean the sum of FIFTY-NINE THOUSAND and NO/100
DOLLARS ($59,000.00), to be deposited pursuant to paragraph 3 hereof and
any further deposits to be made hereunder;
(e) "Escrow Agent" shall mean Hughes & Lane, P. A. 4190 Belfort Road,
Suite 351, Jacksonville, Florida 32216;
(f) "Inspection Period" shall mean the period of time set forth in
paragraph 5 during which Buyer may inspect the Property;
(g) "Property" shall mean that parcel of land located on International
Speedway Boulevard, in Deland, Florida, with at least 279 feet of frontage
on said road, containing approximately ninety thousand four hundred
(90,400) square feet or two and one-tenth (2.1) acres as shown on the site
plan attached hereto as Exhibit A;
(i) "Purchase Price" shall mean FIVE HUNDRED NINETY THOUSAND and
NO/100 DOLLARS ($590,000.00);
(j) "Seller's Notice Address" shall mean ROBERT L. EDENS, JR., 1420
North Atlantic Boulevard, Unit 801, Daytona Beach, Florida 32118.
2. SALE OF PROPERTY.
Seller agrees to sell and convey and Buyer agrees to purchase the
Property upon payment of the Purchase Price, subject to the terms and conditions
of this Agreement.
3. EARNEST MONEY DEPOSIT.
Upon the execution hereof, Buyer shall deposit with Escrow Agent the
Deposit to be held by Escrow Agent subject to the terms of this Agreement. The
Deposit shall be held in an insured money market account and interest on the
Deposit will accrue to Buyer. Upon receipt of the initial Deposit and any
further deposits made hereunder, Escrow Agent shall acknowledge receipt of same
to the parties and thereafter the Deposit shall be held in escrow in accordance
with the terms of this Agreement.
<PAGE>
4. PAYMENT OF PURCHASE PRICE.
The Purchase Price shall be payable as follows:
(a) The Deposit shall be credited against the Purchase Price.
(b) The balance of the Purchase Price, as adjusted for any prorations
under paragraph 6, shall be paid by cash or cashier's check at Closing.
5. INSPECTION PERIOD.
Seller shall deliver and make available to Buyer without cost to Buyer,
promptly after the execution hereof, copies of all studies, surveys, analyses,
environmental audits and studies, easements, restrictions, agreements, soil
tests, signage agreements, leases and other information and data in Seller's
files pertaining to the condition, use, occupancy and characteristics of the
Property. In addition, Buyer may undertake its own analysis and evaluation of
the Property and may make such physical inspection of the Property and conduct
such engineering, soil testing, market, feasibility, and utility availability
studies, analyses and evaluations as deemed necessary or desirable by Buyer,
including, but not limited to, satisfaction of the following conditions:
(a) All governmental agencies having jurisdiction over the Property
have approved and issued all permits for the construction thereon of a
Ryan's Family Steak House in accordance with plans, specifications and
costs acceptable to Buyer and in a location on the Property acceptable to
Buyer or proof shall be furnished to Buyer that such approvals are readily
obtainable at a cost and within a time-frame acceptable to Buyer in its
sole discretion;
(b) All utilities, including electricity, water and sewer, shall be
available for hookup and immediate use at the boundary of the Property and
shall require no lift pumps or other unusual hookup expense to Buyer;
(c) The Property shall be lawfully zoned and subdivided and have all
vested rights necessary to permit the intended use by Buyer;
(d) All covenants, easements, restrictions and matters of record,
appearing on the plat or otherwise common to the Property shall not
restrict or interfere with Buyer's intended use of the Property.
Seller shall give Buyer and its agents, employees, representatives and
consultants full access to the Property and to its records for such purposes.
If, at any time within a period of one hundred fifty (150) days (the "Inspection
Period") after the Effective Date of this Agreement, Buyer, in its sole
discretion, determines that it does not wish to proceed with the transactions
contemplated by this Agreement, Buyer shall deliver written notice (the "Notice
of Termination") thereof to Seller during the Inspection Period. The Deposit
shall be returned to Buyer within ten (10) days after the delivery of the Notice
of Termination, and, thereupon all rights of the parties hereunder shall
terminate. If Buyer determines that it wishes to proceed with the transactions
contemplated by this Agreement, it shall deliver written notice (the "Notice of
Exercise") thereof to Seller during the Inspection Period. The failure to give
Notice of Exercise during the Inspection Period shall be deemed conclusive
evidence that Buyer does not wish to proceed with the transactions contemplated
by this Agreement and thereupon Escrow Agent shall, within ten (10) days after
the expiration of Inspection Period, return the Deposit to Buyer, and, thereupon
all rights of the parties hereunder shall terminate. Buyer shall begin its
analysis, evaluation and inspection of the Property as soon as possible after
the Effective Date and shall proceed diligently and timely to determine if it
will proceed with the transactions contemplated by this Agreement. At Seller's
request, Buyer shall give Seller brief progress reports of Buyer's due diligence
under this paragraph. Such requests may be made by telephone to L. E. Christman,
Jr. or E. B. Alexander at 904-249- 4197. If the transactions contemplated by
this Agreement are not closed, Buyer agrees to give to Seller all studies,
analyses and evaluations obtained hereunder without charge to Seller.
- 2 -
<PAGE>
6. COSTS OF CLOSING AND PRORATIONS.
(a) Seller shall pay for documentary stamps on the deed, premiums for
the title insurance policy, costs of the survey, all costs required to
deliver good and marketable title to the Property, all real estate agent or
brokerage commissions and the costs and fees of its counsel. Buyer shall
pay recording costs for the deed, all fees of its counsel and all costs of
the evaluations, analyses and studies undertaken or conducted by Buyer
pursuant to paragraph 5.
(b) Taxes, assessments, utility charges and all other proratable items
shall be prorated as of the Closing. If the amount of the current year's
taxes are not available at Closing, such proration shall be based on the
prior year's taxes (fully discounted) and such proration shall be adjusted
upon receipt of current year's taxes. The cash payment at the Closing shall
be increased or decreased as may be required by such prorations.
(c) If this transaction does not close for any reason other than
Seller's failure or inability to perform, Buyer shall pay for or reimburse
Seller for the costs of the survey and title search required for issuance
of the Commitment.
7. SURVEY.
Seller shall use its best efforts to deliver to Buyer, within twenty (20)
days after the Effective Date, a staked, on-the-ground current survey of the
Property prepared by a licensed Florida surveyor in accordance with the minimum
technical standards for land surveying in the State of Florida and which shall
be certified to Buyer and the title insurer and shall show all visible or
described easements, setback lines, utility facilities and means of ingress and
egress to and from the Property to all public roads, and shall show no
encroachments on the Property and no easements or any other condition which
would interfere with or prevent Buyer's use of the Property. The survey shall
contain a legal description of the Property, the area, boundaries and dimensions
of the Property. If such survey reflects the existence of any encroachments on
the Property or any improvements on the Property encroaching onto any adjoining
property or any other matters which would restrict, limit, interfere with or
prevent Buyer from using the Property for Buyer's intended purposes, or violate
any restrictions or applicable governmental regulations, the same shall be
treated as an unacceptable title exception.
8. TITLE COMMITMENT.
Seller shall use its best efforts to deliver to Buyer, within twenty (20)
days after the Effective Date, a commitment (the "Commitment") to issue an ALTA
Owner's Title Insurance Policy Form B from a title insurance company acceptable
to Buyer in the amount of the purchase price showing fee simple title to the
Property to be vested in Seller, naming Buyer as the proposed insureds and being
subject only to such exceptions as shall be acceptable to Buyer. The Commitment
shall show that Seller is vested with good and marketable title to the Property
free and clear of all liens and encumbrances. If the Commitment reveals
exceptions unacceptable to Buyer, and if such exceptions are not approved by
Buyer, then Buyer shall so notify Seller in writing within thirty (30) days
after receipt of the Commitment, and Seller shall remove such unacceptable
exceptions within ninety (90) days of receipt of Buyer's notice. If Seller fails
to have the unacceptable exceptions removed, Buyer may terminate this Agreement
and receive the Deposit or, at Buyer's election, may close notwithstanding the
unacceptable exceptions, with an appropriate adjustment of the Purchase Price as
to those exceptions than can be cured with the payment of money. If Seller is
able to remove the unacceptable exceptions, the sale shall close in accordance
with this Agreement on the latter of the Closing Date or ten (10) days after
such exceptions have been removed.
9. CLOSING.
The closing of the transaction contemplated by this Agreement shall be held
on or before thirty (30) days after the Notice of
- 3 -
<PAGE>
Exercise at 11:00 A.M. on such day at such time and place as the parties shall
agree. If the closing date falls on a Saturday, Sunday or legal holiday, it
shall be held on the next following business day.
10. DOCUMENTS TO BE DELIVERED AT THE CLOSING.
(a) Seller shall execute and deliver a general warranty deed conveying
the Property to Buyer subject only to those exceptions as are acceptable to
Buyer.
(b) Seller and Buyer shall execute an agreement creating a
non-exclusive, perpetual easement for storm water retention in accordance
with paragraph 11 of this Agreement.
(c) Seller and Buyer shall execute an agreement whereby Buyer will
agree to relocate one of its 30 foot driveway entrances in accordance with
paragraph 12 of this Agreement.
(d) If required by Buyer, Seller shall grant to Buyer an easement for
ingress and egress and utilities over the private roadway shown as North
Amelia Avenue on the site plan attached hereto as Exhibit A.
(e) Seller shall deliver to the title company, if required by the
title company, an Affidavit that there are no unfiled or unpaid
construction or materialmen's liens against the Property as of the Closing.
(f) All documents shall be delivered which are required by the
Commitment as a condition to issuing a final policy of title insurance
showing fee simple title to the Property to be vested in Buyer subject only
to the exceptions acceptable to Buyer.
(g) Buyer shall pay the balance of the Purchase Price.
(h) Buyer and Seller shall each have received all surveys, binders,
certificates, documents, instruments and other items called for by this
Agreement.
(i) Escrow Agent shall deliver the Deposit to Seller.
(j) Seller shall deliver to Buyer, in a form acceptable to Buyer in
Buyer's reasonable judgment, an affidavit made under penalty of perjury on
behalf of Seller stating the United States Social Security Number for each
individual who is referred to as Seller (and/or the United States Taxpayer
Identification Number for any entity which is referred to as Seller), and
stating further that none of these individuals (or entities) are
non-resident aliens of the United States (nor foreign corporations) nor any
person or entity for whom Buyer is required to withhold any sum from Seller
under the United States Internal Revenue Code in connection with the sale
contemplated by this Agreement. Notwithstanding any other provision herein,
if Seller fails to deliver this affidavit, Buyer may elect to terminate
this Agreement, with Buyer's full deposit to be returned, or Buyer may
proceed to close this purchase but may withhold from the full Purchase
Price all sums which would be required to be withheld by Buyer if Seller
were a non-resident alien or foreign corporation under the United States
Internal Revenue Code.
(k) Buyer and Seller shall each execute and deliver such other and
further documents and instruments as shall be reasonably required in the
opinion of counsel for Seller and counsel for Buyer to consummate the
transactions in accordance with the terms of this Agreement.
11. STORM WATER RETENTION AREA.
The site plan attached hereto as Exhibit A refers to a "common detention
area to be located no more than 100 feet from the NE corner of property." The
Buyer and Seller wish to establish a storm water retention area for the benefit
of Buyer and the Property in this general location. Buyer and Seller hereby
agree to establish a storm water retention area on the following terms and
conditions:
(a) Buyer and Seller shall enter into a storm water retention easement
agreement (the "SWR Easement") at Closing which will describe the storm
water retention area by an adequate metes and bounds description;
(b) The SWR Easement shall set forth the capacity and
- 4 -
<PAGE>
specifications for the construction of the storm water retention area in
light of Buyer's requirements and current governmental zoning and
permitting regulations;
(c) Buyer shall pay for the initial costs of engineering, permitting
and construction of the storm water retention area within the SWR Easement
only to the extent required to provide for the needs and usage of Buyer and
the Property;
(d) Seller shall have the right to grant to future purchasers of
Seller's adjacent lands the right to use the SWR Easement subject to
covenants running with the land which will (i) obligate any future users of
the SWR Easement to share on a pro-rata basis the Buyer's costs of
maintenance and repair of the SWR Easement and the storm water retention
area; (ii) provide that Buyer will pay only future costs directly related
to Buyer's use of the SWR Easement and the storm water retention area and
(iii) provide that any future use of the SWR Easement and the storm water
retention area will not adversely affect Buyer's use thereof.
12. FUTURE ACCESS DRIVE.
The site plan attached to this Agreement and designated as Exhibit A,
depicts an area on the north property line as the "Future Access Drive." This is
an area which Seller will be required to establish in order to obtain access to
contiguous property owned by Seller. Further, said site plan depicts a 30 foot
driveway entrance on the northwest property line off of North Amelia Avenue for
Buyer's proposed business facility. The Seller has been advised by the local
traffic engineering department that it may be necessary for the Buyer to
relocate its northerly 30 foot driveway entrance from North Amelia Avenue to the
Future Access Drive in order for the Seller to obtain the necessary approvals to
establish said Future Access Drive. Buyer agrees to execute at closing a
covenant which will obligate the Buyer and any successors in title to relocate
its northerly 30 foot driveway entrance to the Future Access Drive and take any
and all reasonable additional actions, including the execution of any and all
documents reasonably necessary to establish said Future Access Drive for the
benefit of the Seller and any successors in title to the Seller. The costs
related to the closing of the existing entrance and the relocation to the Future
Access Drive shall be borne by Seller.
13. BROKER'S COMMISSION.
Buyer and Seller represent and warrant to each other that THE STZ COMPANY
and BAUMGARTNER and BENNETT REALTY are the procuring brokers in connection with
the transactions contemplated by this Agreement and such brokers shall be paid
by Seller, if and when this transaction closes, the aggregate commission of ten
percent (10.0%) of the Purchase Price, (five percent [5.0%] to THE STZ COMPANY
and five percent [5.0%] to BAUMGARTNER and BENNETT REALTY). Other than such
brokerage commission, Buyer and Seller represent and warrant to each other that
they have dealt with no broker in connection with the transactions contemplated
by this Agreement. Each party agrees to defend, indemnify and hold the other
harmless from and against any and all expense, cost, damage or liability
resulting from the claims of any brokers, other than those set forth above,
those claiming to be brokers or those claiming to have performed services in the
nature of brokerage services for either one of the parties.
14. WARRANTIES OF SELLER.
Seller represents and warrants that:
(a) Seller has full authority and lawful right to enter into and
execute this Agreement and, when delivered to Buyer, the same shall
constitute the binding obligation of Seller and all of the owners of the
Property;
(b) There are no actual or threatened suits, actions or proceedings
with respect to the Property for condemnation or otherwise;
(c) No part of the Property is leased to any person and no person has
any right, title or interest in or to, or any security interest or lien or
other encumbrance on the
- 5 -
<PAGE>
Property;
(d) There are no violations or notices of violations of any federal,
state, county or municipal building, zoning, land use, health, safety,
environmental protection or other ordinances, laws, rules or regulations
affecting the Property, and Seller knows of no condition or state of facts
that would constitute or form the basis of any such violation.
(e) Seller shall not impose any further covenants or restrictions or
matters or grant or retain any easements, except as noted on Exhibit A
attached hereto, which would restrict or interfere with Buyer's intended
use of the Property.
15. WARRANTIES OF BUYER. Buyer represents and warrants that:
(a) Buyer has full authority and lawful right to enter into and
execute this Agreement and, when delivered to Seller, the same shall
constitute the binding obligation of Buyer.
(b) There are no threatened or pending legal actions, suits or
proceedings which would prevent Buyer from consummating the transactions
contemplated by this Agreement in accordance with the terms hereof.
16. CONDEMNATION.
If at any time or from time to time during the term of this Agreement any
proceedings shall be contemplated, commenced, or consummated for the taking of a
part or all of the Property for public or quasi-public use pursuant to the power
of eminent domain or otherwise, then Seller shall forthwith give notice thereof
to Buyer. Such notice of any such taking shall, if possible, be accompanied by a
sketch of the portion of the Property which will be affected by any such taking
and a metes and bounds description delineating the area to be affected. If any
such taking or contemplated taking shall occur or be commenced, then this
Agreement shall be deemed terminated and the Deposit shall forthwith be returned
to Buyer by Escrow Agent and neither party shall have any further obligation
under this Agreement to the other. Notwithstanding the provisions of the
preceding sentence, if Buyer shall so elect, in its sole and absolute
discretion, within ten (10) days of receipt by Buyer of Seller's notice of such
taking, then Buyer may continue this Agreement in full force and effect. Such
election shall be made by giving written notice thereof to Seller within such
ten (10) day period. If Buyer shall so elect to proceed with the performance of
this Agreement, then Seller shall, and does hereby, assign as of the Closing
Date any and all awards and other compensations for any such taking to Buyer,
and Seller further agrees, at the closing, to execute and deliver such documents
as may be required to effect such assignment.
17. DEFAULT.
After delivery of the Notice of Exercise, a default by either party in the
performance of its obligations to the other shall be governed by the following
provisions:
(a) If the sale of the Property is not consummated by reason of
Buyer's failure or refusal to perform one or more of its obligations under
this Agreement, Seller shall have the right, after demand upon Buyer and
Buyer's failure or refusal to comply therewith, to terminate this Agreement
and retain the Deposit as liquidated damages in which event this Agreement
shall terminate, Escrow Agent shall pay the Earnest Money Deposit to Seller
and neither party shall have any further obligation or liability to the
other.
(b) If the sale of the Property is not consummated by reason of
Seller's failure or refusal to perform one or more of the covenants,
warranties, conditions and representations under this Agreement, Buyer
shall have the right, after demand upon Seller and Seller's failure or
refusal to comply therewith, to terminate this Agreement and thereupon the
Deposit shall be promptly returned by Escrow Agent to Buyer and the parties
shall be released of any and all further
- 6 -
<PAGE>
obligations hereunder or Buyer may seek specific performance of this
Agreement.
18. NOTICES.
All notices, demands, requests, instructions or other communications to be
given or made under this Agreement shall be in writing and delivered by mail or
messenger to Buyer's Notice Address, if to Buyer, or to Seller's Notice Address,
if to Seller, or to such other person or address as may be designated by written
notice given by either party to the other. Any such notice, demand, request,
instruction or other communication shall be deemed to have been given or made
only if hand delivered or mailed, addressed as set forth above, by certified or
registered mail, return receipt requested.
19. ESCROW AGENT.
Escrow Agent is authorized to hold the Deposit in escrow and disburse it at
closing in accordance with the terms and conditions of this Agreement. In the
event Escrow Agent is in doubt as to its duties or liabilities under the
provisions of this Agreement, Escrow Agent may, in its sole discretion, continue
to hold the Deposit until the parties agree to disbursement thereof, or until
the judgment of a court of competent jurisdiction shall determine the rights of
the parties thereto, or Escrow Agent may place the Deposit in the registry of
the Circuit Court of Duval County, Florida, and, upon notifying all parties to
such action, all liability on the part of Escrow Agent shall fully cease and
terminate, except to the extent of accounting for any moneys theretofore
delivered out of escrow. In the event of a suit between Buyer and Seller in
which Escrow Agent is made a party, or in the event of any suit in which Escrow
Agent interpleads the Deposit, Escrow Agent shall be entitled to recover
reasonable attorney's fees and costs incurred, the fees and costs to be charged
and assessed as court costs against the losing party. The parties agree that
Escrow Agent shall not be liable to any party or person whomsoever for
misdelivery of the Deposit to Buyer or Seller, unless misdelivery shall be due
to willful breach of this Agreement or gross negligence on the part of Escrow
Agent.
20. MISCELLANEOUS.
(a) Possession of the Property shall be delivered to Buyer at the
Closing.
(b) This Agreement may not be transferred, assigned or sold by Buyer
without the prior written consent of Seller.
(c) This Agreement and any exhibits attached hereto contain the entire
agreement between the parties respecting the matters herein set forth and
supersedes all prior agreements between the parties respecting such
matters. No claim or waiver, modification or amendment, consent or
acquiescence with respect to any of the provisions hereof shall be made
against Buyer or Seller except on the basis of a written instrument duly
executed by the parties sought to be bound thereby.
(d) This Agreement and its interpretation, performance and enforcement
shall be governed by the laws of the State of Florida.
(e) This Agreement shall be binding upon the parties hereto and their
heirs, successors, transferees and assigns.
(f) The invalidity of any one or more of the provisions of this
Agreement shall in no way effect any of the other provisions hereof which
shall remain in full force and effect.
(g) Time is of the essence of this Agreement.
(h) All covenants, agreements, representations and warranties of the
parties hereto shall survive the closing.
(i) Neither this Agreement nor any assignment of it may be recorded
with the Clerk of the Circuit Court of the county in which the Property is
located.
(j) If this Agreement is not executed by the Seller and Buyer on or
before 5:00 PM on May 5, 1997, and an executed counterpart thereof
delivered to Escrow Agent by 12:00 Noon on May 7, 1997, the aforesaid
Deposit shall be, at the option of
- 7 -
<PAGE>
either party, returned to the Buyer and this Agreement shall be null and
void.
IN WITNESS WHEREOF, the parties have hereunto set their hands and seals the
day and year written below.
DATE EXECUTED BY BUYER:
April 29, 1997 FAMILY STEAK HOUSES OF FLORIDA,
INC.
By: /s/ LEWIS E. CHRISTMAN, JR.
-------------------------------
Lewis E. Christman, Jr.,
President and CEO
DATE EXECUTED BY SELLER:
May 22 , 1997 /s/ WYMAN B. ATKINS
-----------------------------------
WYMAN B. ATKINS
ROBERT L. EDENS, JR.
-----------------------------------
ROBERT L. EDENS, JR.
- 8 -
<PAGE>
Exhibit "A"
[GRAPHIC OMITTED]
PRELIMINARY SITE: ORLANDO, FL
PARKING SPACES at the corners of
North Amelia Ave. & International Blvd.
FAMILY STEAK HOUSES OF FLORIDA, INC.
CORPORATE PROFILE
About The Company
Family Steak Houses of Florida, Inc. is the sole franchisee of Ryan's Family
Steak House restaurants in the state of Florida. The Company's first restaurant
was opened in Jacksonville, Florida in May 1982. The Company presently operates
25 Ryan's restaurants in Florida, including seven in the Jacksonville area.
A Ryan's Family Steak House restaurant is a family-oriented restaurant serving
high-quality, reasonably priced food in a casual atmosphere with server-assisted
service. The restaurants feature scatter bars or a self-service Mega BarTM,
bakery dessert bars, and table service of meals and drink refills. Each
restaurant serves cuts of charbroiled steaks and hamburgers, seafood and various
chicken entrees. In addition to traditional salad bar items, the scatter bars or
Mega BarsTM include a variety of hot meats and vegetables, as well as a variety
of pre-made salads and cheeses. The bakery bar consists of fresh baked products
such as hot yeast rolls, a variety of muffins, sweet rolls, brownies and
cookies. Other selections include cobblers, fresh fruit, candy, cheesecake,
pudding, ice cream, lowfat yogurt and a wide variety of dessert toppings. The
bakery bar is included in the customer's meal price, and items can also be
purchased for take-home.
Ryan's Locations:
Jacksonville (6) Lakeland (2) Gainesville (1)
Orange Park (1) Apopka (1) Hudson (1)
Ocala (1) Winter Haven (1) New Port Richey(1)
Tampa (2) Tallahassee (1) Daytona Beach (1)
Orlando (2) Melbourne (1) Clearwater (1)
Lake City (1) Brooksville (1)
Ryan's
================================================================================
1
<PAGE>
FAMILY STEAK HOUSES OF FLORIDA, INC.
- --------------------------------------------------------------------------------
[THIS PAGE INTENTIONALLY LEFT BLANK]
Ryan's
================================================================================
2
<PAGE>
FAMILY STEAK HOUSES OF FLORIDA, INC.
- --------------------------------------------------------------------------------
Dear Shareholders:
Family Steak Houses of Florida, Inc. survived a difficult year in which we were
beset with problems; an unsolicited tender offer by Bisco Industries,
exceptionally high store management turnover, severe competition from our
competitors with new and attractive facilities and new regulations by Nasdaq
that required us to effect a reverse split of 1-for-5 shares in order to remain
listed on Nasdaq. We also made the decision to write-down the book value of our
under-performing store located on Orange Blossom Trail in Orlando, Florida, by
$550,000. This, of course, is included as a charge on the Company's profit and
loss statement.
We are pleased to tell you that in spite of our problems, we believe we are
poised for a successful 1998!
The problems with Bisco Industries have been resolved by the execution of a
Standstill and Settlement Agreement for a one-year term. Mr. Glen Ceiley,
President of Bisco, will join the Company's Board of Directors, along with Mr.
Jay Conzen. We are pleased to have the opportunity to use the experience of
these new board members to move our Company forward.
We are implementing a 5-day workweek for our restaurant managers in an effort to
improve quality of life, and by so doing have reduced the turnover in these
ranks. Turnover in these management positions adversely affects the profit and
loss statements for the restaurants in which the turnover occurs. We hired a
number of new managers in order to implement this program. Additionally, the
improved quality of life we now offer to our restaurant managers affords us an
opportunity to recruit and employ highly professional managers.
The entire management team in the restaurants and the corporate office have
committed to raising our standards by increasing efforts to afford our customers
the very best quality of food available. We are also committed and dedicated to
improving service to our customers, which is already second to none.
We are continuing to remodel our restaurants, and we have enjoyed outstanding
success in the restaurants we have recently remodeled. The remodeled restaurants
have recorded more than a 20% gain so far over the prior year's sales.
We are in the process of opening a new restaurant in Leesburg, Florida, which we
plan to open by June 1998. We will also begin construction of another new
restaurant in Deland, Florida sometime in May 1998. Our Franchisor, Ryan's,
Inc., supplied the plans and specifications for this restaurant at no cost to
the Company. We are pleased to report that they will in all probability be the
general contractor for this restaurant.
The Company is continuing to market under-performing restaurants, and as these
are sold we plan to replace them with new restaurants on sites that offer much
higher volume and profit potential. Ryan's, Inc. has been invaluable with their
assistance in locating new and viable sites for the Company's new restaurants.
The Company is also marketing all land held for sale. We currently have a
contract on a parcel located in Titusville, Florida, and plan to make good use
of the funds that have been lying fallow in property unsuited for our
restaurants.
Finally, the Company has engaged J.H. Chapman Group LLC, an investment banking
firm, to explore all strategic opportunities that will increase shareholder
value. J.H. Chapman is located in Chicago, Illinois, and specializes in the
restaurant industry nationally.
We believe we are on course for a successful year in 1998, and we sincerely
appreciate the support of our shareholders during a difficult year in 1997.
Sincerely,
/s/ Lewis E. Christman, Jr.
Lewis E. Christman, Jr.
President and Chief Executive Officer
Ryan's
================================================================================
3
<PAGE>
FAMILY STEAK HOUSES OF FLORIDA, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Five Year Financial Summary
- ------------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995(1) 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
Selected Income Statement Data: (in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Sales $ 36,978 $ 37,978 $ 42,105 $ 44,849 $ 48,525
Cost and expenses:
Food and beverage 14,642 15,090 16,591 18,174 19,534
Payroll and benefits 10,516 10,538 11,412 12,097 13,372
Depreciation and amortization 1,751 1,663 1,720 1,961 2,560
Other operating expenses 6,070 5,953 6,313 6,412 7,055
General and administrative expenses 2,681 2,220 2,452 2,899 2,159
Franchise fees 1,108 1,139 1,263 1,561 2,207
Asset valuation charge 550 -- -- -- --
(Income) costs from closed restaurants -- -- (303) 1,392 2,557
Loss on disposition of equipment 146 57 198 86 21
-------- -------- -------- -------- --------
37,464 36,660 39,646 44,582 49,465
(Loss) earnings from operations (486) 1,318 2,459 267 (940)
Interest and other income 438 465 536 123 79
Gain on sale of restaurant -- -- 159 -- --
Gain on sale of property held for sale -- -- 31 -- --
Write-down of properly held for sale -- -- -- (465) (91)
Interest expense (1,577) (1,516) (1,694) (1,980) (2,110)
-------- -------- -------- -------- --------
(Loss) earnings before income taxes,
and extraordinary item (1,625) 267 1,491 (2,055) (3,062)
(Benefit) provision for income taxes (201) 53 147 (274) (978)
-------- -------- -------- -------- --------
Net (loss) earnings before extraordinary item (1,424) 214 1,344 (1,781) (2,084)
Extraordinary item - gain on early extinguishment
of debt, net of income taxes of $88,700 -- 348 -- -- --
-------- -------- -------- -------- --------
Net (loss) earnings $ (1,424) $ 562 $ 1,344 $ (1,781) $ (2,084)
======== ======== ======== ======== ========
Basic earnings per share: (2)
(Loss) earnings before extraordinary item $ (0.65) $ 0.10 $ 0.62 $ 0.83 $ (0.98)
Extraordinary item - gain on early
extinguishment of debt -- 0.16 -- -- --
-------- -------- -------- -------- --------
Net (loss) earnings $ (0.65) $ 0.26 $ 0.62 $ 0.83 $ (0.98)
======== ======== ======== ======== ========
Diluted earnings per share: (2)
(Loss) earnings before extraordinary item $ (0.65) $ 0.09 $ 0.57 $ 0.83 $ (0.98)
Extraordinary item - gain on early
extinguishment of debt -- 0.15 -- -- --
-------- -------- -------- -------- --------
Net (loss) earnings $ (0.65) $ 0.24 $ 0.57 $ 0.83 $ (0.98)
======== ======== ======== ======== ========
Selected Balance Sheet Data:
Land and net property and equipment $ 26,300 $ 26,350 $ 26,837 $ 26,896 $ 29,505
Total assets 30,333 32,803 31,260 32,809 35,095
Long-term debt 14,403 15,107 14,420 16,305 14
Current portion of long-term debt 279 333 1,580 851 17,269
Shareholders' equity 10,644 11,998 11,460 9,993 11,743
Selected Operating Data:
Current ratio 0.6 0.9 0.4 0.6 0.1
Working capital (deficit) $ (1,795) $ (617) $ (3,285) $ (2,673) $(20,089)
Cash provided by operating activities 626 1,645 2,135 3,096 3,979
Property and equipment additions 2,304 1,768 2,600 1,796 1,558
</TABLE>
- ----------------
(1) Fifty-three week period.
(2) Per share amounts have been retroactively adjusted to reflect a 1-for-5
reverse stock split effected in March, 1998.
Ryan's
================================================================================
4
<PAGE>
FAMILY STEAK HOUSES OF FLORIDA, INC.
- --------------------------------------------------------------------------------
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Shown for the years indicated are (i) items in the statements of operations as a
percent of sales, (ii) operating expense items in the statements of operations
as a percent of sales and (iii) the number of restaurants open at the end of
each year.
- --------------------------------------------------------------------------------
Percentage
Change Versus
Prior Year
---------------
1997 1996
vs vs
1997 1996 1995 1996 1995
- --------------------------------------------------------------------------------
Sales $36,977,800 $37,977,600 $42,105,400 (2.6)% (9.8)%
=========== =========== =========== ==== ====
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Net Change
In Percentage
---------------------
Percent of Sales 1997 1996
----------------------------------- vs vs
1997 1996 1995 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cost and expenses:
Operating expenses 89.1% 87.6% 85.6% 1.5 2.0
General and administrative expenses 7.3 5.8 5.8 1.5 --
Asset valuation charge 1.5 -- -- 1.5 --
Franchise fees 3.0 3.0 3.0 -- --
Closed restaurant costs -- -- (0.7) -- 0.7
Loss on disposition of property
and equipment 0.4 0.1 0.5 0.3 (0.4)
----- ----- ----- ----- -----
101.3 96.5 94.2 4.8 2.3
----- ----- ----- ----- -----
(Loss) earnings from operations (1.3) 3.5 5.8 (4.8) (2.3)
Interest and other income 1.2 1.2 1.3 -- (0.1)
Gain on sale of restaurant and property
held for sale -- -- 0.5 -- (0.5)
Interest expense (4.3) (4.0) (4.0) (0.3) --
----- ----- ----- ----- -----
(Loss) earnings before income taxes
and extraordinary item (4.4) 0.7 3.6 (5.1) (2.9)
(Benefit) provision for income taxes (0.5) 0.1 0.4 (0.6) (0.3)
----- ----- ----- ----- -----
Net (loss) earnings before extraordinary
item (3.9) 0.6 3.2 (4.5) (2.6)
Extraordinary item - gain on early
extinguishment of debt, net of
income taxes of $88,700 -- 0.9 -- (0.9) 0.9
----- ----- ----- ----- -----
Net (loss) earnings (3.9)% 1.5% 3.2% (5.4)% (1.7)%
===== ===== ===== ===== =====
Operating expenses:
Food and beverage 39.6% 39.7% 39.4% (0.1)% 0.3%
Payroll and benefits 28.4 27.8 27.1 0.6 0.7
Depreciation and amortization 4.7 4.4 4.1 0.3 0.3
Other operating expenses 16.4 15.7 15.0 0.7 0.7
----- ----- ----- ----- -----
89.1% 87.6% 85.6% 1.5 % 2.0%
===== ===== ===== ===== =====
Restaurants open at end of year 25 24 24
===== ===== =====
</TABLE>
Ryan's
================================================================================
5
<PAGE>
FAMILY STEAK HOUSES OF FLORIDA, INC.
- --------------------------------------------------------------------------------
RESULTS OF OPERATIONS
1997 Compared to 1996
For the year ended December 31, 1997, total sales decreased 2.6% compared to
1996. The sales decline in 1997 compared to 1996 consisted of the following
components:
- --------------------------------------------------------------------------------
% Change
from 1996
1997 1996 Change Total Sales
- --------------------------------------------------------------------------------
Same-Store Sales $34,936,600 $37,977,600 $(3,041,000) (8.0%)
New Restaurant 2,041,200 2,041,200 5.4%
----------- ----------- ----------- ----
Total Sales $36,977,800 $37,977,600 $ (999,800) (2.6%)
=========== =========== =========== ====
Management believes that the decrease in same-store sales (sales in restaurants
that have been open for at least 18 months during comparable weeks during the
current and prior year) is primarily due to the effects of increasing
competition, including several new restaurants opened by competitors in areas
close to Company restaurants.
Due primarily to the negative effects of increasing competition on the Company's
sales and profitability, in March 1998 the Company announced that it had
retained an investment banking firm specializing in the restaurant industry to
assist the Company in identifying and evaluating strategic opportunities which
would enhance shareholder value. The Company intends to evaluate any strategic
opportunities recommended by the investment banking firm, and to pursue such
strategies it deems appropriate. However, there can be no assurance that a
restructuring or transaction will result from this process.
Management plans to sell restaurants which are not meeting sales and profit
expectations, and has listed six restaurants for sale. Proceeds from any sales
of restaurants would be used either to build new restaurants with more
competitive facilities in superior locations, or to reduce long-term debt.
Management also plans to improve sales trends by focusing on improving
restaurant operations and by remodeling certain restaurants. Three restaurants
have been remodeled with new scatter bars since October 1997, and have resulted
in same-store sales gains at these restaurants in excess of 20% since the
remodeling. There can be no assurance, however, that this increase in sales will
be maintained. Management is considering remodeling two additional restaurants
in 1998 with scatter bars. Currently, 18 of the Company's 25 restaurants have
scatter bars.
In January 1998, the Company entered into a lease agreement for a new restaurant
expected to be opened in June 1998. The Company has also entered into an
agreement, subject to its ability to obtain a building permit, to purchase land
for another restaurant scheduled to open sometime in 1998. Management intends to
continue to search for new restaurant sites and develop and open new
restaurants, subject to available financing (see "Liquidity and Capital
Resources").
The operating expenses of the Company's restaurants include food and beverage,
payroll and benefits, depreciation and amortization, and other operating
expenses, which include repairs, maintenance, utilities, supplies, advertising,
insurance, property taxes, rents and licenses. The Company's food, beverage,
payroll and benefits costs are believed to be higher than the industry average
as a percentage of sales as a result of the Company's philosophy of providing
customers with high value of food and service for every dollar a customer
spends. In total, food and beverage, payroll and benefits, depreciation and
amortization and other operating expenses as a percentage of sales increased to
89.1% in 1997 from 87.6% in 1996, primarily due to the decline in same-store
sales.
Ryan's
================================================================================
6
<PAGE>
FAMILY STEAK HOUSES OF FLORIDA, INC.
- --------------------------------------------------------------------------------
Food and beverage costs as a percentage of sales decreased from 39.7% in 1996 to
39.6% in 1997. Payroll and benefits as a percentage of sales increased from
27.8% in 1996 to 28.4% in 1997. The Company experienced unusually high
management turnover in 1997, resulting in higher than expected training costs
for new manager hires, as well as operational difficulties. In an attempt to
reduce turnover, management decided to increase the number of restaurant
managers in order to provide the Company's managers with a five-day work week
and a higher quality of life, and therefore improve management retention and
customer service. This increase in number of restaurant managers contributed to
higher payroll and benefits costs in 1997 as compared to 1996. In addition, the
decline in same store sales resulted in an increase in payroll as a percentage
of sales, since a significant amount of payroll cost is a fixed cost.
Other operating expenses as a percentage of sales increased from 15.7% in 1996
to 16.4% in 1997, primarily due to increased fixed operating expenses (as a
percentage of sales) resulting from the decline in same store sales.
Depreciation and amortization increased as a percentage of sales in 1997
compared to 1996, as a result of additions to property and equipment over the
last 24 months and to the decline in comparable store sales.
General and administrative expenses as a percentage of sales increased to 7.3%
in 1997 from 5.8% in 1996. The increase was primarily due to approximately
$375,000 in costs associated with the Bisco takeover attempt (see Note 13 to the
consolidated financial statements), sales tax expenses incurred and accrued for
under a Florida sales tax audit, and the decline in same-store sales. The
expenses incurred in opposing the Bisco takeover attempt relate to, among other
things, the preparation and mailing of materials in opposition to the Bisco
consent solicitation and tender offer and the Ceiley shareholder proposal,
litigation filed by the Company against Bisco, and the attendant fees paid for
legal advice and proxy solicitation. As discussed in Note 13, in February 1998,
the Company entered into a Standstill and Settlement Agreement with Bisco.
The Company recognized an asset valuation charge of $550,000 in 1997 in
accordance with Statement of Financial Accounting Standards No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of." The charge was based upon a financial review of all Company-owned
restaurants and applied to one underperforming restaurant held for sale.
Interest expense increased from $1,516,300 during 1996 to $1,576,700 in 1997.
The increase was due to interest costs associated with a new restaurant opened
in January 1997.
The effective income tax rates for the year ended December 31, 1997 and January
1, 1997 were (12.4%) and 20.1%, respectively. The increase in the valuation
allowance in deferred tax assets in 1997 and the use of certain deferred tax
assets which had previously been reserved in 1996 resulted in the lower than
statutory effective rates for those periods.
In December 1996, the Company realized a gain on early extinguishment of debt of
$348,500, net of income taxes. The gain was accounted for as an extraordinary
item (see Note 6 to the consolidated financial statements).
Net loss for 1997 was $1,423,900, compared to net earnings of $562,200 in 1996.
Loss per share assuming dilution was $.61 for 1997, compared to net earnings per
share assuming dilution of $.24 in 1996.
Ryan's
================================================================================
7
<PAGE>
FAMILY STEAK HOUSES OF FLORIDA, INC.
- --------------------------------------------------------------------------------
RESULTS OF OPERATIONS
1996 Compared to 1995
For the year ended January 1, 1997, total sales decreased 9.8% compared to 1995,
due to declines in same-store sales and one less week in fiscal year 1996
compared to 1995. The sales decline in 1996 compared to 1995 consisted of the
following components:
- --------------------------------------------------------------------------------
% Change
from 1995
1996 1995 Change Total Sales
- --------------------------------------------------------------------------------
Same-Store Sales $37,977,600 $41,361,900 $(3,384,300) (8.0%)
Extra Week Sales* 0 743,500 (743,500) (1.8%)
----------- ----------- ----------- ----
Total Sales $37,977,600 $42,105,400 $(4,127,800) (9.8%)
=========== =========== =========== ====
- ----------
*1995 was a 53-week period, 1996 was a 52-week period.
Food and beverage costs as a percentage of sales increased to 39.7% in 1996 from
39.4% in 1995, primarily due to higher produce and dairy product costs. Payroll
and benefits as a percentage of sales increased from 27.1% in 1995 to 27.8% in
1996, primarily due to the decline in same-store sales. Other operating expenses
as a percentage of sales increased from 15.0% in 1995 to 15.7% in 1996,
primarily due to higher repair and maintenance costs and the decline in
same-store sales. Depreciation and amortization increased as a percentage of
sales in 1996 compared to 1995, as a result of the decline in same-store sales.
General and administrative expenses as a percentage of sales were 5.8% in 1996
and 1995. Franchise fees were 3.0% of sales in 1996 and 1995 in accordance with
the Company's amended Franchise Agreement with Ryan's Family Steak Houses, Inc.
(the "Franchisor"). (See Note 4 to the consolidated financial statements.)
In 1995, the Company recognized $303,200 in income from the favorable settlement
of two closed restaurant leases. The remaining lease costs at the time of store
closure were included in closed restaurant costs in 1993. No such events
occurred in 1996.
During the first week of fiscal 1995, the Company closed and sold a restaurant
located in Jacksonville, Florida. The Company received approximately 20% of the
purchase price in cash and recorded a mortgage receivable for the balance of the
sale. The Company recognized a gain on this sale of approximately $152,000 in
1995. Total gains on sales of property were $159,000 in 1995. There were no
significant sales of real estate in 1996.
Interest expense decreased from $1,693,800 during 1995 to $1,516,300 in 1996.
The decrease was due primarily to lower outstanding principal balances,
resulting from principal payments made throughout 1996.
The effective income tax rates for the year ended January 1, 1997 and January 3,
1996 were 20.1% and 9.9%, respectively. Certain deferred tax assets were
utilized in both years, resulting in the lower than statutory effective rates
for 1995 and 1996.
In December 1996, the Company realized a gain on early extinguishment of debt of
$348,500, net of income taxes. The gain was accounted for as an extraordinary
item (see Note 6 to the consolidated financial statements).
Net earnings for 1996 were $562,200 compared to $1,344,200 in 1995. Earnings per
share assuming dilution were $.24 for 1996, compared to $.57 in 1995.
Ryan's
================================================================================
8
<PAGE>
FAMILY STEAK HOUSES OF FLORIDA, INC.
- --------------------------------------------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES
Substantially all of the Company's revenues are derived from cash sales.
Inventories are purchased on credit and are converted rapidly to cash.
Therefore, the Company does not carry significant receivables or inventories
and, other than the repayment of debt, working capital requirements for
continuing operations are not significant.
At December 31, 1997, the Company had a working capital deficit of $1,794,700
compared to a working capital deficit of $616,800 at January 1, 1997. The
increase in the working capital deficit in 1997 was primarily due to the net
loss incurred by the Company in 1997.
Cash provided by operating activities decreased to $626,100 in 1997 from
$1,645,000 in 1996, primarily due to the net loss in 1997, compared to net
earnings in 1996. Cash provided by operating activities decreased from
$2,135,300 in 1995 to $1,645,000 in 1996 due to lower earnings in 1996.
The Company spent approximately $2,741,000 in 1997, $1,356,000 in 1996 and
$2,600,000 in 1995 for new restaurant construction, restaurant remodeling and
equipment. Capital expenditures for 1998, based on present costs and plans for
capital improvements, are estimated to be $3,400,000. The Company projects that
proceeds from the Company's financing agreements (described below), and cash
generated from operations will be sufficient to fund these improvements.
In December 1996, the Company entered into a Loan Agreement with FFCA Mortgage
Corporation ("FFCA"). The Loan Agreement governs eighteen Promissory Notes
payable to FFCA totalling $14,681,400 at December 31, 1997. Each Promissory Note
is secured by a mortgage on a Company restaurant property. The Promissory Notes
provide for a term of twenty years and an interest rate equal to the thirty-day
LIBOR rate plus 3.75%, adjusted monthly. In November 1997 the Company prepaid
one of the Promissory Notes in full in the amount of approximately $440,000. The
Loan Agreement provides for various covenants, including the maintenance of
prescribed debt service coverages.
The Company used the proceeds of the FFCA loan to retire its Notes with Cerberus
Partners, L.P. ("Cerberus") and its loan with the Daiwa Bank Limited and
SouthTrust Bank of Alabama, N.A. The Company realized a discount on the
retirement of the Cerberus Notes, which was partially offset by unamortized debt
issuance costs. The resulting gain of $348,500, net of income taxes, was
accounted for in 1996 as an extraordinary item. In addition, the Company retired
warrants for 210,000 shares of the Company's common stock previously held by
Cerberus. Cerberus continues to hold warrants to purchase 140,000 shares of the
Company's common stock at an exercise price of $2.00 per share.
Also in December 1996, the Company entered into a separate loan agreement with
FFCA under which it may borrow up to an additional $4,640,000. This additional
financing would be evidenced by four additional Promissory Notes secured by
mortgages on four Company restaurant properties. The term and interest rate of
this loan agreement are identical to the loan agreement described above. The
Company borrowed $1,290,000 under this agreement in February 1998, secured by a
mortgage on one restaurant property. The availability of new borrowings under
this agreement is currently scheduled to expire in June 1998.
Ryan's
================================================================================
9
<PAGE>
FAMILY STEAK HOUSES OF FLORIDA, INC.
- --------------------------------------------------------------------------------
IMPACT OF INFLATION
Costs of food, beverage, and labor are the expenses most affected by inflation
in the Company's business. Although inflation in recent years has been low and
accordingly has not had a significant impact on the Company in the past, there
can be no assurance that inflation will not increase and impact the Company in
the future. A significant portion of the Company's employees are paid by the
federally established statutory minimum wage. On August 8, 1996, President
Clinton signed into law a bill which raised the federally mandated minimum wage
by $.50 per hour on October 1, 1996, and by an additional $.40 per hour on
September 1, 1997. Future changes in the federal minimum wage may impact the
Company's payroll and benefits costs.
The Company raised sales prices approximately 1.0% in 1997 in order to offset
the effect of higher payroll and benefit costs. Sales prices were increased
approximately 3.0% in 1996 and 2.5% in 1995.
INFORMATION SYSTEMS AND THE YEAR 2000
The Company initiated the process of preparing its computer systems and
applications for the year 2000 in January 1998. This process involves modifying
or replacing certain hardware and software maintained by the Company as well as
communicating with external service providers to ensure that they are taking the
appropriate action to remedy their Year 2000 issues. Management expects to have
substantially all of the system and application changes completed by the end of
1999 and believes that its level of preparedness is appropriate.
The Company estimates that the total cumulative cost of the project could range
as high as $500,000, which includes both internal and external personnel costs
related to modifying the systems as well as the cost of purchasing or leasing
certain hardware and software. Purchased hardware and software will be
capitalized in accordance with normal policy. Personnel and all other costs
related to the project are being expensed as incurred.
The costs of the project and the expected completion dates are based on
management's best estimates.
Ryan's
================================================================================
10
<PAGE>
FAMILY STEAK HOUSES OF FLORIDA, INC.
- --------------------------------------------------------------------------------
Consolidated Statements of Operations
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
For The Years Ended
--------------------------------------------
December 31, January 1, January 3,
1997 1997 1996
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales $36,977,800 $37,977,600 $42,105,400
Cost and expenses:
Food and beverage 14,642,500 15,089,500 16,591,300
Payroll and benefits 10,516,000 10,537,500 11,411,700
Depreciation and amortization 1,750,700 1,662,500 1,719,900
Other operating expenses 6,069,700 5,953,400 6,313,000
General and administrative expenses 2,680,900 2,220,200 2,452,300
Franchise fees 1,108,400 1,138,600 1,263,200
Asset valuation charge 550,000 -- --
Income from closed restaurants -- -- (303,200)
Loss on disposition of equipment 146,200 57,400 197,800
------------ ------------ ------------
37,464,400 36,659,100 39,646,000
------------ ------------ ------------
(Loss) earnings from operations (486,600) 1,318,500 2,459,400
Interest and other income 437,900 465,100 535,600
Gain on sale of restaurant -- -- 158,600
Gain on sale of property held for sale -- -- 31,500
Interest expense (1,576,700) (1,516,300) (1,693,800)
------------ ------------ ------------
(Loss) earnings before income taxes and extraordinary item (1,625,400) 267,300 1,491,300
(Benefit) provision for income taxes (201,500) 53,600 147,100
------------ ------------ ------------
Net (loss) earnings before extraordinary item (1,423,900) 213,700 1,344,200
Extraordinary item - gain on early extinguishment
of debt, net of income taxes of $88,700 -- 348,500 --
------------ ------------ ------------
Net (loss) earnings ($1,423,900) $562,200 $1,344,200
============ ============ ============
Basic earnings per share:
Net (loss) earnings before extraordinary item ($0.65) $0.10 $0.61
Extraordinary item - gain on early extinguishment of debt -- $0.16 --
------------ ------------ ------------
Net (loss) earnings ($0.65) $0.26 $0.61
============ ============ ============
Diluted earnings per share:
Net (loss) earnings before extraordinary item ($0.65) $0.09 $0.57
Extraordinary item - gain on early extinguishment of debt -- $0.15 --
------------ ------------ ------------
Net (loss) earnings ($0.65) $0.24 $0.57
============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
Ryan's
================================================================================
11
<PAGE>
FAMILY STEAK HOUSES OF FLORIDA, INC.
- --------------------------------------------------------------------------------
Consolidated Balance Sheets
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
December 31, 1997 January 1, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $696,000 $1,750,800
Investments 600,300 1,093,100
Receivables 93,200 566,100
Income taxes receivable 297,900 --
Current portion of mortgages receivable 124,900 120,600
Inventories 280,500 202,300
Prepaids and other current assets 311,200 247,200
------------ ------------
Total current assets 2,404,000 3,980,100
Mortgages receivable 308,700 1,089,100
Property and equipment:
Land 9,088,300 9,089,200
Buildings and improvements 19,908,900 19,676,500
Equipment 13,151,600 12,240,400
------------ ------------
42,148,800 41,006,100
Accumulated depreciation (15,848,500) (14,656,200)
------------ ------------
Net property and equipment 26,300,300 26,349,900
Property held for sale 552,800 552,800
Other assets, principally deferred charges,
net of accumulated amortization 767,000 831,600
------------ ------------
$30,332,800 $32,803,500
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $1,287,000 $1,183,000
Accounts payable - construction -- 411,800
Accrued liabilities 2,630,300 2,582,100
Income taxes payable -- 84,800
Current portion of long-term debt 278,900 332,700
Current portion of obligation under capital lease 2,500 2,500
------------ ------------
Total current liabilities 4,198,700 4,596,900
Long-term debt 14,402,800 15,107,200
Obligation under capital lease 1,056,000 1,058,600
Deferred revenue 30,800 43,100
------------ ------------
Total liabilities 19,688,300 20,805,800
Commitments and contingencies (Note 11)
Shareholders' equity:
Preferred stock of $.01 par; authorized 10,000,000 shares; none issued -- --
Common stock of $.01 par; authorized 4,000,000 shares; outstanding
2,216,200 in 1997 and 2,184,140 shares in 1996 22,200 21,800
Additional paid-in capital 8,256,100 8,185,800
Retained earnings 2,366,200 3,790,100
------------ ------------
Total shareholders' equity 10,644,500 11,997,700
------------ ------------
$30,332,800 $32,803,500
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
Ryan's
================================================================================
12
<PAGE>
FAMILY STEAK HOUSES OF FLORIDA, INC.
- --------------------------------------------------------------------------------
Consolidated Statements of Shareholders' Equity
<TABLE>
<CAPTION>
For the Years ended December 31, 1997, January 1, 1997 and January 3, 1996
- -----------------------------------------------------------------------------------------------------------------------------------
Common Stock Additional
--------------------------- Paid-in Retained
Shares Amount Capital Earnings Total
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, December 28, 1994 10,725,200 $107,300 $8,002,300 $1,883,700 $9,993,300
Net earnings 1,344,200 1,344,200
Exercise of stock options 119,800 1,200 1,200
Issuance of warrants 81,000 81,000
Directors' fees in the form of stock options 40,000 40,000
----------- ----------- ----------- ----------- -----------
Balance, January 3, 1996 10,845,000 108,500 8,123,300 3,227,900 11,459,700
Net earnings 562,200 562,200
Exercise of stock options 75,700 700 18,100 18,800
Retirement of warrants (63,000) (63,000)
Directors' fees in the form of stock options 20,000 20,000
----------- ----------- ----------- ----------- -----------
Balance, January 1, 1997 10,920,700 109,200 8,098,400 3,790,100 11,997,700
Net loss (1,423,900) (1,423,900)
Exercise of stock options 32,060 1,600 49,100 50,700
Common stock 1-for-5 reverse split (8,736,560) (88,600) 88,600 --
Directors' fees in the form of
stock options 20,000 20,000
----------- ----------- ----------- ----------- -----------
Balance, December 31, 1997 2,216,200 $22,200 $8,256,100 $2,366,200 $10,644,500
=========== =========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
Ryan's
================================================================================
13
<PAGE>
FAMILY STEAK HOUSES OF FLORIDA, INC.
- --------------------------------------------------------------------------------
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
For the Years Ended
-----------------------------------------------------
December 31, 1997 January 1, 1997 January 3, 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating activities:
Net (loss) earnings ($ 1,423,900) $ 562,200 $ 1,344,200
Adjustments to reconcile net (loss) earnings to net cash provided
by operating activities:
Depreciation and amortization 1,750,700 1,662,500 1,719,900
Asset valuation charge 550,000 -- --
Directors' fees in the form of stock options 20,000 20,000 40,000
Amortization of loan fees 22,200 89,800 85,400
Loss on disposition of property and equipment 146,200 57,400 197,800
Amortization of loan discount -- 51,000 74,700
Gain on early extinguishment of debt -- (437,200) --
Gain on disposition of restaurants and property held for sale -- -- (493,300)
Loss from joint venture -- -- 5,400
Decrease (increase) in:
Receivables (3,200) (16,100) 27,800
Inventories (78,200) 45,100 63,100
Income taxes receivable (297,900) -- 332,200
Prepaid and other current assets (64,000) 9,400 218,900
Other assets (50,900) (492,500) (275,900)
Increase (decrease) in:
Accounts payable 104,000 (67,700) (212,200)
Accrued liabilities 48,200 88,000 (794,000)
Income taxes payable (84,800) 79,400 5,400
Deferred revenue (12,300) (6,300) (5,800)
Other non-current liabilities -- -- (198,300)
------------ ------------ ------------
Net cash provided by operating activities 626,100 1,645,000 2,135,300
------------ ------------ ------------
Investing activities:
Capital expenditures (2,740,700) (1,356,400) (2,599,600)
Principal receipts on notes receivable 776,100 208,700 84,400
Sale (purchase) of investments 492,800 (492,800) 110,400
Proceeds from sale of property and equipment 900 548,600 107,900
Proceeds from sale of property held for sale -- -- 518,000
------------ ------------ ------------
Net cash used by investing activities (1,470,900) (1,091,900) (1,778,900)
------------ ------------ ------------
Financing activities:
Payments on long-term debt and obligation under capital lease (760,800) (15,414,500) (1,249,300)
Construction draw on building under capital lease 500,100 585,000 --
Proceeds from the exercise of stock options 50,700 18,800 1,200
Retirement of warrants -- (63,000) --
Proceeds from the issuance of long-term debt -- 15,360,000 --
------------ ------------ ------------
Net cash provided (used) by financing activities (210,000) 486,300 (1,248,100)
------------ ------------ ------------
Net (decrease) increase in cash and cash equivalents (1,054,800) 1,039,400 (891,700)
Cash and cash equivalents-- beginning of year 1,750,800 711,400 1,603,100
------------ ------------ ------------
Cash and cash equivalents-- end of year $ 696,000 $ 1,750,800 $ 711,400
============ ============ ============
Supplemental disclosures of cash flow information:
Cash paid during the year for income taxes $ 181,000 $ 63,000 $ 139,200
============ ============ ============
Cash paid during the year for interest $ 1,323,100 $ 1,386,600 $ 1,670,800
============ ============ ============
Noncash transactions:
Notes receivable as partial proceeds $ -- $ -- $ 932,800
Interest forgiven in lieu of loan closing costs incurred -- -- 251,600
Warrants issued in connection with loan restructure -- -- 81,000
Accrued interest reclassed to long-term debt -- -- 100,000
</TABLE>
See accompanying notes to consolidated financial statements.
Ryan's
================================================================================
14
<PAGE>
FAMILY STEAK HOUSES OF FLORIDA, INC.
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
Organization
The Company was organized under the laws of the State of Florida in September
l985 and is the sole franchisee of Ryan's Family Steak House restaurants in the
State of Florida.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries, Steak House Construction, Family Rustic
Investments, Steak House Realty Corporation, and Wrangler's Roadhouse, Inc. All
significant intercompany transactions and balances have been eliminated.
Fiscal Year
The fiscal year consists of a fifty-two or fifty-three week period ending on the
Wednesday nearest to December 31. Fiscal year 1995 consisted of fifty-three
weeks. Fiscal years 1996 and 1997 consisted of fifty-two weeks.
Use of Estimates
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.
Cash and Cash Equivalents
The Company has a cash management program which provides for the investment of
excess cash balances in short-term investments. These investments are stated at
cost which approximates market value and consist of money market instruments.
Investments
Investments represent certificates of deposit or bankers' acceptances with
maturities of less than one year. These investments are pledged with various
entities to support the Company's workers' compensation liability. Interest
rates on the certificates vary from 4.83% to 5.50%.
Inventories
Inventories are stated at the lower of cost (first-in, first-out) or market and
consist of ingredients and supplies.
Property and Equipment
Property and equipment are stated at cost. Maintenance, repairs and betterments
which do not enhance the value of or increase the life of the assets are charged
to costs and expenses as incurred. Depreciation is provided for financial
reporting purposes principally on the straight-line method over the following
estimated lives: buildings - 25 years, land improvements - 25 years and
equipment - 5-8 years. Leasehold improvements are amortized over the life of the
related lease.
Property Held For Sale
Property held for sale consists of property parcels stated at the lower of cost
or estimated net realizable value.
Ryan's
================================================================================
15
<PAGE>
FAMILY STEAK HOUSES OF FLORIDA, INC.
- --------------------------------------------------------------------------------
Deferred Charges
Certain costs incidental to the opening of a restaurant, consisting primarily of
employee training costs, are capitalized for each store opened and are amortized
over one year. Other deferred charges and related amortization periods are as
follows: financing costs - term of the related loan, and initial franchise
rights - 40 years.
Income Taxes
Deferred income taxes are provided for temporary differences between financial
reporting basis and tax basis of the Company's assets and liabilities using
presently enacted income tax rates.
New Accounting Standards
In March 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per
Share"(SFAS 128"). SFAS 128 establishes standards for computing and presenting
earnings per share ("EPS") and applies to all entities with publicly held common
stock or potential common stock. SFAS 128 replaces the presentation of primary
EPS and fully diluted EPS with a presentation of basic EPS and diluted EPS,
respectively. Basic EPS excludes dilution and is computed by dividing earnings
available to common stockholders by the weighted-average number of common shares
outstanding for the period. Similar to fully diluted EPS, diluted EPS reflects
the potential dilution of securities that could share in the earnings. The
Company adopted the requirements of SFAS No. 128 in the year ended December 31,
1997 (Note 8). All periods presented have been restated to conform to this
presentation.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income"
("SFAS 130"), effective for fiscal years beginning after December 15, 1997. SFAS
130 requires all items required to be recognized under accounting standards as
components of comprehensive income be reported in a financial statement that is
displayed with the same prominence as other financial statements. SFAS 130 does
not require a specific format for that financial statement but requires an
entity to display an amount representing total comprehensive income for the
period in that financial statement. SFAS 130 requires an entity to classify
items or other comprehensive income by their nature in a financial statement. In
addition, the accumulated balance of other comprehensive income must be
displayed separately from retained earnings and additional paid in capital in
the equity section of a statement of financial position. Reclassification of
financial statements for earlier periods, provided for comparative purposes, is
required. The Company is in the process of determining the impact that the
adoption of SFAS 130 will have on its financial statements.
Reclassifications
Certain items in the prior year financial statements have been reclassified to
conform to the 1997 presentation.
NOTE 2. CLOSED RESTAURANT COSTS
In 1995, the Company recognized $303,200 in income from favorable settlements of
two closed restaurant leases. These closed restaurant costs had been recorded in
1993, when the decision to close the respective restaurants was made.
Ryan's
================================================================================
16
<PAGE>
FAMILY STEAK HOUSES OF FLORIDA, INC.
- --------------------------------------------------------------------------------
NOTE 3. ASSET VALUATION CHARGE
In accordance with SFAS No. 121, the Company recognized a $550,000 asset
valuation charge in 1997. This charge was based upon a financial review of all
Company-owned restaurants and applied to one underperforming unit, which the
Company intends to sell in 1998.
The charge was based on the difference between the unit's net book value and
estimated fair value, which equaled the estimated proceeds from disposal as
determined by management. Considerable management judgement is necessary to
estimate proceeds from disposal and, accordingly, actual proceeds could vary
significantly from such estimates. Management plans to actively market this
restaurant, but currently cannot estimate its expected disposal date. For the
year ended December 31, 1997, this unit had an after-tax loss of $116,500.
NOTE 4. FRANCHISE AGREEMENT
In October 1996, the Company amended its Franchise Agreement with Ryan's Family
Steak Houses, Inc. The amended agreement requires the Company to pay a monthly
royalty fee of 3.0% through December 2001, and 4.0% thereafter of the gross
receipts of each Ryan's Family Steak House restaurant. Total royalty fee
expenses were $1,108,400, $1,138,600 and $1,263,200 for the years ended December
31, 1997, January 1, 1997 and January 3, 1996.
The Franchise Agreement requires the Company to operate a minimum number of
Ryan's restaurants on December 31 of each year. The Company has listed six
restaurants for sale. Failure to operate the minimum number could result in the
loss of exclusive franchise rights to the Ryan's concept in North and Central
Florida.
The following schedule outlines the number of Ryan's restaurants required to be
operated by the Company as of December 31 each year under the amended franchise
agreement:
- --------------------------------------------------------------------------------
Number of
Restaurants Required to
End of Fiscal Year be in Operation
- --------------------------------------------------------------------------------
1997 25
1998 26
1999 27
2000 28
2001 and subsequent years Increases by one each year
Prior to July 1994 the Company held exclusive franchise rights to build Ryan's
restaurants in the State of Florida, with the exception of Panama City, Florida
and Escambia County, Florida, where the Franchisor has the right to operate
Ryan's restaurants. Under the Franchise Agreement, as amended in July 1994, the
Company relinquished the franchise rights to most counties in northwest Florida
and south Florida to the Franchisor for $500,000 in forgiveness of past due
royalty fees. The Company has the right to repurchase the exclusive franchise
rights to those counties for $500,000 at any time prior to June 30, 1998.
In conjunction with the execution of the July 1994 amendment to the Franchise
Agreement, the Company executed and delivered a note to the Franchisor for
payment of $800,000 in past due royalty fees. (See Note 6).
Ryan's
================================================================================
17
<PAGE>
FAMILY STEAK HOUSES OF FLORIDA, INC.
- --------------------------------------------------------------------------------
NOTE 5. ACCRUED LIABILITIES
Accrued liabilities are summarized as follows:
- --------------------------------------------------------------------------------
December 31, 1997 January 1, 1997
- --------------------------------------------------------------------------------
Payroll and payroll taxes $ 549,200 $ 561,500
Workers' compensation claims 1,260,500 1,427,000
Other 820,600 593,600
---------- ----------
$2,630,300 $2,582,100
========== ==========
The Company self-insures workers' compensation losses up to certain limits. The
estimated liability for workers' compensation claims represents an estimate for
the ultimate cost of uninsured losses which are unpaid as of the balance sheet
date. These estimates are continually reviewed and adjustments to the Company's
estimated claim liabilities, if any, are reflected in current operations.
NOTE 6. LONG-TERM DEBT
Long-term debt is summarized as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
December 31, 1997 January 1, 1997
- -------------------------------------------------------------------------------------
<S> <C> <C>
Secured notes payable to FFCA Mortgage
Corporation, monthly principal and interest
payments totaling $141,100 effective
December 1997, interest at thirty day LIBOR
rate +3.75% (9.44% at December 31, 1997) $ 14,681,400 $ 15,360,000
Unsecured note payable to Franchisor, monthly
principal payments of $25,000, interest at 6.0% 75,000
Other 300 4,900
------------ ------------
14,681,700 15,439,900
Less current portion: (278,900) (332,700)
------------ ------------
$ 14,402,800 $ 15,107,200
============ ============
Total maturities of long-term debt are as follows:
1998 $ 278,900
1999 307,300
2000 338,900
2001 373,600
2002 411,900
Thereafter 12,971,100
-----------
$14,681,700
===========
</TABLE>
Ryan's
================================================================================
18
<PAGE>
FAMILY STEAK HOUSES OF FLORIDA, INC.
- --------------------------------------------------------------------------------
In December 1996, the Company entered into a Loan Agreement with FFCA Mortgage
Corporation ("FFCA"). The Loan Agreement governs eighteen Promissory Notes
payable to FFCA totalling $14,681,400 at December 31, 1997. Each Promissory Note
is secured by a mortgage on a Company restaurant property. The Promissory Notes
provide for a term of twenty years and an interest rate equal to the thirty-day
LIBOR rate plus 3.75%, adjusted monthly. In November 1997 the Company prepaid
one of the Promissory Notes in full in the amount of approximately $440,000. The
Loan Agreement provides for various covenants, including the maintenance of
prescribed debt service coverages.
The Company used the proceeds of the FFCA loan to retire its Notes with Cerberus
Partners, L.P. ("Cerberus") and its loans with the Daiwa Bank Limited and
SouthTrust Bank of Alabama, N.A. The Company realized a discount on the
retirement of the Cerberus Notes, which was partially offset by unamortized debt
issuance costs. The resulting gain of $348,500 net of income taxes, was
accounted for in 1996 as an extraordinary item. In addition, the Company retired
warrants for 210,000 shares of the Company's common stock previously held by
Cerberus. Cerberus continues to hold warrants to purchase 140,000 shares of the
Company's common stock at an exercise price of $2.00 per share.
Also in December 1996, the Company entered into a separate loan agreement with
FFCA under which it may borrow up to an additional $4,640,000. This additional
financing would be evidenced by four additional Promissory Notes secured by
mortgages on four Company restaurant properties. The terms and interest rate of
this loan agreement are identical to the loan agreement described above. The
Company borrowed $1,290,000 under this agreement in February 1998, secured by a
mortgage on one restaurant property. The availability of borrowings under this
agreement is currently scheduled to expire in June 1998.
NOTE 7. INCOME TAXES
The (benefit) provision for income taxes is comprised of the following:
- --------------------------------------------------------------------------------
1997 1996 1995
- --------------------------------------------------------------------------------
Current:
Federal $(201,500) $142,300 $147,100
========= ======== ========
Income taxes for the years ended December 31, 1997, January 1, 1997 and January
3, 1996 differ from the amount computed by applying the federal statutory
corporate rate to earnings before income taxes. The differences are reconciled
as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Tax (benefit) provision at statutory rate $(568,900) $245,500 $522,000
Increase (decrease) in taxes due to:
Effect of graduated tax rates 16,300 (7,000) (14,900)
State tax net of federal benefit (59,000) 38,600 53,700
Change in deferred tax asset
valuation allowance 377,900 (109,400) (426,000)
Other 32,200 (25,400) 12,300
--------- -------- --------
(Benefit) provision for income taxes $(201,500) $142,300 $147,100
========= ======== ========
</TABLE>
Ryan's
================================================================================
19
<PAGE>
FAMILY STEAK HOUSES OF FLORIDA, INC.
- --------------------------------------------------------------------------------
The components of deferred taxes at December 31, 1997 and January 1, 1997 are
summarized below:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
December 31, 1997 January 1, 1997
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Capital loss not currently deductible $ 46,100 $ 46,100
Excess tax over book basis:
Property held for sale 164,700 164,700
Asset valuation reserve 207,000 --
Federal and state tax credits 562,500 375,100
Accruals not currently deductible 474,500 547,900
Unearned revenue, previously taxed 16,800 22,500
State net operating loss 44,900 --
----------- -----------
Total deferred tax asset 1,516,500 1,156,300
Valuation Allowance (519,700) (141,800)
----------- -----------
996,800 1,014,500
----------- -----------
Deferred tax liability:
Excess of tax over book depreciation and amortization 996,800 1,014,500
=========== ===========
Net deferred taxes $ 0 $ 0
=========== ===========
</TABLE>
At December 31, 1997 the Company's federal and state tax credit was comprised of
$49,200 in general business credits which expire in 2012 and alternative minimum
tax credits of $513,300 which have no expiration date.
NOTE 8. COMMON SHAREHOLDERS' EQUITY
Stock Split
The Company effected a 1-for-5 reverse stock split of its common stock in March
1998, which was recorded by transferring the aggregate par value of the shares
retired from common stock to additional paid in capital. Accordingly, the
weighted average number of common and equivalent shares, per share amounts for
net earnings, and stock option and warrant data have been retroactively adjusted
to reflect the reverse stock split for all periods presented.
Ryan's
================================================================================
20
<PAGE>
FAMILY STEAK HOUSES OF FLORIDA, INC.
- --------------------------------------------------------------------------------
Earnings per Share
The following is a reconciliation of the numerators and denominators of the
basic and diluted EPS computations for net income and net income available to
common shareholders:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995
------------------------------------ ---------------------------------- --------------------------------
Income Shares Per Income Shares Per Income Shares Per
(Numerator) (Denominator) Shares (Numerator) (Denominator) Shares (Numerator) (Denominator) Shares
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Basic EPS:
Net (loss) income
available to
common shareholders $(1,423,900) 2,206,000 $(0.65) $ 562,200 2,177,100 $0.26 $ 1,344,200 2,163,400 $0.62
====== ===== =====
Effect of Dilutive
Securities:
Stock Options 49,800 59,100
Warrants 140,700 143,700
Diluted EPS:
Net (loss) income
available to
common shareholders
plus assumed
conversions $(1,423,900) 2,206,000 $(0.65) $ 562,200 2,367,600 $0.24 $ 1,344,200 2,366,200 $0.57
====== ===== =====
</TABLE>
The Company has a stock option plan for non-employee directors pursuant to which
up to an aggregate of 180,000 shares of the common stock are authorized to be
granted. All options expire five years after the date of grant or one year after
completion of term as a director.
The Company also had an employee incentive stock option plan pursuant to which
up to an aggregate of 108,000 shares of the common stock were authorized to be
granted. All options expire ten years after the date of grant or 90 days after
termination of employment. This plan expired as of November 30, 1995. Certain
options outstanding under this plan as of November 30, 1995 remain exercisable
pursuant to terms of the plan.
In 1995 the Company's shareholders approved a new employee long-term incentive
plan pursuant to which an additional 200,000 shares of common stock are
authorized to be granted in the form of stock options or restricted stock. All
options granted under this plan expire no later than ten years after the date of
grant or three months after termination of employment.
If compensation cost for stock option grants had been determined based on the
fair value at the grant dates for 1997, 1996, and 1995 consistent with the
method prescribed by SFAS No. 123, the Company's net earnings and earnings per
share would have been adjusted to the pro forma amounts indicated below:
- --------------------------------------------------------------------------------
1997 1996 1995
- --------------------------------------------------------------------------------
Net (Loss) Earnings As reported $(1,423,900) $562,200 $1,344,200
Pro forma (1,477,800) 490,262 1,256,435
Diluted (Loss) Earnings As reported $ (.65) $ .24 $ .57
Per Share Pro forma (.67) .21 .53
Under SFAS No. 123, the fair value of each option grant is estimated on the date
of grant using the Black-Scholes option-pricing model with the following
weight-average assumptions used for grants in 1997, 1996 and 1995, respectively:
dividend yield of 0 percent each year, expected volatility of 99, 134 and 128
percent, risk-free interest rates of 5.6, 6.5 and 5.6 percent, and expected
lives of 10 years for each year.
Ryan's
================================================================================
21
<PAGE>
FAMILY STEAK HOUSES OF FLORIDA, INC.
- --------------------------------------------------------------------------------
The following table summarizes the changes in the total number of stock option
shares outstanding during the three years ended December 31, 1997.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995
--------------------------- ---------------------------- ----------------------------
Weighted Average Weighted Average Weighted Average
Options Exercise Price Options Exercise Price Options Exercise Price
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding
at beginning of year 193,840 $3.00 262,040 $3.11 102,089 $4.03
Options granted 38,104 2.66 27,886 2.66 215,110 2.49
Options exercised (35,304) 1.99 (15,136) 1.25 (23,970) .05
Options forfeited (14,700) 4.23 (80,950) 3.57 (31,189) 3.54
------- ------- -------
Options outstanding
at end of year 181,940 3.08 193,840 3.00 262,040 3.11
======= ======= =======
Options exercisable
at end of year 103,670 3.20 89,810 3.50 94,570 3.55
======= ======= =======
Weighted average
fair value of options
granted during
the year $41,821 $36,163 $326,761
Common shares
reserved for future
grants at end of year 122,437 -- 153,289 -- 149,589 --
</TABLE>
The following table summarizes information about fixed stock options outstanding
at December 31, 1997:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Year Exercise Options Options Weighted Average
Granted Price $ Outstanding Exercisable Remaining Life
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1988 $18.13 1,100 1,100 .1
1989 14.38 3,000 3,000 1.5
1991 4.06 11,800 11,800 3.3
1992 5.63 4,000 4,000 4.1
1993 3.13 7,400 7,400 5.3
1994 1.25 16,200 12,150 7.0
1995 3.75 30,640 15,320 7.7
1995 2.00 57,500 43,125 7.7
1996 2.81 23,100 5,775 9.0
1997 3.28 27,200 -- 10.0
------- -------
181,940 103,670
======= =======
</TABLE>
Remaining non-exercisable options as December 31, 1997 become exercisable as
follows:
1998 38,660
1999 20,235
2000 12,575
2001 6,800
--------------------------
78,270
==========================
Ryan's
================================================================================
22
<PAGE>
FAMILY STEAK HOUSES OF FLORIDA, INC.
- --------------------------------------------------------------------------------
Cerberus Partners, L.P., hold detachable warrants to purchase 140,000 shares of
the Company's common stock at $2.00 per share at any time prior to October 1,
2003. The estimated fair value of the warrants retired as of December 18, 1996
(the date of the retirement of the Cerberus Notes) of $63,000 was recorded as a
decrease to additional paid-in capital and included in the gain from early
retirement of debt.
The Company's Board of Directors is authorized to set the various rights and
preferences for the Company's Preferred Stock, including voting, conversion,
dividend and liquidation rights and preferences, at the time shares of Preferred
Stock are issued. As of December 31, 1997 there were no shares of Preferred
Stock issued.
RIGHTS PLAN
On March 18, 1997, the Company entered into a Rights Agreement (the "Rights
Agreement") with ChaseMellon Shareholder Services, LLC and declared a dividend
of rights to purchase Junior Participating Preferred Stock of the Company
("Rights") to shareholders of record as of March 19, 1997.
Each Right will initially entitle the registered holder to purchase from the
Company a unit consisting of one one-hundredth of a share (a "Unit") of Junior
Participating Preferred Stock of the Company ("Preferred Stock") at $5.00 per
Unit, subject to adjustment (the "Purchase Price"). The description and terms of
the Rights are contained in the Rights Agreement. As long as the Rights are
attached to the common stock of the Company and in certain other circumstances
specified in the Rights Agreement, five Rights (as such number may be adjusted
pursuant to the provisions of the Rights Agreement) shall be deemed to be
delivered with each share of the Company's common stock currently outstanding or
issued or transferred by the Company in the future.
The Rights will be exercisable and will trade separately from the Company's
common stock upon the tenth business day after (i) the date of public
announcement that a person or group have become the beneficial owners of 15%
(other than Bisco and its affiliates, for which the threshold is 20%) or more of
the outstanding shares of the Company's common stock (an "Acquiring Person"), or
(ii) such later date determined by the Board of Directors after the first public
announcement of a tender or exchange offer, which, upon consummation, would
result in a person or a group being the beneficial owner of 15% (other than
Bisco and its affiliates, for which the threshold is 20%) or more of the
outstanding shares of common stock, or (iii) after a majority of the Board who
are not officers of the Company have determined that a person is an Adverse
Person (as defined in the Rights Agreement).
If (i) a person becomes the beneficial owner of 15% (other than Bisco and its
affiliates, for which the threshold is 20%) or more of the then outstanding
shares of the Company's common stock or voting power (except pursuant to certain
business combinations or an offer for all outstanding shares of the Company's
common stock and all other voting securities which the independent and
disinterested directors of the Company determine to be fair to and otherwise in
the best interest of the Company and its shareholders) or (ii) any person is
determined to be an Adverse Person, then each holder of a Right (with the
exception of an Adverse or Acquiring Person) will thereafter have the right to
receive, upon exercise, common stock having a value equal to no less than two
times the exercise price of the Right, which is $5.00, subject to adjustment.
The Company may redeem each Right for $0.001 at any time before the earliest of
(i) ten business days after a person or group becomes an Acquiring Person, (ii)
ten business days after the Board's determination that a person is an Adverse
Person, or (iii) March 17, 2007.
NOTE 9. PROFIT SHARING AND RETIREMENT PLAN
Employees of the Company participate in a profit sharing and retirement plan
covering substantially all full-time employees at least twenty-one years of age
and with more than one year of service. The plan was established
Ryan's
================================================================================
23
<PAGE>
FAMILY STEAK HOUSES OF FLORIDA, INC.
- --------------------------------------------------------------------------------
in August 1991. Contributions are made to the plan at the discretion of the
Company's Board of Directors. No profit-sharing contributions have been made
since the inception of the plan.
The profit sharing plan includes a 40l(K) feature by which employees can defer,
by payroll deduction only, l% to l5% of their annual compensation not to exceed
$9,500 in 1997.
The plan provides for a Company matching contribution of $.25 per dollar of the
first 6% of employee deferral. The Company's matching contribution was $29,211
in 1997, $32,050 in 1996 and $43,173 in 1995. Employees vest in Company
contributions based on the following schedule:
- --------------------------------------------------------------------------------
Years of Vesting
Service Percentage
- --------------------------------------------------------------------------------
Less than 3 0%
3 20%
4 40%
5 60%
6 80%
7 l00%
NOTE 10. INVESTMENT IN JOINT VENTURES
In December 1994, the Company formed a new subsidiary, Family Steak JV, Inc.
which acquired a 50% ownership in a limited liability company, Cross Creek
Barbeque, L.C. ("Cross Creek"), for the purpose of opening a new restaurant. The
Company contributed the equipment to Cross Creek and the other 50% owner of
Cross Creek contributed the cash necessary to remodel and open the new Cross
Creek restaurant. As a result of unsatisfactory operating performance, the
Company sold its interest in the Cross Creek restaurant in July 1995. A Company
subsidiary leased the land and building to Cross Creek until May 1996, when it
sold them at a gain of approximately $5,000.
NOTE 11. COMMITMENTS AND CONTINGENCIES
Lease Obligations
At December 31, 1997, the Company is committed under the terms and conditions of
real and personal property operating leases for minimum rentals aggregating
$2,025,400 plus insurance, common area expenses and taxes. The Company has
various renewal options on these leases covering periods of five to twenty
years.
In September 1996, the Company entered into a twenty year lease agreement with
two five year renewal options for a restaurant building. The total net book
value of the assets covered by the lease amount to $1,188,600 at December 31,
1997. Interest is computed at an annual rate of 10.65%.
Ryan's
================================================================================
24
<PAGE>
FAMILY STEAK HOUSES OF FLORIDA, INC.
- --------------------------------------------------------------------------------
Future minimum lease obligations under noncancelable capital leases and
operating leases consist of the following as of December 31, 1997:
- --------------------------------------------------------------------------------
Capital Operating
Leases Leases
- --------------------------------------------------------------------------------
1998 $ 115,400 $ 259,500
1999 115,400 209,900
2000 115,400 162,300
2001 115,400 113,100
2002 129,300 111,700
Future years 2,051,300 1,168,900
----------- ----------
Total minimum lease payments 2,642,200 $2,025,400
==========
Amounts representing interest (1,583,700)
-----------
Present value of net minimum payments 1,058,500
Current portion (2,500)
-----------
Long-term capitalized lease obligations $ 1,056,000
===========
Rental expense for operating leases for the years ended December 31, 1997,
January 1, 1997 and January 3, 1996 was approximately $477,700, $380,500 and
$419,200, respectively. Contingent rental payments for the years ended December
31, 1997, January 1, 1997 and January 3, 1996 were $0, $0 and $5,500,
respectively.
On May 13, 1997, the Company received notice from Aetna Life Insurance Company,
the mortgage holder of the mall property at which the Company's Clearwater,
Florida restaurant is located, that Aetna intended to foreclose on the property
due to a default by the landlord on the mortgage. In September 1997, Aetna was
granted a Motion for Summary Judgement of Foreclosure by the Circuit Court of
the Sixth Judicial Court in Pinellas County. This Motion indicates that Aetna's
rights under the mortgage are superior to the Company's leasehold interest. It
is uncertain whether this action could allow Aetna to evict the Company from the
Clearwater location. An eviction would result in a write-off of approximately
$350,000 of leasehold improvements. The Company intends to vigorously defend its
interest in this matter. However, there can be no assurance that the Company
will be successful in this defense. Due to the uncertainty of this matter, no
provision for loss has been made in the accompanying consolidated financial
statements.
LEGAL MATTERS
The Company, in the normal course of business, is subjected to claims and
litigation with respect to store operations. In the opinion of management, based
on the advice of legal counsel the ultimate disposition of these claims and
litigation will not have a material effect on the financial position or results
of operations of the Company.
NOTE 12. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate that
value:
Cash and Cash Equivalents -- For those short-term instruments, the carrying
amount is a reasonable estimate of fair value.
Ryan's
================================================================================
25
<PAGE>
FAMILY STEAK HOUSES OF FLORIDA, INC.
- --------------------------------------------------------------------------------
Investments -- The Company's investments consist of certificates of deposit and
bankers' acceptances for which the carrying amount is a reasonable estimate of
fair value.
Mortgage Receivables -- The fair value of mortgage receivables is estimated by
discounting the future cash flows using the current rates at which similar loans
would be made to borrowers with similar credit ratings and for the same
remaining maturities. The Company believes the carrying amount is a reasonable
estimate of fair value.
Debt -- Interest rates that are currently available to the Company for issuance
of debt with similar terms and remaining maturities are used to estimate fair
value for debt instruments. The Company believes the carrying amount is a
reasonable estimate of such fair value.
NOTE 13. SUBSEQUENT EVENTS
Standstill and Settlement Agreement
On February 24, 1998, the Company entered into a Standstill and Settlement
Agreement with Bisco Industries and its affiliates ("Bisco"). In accordance with
this agreement, Bisco agreed, among other things, to (i) support the Company's
proposed reverse stock split and, for a period of one year, (ii) vote shares of
the Company's stock owned by Bisco in favor of the Company's slate of Director
nominees for the 1998 Annual Meeting of Shareholders, (iii) acquire no more than
19.9% of the total outstanding shares of the Company's common stock, (iv) not to
initiate the solicitation of proxies or any shareholder vote with respect to the
Company's common stock in opposition to the recommendations of the Board of
Directors on any matter (except certain "anti-takeover" measures proposed by the
Board of Directors), or (v) not initiate any legal action against the Company or
its Directors.
In accordance with the Standstill and Settlement Agreement, the Company agreed
for a period of one year, among other things, to (i) appoint two Bisco nominees
to the Company's Board of Directors and nominate and vote for such nominees for
election at the 1998 Annual Meeting of Shareholders, (ii) dismiss without
prejudice litigation claims previously filed against Bisco, (iii) amend the
Company's Rights Agreement (as described above) to increase from 15% to 20%
(with respect to Bisco only) the percentage of the Company's common stock which
would trigger the distribution of Rights under the Rights Agreement, (iv) allow
Bisco to acquire up to 19.9% of the Company's common stock through a purchase of
141,340 shares directly from the Company at the average closing price of the
common stock over the ten trading days preceding the stock sale and (v) grant
Bisco a limited release from claims, damages or actions arising from certain
actions by Bisco prior to the date of the Standstill and Settlement Agreement
subject to certain limitations.
Possible Delisting of Securities from the Nasdaq Stock Market
The Company's common stock is currently listed on the Nasdaq National Market. On
August 22, 1997, the qualifications for continued listing on this market would
require that (i) the Company maintain at least $4.0 million in net tangible
assets, (ii) the minimum bid price of the common stock be $1.00 or more per
share, (iii) there be at least 750,000 shares in the public float, valued at a
minimum of $5.0 million or more, (iv) the common stock have at least two active
market makers and (v) the common stock be held by at least 400 holders. On
February 27, 1998, Nasdaq notified the Company that it was not in compliance
with the $1.00 minimum bid price requirement, and had 90 days to regain
compliance by initiating actions necessary to bring the price above $1.00 for 10
consecutive trading days.
Ryan's
================================================================================
26
<PAGE>
FAMILY STEAK HOUSES OF FLORIDA, INC.
- --------------------------------------------------------------------------------
In order to raise the Company's stock price above the minimum $1.00 bid price,
in January 1998 the Company proposed to shareholders a one-for-five stock split.
The reverse split was approved at a Special Meeting of Shareholders on February
24, 1998, and management implemented the reverse split effective March 4, 1998.
Since March 4, 1998 the trading price of the Company's stock has been
consistently above $1, thereby meeting the revised Nasdaq minimum bid price
requirement for remaining on the National Market.
Based on recent trading prices of the Company's stock, it is possible that it
could fail to meet the new $5.0 million public float requirement. This could
result in the stock dropping to the Nasdaq SmallCap Market. There are certain
disadvantages to trading on the SmallCap Market as opposed to the National
Market. Many local newspapers do not carry listings of SmallCap issues, which is
where the majority of the Company's shareholders follow the stock. The Company
would lose the automatic Blue Sky exemption it currently enjoys from being on a
national market, which could result in additional expenses to the Company for
future stock offerings of any kind, including distributions of the Rights. The
stock would no longer be automatically marginable for most shareholders. Also,
the Company would still be required to meet certain initial requirements for
membership on the SmallCap Market, including payment of an entrance fee.
Ryan's
================================================================================
27
<PAGE>
FAMILY STEAK HOUSES OF FLORIDA, INC.
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors and Shareholders
Family Steak Houses of Florida, Inc.
We have audited the accompanying consolidated balance sheets of Family
Steak Houses of Florida, Inc. and subsidiaries as of December 31, 1997 and
January 1, 1997 and the related consolidated statements of operations,
shareholders' equity, and cash flows for each of the three years in the period
ended December 31, 1997. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
consolidated financial statements 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, such consolidated financial statements present fairly, in
all material respects, the financial position of Family Steak Houses of Florida,
Inc. and subsidiaries as of December 31, 1997 and January 1, 1997, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1997 in conformity with generally accepted
accounting principles.
Deloitte & Touche LLP
Jacksonville, Florida
March 6, 1998
Ryan's
================================================================================
28
<PAGE>
FAMILY STEAK HOUSES OF FLORIDA, INC.
- --------------------------------------------------------------------------------
COMPANY'S REPORT ON FINANCIAL STATEMENTS
Family Steak Houses of Florida, Inc. has prepared and is responsible for
the accompanying consolidated financial statements and related consolidated
financial information included in this report. These consolidated financial
statements were prepared in accordance with generally accepted accounting
principles and are appropriate in the circumstances. These consolidated
financial statements necessarily include amounts determined using management's
best judgments and estimates.
Family Steak Houses of Florida, Inc. maintains accounting and other control
systems which the Company believes provides reasonable assurance that assets are
safeguarded and that the books and records reflect the authorized transactions
of the Company, although there are inherent limitations in all internal control
structure elements, as well as cost/benefit considerations.
Family Steak Houses of Florida, Inc.'s independent certified public
accountants, Deloitte & Touche LLP, have audited the accompanying consolidated
financial statements for 1997. The objective of their audit, performed in
accordance with generally accepted auditing standards, is to express an opinion
on the fairness, in all material respects, of the Company's consolidated
financial position, results of its operations and its cash flows in accordance
with generally accepted accounting principles. They consider the internal
control structure to the extent considered necessary to determine the audit
procedures required for the purpose of expressing their opinion on the
consolidated financial statements.
Ryan's
================================================================================
29
<PAGE>
FAMILY STEAK HOUSES OF FLORIDA, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Corporate Listing Family Steak Houses of Florida, Inc.
<S> <C>
Corporate Officer and Directors Independent Certified Public Accountants
Lewis E. Christman, Jr. Deloitte & Touche LLP
President, Chief Executive Officer, Director Suite 2801, Independent Square
One Independent Drive
Edward B. Alexander Jacksonville, FL 32202-5034
Chief Financial Officer and Director
General Counsel
Robert Martin
Director McGuire Woods Battle & Boothe LLP
Retiree, former Vice President 3300 Barnett Center
of the Company 50 North Laura Street
P.O. Box 4099
Jacksonville, FL 32201
Joseph M. Glickstein, Jr.
Director
Partner, Glickstein & Glickstein
Transfer Agent / Rights Agent
Richard M. Gray
Director Chase Mellon Shareholder Services
Partner, Gray & Kelley Four Station Square
Third Floor
Pittsburgh, PA 15219-1173
Glen F. Ceiley
Director
President & CEO, Bisco Industries, Inc.
Executive Office
Jay Conzen Family Steak Houses of Florida, Inc.
Director 2113 Florida Boulevard
Principal, Jay Conzen Investments Neptune Beach, Florida 32266
Form 10-K
A copy of the Company's Annual Report on
Form 10-K for fiscal 1997, as filed with
the Securities and Exchange Commission,
may be obtained by writing to:
Corporate Secretary
Family Steak Houses of Florida, Inc.
2113 Florida Boulevard
Neptune Beach, FL 32266
</TABLE>
Annual Meeting
Form 10-K
The annual meeting will be held at:
Sea Turtle Inn
One Ocean Boulevard
Atlantic Beach, FL 32233
Ryan's
================================================================================
30
<PAGE>
Common Stock Data
The Company's common stock is traded on the NASDAQ National Market System under
the trading symbol "RYFL". As of March 3, 1998, prior to the reverse split,
there were 2,598 shareholders of record, not including individuals holding
shares in street names. The closing sale price for the Company's stock on March
3, 1998 was $2.03.
The Company has never paid cash dividends on its common stock and is not allowed
to pay dividends under its loan agreements. Management of the Company presently
intends to retain all available funds for expansion of the business.
The quarterly high and low closing prices (as adjusted for the reverse stock
split) of the Company's common stock are as shown below:
Market Price of Common Stock
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
1997 1996
Quarter High Low High Low
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
First 5 2 1/2 4 27/32 3 1/8
Second 3 3/8 3 7/16 4 17/32 2 13/16
Third 3 29/32 2 21/32 3 3/4 2 21/32
Fourth 3 19/32 2 31/32 3 19/32 2 3/16
</TABLE>
Pursuant to the Standstill and Settlement with Bisco and its affiliates, on
February 27, 1998, the Company sold 141,340 shares of its common stock to Bisco
at a purchase price of $2.16, which was the average closing price of the
Company's common stock for the ten trading days immediately preceding the date
of the sale. The total price paid by Bisco to the Company was $305,312. These
shares of common stock were sold without registration under the exemption
granted under Rule 506 of Regulation D since the sale was made to only one
purchaser who qualified as an accredited investor.
Ryan's
================================================================================
31
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary information extracted from the Company's 1997
Form 10K and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 696000<F1>
<SECURITIES> 600300
<RECEIVABLES> 218100
<ALLOWANCES> 0
<INVENTORY> 280500
<CURRENT-ASSETS> 2404000
<PP&E> 42148800
<DEPRECIATION> (15848500)
<TOTAL-ASSETS> 30322800
<CURRENT-LIABILITIES> 4198700
<BONDS> 0
0
0
<COMMON> 22200
<OTHER-SE> 10622300
<TOTAL-LIABILITY-AND-EQUITY> 30322800
<SALES> 36977800
<TOTAL-REVENUES> 36977800
<CGS> 14642500
<TOTAL-COSTS> 37464400
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (1576700)
<INCOME-PRETAX> (1625400)
<INCOME-TAX> (201500)
<INCOME-CONTINUING> (1423900)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1423900)
<EPS-PRIMARY> (0.65)
<EPS-DILUTED> (0.61)
<FN>
<F1> Represents investments in certificates of deposit with original maturities
of less than one year.
</FN>
</TABLE>
