-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SbVMo803bnl5L0DNGYIpb8HPco26re0RL10CWtkvA0PhHipyW0Rt/wxA+dWIYy75 UQC2ISU3FzPP1y+9+Se40g== 0001012709-02-001175.txt : 20020816 0001012709-02-001175.hdr.sgml : 20020816 20020816145404 ACCESSION NUMBER: 0001012709-02-001175 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20020703 FILED AS OF DATE: 20020816 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FAMILY STEAK HOUSES OF FLORIDA INC CENTRAL INDEX KEY: 0000784539 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] IRS NUMBER: 592597349 STATE OF INCORPORATION: FL FISCAL YEAR END: 1230 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-14311 FILM NUMBER: 02741081 BUSINESS ADDRESS: STREET 1: 2113 FLORIDA BLVD STREET 2: STE A CITY: NEPTUNE BEACH STATE: FL ZIP: 32266 BUSINESS PHONE: 9042494197 MAIL ADDRESS: STREET 1: 2113 FLORIDA BLVD STE A CITY: NEPTUNE BEACH STATE: FL ZIP: 32266 10-Q 1 x10q-802.txt FAMILY STEAK HOUSES OF FLORIDA, INC. UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 FOR THE QUARTER ENDED JULY 3, 2002 Commission File No. 0-14311 FAMILY STEAK HOUSES OF FLORIDA, INC. Incorporated under the laws of IRS Employer Identification Florida No. 59-2597349 2113 FLORIDA BOULEVARD NEPTUNE BEACH, FLORIDA 32266 Registrant's Telephone No. (904) 249-4197 Indicate by check mark whether the registrant has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Title of Each Class Number of Shares Outstanding ------------------- ---------------------------- Common Stock 3,706,200 $.01 par value As of August 2, 2002 FAMILY STEAK HOUSES OF FLORIDA, INC. CONDENSED CONSOLIDATED RESULTS OF OPERATIONS (Unaudited)
For The Quarters Ended For The Six Months Ended ----------------------------- ----------------------------- July 3, July 4, July 3, July 4, 2002 2001 2002 2001 ------------ ------------ ------------ ------------ Revenues: Sales $ 10,794,800 $ 10,637,400 $ 23,329,800 $ 22,177,200 Vending revenue 54,600 53,100 105,500 109,900 ------------ ------------ ------------ ------------ Total revenues 10,849,400 10,690,500 23,435,300 22,287,100 ------------ ------------ ------------ ------------ Cost and expenses: Food and beverage 3,983,700 4,060,800 8,616,200 8,440,300 Payroll and benefits 3,196,200 3,171,000 6,656,300 6,420,200 Depreciation and amortization 532,400 509,200 1,109,000 1,047,300 Other operating expenses 1,598,000 1,638,600 3,309,600 3,229,400 General and administrative expenses 675,700 681,900 1,422,800 1,351,900 Franchise fees 431,800 318,800 932,800 664,700 Asset valuation charge 260,000 -- 260,000 -- Loss on store closings and disposition of equipment 74,300 61,000 138,500 100,400 ------------ ------------ ------------ ------------ 10,752,100 10,441,300 22,445,200 21,254,200 ------------ ------------ ------------ ------------ Earnings from operations 97,300 249,200 990,100 1,032,900 Investment gain (loss) 6,800 (413,900) 24,600 (496,200) Interest and other income 19,600 20,300 39,900 54,500 Interest expense (423,000) (437,600) (839,500) (904,700) ------------ ------------ ------------ ------------ (Loss) earnings before income taxes (299,300) (582,000) 215,100 (313,500) Provision for income taxes -- -- -- -- ------------ ------------ ------------ ------------ Net (loss) earnings ($ 299,300) ($ 582,000) $ 215,100 ($ 313,500) ============ ============ ============ ============ Basic (loss) earnings per share ($ 0.08) ($ 0.24) $ 0.06 ($ 0.13) ============ ============ ============ ============ Basic weighted average common shares outstanding 3,601,100 2,423,400 3,429,500 2,421,500 ============ ============ ============ ============ Diluted (loss) earnings per share ($ 0.08) ($ 0.24) $ 0.06 ($ 0.13) ============ ============ ============ ============ Diluted weighted average common shares outstanding 3,601,100 2,423,400 3,436,100 2,421,500 ============ ============ ============ ============
See accompanying notes to condensed consolidated financial statements. 2 FAMILY STEAK HOUSES OF FLORIDA, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
July 3, January 2, 2002 2002 ------------ ------------ ASSETS Current assets: Cash and cash equivalents $ 315,300 $ 183,100 Investments 45,500 2,100 Receivables 112,100 159,800 Current portion of mortgages receivable 348,900 13,400 Inventories 265,500 319,800 Prepaid and other current assets 313,300 284,400 ------------ ------------ Total current assets 1,400,600 962,600 Mortgages receivable -- 342,000 ------------ ------------ Certificate of deposit 10,000 10,000 Property and equipment: Land 9,022,200 9,317,000 Buildings and improvements 24,105,600 24,661,700 Equipment 12,557,400 12,543,200 Construction in progress 49,800 -- ------------ ------------ 45,735,100 46,521,900 Accumulated depreciation (17,526,200) (16,940,100) ------------ ------------ Net property and equipment 28,208,900 29,581,800 Property held for sale 2,994,300 2,523,700 Other assets, principally deferred charges, net of accumulated amortization 814,600 841,000 ------------ ------------ $ 33,428,400 $ 34,261,100 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 1,383,000 $ 1,571,300 Accounts payable - construction 2,900 715,500 Securities sold, not yet purchased -- 159,500 Accrued liabilities 2,093,800 2,362,800 Current portion of long-term debt 699,200 663,400 Current portion of obligation under capital lease 20,200 17,700 ------------ ------------ Total current liabilities 4,199,100 5,490,200 Long-term debt 19,746,800 19,902,500 Obligation under capital lease 1,011,400 1,025,800 ------------ ------------ Total liabilities 24,957,300 26,418,500 Shareholders' equity: Preferred stock of $.01 par; authorized 10,000,000 shares; none issued -- -- Common stock of $.01 par; authorized 8,000,000 and 4,000,000 shares; outstanding 3,706,200 and 2,423,400 shares 37,100 32,500 Additional paid-in capital 9,872,400 9,466,600 Accumulated deficit (1,442,700) (1,657,800) Accumulated other comprehensive income 4,300 1,300 ------------ ------------ Total shareholders' equity 8,471,100 7,842,600 ------------ ------------ $ 33,428,400 $ 34,261,100 ============ ============
See accompanying notes to condensed consolidated financial statements. 3 FAMILY STEAK HOUSES OF FLORIDA, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
For the Six Months Ended ----------------------------- July 03, July 4, 2002 2001 ------------ ------------ Operating activities: Net earnings (loss) $ 215,100 ($ 313,500) Adjustments to reconcile net earnings (loss) to net cash provided by operating activities: Depreciation and amortization 1,109,000 1,047,300 Asset valuation charge 260,000 -- Directors' fees in the form of stock options 10,000 2,700 Investment (gain) loss (24,600) 496,200 Amortization of loan fees 19,200 17,900 Loss on disposition of equipment 28,500 36,700 Decrease (increase) in: Receivables 47,700 9,900 Inventories 54,300 (79,500) Prepaids and other current assets (28,900) (173,900) Other assets 1,700 (5,100) Increase (decrease) in: Accounts payable (188,300) 230,500 Accrued liabilities (269,000) (408,100) ------------ ------------ Net cash provided by operating activities 1,234,700 861,100 ------------ ------------ Investing activities: Purchases of investments (175,300) -- Principal receipts on mortgages receivable 6,500 165,700 Proceeds from sale of investments -- 780,900 Proceeds from securities sold, not yet purchased -- 500,600 Capital expenditures (1,202,300) (2,302,500) ------------ ------------ Net cash used in investing activities (1,371,100) (855,300) ------------ ------------ Financing activities: Payments on long-term debt and obligation under capital lease (340,800) (316,400) Proceeds from issuance of long-term debt 209,000 1,157,300 Payments of investment margin debt -- (165,100) Proceeds from issuance of common stock 400,400 -- ------------ ------------ Net cash provided by financing activities 268,600 675,800 ------------ ------------ Net increase in cash and cash equivalents 132,200 681,600 Cash and cash equivalents - beginning of period 183,100 631,500 ------------ ------------ Cash and cash equivalents - end of period $ 315,300 $ 1,313,100 ============ ============ Noncash investing and financing activities: Net change in unrealized (loss) gain $ 3,000 $ 517,100 ============ ============ Supplemental disclosures of cash flow information: Cash paid during the period for interest $ 832,600 $ 891,700 ============ ============ Cash paid during the period for income taxes -- -- ============ ============
See accompanying notes to condensed consolidated financial statements. 4 FAMILY STEAK HOUSES OF FLORIDA, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS July 3, 2002 (Unaudited) Note 1. Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and the interim financial information instructions to Form 10-Q, and do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the results for the interim periods have been included. Operating results for the thirteen and twenty-six week periods ended July 3, 2002 are not necessarily indicative of the results that may be expected for the fiscal year ending January 1, 2003. For further information, refer to the financial statements and footnotes included in the Company's Annual Report on Form 10-K for the fiscal year ended January 2, 2002. The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany profits, transactions and balances have been eliminated. Note 2. Earnings Per Share Basic earnings per share for the thirteen and twenty-six weeks ended July 3, 2002 and July 4, 2001 were computed based on the weighted average number of common shares outstanding. Diluted earnings per share for those periods have been computed based on the weighted average number of common shares outstanding, giving effect to all dilutive potential common shares that were outstanding during the period. Dilutive shares are represented by shares under option and stock warrants. Due to the Company's net losses for the quarters ended July 3, 2002, and July 4 ,2001, and for the six months ended July 4, 2001, all potentially dilutive securities are antidilutive and have been excluded from the computation of diluted earnings per share for those periods. 5 Note 3. Reclassifications Certain items in the prior year financial statements have been reclassified to conform to the 2002 presentation. Note 4. Asset Valuation Charge In accordance with Statement of Financial Accounting Standards ("SFAS") 144, and the Company's policy for impairment review (see Note 1 to the Consolidated Financial statements for the year ended January 2, 2002), the Company recognized an asset valuation charge of $260,000 in the quarter ended July 3, 2002. Note 5. New Accounting Pronouncements In June 2001, the FASB issued SFAS 141, "Business Combinations," SFAS 142, "Goodwill and Other Intangible Assets," and SFAS 143, "Accounting for Asset Retirement Obligations." In August 2001, the FASB issued SFAS 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS 141 requires companies to apply the purchase method of accounting for all business combinations initiated after June 30, 2001 and prohibits the use of the pooling-of-interest method. SFAS 142 changes the method by which companies may recognize intangible assets in purchase business combinations and generally requires identifiable intangible assets to be recognized separately from goodwill. In addition, it eliminates the amortization of all existing and newly acquired goodwill on a prospective basis and requires companies to assess goodwill for impairment, at least annually, based on the fair value of the reporting unit associated with the goodwill. SFAS 143 addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. SFAS 143 applies to legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and/or the normal operation of a long-lived asset, except for certain obligations of lessees. SFAS 144 addresses financial accounting and reporting for the impairment or disposal of long-lived assets. The Company adopted SFAS 141 on July 1, 2001. The adoption of SFAS 141 did not have a material effect on the Company's financial position, results of operations or cash flows. The Company adopted SFAS 142 and SFAS 144 on January 3, 2002. The adoption of SFAS 142 and SFAS 144 did not have a material effect on the Company's financial position, results of operations or cash flows. The Company will adopt SFAS 143 effective January 2, 2003. It does not appear the adoption of SFAS 143 will have a material impact on the Company's financial position, results of operations or cash flows. 6 Note 6. Subsequent Events In July 2002, the Company completed a sales leaseback transaction to refinance one of its restaurants in Tampa, Florida. The Company sold the property for $3 million and paid off its existing mortgage of approximately $1.1 million on the property. The transaction will be accounted for as a capital lease beginning in the third quarter of 2002, with the gain on the sale realized over the twenty-year life of the lease. The lease agreement requires annual payments totaling $330,000, with increases of 10% every five years. Management plans to use the proceeds of the transaction to fund a portion of the construction cost of a new restaurant. In August 2002, the Company entered into a twenty-year lease agreement for a new restaurant to be developed in Orlando, Florida. Under the terms of the lease agreement, the landlord would provide up to $1,150,000 for construction of the restaurant. The Company plans to use the proceeds of the sales leaseback transaction described above to fund the remaining cost of this project, estimated at approximately an additional $1 million, for equipment, impact fees and tenant improvements. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS CRITICAL ACCOUNTING POLICIES Management believes that the Company's policy regarding asset impairment is the Company's sole critical accounting policy. This policy, which is discussed in Note 1 to the Company's Consolidated Financial Statements for the year ended January 2, 2002, generally applies to the recoverability of a restaurant's carrying amount. RESULTS OF OPERATIONS QUARTER ENDED JULY 3, 2002 VERSUS JULY 4, 2001 The Company experienced an increase in total sales during the second thirteen weeks of 2002 compared to the second thirteen weeks of 2001. Total sales increased 1.5%, due primarily to new stores opened in May 2001 and December 2001. Average unit sales per store increased 4.0% in the second quarter due to the successful opening of high-volume restaurants in May 2001 and December 2001, and the closure of low-volume restaurants in December 2001 and May 2002. 7 Same-store sales (average unit sales in restaurants that have been open for at least 18 months and operating during comparable weeks during the current and prior year) in the second quarter of 2002 decreased 4.7% from the same period in 2001, compared to a decrease of 3.3% in the second quarter of 2001 as compared to 2000. The decrease in same-store sales results primarily from significant sales declines at certain restaurants which faced new competition in their markets compared to 2001, and due to the fact that the Easter holiday fell into the first quarter in 2002, compared to the second quarter in 2001. Management is seeking to continue to improve sales trends by focusing on improved restaurant operations, devising competitive strategies to offset the effects of new competition, continuing television advertising and making capital improvements to certain restaurants. The Company tested television advertising in 2001, and experienced some sales improvements. Management has implemented additional television advertising in the first two quarters of 2002 and is evaluating the results. If television advertising proves successful, management will adapt the Company's marketing strategy to place more focus on television advertising. 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 and rents. In total, food and beverage, payroll and benefits, depreciation and amortization and other operating expenses as a percentage of sales decreased to 86.2% in the second quarter of 2002 from 88.2% in the same quarter of 2001. Food and beverage costs as a percentage of sales decreased to 36.9% in the second quarter of 2002 from 38.2% in the same period of 2001, primarily due to menu price increases implemented by the Company. Payroll and benefits as a percentage of sales decreased to 29.6% in the second quarter of 2002 from 29.8% in the same quarter of 2001, primarily due to decreased group health insurance. Other operating expenses as a percentage of sales decreased to 14.8% in the second quarter of 2002 compared from 15.4% in 2001, primarily due to costs associated with the opening of a new restaurant in 2001. Depreciation and amortization increased to 4.9% in 2002 from 4.8% in 2001. 8 General and administrative expenses decreased as a percentage of sales to 6.3% in the second quarter of 2002, from 6.4% in the same quarter of 2001. Franchise fees increased as a percentage of sales to 4.0% in 2002 from 3.0% in 2001, in accordance with the Company's franchise agreement with Ryan's Properties, Inc. ("Ryan's"). Interest expense decreased to $423,000 during the second quarter of 2002 from $437,600 in 2001. The decrease was due to lower interest rates in 2002, offset by an increase in total debt at July 3, 2002 as compared to July 4, 2001. Net loss for the second quarter of 2002 was impacted by an asset valuation charge of $260,000, or 7 cents per share. This charge was based on management's review of the estimated disposal value of two closed restaurants held for sale. The results for the second quarter of 2002 include net realized gains of $6,800 from the sale of marketable securities, compared to net realized losses of $413,900 in the second quarter of 2001. The effective income tax rate for the quarters ended July 3, 2002 and July 4, 2001 was 0.0%. Net loss for the second quarter of 2002 was $299,300, compared to net loss of $582,000 in the second quarter of 2001. Net loss per share was $.08 for 2002, compared to net loss per share of $.24 in 2001. SIX MONTHS ENDED JULY 3, 2002 VERSUS JULY 4, 2001 For the six months ended July 3, 2002, total sales increased 5.2% compared to the same period of 2001, due to the opening of two new restaurants. Average unit sales increased 6.5% for the six months, due to high-volume sales at the two new restaurants and to the closure of two low-volume restaurants. Same-store sales decreased 3.7% for the six months ended July 3, 2002 from the same period in 2001. In total, food and beverage, payroll and benefits, depreciation and amortization and other operating expenses as a percentage of sales decreased to 84.4% for the first six months of 2002 from 86.3% in the same period of 2001. Food and beverage costs as a percentage of sales for the six month period ended July 3, 2002 decreased to 36.9% from 38.1% for the same period in 2001, primarily due to menu price increases. Payroll and benefits as a percentage of sales decreased to 28.5% in 2002 from 28.9% in 2001. The decrease was primarily due to reduced group health insurance expense, offset by higher workers' compensation costs. 9 For the six months ended July 3, 2002, other operating expenses decreased to 14.2% from 14.6% in 2001, primarily due to decreased utilities costs and to costs incurred in 2001 associated with the opening of a new restaurant. Depreciation and amortization increased to 4.8% for the six-month period ended July 3, 2002, compared to 4.7% in 2001. Net loss for the first six months of 2002 was impacted by an asset valuation charge of $260,000, or 8 cents per share. This charge was based on management's review of the estimated disposal value of two closed restaurants held for sale. General and administrative expenses for the six-month periods ended July 3, 2002 and July 4, 2001 were 6.1% of sales. Franchise fees as a percentage of sales increased to 4.0% in 2002 from 3.0% in 2001, in accordance with the Company's franchise agreement with Ryan's. Interest expense decreased for the first six months to $839,500 from $904,700 for the same period in 2001, due to lower interest rates in 2002, offset by an increase in total debt at July 3, 2002 as compared to July 4, 2001. The results for the six months ended July 3, 2002 include net realized gains of $24,600 from the sale of marketable securities compared to net realized losses of $496,200 for the same period in 2001. The effective income tax rate for the six-month periods ended July 3, 2002 and July 4, 2001 was 0.0%. The 0% rate in 2002 was due to the use of net operating loss carryforwards to offset taxable income. Net earnings for the six months ended July 3, 2002 was $215,100 or $.06 per share, compared to net loss of $313,500, or $.13 per share for the same period in 2001. 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. Operating results for the quarter or six months ended July 3, 2002 are not necessarily indicative of the results that may be expected for the fiscal year ending January 1, 2003. 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. As a result, working capital requirements for continuing operations are not significant. 10 At July 3, 2002, the Company had a working capital deficit of $2,798,500 compared to $4,527,600 at January 2, 2002. The decrease in the working capital deficit during the first six months of 2002 was due primarily to increases in earnings, cash from a private placement stock offering and the change in status of mortgages receivable to a current asset. Cash provided by operating activities increased to $1,234,700 in the first six months of 2002 from $861,100 in the same period of 2001. This increase was primarily due to the increased earnings in 2002. The Company spent $1,202,300 in the first six months of 2002 for property and equipment. Total capital expenditures for 2002, based on present costs and plans for capital improvements, are estimated to be approximately $2.5 million. This amount is based on budgeted expenditures for building improvements and equipment for two new restaurants scheduled to open in 2003, remodels of several restaurants, and normal recurring equipment purchases and minor building improvements ("Capital Maintenance Items"). The Company has raised sufficient capital to fund the remodels and two new restaurants through a private placement stock offering (see discussion below) a sales leaseback of an existing restaurant and a twenty-year lease agreement for a new restaurant (see Note 6: "Subsequent Events"). The Company's ability to open new restaurants is also dependent upon its ability to locate suitable locations at acceptable prices, and upon certain other factors beyond its control, such as obtaining building permits from various government agencies. The sufficiency of the Company's cash to fund operations and necessary Capital Maintenance Items will depend primarily on cash provided by operating activities. On October 1, 2001, the Company completed a Rights Offering ("the Offering") for its shareholders of record as of August 10, 2001. The Company raised $838,100 net of offering costs from the Offering, and issued 827,583 shares of common stock to shareholders exercising rights. Glen F. Ceiley, the chairman of the Company's board of directors, Bisco Industries, Inc. ("Bisco"), a company for which Mr. Ceiley is the sole shareholder and president and other affiliates of Mr. Ceiley purchased 822,280 shares in the Offering. In April 2002, the Company completed a private placement with Bisco for 435,000 shares at $0.92 per share, which was primarily based on the average closing price of the Company's common stock on the ten trading days prior to the sale. The Company plans to use the $400,200 proceeds from this sale to fund the remodels discussed above. 11 In July 2002, the Company completed a sales leaseback transaction to refinance one of its restaurants in Tampa, Florida. The Company sold the property for $3 million and paid off its existing mortgage of approximately $1.8 million on the property. The transaction will be accounted for as a capital lease beginning in the third quarter of 2002, with the gain on the sale realized over the twenty-year life of the lease. The lease agreement requires annual payments totaling $330,000, with increases of 10% every five years. Management plans to use the proceeds of the transaction to fund a portion of the construction of a new restaurant in Orlando, Florida. (See Note 6: "Subsequent Events") Beginning in December 1996, the Company entered into a series of loan agreements with FFCA Mortgage Corporation, which is now known as GE Capital Franchise Finance Corporation ("GE Capital"). As of July 3, 2002, the outstanding balance due under the Company's various loans with GE Capital was $20,446,000. The weighted average interest rate for the GE Capital loans is 7.4% at July 3, 2002. The Company used the proceeds of the GE Capital loans primarily to refinance its debt and to fund construction of new restaurants. Management estimates the cost of opening one new restaurant based on current average costs to be $2,900,000. The Company is currently negotiating a financing commitment with GE Capital that, when completed, would provide approximately $2,800,000, which would be used to fund construction of a new restaurant scheduled for opening in 2003. Management plans to fund any new restaurant construction either by the GE Capital funding, sales leaseback financing, developer-funded leases, refinancing existing restaurants, or attempting to get additional financing from other lenders. In 2001, the Company paid franchise fees of 3% of gross sales. The franchise agreement required that the franchise fee increase to 4% beginning January 3, 2002. The increase cost the Company an additional $233,300 in the first six months of 2002, and management projects that it will increase the Company's franchise fee expense by more than $400,000 per year. The preceding discussion of liquidity and capital resources contains certain forward-looking statements. Forward-looking statements involve a number of risks and uncertainties, and in addition to the factors discussed herein, among the other factors that could cause actual results to differ materially are the following: failure of facts to conform to necessary management 12 estimates and assumptions; the willingness of GE Capital or other lenders to extend financing commitments; repairs or similar expenditures required for existing restaurants due to weather or acts of God; the company's ability to identify and secure suitable locations on acceptable terms and open new restaurants in a timely manner; the Company's success in selling restaurants listed for sale; the economic conditions in the new markets into which the Company expands; changes in customer dining patterns; competitive pressure from other national and regional restaurant chains and other food vendors; business conditions, such as inflation or a recession, and growth in the restaurant industry and general economy; and other risks identified from time to time in the Company's SEC reports, registration statements and public announcements. RECENT DEVELOPMENTS Status of Company's Stock with NASDAQ On August 7, 2002, the Company received notice from NASDAQ that the Company's closing bid price had declined below $1.00 per share. Accordingly, NASDAQ informed the Company that in order to continue the listing of the Company's securities on the Nasdaq SmallCap Market ("SmallCap"), the closing bid price of the Company's common stock must be a minimum of $1.00 per share for ten consecutive trading days on or before February 3, 2003, at which time NASDAQ would determine if the Company meets any of the initial listing criteria for SmallCap. One of these criteria is to have stockholder's equity of $5 million. Considering that the Company's stockholders' equity as of July 3, 2002 was $8,471,100, it is likely that the Company will comply with this criteria. If the Company has not met the $1.00 minimum bid price requirement before February 3, 2003, but does meet the $5 million equity criteria, NASDAQ will allow an additional 180 days for the Company to meet the $1.00 minimum bid price requirements, or until August 2, 2003. If the Company's stock is delisted from NASDAQ, trading in the Common Stock would thereafter be conducted on the over-the-counter markets in the so-called "pink sheets" or the National Association of Securities Dealers, Inc.'s "Electronic Bulleting Board". Consequently, the liquidity of the Company's securities could be impaired, not only in the number of shares that could be bought and sold, but also as a result of delays in the timing of the transactions, the news media's coverage of the Company, lower prices for the Company's securities than might otherwise be attained and a larger spread between the bid and asked prices for the Company's securities. 13 In addition, if the Company's securities were to be delisted from the NASDAQ SmallCap Market, the Company's securities could become subject to Rule 15g-9 under the Securities Exchange Act of 1934 relating to penny stocks, which imposes additional sales practice requirements on broker-dealers which sell such securities to persons other than established customers and "accredited investors" (generally, individuals with net worth in excess of $1,000,000 or annual incomes exceeding $200,000 or $300,000 together with their spouses). SEC regulations define a "penny stock" to be any equity security that is not listed on the NASDAQ Stock Market or a national securities exchange and that has a market price (as therein defined) of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. If the Company's securities were subject to the rules on penny stocks, the market liquidity for the Company's securities could be adversely affected. Closure of Restaurant On May 6, 2002, the Company closed its restaurant in Neptune Beach, Florida. After this closure, the Company has twenty-two operating restaurants. The Company's franchise agreement with Ryan's requires that to avoid being in default the Company must operate 22 restaurants at the end of 2002, and 24 restaurants at the end of 2003. The Company expects to be in compliance with the requirements of the franchise agreement. QUALITATIVE AND QUANTITATIVE DISCLOSURE ABOUT MARKET RISK There have been no significant changes in the Company's exposure to market risk during the first six months of 2002. For discussion of the Company's exposure to market risk, refer to Item 7A, Quantitative and Qualitative Disclosures about Market Risk, contained in the Company's Annual Report on Form 10-K for the fiscal year ended January 2, 2002. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Company is party to, or threatened with, litigation from time to time, in the normal course of its business. Management, after reviewing all pending and threatened legal proceedings, considers that the aggregate liability or loss, if any, resulting from the final outcome of these proceedings will not have a material effect on the financial position or operation of the Company. The Company will, from time to time when appropriate in management's estimation, record adequate reserves in the Company's financial statements for pending litigation. 14 ITEM 2. CHANGES IN SECURITIES None ITEM 3. DEFAULTS UPON SENIOR SECURITIES None ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS (a) On June 6, 2002, the Company held its annual meeting of shareholders to elect directors to serve for the upcoming year. (b) The following table sets forth the number of votes for and against each of the nominees for director. Nominee For Withheld Glen F. Ceiley 2,902,527 55,394 Jay Conzen 2,902,573 55,348 Stephen Catanzaro 2,902,823 55,098 William Means 2,902,815 55,106 The Company is unable to determine the number of broker non-votes. Glen F. Ceiley, Jay Conzen, Stephen Catanzaro and William Means were elected as directors by the affirmative vote of a majority of the 2,957,921 shares of the Company's common stock represented in person or by proxy at the annual meeting of shareholders. The following tables set forth votes for, against, abstention and non-votes, regarding approval of the following items by shareholders: 15 For Against Abstain Non-Votes Amendment to increase the 2,849,126 105,654 3,141 - authorized number of shares of common stock from four million to eight million. Amendment to eliminate the 75% 2,067,087 115,268 4,554 771,012 vote requirement for transactions with related corporations Amendment to change the 2,066,912 113,388 6,609 771,012 requisite shareholder vote to approve amendments to the articles of incorporation and to permit such amendments to be adopted by shareholder consent. Approval of the 2002 Long-Term 2,009,740 172,570 4,599 771,012 Incentive Plan ITEM 5. OTHER INFORMATION None ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) The following exhibits are filed as part of the report on Form 10-Q, and the list comprises the Exhibit Index. Exhibit 10.01 Contract for sale and leaseback of restaurant property between the Company and After Ours, LLC, dated June 10, 2002. Exhibit 10.02 Lease agreement for restaurant property between the Company and After Ours, LLC, dated July 12, 2002. 16 Exhibit 10.03 Lease agreement between the Company and E.D.I. Investments, Inc. for a restaurant property, dated August 5, 2002. Exhibit 11.1 The table below details the number of shares and common stock equivalents used in the computation of basic and diluted earnings per share:
Three Months Ended Six Months 7/03/02 7/04/01 7/03/02 7/04/01 ------------ ------------ ------------ ------------ Basic: Weighted average common shares outstanding used in computing basic (loss) earnings per share 3,601,100 2,423,400 3,429,500 2,421,500 ============ ============ ============ ============ Basic (loss) earnings per share $ (.08) $ (.24) $ .06 $ (.13) ============ ============ ============ ============ Diluted: Weighted average common shares outstanding 3,601,100 2,423,400 3,429,500 2,421,500 Effects of dilutive stock options 6,600 ------------ ------------ ------------ ------------ Shares used in computing diluted (loss) earnings per share 3,601,100 2,423,400 3,436,100 2,421,500 ============ ============ ============ ============ Diluted (loss) earnings per share $ (.08) $ (.24) $ .06 $ (.13) ============ ============ ============ ============
Exhibit 99.1: Certification of Periodic Reports by Chief Executive Officer Exhibit 99.2: Certification of Periodic Reports by Chief Financial Officer 17 SIGNATURES Pursuant to the requirements 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. (Registrant) /s/ Glen F. Ceiley ------------------------------- Date: August 15, 2002 Glen F. Ceiley Chairman of the Board /s/ Edward B. Alexander ------------------------------------ Date: August 15, 2002 Edward B. Alexander Executive Vice President / CFO (Principal Financial and Accounting Officer) 18 EX-10.01 3 ex1001-802.txt CONTRACT FOR SALE AND LEASEBACK OF PROPERTY CONTRACT FOR PURCHASE AND SALE ------------------------------ THIS CONTRACT FOR PURCHASE AND SALE (the "Contract"), made as of this _____ day of June 2002, by and between FAMILY STEAK HOUSES OF FLORIDA, INC., a Florida corporation, whose address is 2113 Florida Boulevard, Neptune Beach, Florida 32266 (the "Seller"), AFTER OURS, LTD., a Florida limited partnership, whose address is 500 Noah Lane, Key West, Florida 33040 (the "Purchaser"), and HUGHES & LANE PROFESSIONAL ASSOCIATION, attorneys, whose address is 4190 Belfort Road, Suite 351, Jacksonville, Florida, 32216 (the "Escrow Agent"). W I T N E S S E T H : That, for and in consideration of the mutual covenants and agreements herein set forth, the Seller agrees to sell to Purchaser and Purchaser agrees to buy from Seller the improved real property located at the southwest corner of the intersection of Fowler Avenue and 52nd Street in Tampa, Hillsborough County, Florida, more particularly described in EXHIBIT "A" annexed hereto (the "Property") on the terms and subject to the covenants and conditions set forth below. 1. PURCHASE PRICE AND METHOD OF PAYMENT ------------------------------------ The total purchase price for the Property is $3,000,000.00, payable as follows: (a) $50,000.00 paid to Escrow Agent within two days of the execution hereof as a deposit (the "Deposit"). (b) The balance of $2,950,000.00 payable in cash at closing, subject to the adjustments and prorations set forth herein below. 2. CONVEYANCE ---------- (a) Seller agrees to convey the Property to Purchaser by special warranty deed, subject to the following matters: (i) Taxes and assessments for the year of closing and subsequent years; (ii) Matters set forth on the title report to be provided pursuant to Section 3 herein below; and -1- (iii)Seller's right to occupy and use the Property pursuant to the lease described in paragraph 7 herein below. (b) Revenue stamps required on the deed, the broker's commissions described in paragraph 15 herein below, the title insurance search fee and premium and the survey will be paid by Seller. The cost of recording the deed, expense of delivering the funds due at closing, and the costs associated with the Purchaser's financing (if any) shall be paid by Purchaser. Each party shall pay its own attorney's fees. (c) In addition to the special warranty deed, at closing Seller shall deliver the following additional documents, duly executed, to Purchaser: (i) an assignment assigning and conveying to Purchaser all of Seller's right, title and interest in all transferable permits, approvals, conditional use permits or approvals, variances, guaranties and warranties relating to the Property; (ii) assignment of any parking agreements or easements relating to the Property; (iii) affidavits as commonly used in Hillsborough County, Florida to the effect that Seller has not, except for the lease with Seller to be entered into at closing, granted any rights to any persons to possession of the Property, that all fees and assessments and all bills for all labor, services and materials, incurred by Seller that affect the Property have been fully paid for so that there cannot exist any lien upon the Property as a result thereof. The affidavit shall be in such form as will enable a title insurance company to eliminate its standard printed form exception for rights of parties in possession (except for Seller as tenants) and unfiled construction and other liens incurred by Seller and to be able to insure the "gap"; (iv) pursuant to Section 1445 of the Tax Reform Act of 1984, a non-foreign person affidavit; (v) such other items and instruments as the title insurance company may reasonably require; (vi) a closing statement (both Seller and Purchaser to execute). 3. EVIDENCE OF TITLE ----------------- Within twenty (20) days from the date upon which the latter of the Seller and Purchaser has executed this Contract (the "Effective Date"), Purchaser shall obtain, at Seller's expense and deliver to the Purchaser, a commitment for title insurance issued by Attorneys Title Insurance Fund, Inc. through its agent, Wickman & Wyckoff, P.A., 4909 Manatee Ave. W., Bradenton, FL 34209, agreeing to insure the fee-simple title to the Property in the Purchaser upon recording of the deed from the Seller for the full amount of the purchase price under an ALTA owner's policy. The Purchaser shall, prior to the expiration of the Inspection Period hereunder, notify the Seller of any matters of title which it finds objectionable. Seller shall have ten (10) days' time in which to cure such objections to title, but shall not be obligated to spend any money or file suit to do so. In the event Purchaser does not give notice of defects of title prior to the expiration of the Inspection Period, then title shall be considered acceptable. If Seller elects in its sole discretion not to cure or is unable to cure the defects during said ten (10) day curative period, then Purchaser shall have five (5) days after the expiration of the curative period within which to elect whether or not it will complete the purchase and accept title subject to title defects, or whether it will elect to terminate this Contract. -2- If Purchaser elects to terminate this Contract pursuant to this section, Escrow Agent will forthwith return the Deposit to Purchaser, and all rights and obligations of the parties hereunder shall thereupon terminate. 4. SURVEY AND OTHER INFORMATION ---------------------------- Seller shall obtain and deliver to the Purchaser with the title commitment a current ALTA survey of the Property (the "Survey"). If the Purchaser makes written objection to any matters shown thereon within ten (10) days following receipt thereof, such matters shall be treated as a title objections pursuant to the provisions of paragraph 3 above. In addition, within five (5) business days following the Effective Date Seller shall also deliver to the Purchaser copies of any other documentary information which it has in its possession concerning the Property, including but not limited to a site plan, existing title insurance policy, existing survey, copies of easements, parking agreements or other restrictions affecting the Property or running in favor of the Property, any notices received pertaining to building, zoning or environmental conditions; service, maintenance or other contracts affecting the Property, Phase I Environmental Assessment, engineering, mechanical and roof reports, and plans and specifications for the improvements located upon the Property (and such other documentation or information that Purchaser may reasonably request that is in the possession of Seller). Any of the aforedescribed documents delivered to the Purchaser pursuant to this paragraph are accurate to the best of the Seller's knowledge and belief, but without having made independent inquiry. Seller is unaware of any material omission or errors in any of said documents. Seller makes no representation or warranty concerning the existence of any of the aforedescribed documents, nor does it represent and warrant the accuracy or completeness of any documentary information concerning the Property which was prepared by a third party. By its receipt of the same, the Purchaser acknowledges that the accuracy and completeness of any third party study or report is not warranted by the Seller and Purchaser agrees to look only to such third party in the event of errors or omissions therein. Seller, at Seller's expense shall cause a Phase I Environmental Assessment ("Phase I") of the Property to be conducted and completed within thirty (30) days after the Effective Date. In the event that said Phase I report contains a recommendation that a Phase II Environmental Assessment ("Phase II") be conducted on the Property, then Seller shall cause a Phase II to be conducted on the Property. Seller, at Seller's expense, shall within five (5) days after receipt of the Phase II Report cause any remediation that is suggested in said report to be commenced, provided the cost of said remediation is not greater than Thirty Thousand Dollars ($30,000.00). Buyer agrees to extend the Closing Date for a period of up to sixty (60) days (or such longer period as may be reasonably necessary) to allow Seller to accomplish the remediation. If the estimated cost of remediation exceeds Thirty Thousand Dollars ($30,000.00), the Contract shall be automatically terminated. In addition, if the Seller commences remediation based upon an estimated cost of Thirty Thousand Dollars ($30,000.00) or less, and during the conduct of remediation the estimate is revised to exceed Thirty Thousand Dollars ($30,000.00), or if invoices for the remediation submitted to the Seller exceed Thirty Thousand Dollars ($30,000.00), then this Contract shall be automatically terminated. Should the Contract be terminated pursuant to this paragraph, Seller shall return Purchaser's Deposit to Purchaser and neither party shall have any further obligation or liability to the other under this -3- Contract. Notwithstanding anything in the Contract to the contrary, the Investigation Period shall be extended to the date that the Phase II Report, if required hereunder, confirms that the Property is free of contamination or the date Seller accomplishes, to Purchaser's satisfaction, any remediation suggested in the Phase II Report which the Seller is required to accomplish hereunder. 5. SELLER'S REPRESENTATIONS AND WARRANTIES --------------------------------------- Seller represents, warrants and covenants to Purchaser as of the date of this Contract through his authorized agents, and as of the closing as follows: (a) Seller has full power and authority to enter into and carry out the agreements continued in, and transactions contemplated by, this Contract. The persons signing this Contract and any documents and instruments in connection herewith on behalf of Seller have full power and authority to do so. This Contract has been duly authorized and executed by Seller, and upon delivery to and execution by Purchaser shall be a valid and binding agreement of Seller. (b) The execution, delivery and performance by Seller of this Contract and such other instruments and documents to be executed and delivered in connection herewith by Seller do not, and shall not, result in any violation of, or conflict with, or constitute a default under, (i) any provisions of any agreement of Seller or any mortgage, deed of trust, indenture, lease, security agreement, or other instrument, covenant, obligation or agreement to which Seller or the Property is subject, or (ii) any applicable statute or regulation, or any administrative or a court order or decree. (c) There are no attachments, assignments for the benefit of creditors, receiverships, conservatorship or voluntary or involuntary proceedings in bankruptcy or any other debtor relief actions contemplated by Seller or filed by Seller, to Seller's actual knowledge, pending in any current judicial or administrative proceedings against Seller. (d) To the best of Seller's knowledge and belief there are no existing or threatened eminent domain or condemnation actions relating to the Property or any part thereof nor any action, suit, arbitration or other legal proceeding pending against or affecting the Property or any portion thereof. (e) To the best of Seller's knowledge and belief, no "Hazardous Substances" (as herein defined) are located on or under the Property in violation of any applicable laws or governmental rules or regulations, nor are any Hazardous Substances located on or under the Property in compliance with applicable laws or governmental rules or regulations which are required to be removed -4- or remediated in order to develop the Property. For purposes of this paragraph 11, the term "Hazardous Materials" includes (i) any hazardous or toxic substance, material or waste which is or becomes designated, regulated or classified as hazardous or toxic under any applicable federal, state or local laws or regulations, (ii) any other substance, material or waste which results in liability to any person or entity from exposure to such substance, material or waste under any statutory or common law theory, (iii) petroleum, oil or gas or any direct or derivative product or by-product thereof, (iv) asbestos, (v) Polychlorinated biphenyls, (vi) flammable explosives and (vii) radioactive materials. To the best of Seller's knowledge and belief, Seller has received no notice of any violations of any local, state or federal statutes or laws governing the regulation, treatment, storage, disposal or clean-up of Hazardous Material relating to the Property. (f) To the best of Seller's knowledge and belief, no endangered or protected habitat, flora or fauna exist on nor are in the Property, nor is the Premises located in a designated wetlands area. (g) Seller has the financial capability to comply with its obligations under this Contract and the Lease to be executed at closing. (h) Seller covenants that Seller shall not take any actions which result in additional encumbrances being imposed against the Property after the date of this Contract and prior to the closing, except as otherwise contemplated by this Contract. (i) There are no outstanding contracts made by Seller for any improvements to the Property which have not been fully paid for, and Seller shall cause to be discharged any and all construction liens or materialmen's liens arising from work from which Seller has contracted. (j) Seller will, on the Closing Date, be the owner of and have title in fee simple to the Property, and shall know of no possessory or other rights affecting the Property other than those revealed in the title commitment referred to in the Contract and not objected to by Purchaser. (k) Seller is not a party to any litigation and is not aware of any threatened litigation or claims against it. No material claim has been made or asserted against Seller and there are no proceedings affecting it that are pending or, to its knowledge, threatened before any federal, state or municipal body or agency. There is no outstanding judgment, decree, or order against Seller which affects Seller in any way. (l) All federal, state and local taxes that Seller must pay or that have been assessed against it or as to which, to its knowledge, a claim has been made or threatened have been paid or provided for. Seller has filed with the appropriate governmental agencies all required tax returns and tax reports. There is no pending tax claim or dispute on taxes which might result in a lien against the Property. -5- (m) The material truth and accuracy of the foregoing representations and warranties shall be a condition to Purchaser's obligations hereunder. Prior to closing, Seller shall notify Purchaser of any facts or circumstances which are contrary to the foregoing representations and warranties. All the representations, warranties, covenants, agreements and indemnities of Seller set forth herein and else where in this Contract shall be true upon the execution of this Contract, and shall be deemed to be repeated at and as of the closing and shall survive the closing hereunder for a period of one (1) year. Additionally, all indemnities by Seller to Purchaser as set forth in this Contract shall survive the termination of this Contract. PURCHASER ACKNOWLEDGES AND AGREES THAT SELLER HAS NOT AND DOES NOT MAKE ANY REPRESENTATIONS, WARRANTIES, PROMISES, COVENANTS, AGREEMENTS, OR GUARANTIES OF ANY KIND OR CHARACTER WHATSOEVER, EXPRESS OR IMPLIED, ORAL OR WRITTEN, PAST, PRESENT, OR FUTURE, OF, AS TO, CONCERNING, OR WITH RESPECT TO THE PROPERTY AND ITS CONDITION, OTHER THAN THOSE SET FORTH ABOVE. 6. INSPECTION PERIOD ----------------- Purchaser shall have forty-five (45) days from and after the Effective Date (the "Inspection Period") within which to inspect the Property, make soil and other environmental tests thereon and make other such investigations of the Property as it deems necessary. In making such inspections and investigations, Purchaser shall not interfere with the operations of Seller at the Property and shall indemnify and hold Seller harmless from damage to person or property caused by or arising from such inspections and/or investigations, such indemnity to include attorneys' fees at all trial and appellate levels. At or prior to the end of the Inspection Period, Purchaser shall notify Seller in writing as to whether it, in its sole discretion, desires to go forward under this Contract. Should Purchaser give notice that it has elected to purchase the Property, the Deposit shall become non-refundable except in the event of default by the Seller and the parties shall proceed to closing as provided herein. Should Purchaser fail to furnish notification within the time specified, Purchaser shall be deemed to have accepted the Property, the Deposit shall become non-refundable except in the event of default by the Seller and the parties shall proceed to closing as provided herein. Should Purchaser give notice at or prior to the expiration of the Inspection Period that it has elected not to purchase the Property, the Deposit shall be returned to the Purchaser, this Contract shall terminate and be of no further force and effect, and the parties hereto shall be relieved of any further obligation hereunder. 7. LEASE TO SELLER --------------- In consideration of Seller's agreement to sell and Purchaser's agreement to purchase the Property, the Purchaser agrees to lease the Property to Seller at closing upon the terms and conditions set forth in the lease attached hereto as EXHIBIT "B" (the "Lease"). Execution and delivery of the Lease by the Purchaser and Seller is a condition precedent to the Seller's and Purchaser's respective obligations to close this transaction. -6- 8. NOTICES ------- Any notices required or permitted under this Contract shall be deemed delivered when mailed, postage prepaid by registered or certified mail, return receipt requested, or deposited with a reputable overnight courier service such as Federal Express, addressed to the respective parties at their addresses set forth in the heading of this agreement. 9. CLOSING ------- The closing shall take place at the offices of Wickman & Wyckoff, P.A., Bradenton, Florida, Florida or, if the parties agree, by mail, on any day selected by the Purchaser which falls within either of the following two time periods: July 11 to July 13, 2002, inclusive, or August 11 to August 13, 2002, inclusive. Purchaser shall notify the Seller in writing of its election of the Closing Date more than three (3) business days prior to said date. At closing, real estate taxes, rents, expenses and other proratable items will be prorated as of the date of closing, and possession of the Property will be delivered to Purchaser at closing. If the current year's tax assessment or millage is not available at the time of closing, prorations shall be based upon taxes for the preceding tax year. Taxes will be prorated taking into account the November discount. At Closing, Seller shall deliver to Purchaser the following original documents: (a) A special warranty deed to the Property, subject only to those exceptions approved in writing or waived by Purchaser; (b) An assignment to Purchaser of all assignable permits, licenses, and certificates held by Seller and relating to the Property; (c) A certificate of non-foreign status satisfying Section 1445 of the Internal Revenue Code executed by Seller; (d) A certificate executed by Seller re-certifying to the Purchaser as of the Closing Date all of the representations and warranties contained in paragraph 5 of this Contract; and (e) A seller's affidavit sufficient to remove all of the standard exceptions from the title insurance policy to be issued after Closing. (f) Such other documents, agreements, and affidavits as may reasonably be requested by the title insurance company or Purchaser's counsel. 10. DEFAULT BY PURCHASER -------------------- If Purchaser breaches this Contract through no fault of Seller, Seller shall have the right to the Deposit made with Escrow Agent, and Escrow Agent shall pay over same to Seller. The moneys thus received shall be accepted by Seller as consideration for the execution of this Contract and in full settlement of any claims for damages (it being recognized by the parties that the amount of actual -7- damages suffered by Seller for holding the Property off the market are impossible to determine and the amount of the deposits represent a good faith effort on the part of the parties to estimate such damages) and thereupon the parties hereto shall be relieved of all further obligations hereunder. Notwithstanding the foregoing, Purchaser's indemnities contained in Section 6 hereof shall survive a termination and are not subject to the limitations of this section and Seller's rights under such indemnities shall not be limited to the Deposit. 11. DEFAULT BY SELLER ----------------- If Seller fails to perform any of the covenants of this Contract, Purchaser shall have the option to (a) require the return of the Deposit to Purchaser on demand, or (b) to enforce this Contract by suit for specific performance of Seller's obligations hereunder. Seller shall have no other liability hereunder. 12. PROVISIONS NOT TO SURVIVE CLOSING/INDEMNIFCATION ------------------------------------------------ Other than the Lease to be executed by the parties at closing, Purchaser's indemnity set forth in paragraph 6 hereof, all indemnities by Seller to Purchaser as set forth in this Contract, and Seller's warranties set forth in paragraph 5 hereof, the provisions of this Contract shall merge into the deed, and no provisions shall survive the closing of this sales transaction. Notwithstanding the foregoing, Seller hereby indemnifies and agrees to hold Purchaser harmless from all liability, loss or damage of any nature, including attorney's fees and expenses incurred (i) as a result of the breach of this Agreement by Seller and/or the failure of any warranty or representation of Seller contained in this Agreement, and (ii) arising out of or relating to the Property up to and including the closing date. 13. PERSONS BOUND ------------- This Contract shall be binding upon and inure to the benefit of the parties and their respective heirs, personal representatives, successors and assigns. 14. ASSIGNMENT ---------- Purchaser shall not have the right to assign its rights under this Contract prior to closing without Seller's consent. However, Purchaser may assign its rights hereunder without the Seller's consent to any entity owned or controlled by Fred Wickman, or Purchaser's qualified intermediary, Iowa State Bank. 15. BROKERAGE --------- The parties represent to each other that they have not dealt with any real estate broker or agent in connection with this transaction other than Florida Growth Realty, Inc. representing the Seller to whom a total commission of four percent (4%) of the Purchaser Price shall be paid by Seller, if and only if the transaction closes but not otherwise. Each party shall indemnify and hold -8- the other harmless from any other claim or demand made by a broker or agent with respect to this transaction because of acts or omissions of such party. 16. ESCROW AGENT ------------ Escrow Agent shall hold the Deposit in escrow in an interest bearing account and disburse it in accordance with the terms and conditions of this Contract. All interest earned on the Deposit shall belong to the Purchaser except in the event of a default entitling the Seller to the Deposit, in which event the interest accrued thereon shall belong to the Seller. In the event it is in doubt as to its duties or liabilities under this Contract, the Escrow Agent may, in its sole discretion, continue to hold the Deposit until the parties mutually agree as to the disbursement thereof, or until the rights of the parties are determined in accordance with the Contract, or it may deliver the Deposit then held pursuant to this Contract to the Clerk of the Circuit Court of Hillsborough County, Florida, and upon notifying all parties concerned of such delivery, all liability on the part of the Escrow Agent shall fully cease and terminate, except to the extent of accounting for any monies theretofore delivered out of escrow. In the event of any dispute between Purchaser and Seller wherein the Escrow Agent is made a party or if Escrow Agent interpleads the subject matter of this escrow, the Escrow Agent shall be entitled to recover its attorneys' fees and costs incurred, said fees and costs to be charged and assessed against the non-prevailing party in any such dispute. All parties agree that the Escrow Agent shall not be liable to any party or person whomsoever for misdelivery to Purchaser or Seller of the Deposit, unless such misdelivery shall be due to willful breach of this Contract or gross negligence on the part of the Escrow Agent. Both Purchaser and Seller, jointly and severally, agree to indemnify and hold Escrow Agent harmless from all expenses, costs and damages incurred by Escrow Agent in connection with or as a result of its acting as Escrow Agent herein but excepting only such costs, expenses and damages as result from the willful breach or gross negligence of Escrow Agent. Both parties recognize and acknowledge that Escrow Agent has agreed to serve as Escrow Agent only as a convenience to both parties. 17. RADON GAS NOTIFICATION ---------------------- Florida law requires that the following notice be given: Radon is a naturally occurring radioactive gas that, when it has accumulated in a building in sufficient quantities, may present health risks to persons who are exposed to it over time. Levels of radon that exceeds federal and state guidelines have been found in buildings in Florida. Additional information regarding radon and radon testing may be obtained from your county public health unit. 18. FACSIMILE TRANSMISSION ---------------------- The parties agree that this Contract may be transmitted between them by facsimile machine. The parties intend that faxed signatures constitute original signatures and that a faxed agreement containing the signatures (original or faxed) of all the parties is binding on the parties. -9- 19. ATTORNEY'S FEES --------------- In connection with any litigation arising out of this Contract, the prevailing party shall be entitled to recover reasonable attorney's fees and costs including fees and costs on appeal. 20. TAX-FREE EXCHANGE ----------------- Seller acknowledges that the Purchaser may conduct a tax-free exchange in connection with the purchase of the Property pursuant to Section 1031 of the Internal Revenue Code. Seller agrees to cooperate fully with all reasonable requests made by the Purchaser in connection therewith, including but not limited to the execution of any and all documents necessary to effectuate said exchange, so long as the Seller is not required to expend any funds or assume any additional liabilities in connection therewith and such tax free exchange shall not result in any material delay of the closing of the transaction contemplated hereby. Further, Purchaser hereby agrees to defend, indemnify and hold harmless the Seller from and against any and all claims, suits, actions, losses and damages whatsoever suffered by the Seller as a result of Purchaser's tax-free exchange. This indemnification obligation shall survive the Closing. 21. MISCELLANEOUS ------------- (a) COUNTERPARTS. This Contract may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. (b) CAPTIONS. The captions in this Contract are inserted for convenience of reference and in no way define, describe or limit the scope or intent of this Contract or any of the provisions hereof. (c) ENTIRE AGREEMENT; MODIFICATIONS. This Contract contains the entire agreement between the parties relating to the transaction contemplated hereby, and all prior or contemporaneous agreements, understandings, representations or statements, oral or written, are superseded hereby. No waiver, modification, amendment, discharge or change of this Contract shall be valid unless the same is in writing and signed by the party against which the enforcement of such modification, waiver, amendment, discharge or change is sought. (d) PARTIAL INVALIDITY. Any provision of this Contract which is unenforceable or invalid or the inclusion of which would affect the validity, legality or enforcement of this Contract shall be of no effect, but all the remaining provisions of this Contract shall remain in full force and effect. (e) NO THIRD-PARTY RIGHTS. Nothing in this Contract, express or implied, is intended to confer upon any person other than the parties hereto and their respective successors and permitted assigns, any rights or remedies under or by reason of this Contract. (f) FURTHER ASSURANCE. Both Seller and Purchaser agree that they will without further -10- consideration execution and deliver such other documents and take such other action, whether prior or subsequent to Closing, as may be reasonably requested by the other party to consummate more effectively the transactions contemplated hereby. (g) CONSTRUCTION. The parties acknowledge that they and their counsel have reviewed and revised this Contract and that the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Contract or any exhibits or amendments hereto. (h) CALCULATION OF TIME PERIODS. Unless otherwise specified, in computing any period of time described in this Contract, the day of the act or event after which the designation period of time begins to run is not to be included and the last day of the period so computed is to be included, unless such last day is a Saturday, Sunday or legal holiday under the laws of the State of Florida, in which event the period shall run until the end of the next day which is neither a Saturday, Sunday or legal holiday. The final day of such period shall be deemed to end at 5:00 p.m., Eastern Standard Time. IN WITNESS WHEREOF, the parties hereto have executed this Contract for Purchase and Sale as of the day and year first above written. Signed, sealed and delivered in the FAMILY STEAK HOUSES OF FLORIDA, INC. presence of: _____________________________________ By: _________________________________ Witness _____________________________________ Name: _______________________________ Name (please print) (please print) _____________________________________ Its: ________________________________ Witness "SELLER" _____________________________________ Name (please print) Signed by Seller on ______________, 2002 -11- Signed, sealed and delivered in the AFTER OURS, LTD., a Texas limited presence of: partnership _____________________________________ By: After Ours Irrevocable Trust u/a/d Witness April 8, 1997, General Partner _____________________________________ Name (please print) By: _________________________________ _____________________________________ FRED WICKMAN, TRUSTEE Witness _____________________________________ Name (please print) "PURCHASER" Signed by Purchaser on June ____, 2002 -12- Signed, sealed and delivered in the HUGHES & LANE PROFESSIONAL ASSOCIATION presence of: _____________________________________ Witness By: _________________________________ _____________________________________ Edward W. Lane, III Name (please print) Its President _____________________________________ Witness "ESCROW AGENT" _____________________________________ Name (please print) If payment is made by check it is subject to clearance -13- EXHIBIT "A" (LEGAL DESCRIPTION) TO BE ATTACHED PRIOR TO EXECUTION --------------------------------- EXHIBIT "B" (THE "LEASE") EX-10.02 4 ex1002-802.txt LEASE AGREEMENT LEASE AGREEMENT BY AND BETWEEN AFTER OURS, LLC AND FAMILY STEAK HOUSES OF FLORIDA, INC. DATED: JULY 12, 2002 5109 E. FOWLER AVENUE TAMPA, FLORIDA LEASE AGREEMENT This Lease Agreement (this "Lease") is made this 12th day of July, 2002 ("Effective Date") by and between AFTER OURS, LLC ("Landlord"), whose address for purposes hereof is 500 Noah Lane, Key West, Florida 33040, and whose federal tax identification number is 74-2825127, and FAMILY STEAK HOUSES OF FLORIDA, INC. ("Tenant"), whose address for purposes hereof is 2113 Florida Boulevard, Neptune Beach, Florida 32266. 1. DESCRIPTION OF PREMISES. Landlord leases to Tenant that certain parcel of land located at 5109 E. Fowler Avenue, Tampa, Florida, together with all improvements located thereon, and together with the Landlord's right to use certain adjacent lands for vehicular parking, said land and parking rights being more particularly described in Exhibit "A" attached hereto (the "Premises"). 2. LEASE TERM . The term of this Lease shall be for a period of twenty (20) years (the "Term") or until such Term shall sooner cease and expire as hereinafter provided. The Term shall commence on July 12, 2002 (the "Commencement Date") and shall expire at midnight on July 11, 2022. If, for any reason, Tenant discontinues the use of the Property for the purposes rented or any purpose, Tenant shall still remain liable for the performance of the terms of this Lease and the payment of the rental hereunder. 3. USE. The Premises may be used for the operation of a restaurant offering seated dining and uses ancillary thereto, and for no other purposes without Landlord's written consent, which consent shall not be unreasonably, withheld, conditioned or delayed. 4. RENT. The "Rent Commencement Date" shall be the Commencement Date. Subject to adjustments as set forth herein, Tenant agrees to pay, as base annual rent for the use of the Leased Premises, each year during the first five years of the term hereof, the sum of $330,000.00 ("Rent" or "Base Rent"), plus applicable sales tax, which shall be payable in twelve (12) equal monthly installments of $27,500.00 as set forth on the Rent Schedule attached hereto as Exhibit B. All payments due under this Lease shall be paid monthly in advance on or before the first (1st) day of each month (the "Due Date") without reduction, abatement or set-off (except when and as specifically provided herein), and shall be mailed or delivered to Landlord's office at the address above (or at such other address for the payment of rent that Landlord may give notice of to Tenant). Any payment due and not paid within five (5) days of the Due Date shall bear interest retroactive from the Due Date at a rate of twelve percent (12%) per annum until paid. In addition, the Tenant shall pay Landlord a late payment penalty in an amount equal to five percent (5%) of the delinquent payment. If the Rent Commencement Date is other than the first day of a calendar month, the rent for the portion of said month shall be prorated at a daily rate based upon the base monthly rent, and shall be payable on the Rent Commencement Date. 5. RENT ESCALATION. The annual Rent to be paid to Landlord by Tenant shall be increased as described in Exhibit B. 6. SERVICES. Tenant shall pay before delinquency, at its sole cost and expense, all charges for water, gas, heat, electricity, power, telephone service, sewer service charges, and sewer rentals charged or attributable to the Premises, and all other services or utilities used in, upon, or about the Premises by Tenant or any of its subtenants, licensees, or concessionaires from the Commencement Date and throughout the lease term hereof. 7. CARE AND MAINTENANCE OF PREMISES, ACCESS. Tenant shall be solely responsible for the maintenance, repair, and replacement of the Premises throughout the term of this Lease, including, but not limited to, the maintenance, repair, and replacement of all improvements located on the Premises, including the roof and structural components thereof, all plumbing, electrical, heating, ventilation and air conditioning systems therein, and all other improvements to the Premises, such as the asphalt paving and concrete curbing of the parking areas and driveways, and the landscaping located on the Premises. All of the improvements upon the Premises shall be maintained in substantially the same condition throughout the lease term as existed on the Effective Date of this Lease, ordinary wear and tear excepted. Landlord shall have no responsibility whatsoever for any maintenance, repair, replacement of the Premises or any improvements located thereon unless such is made necessary due to the gross negligence or willful act of the Landlord. Tenant agrees to observe and comply with all laws, ordinances, rules and regulations of the Federal, State, County, Municipal authorities and regulations of the Board of Fire Underwriters applicable to the Property and to the business to be conducted by Tenant in the Property. The Landlord shall at all reasonable times have access to the Property for the purposes of examining the same, or for the purpose of showing the Property to prospective purchasers or lessees; and for a period of at least twelve (12) months prior to the expiration of the Lease or any renewal thereof, shall have the right to post a sign on the front of the Property offering the same "To Let" or "For Sale", which said sign the Tenant shall permit to remain without molestation. 8. SIGNAGE (a) SIGNS. Landlord and Tenant agree that throughout the Term and any Renewal Terms of this Lease, Tenant and its permitted subtenants, and assignees 2 may erect, maintain, repair and replace any and all signs which the Tenant and its permitted subtenants, and assignees may desire from time-to-time on the Premises including, without limitation, building, pylon and monument signs, so long as (i) such signs comply in all respects and at all times with applicable codes, ordinances, laws and statutes concerning the same, and (ii) the Tenant and its permitted subtenants, and assignees has at its expense obtained all necessary governmental licenses, permits, and approvals for such signs. All such signs shall be maintained in good condition and repair at all times. 9. RENEWAL OPTION. Provided Tenant has not been in material default hereunder beyond applicable cure periods, this Lease may be renewed by Tenant for up to two (2) successive, five (5) year terms (the "Renewal Term(s)"), if Tenant shall give written notice of renewal to Landlord at least twelve (12) months prior to the end of the then-current term. Each Renewal Term shall be subject to the same terms and conditions as the initial Term, except that Tenant shall pay to Landlord the Base Rent provided for in Exhibit "B" of this Lease. 10. SUBLEASE AND ASSIGNMENT. Tenant shall not have the right to assign this Lease and/or sublease all or any portion of the Premises without Landlord's prior written consent, such consent not to be unreasonably conditioned, delayed, or withheld. Concurrently with any request for Landlord's consent Tenant shall pay to Landlord the sum of $750.00 for Landlord's review and processing of such request, and Landlord shall not be obligated to review such request prior to its receipt of the foregoing fee. Notwithstanding the foregoing, however, a change in the ownership or control of the Tenant shall not be deemed an assignment of this Lease for the purposes of this paragraph. In addition, in the event the Tenant elects to sell fifty percent (50%) or more of its assets, it shall have the right to assign this Lease in connection with such sale without the consent of the Landlord. In the event of a permitted subletting or an assignment of this Lease, Tenant shall not be released from liability hereunder. Consent by Landlord to an assignment or subletting shall not be deemed consent to any further assignment or subletting; the restrictions set forth in this paragraph 10 shall apply to any assignee or sublessee of Tenant. 11. ALTERATIONS BY TENANT. All additions, alterations, improvements and fixtures (except Tenant's movable trade fixtures and signage) in or upon the Premises, whether placed there by Tenant or by Landlord, shall become Landlord's property and shall remain upon the Premises at the termination of this Lease by lapse of time, or otherwise, without compensation or allowance or credit to Tenant. After the Commencement Date, Tenant shall not make additions, changes, alterations or improvements to the Premises costing more than $150,000.00 in the aggregate, without the prior written consent of Landlord, which consent shall not be unreasonably withheld, conditioned or delayed. Even if Landlord's consent is not required, Tenant shall give Landlord prior written notice specifying any work to be done. If Landlord grants its consent, Landlord may impose reasonable requirements as a condition of such consent including without limitation the submission of plans and specifications for Landlord's 3 prior written approval, obtaining necessary permits, obtaining insurance, prior approval of contractor (not to be unreasonably withheld) and reasonable requirements as to the manner and times in which such work shall be done. All work shall be performed in a good and workmanlike manner and shall be in accordance with plans and specifications, (approved by Landlord if approval is required by the above provisions) and shall be made in accordance with all applicable laws, ordinances, and codes. If any of such work may affect the structure of the Building or interfere with Building systems or operation, Landlord may require that such work be performed under Landlord's supervision (but at no additional cost to Tenant for such supervision). Notwithstanding the foregoing, upon expiration of the Term or earlier termination of the Lease, Tenant may remove all of its personal property, furniture and trade fixtures from the Premises, repair any damage caused to the Premises by such removal. Such repairs shall be done in a good and workman like manner consistent with all applicable laws, rules and regulations. Tenant shall make such alterations to the Premises to keep same in compliance with all applicable laws, rules and regulations, including, without limitation, the Americans With Disabilities Act. In the event that any governmental authority directs any modification or alteration to the Property as the result of Tenant's occupancy, Tenant shall pay for the cost of such modification or alteration. 12. CONSTRUCTION LIEN. In no event shall Tenant have the right or authority to create, or permit there to be established, any contractor's, mechanic's, materialmen's or other lien or encumbrance of any nature against Landlord's interest in the Premises or the Building for improvements made or caused to be performed by and at the request of Tenant. Any lien filed by any contractor, materialman or supplier performing work requested by and for Tenant shall attach only to Tenant's interest in the Premises for work claimed to have been furnished for Tenant. Tenant shall, within 20 business days after Tenant receives notice of the filing of any lien for such work, duly discharge the lien or contest such lien by posting a bond equal to the amount of the disputed claim with companies reasonably satisfactory to Landlord. In the event that such lien is not released and removed or bonded within 20 business days after Tenant has received notice thereof, Landlord, at its sole option, may take all action necessary to release and remove or bond such lien (without any duty to investigate the validity thereof) and Tenant shall promptly upon notice reimburse Landlord for all reasonable sums, costs and expenses (including reasonable attorneys' fees) incurred by Landlord in connection with such lien. 13. HAZARDOUS SUBSTANCES. Tenant shall not bring upon or permit to be brought upon the Premises any Hazardous Substances, except normal office supplies. Tenant shall not use the Premises for the manufacture, storage, disposal or handling of any Hazardous Substances, and Tenant shall indemnify and hold harmless Landlord from and against any and all loss, claim, damages, liability, cost or expense, including reasonable attorney's fees actually incurred at customary hourly rates, court costs and remediation costs and expenses incurred by Landlord arising from or relating to (i) Tenant's violation of the terms of this paragraph, and (ii) any other environmental contamination of the Premises, including, without limitation, the costs of remediation. 4 The indemnification described herein shall survive the expiration or other termination of Tenant's leasehold interest in the Premises. Tenant further agrees at all times during the term hereof, and upon the termination of the terms hereof, Tenant shall comply with all applicable environmental protection laws, rules or requirements, and shall promptly cure all violations thereof arising from its non-compliance, including but not limited to the preparation, delivery and/or filing with the applicable governmental authorities and with the Landlord, of all forms, certificates, notices, documents, plans and other writings, and the furnishing of such other information as may be required or requested by the Landlord, its mortgagee or any applicable governmental authority in connection with the sale, lease, transfer, mortgaging or other disposition of the building and/or lands. It is specifically acknowledged and agreed that the provisions of this paragraph shall survive the termination of this Lease, regardless of the reason or cause thereof. 14. QUIET ENJOYMENT. Landlord covenants and agrees, provided Tenant pays all Rent and performs the terms and conditions of this Lease as and when required, to take all necessary steps to secure to Tenant and to maintain for the benefit of Tenant the quiet and peaceful possession and enjoyment of the Premises and all rights appurtenant thereto, for the term hereof, without disturbance, hindrance or molestation by Landlord or any other person claiming title to the Premises or any part thereof by through or under Landlord, and Landlord warrants and forever agrees to defend Tenant's interest under this Lease against the claims of any and all persons claiming title to the Premises or any part thereof by through or under Landlord. 15. INSURANCE. At all times during the Term of this Lease and any renewals thereof Tenant shall obtain and thereafter keep in full force and effect: (i) commercial general liability insurance, such insurance to insure against liability for bodily injury and death and for property damage in an amount not less than $2,000,000 combined single limit on a per occurrence basis; further Tenant shall also maintain at all times during this lease an umbrella insurance policy in an amount not less than $10,000,000. (ii) workmen's compensation as required by law providing statutory benefits for all persons employed by Tenant in connection with the Premises, (iii) builder's risk insurance during all periods in which Tenant is constructing alterations or additions to or within the Premises, in reasonable amounts, and (iv) casualty insurance coverage on the improvements located on the Premises for the full replacement cost thereof, and with a deductible of not more than $10,000.00. All insurance that Tenant shall be required to 5 effect pursuant to this provision shall be underwritten by insurance companies that are licensed or authorized to do business in and shall be in good standing with the State of Florida and rated A or better by AM Best and Company or its equivalent. All insurance contracts that Tenant is required to maintain under this Lease shall be issued for terms of not less than one year and shall contain a provision that they shall not be subject to cancellation, non-renewal or material reduction in coverage as to the Premises unless Landlord shall be served with a written notice not later than 30 days prior to cancellation, non-renewal or material reduction in coverage; for purposes of the foregoing, "material reduction in coverage" shall mean change from "all-risk" casualty insurance coverage, or a material increase in deductible. 16. INDEMNIFICATION/HOLD HARMLESS. Landlord, its partners, representatives, agents, and their respective officers and employees, shall not be liable to Tenant, or to Tenant's officers, directors, shareholders, agents, servants, employees, customers or invitees, for any damage to person or property in or about the Premises caused by any act, omission or neglect of Tenant and its agents and their respective officers, directors, shareholders, and employees, and Tenant agrees to indemnify and hold harmless Landlord from all claims for any such damage. Tenant and its agents and their respective officers, directors and shareholders and employees shall not be liable to Landlord or to Landlord's partners, representatives, agents, servants, customers, or invitees and their respective officers and employees for any damage to person or property caused by any act, omission or neglect of Landlord, its partners, representatives and agents and their respective officers and employees and Landlord agrees to indemnify and hold harmless Tenant from all claims for any such damage. The Tenant further covenants and agrees with the Landlord that during the term of this Lease and for such other times as the Tenant shall hold or have access to the Property, that, (a) the Landlord and its affiliates shall not be liable to the Tenant or to any other person for any claim, injury, loss or damage to any person or property on or about the Property, and (b) the Tenant will save the Landlord harmless and indemnified from and against such claim, injury, loss or damage (including defense costs). 17. DAMAGE BY FIRE OR OTHER CASUALTY. (a) DAMAGE. If fire or other casualty insurable under a standard fire and extended risk policy of insurance required to be carried by Tenant covering the Premises shall render the whole or any material portion of the Premises untenantable, and if the Premises can reasonably be expected to be reparable within one hundred eighty (180) days from the date of such event, then Tenant shall repair and restore the Premises to their condition prior to the fire or other casualty within such one hundred eighty (180) day period (subject to delays for causes beyond Tenant's reasonable control such as delays due to issuance of building permits or obtaining of insurance proceeds provided Tenant diligently pursues the same) and notify Landlord in writing that it will be doing 6 so, such notice to be mailed within thirty (30) days from the date of such damage or destruction, and this Lease shall remain in full force and effect, but the Minimum Rent, Additional Rent and other costs for the period during which the Premises are untenantable shall not be abated. At all times during the term of this Lease, Tenant shall carry business interruption insurance. (b) REPAIR AND RESTORE. Tenant shall repair and restore the Premises as the case may be to its condition prior to the damage or destruction within that time period reasonably necessary for such repair and restoration (subject to delays for causes beyond Tenant's reasonable control such as delays due to issuance of building permits or obtaining of insurance proceeds provided Tenant diligently pursues the same) and the Minimum Rent, Additional Rent and other costs shall not be abated during the period of such restoration and/or repair. 18. CONDEMNATION. (a) TOTAL TAKING. If all the Premises are taken by the power of eminent domain exercised by any governmental or quasi-governmental authority, this Lease shall terminate as of the earlier of: (i) the date Tenant is required to vacate the Premises, or (ii) the date title passes to the condemning authority, and upon either such date of termination, all Minimum Rent, Additional Rent, and other costs due hereunder shall be paid to that date. The term "eminent domain" shall include the taking or damaging of property by, through, or under any governmental or quasi-governmental authority, and any purchase or acquisition in lieu thereof, whether or not the damaging or taking is by the government or any other person. (b) PARTIAL TAKING. Tenant may terminate this Lease upon nine (9) months prior written notice to Landlord for any of the following events of Partial Taking: (i) If more than fifteen percent (15 %) of the Rentable Square Feet of Floor Area of the Premises shall be taken or appropriated; (ii) The Premises, after the taking, would no longer satisfy the requirements for a restaurant offering seated dining (based on Tenant's standard restaurant requirements in Tenant's reasonable business judgment); (iii) The access to the Premises is materially adversely affected; (iv) The visibility of the Premises is materially adversely affected; 7 (v) The parking available to the Premises is materially adversely affected, whether modified or reduced; or (vi) If Tenant's business will otherwise be materially adversely affected. (c) DAMAGES. Landlord reserves all rights to the entire damage award or payment for any taking by eminent domain. Tenant shall, however, have the right to claim from the condemning authority all compensation that may be recoverable by Tenant on account of any loss incurred by Tenant, including, but not limited to, loss due to removing Tenant's merchandise, furniture, trade fixtures, and equipment or for damage to Tenant's business, loss of business, and/or loss of leasehold interest; provided, however, that Tenant may claim such damages only if they are awarded separately in the eminent domain proceeding and not as part of Landlord's damages. 19. FORCE MAJEURE. If either Landlord or Tenant is delayed or prevented from completing the performance of any obligation under this Lease by reason of accident, fire, act of God, public enemy, injunction, riot, strike, lockout, insurrection, war, court order, requisition or order of governmental body or authority, inability to procure labor or materials from normally available sources, or by any other cause without its fault and beyond its reasonable control (financial inability excepted), completion will be excused for the period of such delay and the date for completion will be extended for the period of such delay provided notice of the occurrence or encountering of such cause is given to the other party within 10 days after such occurrence or encounter and notice of the duration of such cause is given with 10 days after the cessation of such cause. 20. SUBORDINATION/NON-DISTURBANCE. Tenant agrees that this Lease is subject and subordinate to all mortgages which may now or hereafter affect or encumber all or any portion of the property and to all renewals, modifications, consolidations, replacements and extensions thereof; provided, however, that the foregoing provision shall only be applicable with respect to those mortgages to which Tenant has been provided a Subordination, Non-Disturbance and Attornment Agreement substantially in the form attached as Exhibit C ("Non-Disturbance Agreement"), or in such other from as may be reasonably requested by Landlord's lender(s), providing generally that the mortgagee or any purchaser at the foreclosure of the mortgage will not disturb Tenant's possession of the Premises and that Tenant will attorn to such mortgagee or purchaser at foreclosure as Landlord under the terms and conditions of this Lease upon receiving written notice that such party has succeeded to the interest of Landlord under this Lease. In confirmation of such subordination, Tenant shall join with any such mortgagee and execute promptly (and, in any event, within 15 days after receipt of a written request therefor) a Non-Disturbance Agreement. Tenant's obligation to join with any mortgagee in the execution of a Non-Disturbance Agreement shall be applicable with respect to all present and future mortgages to which Landlord requests Tenant's execution of a Non-Disturbance Agreement. 8 21. ESTOPPEL CERTIFICATE. Landlord and Tenant agree that they will from time to time upon request from each other, within 15 business days after notice from the other, execute and deliver to such persons as the requesting party shall request, a statement certifying that this Lease is unmodified and in full force and effect (or if there have been modifications, that the same is in full force and effect as so modified), stating the dates which rent and other charges payable under this Lease have been paid, stating the commencement and termination dates of the current term of the Lease and stating whatever options to extend there may be in the Lease, stating that Landlord or Tenant, as applicable, is not in default hereunder to the best of such party's knowledge after due inquiry (or if Landlord or Tenant, as applicable, have alleged a default, stating the nature of such alleged default), and further stating such other matters relating to the Lease as the requesting party shall reasonably require. 22. LANDLORD DEFAULT. Landlord's failure to perform any of its obligations under this Lease for a period of 15 days after receiving notice from Tenant is a "Default." The notice from Tenant shall give in reasonable detail the nature and extent of the failure. If Landlord commits a Default, Tenant, in addition to any remedies available under the law, may, without being obligated and without waiving the Default, cure the Default. Landlord shall pay Tenant, upon demand, all costs, expenses, and disbursements reasonably incurred by Tenant to cure the Default. It is understood and agreed that Tenant's exercise of any right or remedy to a default or breach by Landlord shall not be deemed a waiver of or to alter, affect, or prejudice any right or remedy which Tenant may have under this Lease or by law or in equity. Neither the payment of rent nor any other act or omission of Tenant at any time or times shall operate as a waiver of any past or future violation, breach, or failure to keep or perform any covenant, agreement, term, or condition hereof, or to deprive Tenant of its available remedies, upon the written notice provided for herein. 23. TENANT DEFAULT. (a) It shall be a default ("Event of Default") hereunder if: (i) Tenant shall fail to pay any rent or any other sums of money within 5 days after receipt of written notice that the same is due; provided, however, Landlord shall not be obligated to give Tenant written notice of nonpayment of rent more than two (2) times in any twelve (12) month period. (ii) Tenant shall fail to comply with any other provision of this Lease and after receipt of written notice, fail to correct any default within 30 days after written notice or if such compliance cannot reasonably be corrected within such 30 day period, then Tenant shall not be deemed in 9 Default if Tenant commences such cure within 20 days of said written notice and diligently pursues same to completion. (iii) the Premises shall be taken on execution or other process of law in any action against Tenant; (iv) Tenant shall become insolvent or unable to pay its debts as they become due, or Tenant notifies Landlord in writing that it anticipates either condition; (v) Tenant takes any action, or notifies Landlord in writing that Tenant intends, to file a petition under any section or chapter of the Bankruptcy Code as amended, or under any similar law or statute of the United States or any State thereof; or a petition shall be filed against Tenant under any such statute which is not dismissed within 60 days after the filing thereof; or (vi) a receiver or trustee shall be appointed for Tenant's leasehold interest in the Premises or for all or a substantial part of the assets of Tenant and not discharged within 60 days after the appointment of a receiver or trustee. (b) On the occurrence of any Event of Default and after the applicable notice and cure period, and subject to terms and conditions provided herein, Landlord may; (i) without terminating this Lease and without entering into possession of the Premises, continue this Lease in effect and enforce all rights of Landlord and obligations of Tenant hereunder, including the filing of suit for the collection of monthly rent, Operating Expenses, and all other sums due hereunder as they accrue (including attorneys' fees and other damages). Acts of maintenance or preservation, efforts to relet the Premises, or the appointment of a receiver upon Landlord's initiative to protect its interest under this Lease shall not constitute a termination of this Lease or Tenant's right to possession hereunder; (ii) re-enter and repossess the Premises subject to notice to and the rights of the FDIC and any other regulatory or governmental agency having regulatory authority over Tenant and any and all improvements thereon and additions thereto and remove all persons and property therefrom either by summary dispossess proceedings or by a suitable action or proceeding at law or in equity, or by force or otherwise, without being liable for any damage therefor. No re-entry by Landlord shall be deemed a termination or an acceptance of a surrender of this Lease; 10 (iii) Terminate this Lease and sue Tenant for damages hereunder which damages shall be an amount equal to: (a) the sum of all amounts due hereunder to the date of termination; plus (b) the aggregate rent remaining over the unexpired portion of the Term plus the reasonable cost to Landlord for any repairs and other costs of reletting, all reduced to present value using a discount rate equal to the interest rate of a governmental security having a maturity closest to the then current expiration of the Term; less (c) the aggregate fair net rental value of the Premises over the remaining portion of the Term provided, however, a reasonable period of time, not to exceed twelve (12) months, may be considered as a leasing period by which the Premises would not be leased and therefor no income would be realized for such period reduced to present value; plus (d) Landlord's costs and expenses incurred in the enforcement hereof including reasonable attorneys fees as herein provided; (iv) relet any or all of the Premises for Tenant's account for any or all of the remainder of the Term or for a period exceeding such remainder, in which event Tenant shall pay to Landlord, at the times and in the manner specified by the provisions herein the rent accruing during such remainder, less any rent received by Landlord, with respect to such remainder, from such reletting, as well as the cost to Landlord of any reasonable attorney's fees actually incurred at customary hourly rates, or for any repairs or cost of reletting or other action (including those taken in exercising Landlord's rights under any provision of this Lease ) taken by Landlord on account of such Event of Default, but in no event shall Landlord be liable in any respect for failure to relet the Premises after good faith efforts to do so or in the event of such reletting, for failure to collect the rent thereunder. Any sums received by Landlord on a reletting in excess of the rent reserved for this Lease shall belong to Landlord; (v) cure such Event of Default in any other manner (after giving Tenant written notice of Landlord's intention to do so except in the case of emergency), in which event Tenant shall reimburse Landlord for all expenses reasonably incurred by Landlord in doing so (plus 10% of such expenses to cover Landlord's administrative costs and expenses, plus interest on all of the foregoing at the rate of twelve percent (12%) per 11 annum, which expenses and interest shall be additional rent and shall be payable by Tenant immediately on demand therefor by Landlord; and/or (vi) pursue any combination of such remedies and/or any other remedy available to Landlord on account of such Event of Default at law or in equity. If legal proceedings are instituted hereunder, and a compromise or settlement thereof shall be made, it shall not be constituted as a waiver of any subsequent breach of any covenant, condition or agreement herein contained. All such remedies of Landlord shall be cumulative, and in addition, Landlord may pursue any other remedies that may be permitted by law or in equity. Forbearance by Landlord to enforce one or more of the remedies herein provided upon an event of default shall not be deemed or construed to constitute a waiver of such default. 24. HOLDING OVER. In the event of holding over by Tenant without Landlord's written consent Tenant shall pay rent equal to 150% of the applicable rent plus other sums due from time to time hereunder. Possession by Tenant after the expiration of this Lease shall not be construed to extend its Term. 25. NO OFFER. The submission of this Lease by either party to the other for review shall not be considered an offer to enter into this Lease and such submission shall not bind either party in any way until both Landlord and Tenant have each executed and delivered duplicate originals of this Lease. 26. NO CONSTRUCTION AGAINST DRAFTING PARTY. Landlord and Tenant acknowledge that each of them and their respective counsel have had an opportunity to review this Lease and that this Lease shall not be construed for or against either party merely because such party prepared or drafted this Lease or any particular provision thereof. 27. SEVERABILITY. If any provision of this Lease or the application thereof to any person or circumstance shall to any extent be or become illegal, invalid or unenforceable, the remaining provisions of this Lease, or the application of such provision to other persons or circumstances, shall not be affected thereby and each remaining provision of this Lease shall be valid and enforceable to the fullest extent permitted by law. 28. TIME OF THE ESSENCE. Except as otherwise expressly provided herein, time is of the essence with respect to all required acts of Tenant and Landlord and each provision of this Lease. 29. BROKERAGE COMMISSIONS. Landlord and Tenant warrant and represent that they have not dealt with any real estate broker or salesman in connection with this 12 Lease except Florida Growth Realty, Inc., and Tenant shall be solely responsible for the payment of any fees or commissions due. Landlord and Tenant further represent they have dealt with no other person which would create any liability for the payment of a commission by the other party. The party who breaches this warranty shall defend, hold harmless, and indemnify the non-breaching party from any claims or liability arising from the breach. 30. AUTHORITY TO EXECUTE LEASE. Tenant represents and warrants that this Lease has been duly authorized, executed and delivered by and on behalf of Tenant and constitutes the valid, binding, and enforceable agreement of Tenant in accordance with the terms hereof. Landlord represents and warrants that Landlord is the owner of fee simple title to the property on which the Premises is located, this Lease has been duly authorized, executed and delivered by and on behalf of Tenant, and constitutes the valid, binding and enforceable agreement of Landlord in accordance with the terms hereof. 31. NOTICES. All notices, demands, consents and approvals which may be or are required to be given by either party to the other hereunder shall be in writing and shall be deemed to have been fully given and received upon actual delivery (or refusal to accept delivery) to the address of all parties designated to receive notice as set forth below or to such other place as the party to be notified may from time to time designate by at least 10 business days notice to the other parties. Notices, demands, consents and approvals shall be deemed properly given only by: (a) personal delivery; or (b) sent by Federal Express or other nationally-recognized overnight delivery service; or (c) deposit in the United States mail certified, return receipt requested with postage prepaid. Until changed in the manner set forth above, the addresses for notice are as follows: If to Landlord: After Ours, LLC 500 Noah Lane Key West, Florida 33040 Telephone: 305-293-0518 Telecopier: 305-293-0518 with copy to: Wickman & Wyckoff, P.A. Attention: John E. Wickman, Esquire 4909 Manatee Avenue West Bradenton, Florida 34209 Telephone: 941-795-6565 Telecopier: 941-795-5774 If to Tenant: Family Steak Houses of Florida, Inc. Attention: Mr. Edward B. Alexander 2113 Florida Boulevard Neptune Beach, Florida 32266 Telephone: 904-249-4197 Telecopier: 904-249-1466 13 With a copy to Hughes & Lane, P.A. Attention: Edward W. Lane, III, Esquire 4190 Belfort Road, Suite 351 Jacksonville, Florida 32216 Telephone: 904-296-2200 Telecopier: 904-296-2270 32. ENTIRE AGREEMENT. This Lease contains the entire agreement between the parties hereto with respect to its subject matter and negotiations relating thereto, and supersedes all previous letter agreements. This Lease may be amended only by subsequent written agreement between the parties. Except for those that are set forth in this Lease, no representations, prior written or oral promises, warranties or agreements made by Landlord or Tenant shall be applicable to this Lease. 33. GOVERNING LAW. This Lease shall be governed by and shall be construed and interpreted in accordance with the laws of the State of Florida. 34. ATTORNEY'S FEES/COLLECTION COSTS. In the event Tenant or Landlord defaults in the performance of any of the terms, covenants, agreements or conditions contained in this Lease or in the event Landlord places the enforcement of this Lease for the collection of any Rent due or to become due, or the recovery of possession of the Premises in the hands of an attorney, or in the event either party files suit against the other, with respect to the enforcement of its rights under this Lease, Tenant and Landlord agree that the prevailing party shall be entitled to be reimbursed by the non-prevailing party for all reasonable attorney's fees, expert witness fees, paralegal fees and court costs incurred by the prevailing party. All costs charged to or incurred by Landlord in the collection of any amounts owed pursuant to this Lease, including reasonable attorney's fees and court costs, shall be paid by Tenant; and, at the option of Landlord, shall be deemed to be additional rent hereunder and shall be due from Tenant to Landlord on the first day of the following month. 35. PROPERTY TAXES AND ASSESSMENTS. Tenant shall pay on or before when due all real property taxes and assessments or governmental impositions in lieu thereof, be they special or otherwise of every kind and nature (including without limitation, assessments for public improvements or benefits whether or not commenced during the term of this Lease), water, sewer and other rents, rates and charges, excises, levies, license fees, permit fees and other authorization fees, public dues and all other charges (in each case whether general or special, ordinary or extraordinary, or foreseen or unforeseen), of every character (including all penalties or interest thereof, if incurred due to Tenant's late payment), which at any time during or in respect of the term of this Lease may be assessed, levied, confirmed, or imposed on or in respect of or be a lien upon, or measured by the value or amount of (a) the Property or any part thereof, including any personal property, any rent therefrom or any estate, right or interest therein, or (b) any occupancy, use or possession of the Property or any part thereof other than any franchise, 14 capital stock or similar tax of Landlord, or any income or excess profit tax of Landlord or portion thereof determined on the basis of its general income or revenues shall not be considered real estate taxes ("Taxes"). Landlord reserves the right to have Tenant establish a tax escrow with Landlord. In such event Tenant shall pay to Landlord a monthly amount reasonably determined by Landlord to cover the next tax bill. If at any time there is a shortfall in said account Tenant shall pay such shortfall to Landlord within ten (10) days of demand therefore. Taxes for any partial year of the Lease term or any extension term shall be prorated. 36. RADON GAS. Radon is a naturally occurring radioactive gas that, when it has accumulated in a building in sufficient quantities, may present health risk to persons who are exposed to it over time. Levels of radon that exceed Federal and State Guidelines have been found in buildings in Florida. Additional information regarding radon and radon testing may be obtained from your county public health unit. 37. CONFIDENTIALITY. Each party hereto agrees not to disclose the economic terms of this Lease except as each party respectively determines to be necessary for the conduct of its business. Neither party shall issue any press releases pertaining to this Lease or containing the economic terms of this Lease without the prior written consent of the other party. 38. NUMBER OF EXECUTION COPIES. This Lease may be executed in any number of counterparts, each of which shall be an original, but all of which shall constitute one instrument. 39. MEMORANDUM OF LEASE. Neither Landlord nor Tenant shall permit, allow or cause this Lease, or any amendment hereto, to be recorded in any public registry or office of register of deeds; however, at the request of either party, Landlord and Tenant agree to execute a recordable memorandum of this Lease setting forth the names and addresses of the parties, a reference to the lease with its date of execution, a specific legal description of the Premises, the actual Commencement Date of the Lease, the term of the Lease, any renewal Terms, which memorandum may be recorded by Tenant at Tenant's expense or by Landlord at Landlord's expense in the appropriate public records of the county or counties in which the Premises is situated. 40. WAIVER OF THE RIGHT TO TRIAL BY JURY. Landlord and Tenant hereby knowingly and intentionally waive the right to trial by jury in any action or proceeding that Landlord or Tenant may hereinafter institute against each other with respect to any matter arising out of or related to this Lease or the Premises. 41. COVENANT AGAINST WITHHOLDING RENTAL. Notwithstanding any other provisions contained in this Lease or any extensions, modifications or renewals thereof, it is understood and agreed that in the event of default in performance of any agreement, condition, or other provisions to be performed by the Landlord, or if for any other reason 15 Tenant might be entitled to any reimbursement from Landlord, in no event shall Tenant deduct or withhold any such amount from rental payments due Landlord pursuant to the rental provision of this Lease. 42. MONTHLY RENTAL STATEMENTS. The Landlord shall not be required to send to Tenant monthly statements for rentals due or to become due under the terms and conditions of this Lease. However, past due reminders shall be considered notice under paragraph 23.(a)(i) hereunder. 43. PARTIAL INVALIDITY. If any term or provision of this Lease or the application thereof to any party or circumstance shall, to any extent, be invalid or unenforceable, the remainder of this Lease, or the application of such term or provision to parties or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby, and each term and provision of this Lease shall be valid and enforceable to the fullest extent permitted by law. 44. RETURNED CHECKS. For a check sent in full or partial payment of any amounts owed pursuant to this Lease, or any rider thereto or modification thereof, which is not honored because of insufficient funds, uncollected funds or any other reason, there will be assessed a charge of $50.00 and all subsequent payments shall be made by cash, bank draft, certified check or money order. 45. DEFINITION OF AND LIABILITY OF LANDLORD. The term "Landlord" as used in this Lease means only the owner for the time being of the Property or the owner of a leasehold interest in the Property so that in the event of sale of the Property or an assignment of this Lease, or a demise of the Property, Landlord shall be and hereby is entirely freed and relieved of all obligations of Landlord hereunder and it shall be deemed without further agreement between the parties and such purchaser(s), assignee(s) or lessee(s) that the purchaser, assignee or lessee has assumed and agreed to observe and perform all obligations of Landlord hereunder. It is specifically understood and agreed that there shall be no personal liability of Landlord in respect to any of the covenants, conditions or provisions of this Lease. In the event of a breach or default by Landlord of any of its obligations under this Lease, Tenant shall look solely to the equity of Landlord in the Property for the satisfaction of Tenant's remedies. 46. WAIVER OF COVENANT OR CONDITION. The failure of Landlord to insist upon strict performance of any of the covenants or conditions of this Lease or to exercise any option herein conferred in any one or more instances shall not be construed as a waiver or relinquishment for the future of any such covenants, conditions or options, but the same be and remain in full force and effect. 16 IN WITNESS WHEREOF, the parties hereto have duly executed multiple counterparts of this Lease in their respective names by their respective authorized representatives, effective as of the date set forth above. LANDLORD: AFTER OURS, LLC _______________________________ By: _______________________________ Fred Wickman ________________________________ Manager TENANT: FAMILY STEAK HOUSES OF FLORIDA, INC. ________________________________ By: _______________________________ Edward B. Alexander ________________________________ Vice President 17 STATE OF ______________ COUNTY OF ____________ The foregoing instrument was acknowledged before me this _____ day of July, 2002, by Fred Wickman, Manager of AFTER OURS, LLC. He is personally known to me or has produced ____________ as identification. Name: ___________________________ NOTARY PUBLIC, State and County Aforesaid Commission No. My Commission Expires: STATE OF FLORIDA COUNTY OF DUVAL The foregoing instrument was acknowledged before me this _____ day of July, 2002, by Edward B. Alexander as Vice President, of FAMILY STEAK HOUSES OF FLORIDA, INC., on behalf of the corporation. He is personally known to me or has produced ____________ as identification. Name: ___________________________ NOTARY PUBLIC, State and County Aforesaid Commission No. My Commission Expires: 18 EXHIBITS PARAGRAPH EXHIBIT --------- ------- A Legal Description of Premises B Rent Schedule C Subordination, Non-Disturbance and Attornment Agreement 19 EXHIBIT A LEGAL DESCRIPTION OF PREMISES (TO BE ATTACHED PRIOR TO EXECUTION) FROM SURVEY LEGAL DESCRIPTION EXHIBIT B RENT SCHEDULE (INITIAL TERM) YEARS MONTHLY ANNUALLY ----- ------- -------- 1-5 $27,500.00 $330,000.00 6-10 $30,250.00 $363,000.00 11-15 $33,275.00 $399,300.00 16-20 $36,602.50 $439,230.00 (RENEWAL TERMS) 21-25 $40,262.75 $483,153.00 26-30 $44,289.03 $531,468.30 20 EXHIBIT C STATE OF ___________ SUBORDINATION, NON-DISTURBANCE COUNTY OF __________ AND ATTORNMENT AGREEMENT THIS AGREEMENT is made as of ____________, ______, between ________ _______________, a ______________ ("Lender"), and FAMILY STEAK HOUSES OF FLORIDA, INC. ("Tenant"). RECITALS: 1. Tenant is the lessee under the Lease Agreement dated ____________________,______, entered into by and between ___________________, a ___________________, as landlord ("Landlord"), and Tenant (as amended, the "Lease"), covering certain land and improvements thereon or to be constructed thereon (the "Premises") located in _______________________________, as more particularly defined and described in the Lease; and 2. Lender has made or will make a loan to Landlord, who is the owner of the Premises, in the principal amount of up to $ __________ (the "Loan") as evidenced by a note in said principal amount (the "Note") and secured by a Mortgage or Deed of Trust and an Assignment of Rents, Leases and Profits on the Premises, which is further described on Exhibit A attached hereto and incorporated herein by reference (the "Property") (collectively, the "Security Documents"); and 3. Tenant desires to be assured that, if Lender should foreclose the Security Documents, Lender agrees to recognize the leasehold estate and rights of Tenant under the Lease and to assume and be bound to Tenant to perform the obligations of Landlord under the Lease with the same force and effect as if Lender were the landlord under the Lease (subject to any express exceptions herein); 4. Lender is willing to agree that Tenant's possession of the Premises shall not be disturbed as a result of a foreclosure of the Security Documents or a transfer in lieu of foreclosure so long as Tenant is not in default (beyond any period of time given Tenant to cure) under the Lease and provided Tenant subordinates the Lease to the lien of the Security Documents and agrees to attorn to the purchaser at the foreclosure sale or transferee taking title in lieu of foreclosure and recognizes said purchaser or transferee as landlord under the Lease. NOW, THEREFORE, for and in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency 21 of which is hereby acknowledged, Lender and Tenant do hereby mutually covenant and agree as follows: 1. SUBORDINATION. Subject to the terms hereof, Tenant hereby subordinates the Lease, all extensions, modifications and renewals thereof, and all of Tenant's rights and interests thereunder, to the Security Documents and the lien thereof, and to all modifications, renewals and extensions of the same, to the extent of all advances heretofore or hereafter made to Landlord secured by the Security Documents. 2. NON-DISTURBANCE AND ATTORNMENT. Provided Tenant is not in default beyond any period of time set forth in the Lease given Tenant to cure following any notice required by the Lease, as of the date Lender commences foreclosure proceedings or accepts a deed in lieu of foreclosure (except that if Tenant is in default at such date and the default is capable of cure by Tenant and Tenant is diligently and continuously pursuing such cure to completion then such default shall not affect Lender's obligations to Tenant hereunder), then no default under the Security Documents, as modified, extended, increased, spread, or consolidated, and no proceeding to foreclose the same or the acceptance by Lender of a deed in lieu of foreclosure, or by any other manner, will disturb Tenant's possession under said Lease and the Lease will not be affected or extinguished thereby. In addition, Lender agrees not to name Tenant in any proceeding instituted to foreclose the Security Documents, unless Lender is legally obligated to do so in order to properly foreclose the same, and then such foreclosure shall in any event be made subject to the provisions of this Agreement. In the event of any such foreclosure or other sale to, or acquisition of the Premises by, a third party, or by any other manner, in lieu of foreclosure by Lender, Tenant shall attorn to Lender or such other third party, and the Lender or such third party shall recognize the Lease as a direct lease from Lender or such third party, and the Lender or said third party shall assume and be bound to Tenant to perform the obligations of Landlord under the Lease, except that neither the purchaser at such foreclosure sale nor the grantee of a deed in lieu thereof shall (a) be liable for any previous act or omission of Landlord under the Lease, (b) be subject to any offset, claim or defense which shall theretofore have accrued against Landlord, unless the basis of such offset, claim or defense remains uncured and notice thereof is given to Lender by Tenant as provided herein, (c) have any obligation with respect to any security deposit under the Lease unless such security deposit has been physically delivered to Lender, or (d) be bound by any previous modification of the Lease or by any previous prepayment of rent for a period greater than one (1) month in advance of its due date under the Lease, unless such modification or prepayment shall have been expressly approved in writing by Lender, such approval, in the case of modifications, not to be unreasonably withheld, conditioned or delayed. Lender agrees to immediately notify Tenant in writing of any breach or default by Landlord of any of the Security Documents. 3. TERMINATION OF LEASE. Effective from and after the date of this Agreement, Tenant will not terminate nor seek to terminate the Lease by reason of a default under the Lease until Tenant shall have given written notice of such default to Lender as hereinafter provided. Such notice may be given to Lender contemporaneously 22 with Tenant giving notice to Landlord under the Lease. Tenant will allow Lender the same period of time to cure the event of default as is allowed to Landlord under the Lease. 4. WAIVERS TO BE IN WRITING. No modification, amendment, waiver or release of any provision of this Agreement or of any right, obligation, claim or cause of action arising hereunder shall be valid or binding for any purpose whatsoever unless in writing and duly executed by the party against whom the same is sought to be asserted. 5. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of the parties hereto, their successors and assigns; provided, however, that in the event of the assignment or transfer of the interest of Lender, all obligations and liabilities of Lender under this Agreement arising from or after the date of such assignment or transfer by Lender shall terminate as to the entity that is then Lender, and thereupon all such obligations and liabilities shall be the responsibility of the party to whom Lender's interest is assigned or transferred. 6. NOTICE. Notice to Lender under the Lease or this Agreement shall be sent to Lender at the following address, or such other address as Lender shall designate to the Tenant in writing, such new address to be effective thirty (30) days after Tenant has received it: _______________________________________ _______________________________________ _______________________________________ _______________________________________ IN WITNESS WHEREOF, Tenant and Lender have respectively signed and sealed this Agreement as of the day and year first above written. FAMILY STEAK HOUSES OF FLORIDA, INC. By: _______________________________ Name: _____________________________ Title: ____________________________ TENANT By: _______________________________ Name: _____________________________ Title: ____________________________ LENDER 23 STATE OF ____________ COUNTY OF ___________ The foregoing instrument was acknowledged before me this _____ day of _________, ____, by as _____________________________, of __________________________________, a ________________ corporation, on behalf of the corporation. He/She is personally known to me or has produced ____________ as identification. Name: ___________________________ NOTARY PUBLIC, State and County Aforesaid Commission No. My Commission Expires: STATE OF FLORIDA COUNTY OF DUVAL The foregoing instrument was acknowledged before me this _____ day of __________, 2002, by ____________________, as _______________, of FAMILY STEAK HOUSES OF FLORIDA, INC. on behalf of the corporation. He/She is personally known to me or has produced ____________ as identification. Name: ___________________________ NOTARY PUBLIC, State and County Aforesaid Commission No. My Commission Expires: 24 EX-10.03 5 ex1003-802.txt LEASE AGREEMENT FLORIDA RETAIL LEASE AGREEMENT ------------------------------ THIS FLORIDA RETAIL LEASE AGREEMENT (the "Lease"), is made and entered into on the ______ day of ___________________, 2002, between E.D.I. II INVESTMENTS, INC., A FLORIDA CORPORATION ("Landlord") whose offices are located at 5728 Major Boulevard, Suite 174, Orlando, Florida 32819 and FAMILY STEAK HOUSES OF FLORIDA, INC., A FLORIDA CORPORATION, D/B/A RYAN'S GRILL, BUFFET & BAKERY ("Tenant"), whose offices are located at 2113 Florida Boulevard, Neptune Beach, FL 32266. SECTION 1 - DEFINITIONS. 1.1 AFFILIATE. "Affiliate" means an officer or director, with regard to a Tenant, which is a corporation, any entity wholly owned by, or under common control of Tenant, and any person or entity having a relationship described in Internal Revenue Code Section 267(b) (including any ownership attribution provisions contained in other subsections of Section 267, and the regulations promulgated thereunder), to the Tenant. 1.2 APPLICABLE PERCENTAGE. "Applicable Percentage" means Five and no/100 percent (5.0%). 1.3 BASE RENT. "Base Rent" means the sums set forth or determined below, subject to change as set forth in Section 1.11 hereinbelow, payable in advance monthly installments as follows: LEASE YEARS ANNUAL BASE RENT MONTHLY BASE RENT Lease Year No. 1 to Lease Year No. 5 $227,325.00 $18,943.75 Lease Year No. 6 to Lease Year No. 10 $250,057.50 $20,838.12 Lease Year No. 11 to Lease Year No. 15 $275,063.25 $22,921.93 The Base Rent due for the first month of the Lease Term (hereafter defined), in the amount of TWENTY THOUSAND TWO HUNDRED SIXTY-NINE AND 81/100 DOLLARS ($20,269.81), including applicable state sales tax, shall be due and payable and shall be paid to Landlord by Tenant on the Commencement Date. The payment of monthly installments of Base Rent shall commence on the Commencement Date. 1.4 BROKER. Tenant represents to Landlord and Landlord represents to Tenant that the only Brokers involved in this transaction are Diab Realty, Inc. and the STZ Company ("Brokers"). Said Brokers shall be due a commission pursuant to a separate agreement by and between Diab [LANDLORD'S INITIALS ______] [TENANT'S INITIALS ______] 1 Realty, Inc. and Landlord and a Co-Brokerage Agreement between Diab Realty, Inc. and STZ Company. 1.5 BUILDING GRADE. "Building Grade" means the type, brand and/or quality of mate rials Landlord designates from time to time to be the minimum quality to be used on the Property or the exclusive type, grade or quality of material to be used on the Property. 1.6 COMMENCEMENT DATE. "Commencement Date" means one hundred fifty days (150) after the date Landlord shall deliver a building pad as specified in Exhibit "J" attached hereto for the construction of the Tenant Improvements, as defined hereinafter, on the Premises, or the opening for business, whichever shall occur first. At any time after the Commencement Date, upon demand by Landlord, Tenant shall execute and deliver to Landlord a written certificate in the form provided by Landlord affirming the date of the Commencement Date. 1.7 COMMON AREAS. "Common Areas" means those areas devoted to the common use or benefit of tenants generally and/or the public (except where the context shall indicate to the contrary), including mechanical, electrical and telephone installations and wiring, if any, and also includes the "Exterior Common Areas" described in Subsection 1.9. 1.8 ESTIMATED MONTHLY OPERATING EXPENSES. "Estimated Monthly Operating Expenses" for the first Lease Year of the Lease Term, or until it shall be adjusted as provided in Subsection 19.2 hereof, means the sum of FOUR THOUSAND FIFTY-NINE AND 37/100 DOLLARS ($4,059.37) per month, based upon estimated initial year Operating Expenses of FOUR AND 50/100 ($4.50) per square foot of Net Rentable Area per annum. 1.9 EXTERIOR COMMON AREAS. "Exterior Common Areas" means the portion of the Property which is not located within the Premises or other improved structures and which is provided or maintained for the common use and benefit of Landlord and other tenants of the Property generally and the employees, invitees and licensees of Landlord and such tenants; including, without limitation, the roof, exterior walls (but not glass, plate glass or doors), and foundations of the building or buildings containing the Premises and all other premises used, rented, or held for rent by Landlord on the Property, all parking areas, drives, sidewalks and landscaped areas, and retention ponds. 1.10 GROSS RECEIPTS FLOOR. "Gross Receipts Floor" for any Lease Year during the Lease Term shall be Three Million Five Hundred Thousand and no/100 Dollars ($3,500,000.00). 1.11 LANDLORD IMPROVEMENTS. "Landlord Improvements" means those improvements to the Property that the Landlord shall provide pursuant to the site plan prepared by Pecht and Evans Engineering, Inc. as in Preliminary Site Plan attached hereto as Exhibit "B" . Landlord Improvements shall provide for the construction of a compacted building pad (the "Pad") as specified in Exhibit "J" [LANDLORD'S INITIALS ______] [TENANT'S INITIALS ______] 2 attached hereto for Tenant to build said Premises with site work and parking for the entire Property, including the retention area required by the City of Orlando for the development of said Property. Landlord Improvements shall include the construction of no less than one hundred eighty (180) parking spaces, and shall be in compliance with parking requirements of City of Orlando. All parking spaces shall be available to all tenants on the Property for their non-exclusive use. Landlord will provide those utilities identified on the attached Exhibit "I" to within five feet (5') of the Pad. Tenant shall pay all hookup fees, impact fees, and all deposits pertaining to Tenant Improvements. Tenant shall construct the Premises, together with Tenant's restaurant operation, pursuant to the terms of the Work Schedule attached hereto as Exhibit "D" and a Development Agreement of even date between Landlord and Tenant ( the "Development Agreement") a true and correct copy of which is attached hereto as Exhibit "C". Pursuant to the terms and conditions of said Development Agreement and the Work Schedule, Landlord shall provide Seven Hundred Fifty Thousand and no/100 Dollars ($750,000.00) as Tenant Improvement Allowance for the construction of the Tenant's Improvements; provided, further, in the event Tenant shall request additional investment on the part of the Landlord for completion of the Tenant Improvements, Landlord shall provide an additional sum not to exceed $400,000.00 solely for the construction of approved Tenant Improvements (the "Supplemental Tenant Improvement Allowance"). Landlord shall have forty-five (45) days from the date Tenant delivers a written request for the Supplemental Tenant Improvement Allowance, to fund said Supplemental Tenant Improvement Allowance. In the event Tenant shall request the advancement of sums from the Landlord under the Supplemental Tenant Improvement Allowance, said sum(s) shall be repaid under the terms of this lease, as part of the "Base Rent", and shall increase the "Base Rent" pursuant to the following formula: upon the "Commencement Date" the sum funded by the Landlord under the Supplemental Tenant Improvement Allowance shall be determined and multiplied by 14%. Said product shall then be added to the "Annual Base Rent" described in Section 1.3 hereinabove and shall be paid monthly in advance, as part of and in addition to the "Monthly Base Rent" described in Section 1.3 hereinabove. Thereafter the monthly rental payment shall equal the sums of the Annual Base Rent (Section 1.3) plus the Supplemental Tenant Improvement Allowance divided (/) by twelve (12). Landlord shall not be required to pay for any equipments, systems, fixtures, or property, or for any improvements or alterations which either (i) do not conform to the plans and specifications approved in accordance with the terms of the Work Schedule, or (ii) in the aggregate, exceed the sum of Seven Hundred Fifty Thousand and 00/100 Dollars ($750,000.00) as provided in the Work Schedule. Tenant shall be required to, and shall, at its sole costs and expense, install all equipments, partitions, systems, fixtures, and property, and make any and all improvements or alterations which shall be necessary for completion of the Building Standard Improvements and for Tenant's use of the Premises for the Permitted Use, which shall either (i) not be included in the approved plans and specifications, or (ii) when added to all other sums incurred or expended by Landlord, exceed the sum of Seven Hundred Fifty thousand and 00/100 Dollars ($750,000.00). Prior to the delivery of the Building Pad to Tenant, Landlord shall furnish to Tenant a copy of a loan commitment letter from a institutional lender evidencing a loan in an amount equal to the Tenant Improvement Allowance and the Supplemental Tenant Improvement Allowance. [LANDLORD'S INITIALS ______] [TENANT'S INITIALS ______] 3 1.12 LEASE TERM. "Lease Term" means a term commencing on the Commencement Date and expiring at 11:59 P.M. on the last day of the Fifteenth (15th) Lease Year. 1.13 LEASE YEAR. "Lease Year" means the period beginning on the Commencement Date and expiring at 11:59 P.M. on the last day of the calendar year which shall contain the Commencement Date, with regard to the first Lease Year. Any subsequent Lease Year shall mean the period of twelve (12) consecutive calendar months commencing immediately upon the expiration of the preceding Lease Year. 1.14 MINIMUM COVERAGE. "Minimum Coverage" means the minimum required coverage for insurance against bodily injury and property damage, which, for purposes hereof, shall be no less than TWO MILLION DOLLARS ($2,000,000) per person, TWO MILLION DOLLARS ($2,000,000) per occurrence, with umbrella coverage, per occurrence in the amount of TEN MILLION DOLLARS ($10,000,000.00) and ONE MILLION DOLLARS ($1,000,000) for property damage. 1.15 NET RENTABLE AREA. "Net Rentable Area" of the Premises means the gross area measured from the unfinished outside surface of the outer exterior walls of the Premises, to the midpoint of any walls separating portions of the Premises from those of adjacent tenants, and to the unfinished Common Area side of walls separating the Premises from Common Areas. Net Rentable Area of the Property means the other gross area within the outside surface of the outer exterior walls of all improvements now or hereafter constructed on the Property, excluding Common Areas. Upon completion of construction of the Premises, the Net Rentable Area of the Premises shall be determined by Landlord's architect in accordance with BOMA standards, and the result of such measurement shall be certified by Landlord's architect in writing to Landlord. Notwithstanding the foregoing, Tenant shall construct the Premises such that the Net Rentable Area shall not be less than ten thousand eight hundred twenty-five square feet (10,825 sq. ft.). In the event the Premises contains more than 10,825 square feet, the Base Rent and Tenant's Operating Expense Percentage shall be increased accordingly (i.e., the Base Rent as set forth in section 1.3 is based upon a Net Rentable Area of 10,825 square feet. By way of illustration only, if the Net Rentable Area is determined to be 10,925 square feet, the annual Base Rent for Lease Year No. 1 to Lease Year No. 5 would be increased by $2,100.00 ($21 per square foot x 100 additional square feet)). Notwithstanding the foregoing, however, Base Rent shall not increase as a result of added square feet within the Premises to accommodate the subtenant under the Timeshare Lease, a copy of which is attached as Exhibit "E." In the event Tenant's architect determines that the Premises contains less than 10,825 square feet, there shall be no reduction to Base Rent, and the Net Rentable Area of the Premises for the purposes of determining Tenant's Operating Expense Percentage shall be deemed to be 10,825 square feet. 1.16 OPERATING EXPENSE PERCENTAGE. "Operating Expense Percentage" for purposes of computing Tenant's proportionate share of the operating expenses for the Property means the [LANDLORD'S INITIALS ______] [TENANT'S INITIALS ______] 4 percentage, rounded to the nearest 1/100th of a percent (0.01%), and derived by dividing the Net Rentable Area of the Premises by the Net Rentable Area buildable upon the Property. The Operating Expenses Percentage of the Premises is currently unknown as it is subject to increases of the leasable area of the Premises and to increases or decreases in the gross leasable area of the Property. 1.17 PERMITTED USE. "Permitted Use" shall mean the initial use of the Premises only as a Ryan's Grill, Buffet and Bakery, serving breakfast, lunch and dinner, and subject to the terms of of Section 4.1 below, as a Tourist Information Attraction Ticket and any other use permitted under the Timeshare Lease, a copy of which is attached hereby as Exhibit "E" and {and} for no other purposes whatsoever. If the Tenant, after having commenced operations as a Ryan's Grill, Buffet and Bakery shall thereafter determine that it shall be in its best interest to change the name or concept of the Restaurant, the Premises may then be used as a sit-down family restaurant or as a dinner house provided that the new Permitted Use shall not be the same as any business activity then conducted on the Property by the Landlord or any other tenant of the Property. The type of restaurant which the Tenant may operate in the Premises shall not be a fast food restaurant. Notwithstanding the foregoing to the contrary, Tenant shall have the right to discontinue breakfast service in Tenant's sole discretion. 1.18 PREMISES. "Premises" means a building pad on the Property to be leased to Tenant, together with a free-standing building to be constructed thereon. The Premises are depicted and outlined on the site plan attached as Exhibit "B". The Premises are estimated to contain approximately Ten Thousand Eight Hundred Twenty-Five (10,825) square feet of "Net Rentable Area" (as defined below). 1.19 PROPERTY. "Property" means the real property located at 5370 International Drive, Orlando, FL 32819, and more particularly described on the attached Exhibit "A", together with all site work improvements to be constructed by Landlord as Landlord's Improvements. 1.20 RENEWAL TERMS. "Renewal Terms" means two (2) successive option terms of ten (10) years each, available to Tenant in accordance with the provisions of Section 33 hereof. 1.21 REQUIRED BUSINESS HOURS. "Required Business Hours" means the hours between 8:00 A.M. and 10:00 P.M., Monday - Sunday. 1.22 SECURITY DEPOSIT. [INTENTIONALLY OMITTED] 1.23 TENANT IMPROVEMENTS. "Tenant Improvements" means those improvements to the Premises and to the Property, sometimes referred as Building Standard Improvements, which the Tenant agrees to construct on behalf of the Landlord in accordance with the Development Agreement and Work Schedule attached hereto as Exhibits "C" and "D", respectively, which "Tenant Improvements" shall be of a consistent nature and character as Tenant has constructed on sites [LANDLORD'S INITIALS ______] [TENANT'S INITIALS ______] 5 similar to the Property and of a character consistent with Tenant's previously constructed "Ryan's Grill, Buffet & Bakery" restaurant facilities constructed in the State of Florida. SECTION 2 - LEASE GRANT. ------------------------ Subject to and upon the terms herein set forth, Landlord leases to Tenant and Tenant leases from Landlord the Premises, together with the right for Tenant and Tenant's employees, customers and invitees to use the sidewalks, common driveways for ingress and egress and parking areas of the Property. SECTION 3 - LEASE TERM. ----------------------- 3.1 LENGTH OF TERM. This Lease shall continue in force during a period beginning on the Commencement Date and continuing until the expiration of the Lease Term, unless this Lease is sooner terminated or extended to a later date under any other term or provision of this Lease. If Landlord shall give possession of the Premises to the Tenant prior to the Commencement Date, such possession by Tenant shall be subject to all covenants, agreements, terms, and conditions of this Lease, other than the obligation to pay Base Rent. 3.2 ACCEPTANCE OF POSSESSION. Tenant agrees to accept possession of the Premises at the Commencement Date. 3.3 DELIVERY OF PREMISES. Tenant shall use diligent effort to obtain all necessary governmental permits for the construction of the Tenant Improvements within one hundred twenty (120) days of the date of this Lease (the"Permit Period"). In the event all necessary permits for the Tenant Improvements have not been obtained on or before the expiration of the Permit Period, then Tenant, upon written request, shall be granted, up to three (3), thirty (30) day extensions of the Permit Period. Tenant shall promptly notify Landlord when all permits have been obtained by Tenant. Thereafter, Landlord shall construct and deliver the Landlord Improvements at Landlord's expense. Tenant shall accept the Landlord Improvements in writing when Landlord has constructed the building pad as specified in Exhibit "J" and the other Landlord Improvements are substantially completed in the reasonable opinion of Landlord. If there are any unfinished items to be completed (except for the building pad) that do not interfere with the construction of the Tenant Improvements, then Tenant shall accept the Premises. Landlord agrees that any unfinished or punch list items shall be completed prior to the Commencement Date. Tenant shall thereafter construct the Tenant Improvements pursuant to the terms of the Development Agreement and Work Schedule attached hereto as Exhibits "C" and "D", respectively. Landlord shall pay the sum of Seven Hundred Fifty Thousand and no/100 Dollars ($750,000.00) representing Landlord's portion of the costs of the Tenant's Improvements. Thus, Tenant shall be responsible for the completion of the Tenant Improvements, and unless it shall be caused solely by the Landlord's default under the Development Agreement, Landlord shall have no liability for the failure or inability of the Premises to be ready for [LANDLORD'S INITIALS ______] [TENANT'S INITIALS ______] 6 use by Tenant at any particular time. If Landlord shall default under the Development Agreement, Tenant shall have the right to pursue any and all remedies provided therein, but shall not have the right to cancel or terminate this Lease, nor to pursue any claims for damages for or on account of any delay in delivery of the Premise under this Lease, except that the one hundred fifty (150) day period set forth in Section 1.6 for determining the Commencement Date shall be extended one day for each day of delay in completion of the Landlord Improvements attributable solely to Landlord's default under the Development Agreement. SECTION 4 - USE. ---------------- 4.1 USE OF PREMISES. The Premises shall be used for the Permitted Use set forth in Subsection 1.17 hereof, and for no other purpose whatsoever. Without limiting the foregoing restriction, Tenant, unless specifically and explicitly authorized pursuant to the terms of Subsection 1.17, shall not sell or solicit the sale of, lease or solicit the lease of, nor permit any other person to sell or solicit the sale of, or lease or solicit the lease of, in, about, or from the Premises, any attraction tickets, time share resort units, recreational vehicle or campground lots, condominium or resort units or facilities, or similar products in, about, or from the Premises provided, however, that the Landlord, and those persons authorized by the Landlord, may engage in such activities in the Premises pursuant to the terms of a certain Timeshare Sublease of even date herewith entered into between the Landlord as Sub-Tenant and the Tenant as Sub-Landlord, a true and correct copy of which is attached hereto as Exhibit "E" (the "Timeshare Lease"). Nor shall Tenant sell any T-Shirts, sweatshirts, nightshirts, jerseys, or beach cover-ups, any souvenirs or gift items relating or otherwise pertaining to Florida, Orlando, Florida, the Central Florida area, Walt Disney World, Epcot, Universal Studios, or any other tourist attraction located in the Central Florida area, or any characters, logos, or graphic images depicting such location, or attraction, or any persons, characters, buildings, or structures commonly associated with such geographic area, or attraction. Without the express prior written consent of the Landlord, the Tenant shall not display any merchandise or showcases outside of the Premises, nor maintain any other obstruction outside of the Premises. The Tenant shall not use or permit the use of the Exterior Common Areas for gatherings, solicitations, or demonstrations, regardless of whether such solicitation or demonstration shall be for profit or nonprofit purposes. 4.2 LAWFUL USE. The Premises shall not be used for any illegal purposes or in violation of any regulation of any governmental body, or in any manner to create any nuisance or trespass, or to make void or voidable any insurance or increase the rate of insurance on the Premises or the Property. Tenant shall comply with all applicable laws, ordinances, rules and regulations of any governmental entity, agency or authority having jurisdiction of the Premises or Tenant's use of the Premises, regardless of when they become effective, including, without limitation, the Americans with Disabilities Act, all provisions pertaining to air and water quality, Hazardous Materials (as hereinafter defined), waste disposal, air emissions, and other environmental matters, and all recorded covenants, conditions, and restrictions applicable to the Property. For purposes hereof, Hazardous Materials shall include, but not be limited to, substances defined as "Hazardous Substances", [LANDLORD'S INITIALS ______] [TENANT'S INITIALS ______] 7 "Hazardous Materials", or "Toxic Substances": in the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, 42 USC Section 9601, et seq.; The Hazardous Materials Transportation Act, 49 USC Section 1801, et seq.; The Resource Conservation and Recovery Act, 42 USC Section 6901, et seq.; any substance regulated under any similar Florida statutory or regulatory provision, and in the regulations adopted and publications promulgated pursuant to said laws. If Tenant receives notice of any claim of violation of any law, ordinance, rule, or regulation applicable to the Premises or Tenant's use thereof, Tenant shall immediately notify Landlord thereof. Tenant shall not do or permit anything to be done in or about the Premises, which will obstruct or interfere with the rights of other persons in the Property. The Tenant shall keep the Premises and the adjoining sidewalk neat and clean at all times, and shall store all trash, garbage, rubbish and other debris generated by the operation of the Premises within the container to be provided by the Tenant for such purpose. The Tenant shall not burn any trash of any kind in or about the Premises, nor shall the Tenant permit rubbish, refuse, or garbage to accumulate, nor permit any fire or health hazard to exist on or about the Premises. Tenant shall comply with the Building Rules adopted and amended by the Landlord from time to time and will cause all of its agents, employees, invitees and guests to do so. All changes to such rules will be furnished by Landlord to Tenant in writing. A copy of the current Building Rules is attached hereto as Exhibit "H". 4.3 BUSINESS OPERATION. The Tenant shall, during the term of this Lease, continuously and diligently use the Premises for the Permitted Use, carrying on therein the Tenant's business. The Tenant shall maintain on the Premises a sufficient supply of goods and equipment and shall employ such personnel as may be necessary to assure the successful operation of the Tenant's business. The Tenant shall keep the Premises open and available for business activity therein during such periods and hours as are customary in the county where the Premises are located for businesses of a like character. Without limiting the foregoing, except when prevented by strikes, fire, casualty, or other causes beyond the Tenant's reasonable control, the Tenant shall be required in any event to be open during Required Business Hours, as specified in Subsection 1.21. 4.4 TENANT'S EXCLUSIVE. Landlord agrees that while Tenant shall not be in default under the terms hereof beyond any notice and cure period, and while Tenant shall be operating as a Ryan's Grill, Buffet and Bakery, the Landlord shall neither lease for operation by another, nor operate itself on the Property, those uses set forth on Exhibit "G" ("Prohibited Uses"). This provision, however, shall not preclude Landlord from leasing any space within the Property to other restaurants, provided the same are not listed on Exhibit "G". Nor shall this provision preclude the Landlord from permitting other tenants within the Property to sell or to include in their menus products sold by the Tenant. Nothing herein shall prohibit Landlord from leasing space to any such operation, and that operation's selling such products or services shall not be deemed a violation of this provision. Furthermore, in the event Landlord shall cause to be constructed a free-standing restaurant building on that portion of the Property identified on the Site Plan, Exhibit "B", as Phase II, Landlord agrees that said building shall not exceed a leasable area of six thousand five hundred (6,500) square feet unless Landlord provides additional parking in the Property. If the Premises shall cease to be used as [LANDLORD'S INITIALS ______] [TENANT'S INITIALS ______] 8 Ryan's Grill, Buffet, and Bakery at any time, then the provisions and restrictions imposed by this Subsection 4.4 will automatically terminate, without notice, as if it were never made a part of this Lease. SECTION 5 - RENT ---------------- 5.1 OBLIGATION TO PAY. Tenant shall pay to Landlord without any set-off or deduction whatsoever, the Base Rent and all other money as shall become due to the Landlord from time to time hereunder, as additional rent, all of which are sometimes herein collectively called "rent". 5.2 TIME OF PAYMENT. Except for any sums of advance rent which shall be due and payable at the time or times specified in Subsection 1.3 hereof, the Base Rent for each month, together with any adjustments thereto as are set forth elsewhere herein, shall be due and payable on the first day of each calendar month during the Lease Term and during any extensions or renewals thereof. Tenant agrees to pay all such sums in advance, and without demand. 5.3 PLACE OF PAYMENT. Tenant shall pay the Base Rent and all other rent to Landlord at Landlord's address provided on the first page hereof (or such other address as may be designated by Landlord in writing from time to time). 5.4 PRORATION FOR PARTIAL MONTH. If the term of this Lease commences on a day other than the first day of a calendar month, then on the Commencement Date Tenant shall pay Landlord an additional installment of rent for such month, which additional installment shall be an amount equal to (i) the sum of one month's Base Rent and one month's Estimated Monthly Operating Expenses, multiplied by (ii) a fraction, the numerator of which shall be the number of days between the Commencement Date and the last day of the said calendar month, both inclusive, and the denominator of which shall be the total number of days in said calendar month. 5.5 SALES OR RENTAL TAX. Tenant shall pay all sales or rental taxes levied or assessed against all rent payments due under this Lease simultaneously with each rent payment required, whether Base Rent or additional rent. 5.6 INFLATION RENT. The Base Rent shall adjust each five (5) lease years by multiplying the Base Rent times (x) one hundred ten percent (110.0%). At the end of each five (5) year period, the then Base Rent (including any adjustments to the Base Rent from prior five (5) year lease terms) shall increase by ten percent (10.0%) over the Base Rent (as modified) for the prior five (5) year period. By way of example, the Base Rent for Lease Years Six (6) through Ten (10) shall be Two Hundred Fifty Thousand Fifty-Seven and 50/100 Dollars ($250,057.50) for each Lease Year and the Base Rent for Lease Years Eleven (11) through Fifteen (15) shall be Two Hundred Seventy-Five Thousand Sixty-Three and 25/100 Dollars ($275,063.25) for each Lease Year. The base Rent, as [LANDLORD'S INITIALS ______] [TENANT'S INITIALS ______] 9 adjusted for each five (5) year cycle, shall be automatically adjusted during the term of the Lease and any option terms and shall be payable in monthly installments as provided in this Lease. 5.7 PERCENTAGE RENT. In addition to the payment of Base Rent and all other sums required under the terms of this Lease, Tenant covenants and agrees to pay Landlord as additional rent for each Lease Year for the term hereof, on the Gross Receipts made in such Lease Year from Tenant's business or businesses conducted in, on, at, from or arising out of the use of the Premises, the excess of (i) the product of the Applicable Percentage, as defined in Subsection 1.2 hereof, multiplied by the excess of Gross Receipts for such Lease Year over the "Gross Receipts Floor" less the difference between the Inflation Rent less the Base Rent. The said excess shall be hereinafter referred to as "Percentage Rent". For example, assume that Gross Receipts in the Sixth (6th) Lease Year are Four Million and no/Dollars ($4,000,000.00) and the Base Annual Rent is Two Hundred Twenty-Seven Thousand Three Hundred Twenty-Five and no/100 ($227,325.00), the Percentage Rent would be calculated as follows: Estimated Gross Receipts 6th Lease Year $4,000,000.00 Less Gross Receipts Floor 3,500,000.00 ------------- Balance $ 500,000.00 Times (x) Applicable Percentage 0.05 ------------- Percentage Rent Adjustment $ 25,000.00 Less Percentage Rent 6th Lease Year Less Base Rent ($250,057.50 - $227,325.00 = $22,732.50) 22,732.50 ------------- Percentage Rent 6th Lease Year $ 2,267.50 Such Percentage Rent, if any, shall be due and payable to Landlord, together with applicable sales, use, or rental tax thereon as required by law, within thirty (30) days following each Lease Year. 5.8 GROSS RECEIPTS. "Gross Receipts" means the total gross receipts from all businesses conducted by Tenant or any other person in, on, at, or from the Premises. Without limiting the foregoing, gross receipts shall specifically include the total gross receipts for all goods, wares, foodstuffs, and merchandise of all kinds sold or rented, the actual charges for all admissions or donations, and the actual charges for all services performed by Tenant or by any assignee, sub-tenant, licensee or concessionaire in, on, at, from, or arising out of the use of the Premises, whether at wholesale or retail, whether for cash or credit, or otherwise, and including the value of all consideration other than money received for any of the foregoing, without reserve or deduction for inability or failure to collect, including but not limited to sales, rentals, admissions, and services: (i) where the orders therefor originate in, on, at, from, or arising out of the use of the Premises, whether delivery or performance is made from the Premises or from some other place, and regardless of the [LANDLORD'S INITIALS ______] [TENANT'S INITIALS ______] 10 place of bookkeeping for, payment of, or collection of any account; or (ii) made or performed by mail, telephone, telegraph, or facsimile transmission orders received or filled in, on, at, or from the Premises; or (iii) made or performed by means or mechanical or other vending devices in the Premises; or (iv) which Tenant or any assignee, sub-tenant, licensee, or concessionaire, in the normal and customary course of its business, would credit or attribute to its operations in, on, at, from, or arising out of the use of the Premises or any part thereof. Any deposit accepted or retained by Tenant shall be included in Gross Receipts. Each installment or credit sale or rental shall be treated as a sale or rental for the full price in the month during which such sale or rental is made, irrespective of whether or when Tenant receives payment therefor. The sale of a gift certificate from the Premises and gift certificates sold from off the Premises shall be included in Gross Receipts in the month in which the certificate is redeemed or traded for food, merchandise, admission, or services at or from the Premises. No franchise, capital stock tax, tax based upon assets or net worth, or gross receipts tax, and no income or similar tax based on income or profit shall be deducted from Gross Receipts. The following shall be excluded from Gross Receipts: (i) any exchange of inventory or merchandise between facilities of Tenant if such exchanges shall be made solely for the convenient operation of Tenant's business, and not for the purpose of consummating a sale made in, on, at, from, or arising out of the use of the Premises; (ii) returns to shippers, suppliers, or manufacturers; (iii) sales or rentals for which a cash or credit refund has been given to the customer in the amount of such refund, for transactions otherwise included in Gross Receipts (but not store credits or chain coupons); (iv) sales of fixtures, machinery and equipment which are not stock in trade, inventory, or property held for sale, trade, or rental in the ordinary course of business, after use thereof in the conduct of Tenant's business on the Premises; (v) amounts collected from customers and paid by Tenant to any government for any sales, use or excise tax; (vi) insurance proceeds paid to Tenant pursuant to insurance which Tenant maintains to compensate Tenant for damage or loss to its inventory, stock in trade, fixtures, machinery and equipment stored in the Premises; (vii) commissions or deposits from toy machines within the Premises; and (viii) sales made by the Subtenant under the Timeshare Agreement. In recognition of the fact that this Lease provides for a Percentage Rent based on Gross Receipts made by Tenant in, on, at, from, or arising out of the use of the Premises, Tenant agrees (to the extent that it is lawful so to agree) that neither Tenant nor any Affiliate of Tenant, directly or indirectly, shall own, be employed by, operate, manage, or have any interest in, any other Ryan's restaurant or any restaurant concept similar a restaurant concept permitted under Subsection 1.17 hereof, within two (2.0) miles radius of the Premises. If this covenant shall be violated, Landlord (in addition to Landlord's other remedies) shall include an amount equal to one hundred percent (100%) of the Gross Receipts of such same or similar business in the Gross Receipts transacted in the Premises for the purpose of computing Percentage Rent due hereunder, as though said Gross Receipts had actually been derived from the Premises, and Tenant shall comply with the provisions of this Section in respect of such same or similar business. 5.9 GROSS RECEIPTS STATEMENT. Tenant shall submit to Landlord on or before the forty-fifth (45th) day following the end of each Lease Year a statement showing the amount of Gross [LANDLORD'S INITIALS ______] [TENANT'S INITIALS ______] 11 Receipts for the Lease Year. If Tenant shall have audited or reviewed financial statements prepared by a certified public accountant for any portion of its business, then such statement shall be furnished to Landlord. The statement shall show in reasonable detail the amount of Gross Receipts made during such Lease Year, and the amount of Percentage Rent due to Landlord pursuant to Section 5.7 hereof for such Lease Year. Whether or not the Tenant shall have audited or reviewed financial statements prepared for Tenant by an independent certified public accountant, the statement shall be signed by the chief financial officer of Tenant, under oath and such chief financial officer shall affirm that the statement accurately represents the Tenant's Gross Receipts as defined in this Lease for such Lease Year. 5.10 AUDITS. Tenant agrees to record and report all Gross Receipts in accordance with generally accepted accounting principals, consistently applied, and to maintain sufficient records, which accurately reflect all transactions. Such records shall include but shall not be limited to: sales and use tax returns and allowance details, sales journals or daily sales reports, and a complete general ledger. Documentation of specific exclusions must be maintained. Said records shall be preserved by Tenant for two (2) years following the Lease Year to which such records relate. Tenant shall make available to Landlord Tenant's business records of its Gross Receipts upon reasonable notice. Landlord may, at its own expense, examine and audit Tenant's records for the purpose of ascertaining the amount of such Gross Receipts during any Lease Year. Landlord may conduct such audit at any time after Tenant shall have furnished its statement of Gross Receipts for the Lease Year. If such audit shall reveal that Percentage Rent shall have been underpaid, Tenant shall immediately pay the Landlord such additional Percentage Rent as shall be revealed to be due by the audit. If such audit shall reveal that Percentage Rent shall have been overpaid, Tenant shall be entitled to a credit against the next installment of Base Rent due to Landlord (or a refund if the Lease shall have expired without renewal), equal to the excess of the overpaid Percentage Rent over the costs to Landlord of the audit. If the audit shall reveal that Percentage Rent shall have been underpaid by an amount equal to or greater than three percent (3%) of the Percentage Rent paid by Tenant, then Tenant shall, in addition, upon demand, pay Landlord's costs of such audit. If any audit shall reveal an understatement equal to fifteen percent (15%) or more of the Gross Receipts initially reported by Tenant, Landlord, in addition to all other remedies hereunder, shall have the right to terminate this Lease upon thirty (30) days notice to Tenant. 5.11 CONFIDENTIALITY. Landlord agrees that all financial information provided by Tenant shall remain confidential, and shall not be divulged or published by Landlord, except to current or future mortgagees of all or part of the Property, prospective purchasers of all or part of the Property, and Landlord's accountants, attorney's and other agents or representatives acting on behalf of Landlord with regard to the Property. Moreover, this provision shall not be construed to prohibit Landlord from placing of record any information relating to Tenant's finances in any litigation between the parties with regard to the determination, collection, or both, of amounts of Percentage Rent due to Landlord hereunder. [LANDLORD'S INITIALS ______] [TENANT'S INITIALS ______] 12 SECTION 6 - SERVICES TO BE FURNISHED BY LANDLORD. ------------------------------------------------- 6.1 SERVICES. Subject to reimbursement as provided in Section 19 hereof, Landlord agrees to furnish Tenant the foll owing services ("Services") at the proper season. Routine maintenance, repairs, cleaning, and electric lighting service for all Common Areas and Exterior Common Areas of the Property in the manner and to the extent consistent with similar tourist retail properties in the surrounding area along the north end of International Drive. 6.2 BEST EFFORTS. Landlord shall in no way be liable for cessation of any of the Services of Subsection 6.1 caused by strike, accident or breakdown, nor shall Landlord be liable for damages from any of the fixtures or equipment in the Property being out of repair, or for injury to person or property, caused by any defects in the electrical equipment, heating, ventilating and air conditioning system, or water apparatus. Landlord shall not be liable for any damages arising out of failure to furnish the Services enumerated in Subsection 6.1. Cessation of any of the Services of Subsection 6.1 shall not be considered to be an eviction or disturbance of Tenant's use of the Premises, nor shall this Lease or any of the provisions be deemed invalidated by such cessation. Landlord agrees, however, to use its best efforts to restore the Services provided herein as quickly as possible. Should any of the equipment or machinery used in the provision of Services for any cause cease to function properly, Tenant shall have no claim for offset or abatement of rent or damages on account of an interruption in Service occasioned thereby or resulting there from. 6.3 AVAILABILITY OF UTILITIES. Landlord's obligation to furnish light to Common Areas and Exterior Common Areas shall be conditioned upon the availability of adequate energy sources. Landlord shall have the right to reduce lighting within the Property as required by any mandatory fuel or energy conservation or allocation statute, regulation, order or program. 6.4 EXCLUSIVE OBLIGATIONS. Except as otherwise expressly provided herein, Landlord shall not be required to maintain, to make any repairs or replacements to, or to provide any services or supplies to, the Premises. SECTION 7 - GRAPHICS. --------------------- 7.1 STANDARD GRAPHICS. Landlord shall provide Tenant with a proposed monopole sign plan for the Property within forty-five (45) days from the execution hereof. Tenant shall have ten (10) days to review and satisfy itself with said sign. Thereafter, Tenant agrees to share such a freestanding monopole sign with other tenants in the Property and Tenant shall have the option to place its sign on the highest point of such shared sign, but under the sign that identifies the Property, as shall be depicted on the Sign Schedule attached hereto as Exhibit "F". Tenant shall pay its prorata share of the cost of said sign. If the same shall be permitted by law without reducing the signage otherwise available to the Property and without interfering with the permitting and construction of such monopole signs for the Property, Landlord shall permit and shall use commercially reasonable [LANDLORD'S INITIALS ______] [TENANT'S INITIALS ______] 13 efforts to assist Tenant to apply for its own monopole signage to be used for advertising Tenant's business. Landlord shall not be responsible for any cost or expense relating to the Tenant's separate monopole sign. Tenant must obtain said sign permit, if any, by Commencement Date. If Tenant fails to obtain a sign permit by Commencement Date as provided herein, then Tenant shall be deemed to have waived its right to construct a separate monopole sign. Provided that the foregoing shall be permitted as described herein, Tenant shall place such sign at Tenant's sole cost at a location mutually acceptable to Landlord and Tenant and Tenant's sign shall be of such material, type and size as shall be approved by Landlord. 7.2 STORE FRONT SIGN. In addition to the free-standing monopole sign, Tenant may construct, at Tenant's sole cost and expense, a sign or signs and canopy on the exterior portion of the Premises advertising Tenant's business in the Premises, if and as such shall be approved by appropriate governmental authorities. Said sign or signs shall be of such size, shape, and design, and shall be in such location on the Property, as shall be approved by the Landlord. Under no circumstance shall any sign advertise anything other than Tenant's business conducted on the Premises, or which Landlord shall reasonably determine to be obscene, vulgar, or offensive. 7.3 APPROVAL OF LANDLORD. Except as specifically authorized elsewhere herein, the Tenant shall not place or suffer to be placed or maintained on the exterior portion of any door, roof, wall, or window of the Premises, or any other portion of the Property, any sign, or advertising matter or other thing of any kind, without first obtaining the Landlord's prior written approval and consent, which Landlord shall not unreasonably withhold, provided that the foregoing shall not limit the Tenant's right to place signs on the interior surfaces of the Premises' windows and doors and to place advertising materials and signs in the interior of the Premises. Under no circumstance shall any sign be erected by or for Tenant, which shall advertise anything other than Tenant's business conducted on the Premises, or which Landlord shall determine to be obscene, vulgar, or offensive. The Tenant further agrees to maintain any such sign, awning, canopy, decoration, lettering, advertising matter or other thing as may be approved, in good condition and repair at all times and to remove same at the end of the term if so requested by the Landlord. SECTION 8 - REPAIRS AND ALTERATIONS BY TENANT. ---------------------------------------------- 8.1 REPAIRS AND MAINTENANCE. Tenant accepts the Premises in their present condition, subject to completion of the Landlord and Tenant Improvements. Tenant will, at Tenant's sole expense, maintain and take good care of the Premises and the fixtures, equipment and appurtenances which serve them, will suffer no active or permissive waste or injury thereof. Tenant agrees, at Tenant's expense to promptly repair (making replacements where necessary) any injury or damage to the Premises. Tenant also agrees, at Tenant's expense to promptly repair (making replacements where necessary) any injury or damage to other portions of the Property caused by the misuse or neglect thereof by Tenant, Tenant's employees, agents, invitees, or licensees. All such repairs and replacements shall be of a quality equal to original installations. If Tenant fails to make such repairs [LANDLORD'S INITIALS ______] [TENANT'S INITIALS ______] 14 or replacements within thirty (30) days of Landlord's demand, Landlord may, at its option, make repairs or replacements, and Tenant shall repay the cost thereof to Landlord on demand as additional rent. Subsequent to the Commencement Date, the Landlord shall have no obligation to maintain, make any repairs, replacements, improvements, or alterations whatsoever to the Premises other than maintaining in good order and repair during the Lease Term the Common Areas and Exterior Common Areas, including, but not limited to, the roof, exterior walls (but not glass, plate glass or doors), and foundations of the building or buildings containing the Premises and all other premises rented or held for rent by Landlord on the Property, and paved parking areas, provided that damage thereto shall not have been caused by the negligence or fault of the Tenant, its employees, servants or invitees, or by burglary or attempted burglary of the Premises, in which event the Tenant shall be responsible for all repairs and maintenance. Landlord's expenses of repairs, maintenance, and replacements of Common Areas and Exterior Common Areas shall be included in Operating Expenses described in Subsection 19.4 hereof, for which Tenant shall be obligated to pay its pro rata share as provided in Section 19. The Tenant shall service, keep and maintain, making replacements where necessary, the interior of the Premises and all fixtures and systems serving the Premises, including, without limitation, all wiring, piping, fixtures, doors, equipment, heating, air conditioning, plumbing, and electrical systems and appurtenances, in good order and repair during the term of this Lease and any renewal terms and shall replace all glass windows or doors damaged or broken during the Lease Term. All replacements shall be Building Standard. Tenant shall be required to maintain a heating and air conditioning maintenance contract for the Premises with professionals reasonably acceptable to Landlord. Notwithstanding anything contained herein to the contrary, however, Landlord and Tenant agree that (1) Tenant shall be solely responsible at Tenant's cost for maintaining and repairing Exterior Common Areas specific to and immediately surrounding the Premises (including, without limitation, all walls, floors, roofing and other portions of the building improvements located on the Premises, and (2) Tenant shall not be charged for Operating Expenses which relate to Landlord's maintenance and repair of Exterior Common Areas specific to and immediately surrounding the premises of other tenants of the Property, but such exclusion shall in no way be extended to an exclusion for charges relating to Exterior Common Areas of the Property which are utilized by all tenants of the Property (including, without limitation the monopole signs (for the benefit of the entire Property), streets, alleys, areas, area-ways, passages or sidewalks located on the Property). 8.2 ALTERATIONS AND ADDITIONS. Except for ordinary repairs and maintenance performed by Tenant pursuant to Section 8.1 above, Tenant will not, without Landlord's written consent make any exterior or structural interior alterations, additions or improvements in or about the Premises. Landlord shall not unreasonably withhold its consent, and if Landlord's consent shall be granted, Tenant shall, at its sole cost and expense, obtain all appropriate governmental permits, licenses, and approvals prior to beginning any such work in the Premises, shall have all required inspections made thereafter, and all improvements shall be made in accordance with the plans and specifications submitted to and approved by Landlord, and each and every provision of applicable laws, regulations, codes, and legal requirements. All alterations, additions or improvements (including, [LANDLORD'S INITIALS ______] [TENANT'S INITIALS ______] 15 but not limited to, carpets, drapes and drapery hardware) made or installed in the Premises by or for Tenant, or by the Landlord for Tenant's benefit, shall become the property of Landlord upon the expiration or earlier termination of this Lease. Nevertheless, provided that Landlord notifies Tenant at the time of Landlord's approval of any improvements, alterations or additions that Landlord may require such improvements, alterations or additions be removed by Tenant, Landlord reserves the right to require Tenant, at Tenant's expense: (i) to remove any additions made to the Premises by or for Tenant, or by Landlord for Tenant's benefit; and (ii) to repair all injury done by or in connection with installation or removal of said additions. Tenant shall not remove the walk-in cooler and freezers HVAC system, hood and ventilation systems from the Premises. Tenant further agrees to do so prior to the expiration or earlier termination of this Lease, or within ten (10) days after notice from Landlord, whichever shall be later. 8.3 REMOVAL OF PERSONAL PROPERTY. Immediately upon the expiration or earlier termination of this Lease, if Tenant shall have performed all obligations imposed and shall have paid all sums of rent which have or may come due hereunder, such that the property of Tenant shall be no longer be subject to Landlord's lien for rent, Tenant shall remove all Tenant's personal property, with the exception of the walk-in freezer, hood and ventilation system for stove or grill and all fire extinguishing systems from the Premises and Tenant shall repair all injury done by or in connection with the installation or removal of said property, and shall surrender the Premises (together with all keys and other access devices to the Premises and Property) in as good a condition as they were at the beginning of the Term, reasonable wear and tear excepted. All property of Tenant remaining on the Premises thereafter shall be deemed conclusively abandoned and may, at the election of Landlord, either be retained as Landlord's property or be removed by Landlord, and Tenant shall reimburse Landlord for the cost of removing the same, which shall be in addition to Landlord's right to require Tenant to remove any improvements or additions made to the Premises by Tenant pursuant to Subsection 8.2. 8.4 CONTRACTORS AND BONDS. In doing work of any nature in, to, or about the Premises, Tenant will use only duly licensed contractors or workmen approved by Landlord. Notwithstanding the foregoing, however, the foregoing approval right of Landlord shall not apply to any subcontractors of the general contractor. Tenant shall have the right to use Tenant's affiliate, Steak House Construction Company, as the general contractor for the initial construction of the Premises, provided such general contractor shall be licensed by all appropriate governmental agencies and bonded as set forth elsewhere in this Agreement. As a condition to approval of any Tenant alterations or additions, Landlord may, but shall have no obligation to, require Tenant to provide a bond against any potential claims of lien for materials or labor to be furnished to the Premises on Tenant's behalf, proof of availability of cash for payment of all said improvements, or both, and may impose such additional conditions, restrictions, or requirements as Landlord shall deem to be necessary or appropriate to assure the Tenant's compliance with this Lease or to reduce or avoid interference of the work with the businesses of the Landlord and other tenants on the Property. [LANDLORD'S INITIALS ______] [TENANT'S INITIALS ______] 16 SECTION 9 - PARKING AND EXTERIOR COMMON AREAS. ---------------------------------------------- 9.1 USE OF EXTERIOR COMMON AREAS. During the term of this Lease, Tenant shall have the nonexclusive use in common with Landlord, other occupants of the Property, their agents, employees, guests and invitees, of the common automobile parking areas, driveways, and footways, which are part of the Exterior Common Areas, subject to the Building Rules governing the use thereof as prescribed from time to time as provided in Section 4. Building Rules may designate certain areas for Tenant and employee parking, for parking of trucks and delivery vehicles, and for loading and unloading merchandise, equipment, and supplies for the Premises, and as ingress, egress, drives, walks and fire lanes. Tenant shall require its employees to park in the areas designated as employee parking as shown on the Preliminary Site Plan. Landlord reserves the right to have Tenant's employees vehicles towed if they shall be parked on the Property other than in designated employee parking areas, and Tenant shall defend, indemnify, and hold harmless Landlord from and against any claims and liabilities on account of any such towing. Landlord reserves the right to change the location of Tenant's employee parking provided that such change does not reduce the amount of parking available to the Property. 9.2 RESERVED PARKING. No specific designated parking spaces shall be assigned to Tenant unless otherwise agreed by Landlord and Tenant in writing. Landlord agrees that during the term of this Lease Agreement, it will not grant any other party an exclusive use of any of the parking area. 9.3 CHANGES TO COMMON AREAS. Landlord reserves the right, in its sole discretion, to modify, change, alter, increase or diminish the size, location and use of all Common Areas and Exterior Common Areas, provided that at all times there will be no less than 180 parking spaces available for use of the Property and provided that no change shall materially affect the visibility of Tenant improvement from International Drive. Landlord may lease or let portions thereof to other tenants, licenses, or concessionaires, for use in their trades or business, with or without additional improvements, whether permanent or temporary, Tenant shall have no claim or set-off for any alterations to the Common Areas and Exterior Common Areas in compliance with this Subsection. SECTION 10 - ENTRY BY LANDLORD. ------------------------------- Landlord reserves the right, but shall have no obligation, and Tenant shall permit Landlord, its agents and representatives, to enter into and upon any part of the Premises at all reasonable hours (and in emergencies at all times) to inspect the condition, occupancy or use; to show the Premises to prospective purchasers, mortgagees, tenants or insurers; or to clean or make repairs, alterations or additions to the Premises or the Property, and Landlord shall have the right to take and store any necessary equipment and materials therein during such repairs, alterations, and additions. Tenant shall not be entitled to any abatement or reduction of rent by reason of this right of entry. Tenant hereby waives any claim for damages for any injury or inconvenience to, or [LANDLORD'S INITIALS ______] [TENANT'S INITIALS ______] 17 interference with, Tenant's business, any loss of occupancy or quiet enjoyment of the Premises, or any other loss occasioned thereby. Landlord shall have the right to use any and all means that Landlord may deem necessary or proper to open the doors in an emergency, in order to obtain entry to any portion of the Premises, and any entry to the Premises or portions thereof obtained by Landlord by any of said means, or otherwise, shall not, under any circumstances, be construed or deemed to be a forcible or unlawful entry into, or a detainer of, the Premises, or an eviction, actual or constructive, of Tenant from the Premises or any portion thereof. Except in the case of emergency, Landlord and its agents shall be accompanied by Tenant or its agents, and Tenant shall make itself or its agents available for such purpose on demand during Required Business Hours. SECTION 11 - ASSIGNMENT AND SUBLETTING. --------------------------------------- 11.1 LANDLORD'S CONSENT. Tenant shall not assign, sublease, transfer, pledge or encumber this Lease, the Premises, or any interest therein (including the granting of any concessions, licenses or other rights to persons or entities other than Tenant's employees to occupy the Premises for business or other income-producing activities), without Landlord's prior written consent, which consent shall not be unreasonably withheld provided that (1) the proposed Transferee has a net worth equal to or greater than that of Tenant as of the Commencement Date and as of the date of the proposed assignment, subletting or other transfer, (2) the Transferee proposes to operate on the Premises a full service restaurant, which is not out of character and not conflicting with, or cause any default on the part of the Landlord with respect to the terms of any other lease(s) it has entered into with respect to any other portion(s) of the Property, and (3) Landlord is reasonably satisfied with all other information provided as set forth in Subsection 11.2 below. Any such attempted assignment, sublease or other transfer or encumbrance by Tenant in violation of the terms and covenants of this Subsection shall be void. For purposes hereof, if Tenant shall be a corporation, partnership, limited partnership, or other entity other than a natural person, the transfer, sale, or other disposition of fifty percent (50%) or more of the stock, partnership interest, or other beneficial interest in such entity, shall not be deemed an assignment of this Lease. If Tenant's interest in the Premises and this Lease is transferred to an Affiliate or to another entity as part of a transaction by which such other entity shall acquire the Premises and all other restaurants operated by Tenant, then the Landlord's consent shall be granted, provided that the Tenant shall first provide to Landlord all information required under the terms of Subsection 11.2 hereof, the acquiring entity shall first assume and agree to pay all obligations of the Tenant hereunder, and the Tenant shall first reaffirm their continuing obligations for the Tenant's performance under the terms of this Lease. 11.2 NOTICE. If Tenant shall desire Landlord's consent to any subletting, assignment, or other transfer, Tenant shall give Landlord thirty (30) days prior written notice thereof. Written notice shall not be deemed to have been given to Landlord until Tenant shall have provided Landlord each of the following: [LANDLORD'S INITIALS ______] [TENANT'S INITIALS ______] 18 (a) The name, address, and telephone number of the proposed new tenant or transferee of the stock, partnership, or other beneficial interest in Tenant ("Transferee"); (b) A description of the space to be sublet or assigned; (c) A copy of the fully executed sublease, assignment, or other agreement deemed an assignment, sublease, transfer, pledge, or encumbrance of the Lease, the Premises, or any interest therein (which agreement shall be contingent upon Landlord's written consent); or a summary of the business terms if the transfer shall consist only of a transfer of an interest in the Tenant; (d) The nature and character of business of the new tenant or Transferee, and years of experience in such business; (e) The proposed use of the Premises by the new tenant or Transferee; (f) Current financial information on the proposed new tenant or Transferee; and (g) Such other information as Landlord shall reasonably request. 11.3 NOTICE OF OBJECTION. Landlord shall notify Tenant no later than thirty (30) days after receipt of the last item provided by Tenant pursuant to Subsection 11.2 of Landlord's consent or objection to the proposed assignment, sublease, transfer, pledge, or encumbrance. If Landlord shall not notify Tenant of its objection by the end of said thirty (30) day period, Landlord shall be deemed to have consented thereto. Landlord's consent shall not be unreasonably withheld. 11.4 TRANSFERS WITHOUT CONSENT. If Tenant shall assign, sublease, transfer, pledge, or encumber the Lease, the Premises, or any interest therein, without Landlord's prior written consent, such assignment, sublease, transfer, pledge, or encumbrance shall be an Event of Default. If Tenant or such new tenant or Transferee shall knowingly provide, or allow to be provided, any false or misleading information to Landlord pursuant to Subsection 11.2, Tenant, such new tenant, or Transferee, or all of them, as the case may be, shall be deemed to have committed an Event of Default. Landlord may collect rent from any such new tenant or Transferee and apply the amount so collected to rent herein reserved, and the same shall not be deemed to constitute or effect a waiver, consent, ratification, or estoppel as to Landlord's right to treat such assignment, sublease, transfer, pledge, encumbrance, or provision of false or misleading information, as an Event of Default. Nor shall it constitute acceptance of the new tenant or Transferee, or a release of the performance of the covenants on Tenant's part to be performed as are herein contained. 11.5 CONSENT REQUIRED FOR EACH TRANSFER. The giving of consent by the Landlord to any sublease, assignment, transfer, pledge, or encumbrance shall not release Tenant from the performance of its covenants and obligations hereunder. No consent given shall obviate the need for [LANDLORD'S INITIALS ______] [TENANT'S INITIALS ______] 19 Landlord's prior written consent to any other or additional assignment, sublease, transfer, pledge, or encumbrance of the Lease, the Premises, or any interest therein, by Tenant, any new tenant, or Transferee. 11.6 FIRST REFUSAL. If Tenant shall notify Landlord of its intention to assign this Lease or sublet all or any portion of the Premises, or if Tenant shall become involved in bankruptcy proceedings under the Bankruptcy Code of the United States, as the same may be amended from time to time, and the bankruptcy trustee or debtor in possession shall intend to assign this Lease or sublet the Premises, Landlord shall have the right of first refusal to reacquire the Lease on the same terms and conditions as may be contained in any bona fide offer made by any third party, which offer the Tenant or trustee or debtor intends to accept. SECTION 12 - MECHANIC'S LIEN. ----------------------------- 12.1 NO RIGHT TO CREATE LIENS. Tenant will not, and has no right, power, or authority to, permit any mechanic's lien or liens to be placed upon the Premises or the Property. Nothing in this Lease shall be deemed or construed in any way as constituting the consent or request of Landlord, express or implied, to any person for the performance of any labor or the furnishing of any materials to all or part of the Premises or the Property, nor as giving Tenant any right, power, or authority to contract for or permit the rendering of any services or the furnishing thereof that would or might give rise to any mechanic's or other liens against the Premises or the Property. This Lease, and all other Leases with regard to the Property, prohibits the imposition of any lien upon the Property or the Premises for any work or materials provided to, for, or at the request of the Tenant or any other tenant on the Property. All "Lienors" performing work on behalf of the Tenant are hereby notified that the Landlord's interest in the Land shall not, under any circumstances, be subject to liens for improvements made by the Tenant, and Tenant shall notify each of its contractors of this provision prior to the commencement of construction, pursuant to Florida Statutes 713.10, and further, Landlord shall file, in the public records, a Memorandum of Lease, in accordance with Section 713.10, Florida Statutes. 12.2 EFFECT OF LIEN. If any lien is claimed against the Premises or the Property for services or materials provided at the request, or for the benefit, of Tenant, then, in addition to any other right or remedy of Landlord, Landlord may, in its sole discretion, elect to (i) discharge the same, and any amount paid by Landlord for such purposes shall be paid by Tenant to Landlord within ten (10) days after Landlord's demand therefore; or (ii) notify Tenant that the filing of such lien or claim of lien is an Event of Default. SECTION 13 - PROPERTY INSURANCE. -------------------------------- 13.1 LANDLORD HAZARD INSURANCE. Landlord shall maintain and pay for fire and extended coverage insurance on the Property and the Premises, including such rental loss insurance as [LANDLORD'S INITIALS ______] [TENANT'S INITIALS ______] 20 Landlord shall deem necessary, and the costs thereof shall be reimbursed pursuant to Section 19 hereof. Payments for losses thereunder shall be made solely to Landlord or the mortgagees of Landlord as their interests shall appear, and Tenant shall have no claim thereto. 13.2 TENANT HAZARD INSURANCE. Tenant shall maintain at its expense, in an amount equal to full replacement cost, fire and extended coverage insurance on all of its personal property, including removable trade fixtures, located in the Premises, naming Landlord as a mortgagee/secured party. Tenant's insurance shall be written by one or more responsible insurance companies acceptable to Landlord, and licensed to do business in the state in which the Premises are located. 13.3 PROOF OF INSURANCE. At the time of execution hereof, and thereafter prior to the expiration date of each policy, Tenant shall provide Landlord with current certificates of insurance evidencing Tenant's insurance coverage for the next twelve (12) months in compliance with Sections 13 and 14 hereof, including the insurer's agreement pursuant to Subsection 13.4, on forms which shall neither disclaim the insurer's liability to the Landlord for reliance upon their content, nor permit the insurer to alter the terms of the insurance coverage without ten (10) days prior written notice to the Landlord. Tenant shall deliver to Landlord a true and correct copy of Tenant's original hazard and liability insurance policies upon receipt by Tenant, but in no event later than thirty (30) days after the date of expiration or termination of the Tenant's prior policy. 13.4 NOTICES BY TENANT'S INSURER. Tenant shall obtain the agreement of Tenant's insurers to notify Landlord at least ten (10) days prior to cancellation, expiration, or material modification of any insurance coverage required of Tenant pursuant to Sections 13 and 14 hereof. 13.5 WAIVER OF LIABILITY. Tenant hereby waives any and all rights of recovery against Landlord for or arising out of damage to or destruction of any property of Tenant from causes then included under standard fire and extended coverage insurance policies or endorsement, and Tenant covenants and agrees with Landlord that it will obtain a waiver from the carrier of its insurance on the Premises releasing such carrier's subrogation rights as against Landlord. SECTION 14 - LIABILITY INSURANCE. --------------------------------- 14.1 COMPREHENSIVE GENERAL LIABILITY. Tenant shall, at its own expense, maintain a policy or policies of comprehensive general liability insurance, with respect to its activities on or about the Property, with the premiums thereon paid for on or before due date, issued by and binding upon an insurance company licensed in the state where the Premises are located, approved by Landlord. Such insurance shall afford minimum protection not less than the Minimum Coverage specified in Subsection 1.14 hereof. Landlord and any other entity so designated by Landlord, and any holder of a lien encumbering the Property designated to Tenant by Landlord, shall be named as an additional insured under Tenant's policy of comprehensive general liability insurance. Not more frequently than once every three (3) years Landlord may require that the Minimum Coverage is [LANDLORD'S INITIALS ______] [TENANT'S INITIALS ______] 21 increased to an amount that is commercially reasonable for similar properties in the general geographic area. In addition, if any institutionalized lender requires an increase in the per occurrence insurance coverage, the Tenant agrees to provide said increase. 14.2 NO THEFT INSURANCE. Landlord shall not be required to maintain insurance against thefts within the Premises or on or about the Property. SECTION 15 - ASSUMPTION OF RISK. -------------------------------- 15.1 WAIVER OF LIABILITY. Landlord shall not be liable to Tenant or Tenant's customers, licensees, agents, guests or employees for any injury or damages to its, his or their persons or property by any cause whatsoever, including, but not limited to, acts or omissions of any other tenant in the Property, construction defects, water, rain, sleet, snow, fire, storms, negligence (specifically including the Landlord's own negligence), crimes and intentional torts and accidents, breakage, stoppage, or leaks of gas, water, heating, sewer pipes, boilers, wiring or plumbing, any equipment or apparatus, or any other defect in, on or about the Premises or the Property, unless such injury or damages are caused solely by the willful misconduct or gross negligence of Landlord. 15.2 INDEMNIFICATION. Tenant expressly assumes all liability for or on account of any such injury, loss or damage referred to in Section 15.1 above (specifically including Landlord's own negligence), and will at all times, indemnify, defend, and save Landlord harmless from and against all liability, damage, or expense caused by or arising out of any such injury, loss or damage to persons or property upon the Premises or the Property, including, but not limited to, costs and attorneys fees. Tenant's insurance, pursuant to Subsection 14.1 shall insure against such liability of Tenant, but Tenant's obligations hereunder shall not be limited to the amount of such insurance. If Tenant shall cause or permit any Hazardous Materials to be brought upon, kept, or used in or about the Property, or if the presence of Hazardous Materials in the Property caused or permitted by Tenant results in contamination of the Property, or if contamination of the Premises by Hazardous Materials otherwise occurs as the result of any action or inaction of Tenant, its agents, employees, customers, or contractors, then Tenant shall indemnify, defend, and hold Landlord harmless from and against any and all claims, judgments, damages, penalties, fines, costs, liabilities or losses (including, without limitation, diminution in value of the Premises and the Property, damages for the loss or restriction on use of any portion of the Premises or the Property, damages arising from any adverse impact on marketing of rentals in the Premises and the Property, sums paid in settlement of claims, attorneys' fees, consultant fees, and expert fees, costs incurred in connection with any investigation of site conditions or any clean-up, remedial, removal, or restoration work required by any Federal, state, or local governmental agency or political subdivision) which arise during or after the Lease Term as a result of such contamination. Without limiting the foregoing, if the presence of any Hazardous Materials on the Property caused or permitted by Tenant results in any contamination of the Property, Tenant shall promptly take all actions at its sole cost as are necessary to return the Property to the condition existing prior to the introduction of such Hazardous Material; provided that [LANDLORD'S INITIALS ______] [TENANT'S INITIALS ______] 22 Landlord's approval of such action shall first be obtained, which approval shall not be unreasonably withheld so long as such actions would not potentially have any adverse material long term effect on the Property. All provisions for indemnification and cure contained in this Subsection 15.2 shall survive the expiration or earlier termination of this Lease. SECTION 16 - CASUALTY DAMAGE. ----------------------------- 16.1 NOTICE. If the Premises or any part thereof shall be damaged by fire or other casualty, Tenant shall give prompt written notice thereof to Landlord. 16.2 LANDLORD'S TERMINATION RIGHT. If the Premises shall be so damaged that, in Landlord's sole opinion, it shall not be economical to repair or reconstruct the damaged Premises, or in the event any mortgagee of Landlord's should require that the insurance proceeds payable as a result of a casualty to the Property or the Premises be applied to the payment of the mortgage debt, or in the event of any material uninsured loss to Property or the Premises, Landlord may, at its option, terminate this Lease by notifying Tenant in writing of such termination within ninety (90) days after the date of such damage. In the event this Lease is terminated by Landlord as provided in this Subsection, rent and all other sums due hereunder accruing subsequent to the date of the casualty shall abate. 16.3 LANDLORD'S OBLIGATION TO REBUILD. If Landlord does not elect to terminate this Lease pursuant to Subsection 16.2, Landlord and Tenant shall commence and proceed with reasonable diligence to restore the Premises to substantially the same condition in which it was immediately prior to the happening of the casualty. Landlord's obligation to restore the Premises shall not exceed the proceeds of insurance actually received by Landlord as a result of such casualty and directly relating to the Premises. 16.4 NO BUSINESS LOSS DAMAGES. Landlord shall not be liable for any inconvenience or annoyance to Tenant or injury to the business of Tenant resulting in any way from such damage or the repair thereof. There shall be no abatement or diminution of rent on account of any such damage or repair unless Landlord shall have terminated the Lease pursuant to Section 16.2 above. SECTION 17 - CONDEMNATION. -------------------------- 17.1 TAKING OF PROPERTY OR PREMISES. If the whole or substantially the whole of the Property or the Premises should be taken for any public or quasi-public use, by right of eminent domain or otherwise, or if it should be sold in lieu of condemnation (a "Taking"), then this Lease shall terminate as of the earlier of the date on which physical possession of the Property or the Premises, or such part thereof as shall be taken, is taken by the condemning authority, or the date title is vested in the condemning authority. [LANDLORD'S INITIALS ______] [TENANT'S INITIALS ______] 23 17.2 PARTIAL TAKING. If part of the Property, but less than the whole or substantially the whole of the Property or the Premises is thus taken or sold, Landlord (whether or not the Premises are affected thereby) may terminate this Lease if Landlord determines, in Landlord's reasonable opinion, that the operation of the remaining Property would be unlawful or uneconomical, by giving written notice thereof to Tenant, in which event this Lease shall terminate as of the earlier of the date when physical possession of such portion of the Property is taken by the condemning authority, or the date title is vested in the condemning authority. If any partial Taking of the Property shall be to such an extent as to render the Permitted Use of the Premises unlawful or uneconomical, then Tenant may terminate this Lease by written notice to Landlord within thirty (30) days after such Taking. 17.3 RENT ADJUSTMENT. If this Lease is not so terminated upon any such Taking, the Base Rent payable hereunder shall be diminished in proportion to the portion of the Premises taken or conveyed, and Landlord shall, to the extent Landlord deems it to be feasible, restore the Property and the Premises to substantially its former condition, but in no event shall Landlord be required to spend for such work any amount in excess of the amount received by Landlord specifically as compensation for such costs of restoration in the proceedings related to the Taking. 17.4 PROCEEDS. All amounts awarded upon a taking of any part or all of the Property or the Premises, shall belong to Landlord, and Tenant shall not be entitled to, and expressly waives all claim to, any such compensation. 17.5 TENANT'S BUSINESS LOSSES. Tenant shall be entitled to claim independently against the condemning authority any damages expressly referable to Tenant's business as the same may be permitted by law, provided such claim shall not reduce any award payable to Landlord. SECTION 18 - EVENTS OF DEFAULT/REMEDIES. ---------------------------------------- 18.1 EVENTS OF DEFAULT BY TENANT. The happening of any one or more of the following listed events (Events of Default) shall constitute a breach of this Lease by Tenant: (a) the failure of Tenant to pay any rent or any other sums of money due hereunder if such failure shall continue for a period of three (3) days after written notice; (b) the failure of Tenant to comply with any other provision of this Lease or any other agreement between Landlord and Tenant (all of which terms, provisions, and covenants shall be deemed material) within ten (10) days after written notice; provided, however, that if the failure does not pose a threat to the health or safety of any person and if the nature of the failure is such that more than ten days would be reasonably required to cure the failure, then Tenant shall not be in default provided that Tenant commences to cure the default within such ten-day period and thereafter Tenant diligently cures such failure or default within thirty (30) days after the written notice, and provided, however, that if the Tenant shall have failed to comply with any provision of this Lease on two (2) or more occasions within any twelve (12) month period, and if notice thereof shall have been provided by Landlord, no notice or opportunity for cure shall be required with respect to any subsequent noncompliance with the Lease; (c) the taking of the [LANDLORD'S INITIALS ______] [TENANT'S INITIALS ______] 24 leasehold on execution or other process of law in any action against Tenant; (d) the failure of Tenant to accept the Premises, to promptly move into, complete any tenant improvements to, take possession of, and to operate its business in the Premises after the Commencement Date, or if Tenant ceases to do business in or abandons any substantial portion of the Premises, other than on account of force majeure; (e) Tenant becoming insolvent or unable to pay its debts as they become due, or Tenant's notice to Landlord that it anticipates either condition; (f) the filing of any bankruptcy or similar proceeding by or against Tenant under any applicable law; (g) the appointment of a receiver or trustee for Tenant's leasehold interest in the Premises or for all or a substantial part of the assets of Tenant; (i) the death or dissolution of the Tenant; and (h) any other act or omission designated as an Event of Default in this Lease. The notices to Tenant required, and the opportunities for cure provided, under this Subsection 18.1 are the exclusive notice requirements and cure periods available to Tenant for any breach of this Lease, and Tenant hereby waives all other or additional notice requirements, cure periods, and rights of redemption imposed, created, provided, or otherwise allowed by law. 18.2 REMEDIES. Upon the occurrence of any Event of Default by Tenant, whether enumerated in Subsection 18.1 or not, other than an Event of Default identified in item (a) of Subsection 18.1, if Tenant fails to cure any such default within ten (10) days of written notice from Landlord (or such greater or lessor period of time as shall be specified elsewhere herein for Tenant's compliance with specific duties or obligations), or if the default is of such a nature that it shall not be reasonably possible to cure such default within ten (10) days after written notice, if Tenant shall fail to commence action reasonably calculated to cure such default within ten (10) days after written notice from Landlord, or shall thereafter fail to pursue the cure of the default to completion continuously and with diligence, Landlord shall have the option at Landlord's election then, or at any time thereafter, to pursue any one or more of the following remedies: (a) Landlord may give Tenant written notice of Landlord's intention to terminate this Lease on the date of such notice or any later date specified therein, whereupon all Tenant's right, title and interest in and to this Lease and the Premises shall cease and this Lease shall be terminated, except as to Tenant's liability for rent, costs, attorneys' fees, and other sums hereunder. Thereupon, Landlord shall be entitled to recover all sums of unpaid rent through the date of termination. Landlord shall also recover from Tenant, in one or more actions, all sums of rent coming due during that portion of the remaining Lease Term (or any applicable extension or renewal thereof) as they would have come due under the terms of this Lease, on a monthly basis, or at the scheduled expiration of the said Lease Term (or any applicable extension or renewal thereof), or, at Landlord's option, to recover against Tenant as damages for loss of the bargain, and not as a penalty, an aggregate sum which, at the time of such termination of this Lease, represents the excess, if any, of the aggregate of the rent and all other sums payable by Tenant hereunder that would have accrued for the balance of the Lease Term (or any applicable extension or renewal thereof) over the aggregate rental value of the Premises for the balance of such Lease Term (or any applicable extension or renewal thereof), both discounted to present worth at the rate of six percent (6%) per annum, together [LANDLORD'S INITIALS ______] [TENANT'S INITIALS ______] 25 with all costs of eviction, removal, storage, repairs, and collection which may be incurred by Landlord. In determining the aggregate rental value of the Premises, actual or reasonably estimated expenses for brokerage commissions, legal expenses, repair and tenant improvement costs, rent holidays, and periods of lease-up vacancy shall be taken into account. (b) Landlord may reenter and take possession of the Premises or any part thereof, and expel Tenant and those claiming through or under Tenant, and remove the effects of both or either, using such force as may be necessary without being liable for prosecution therefore, without being deemed guilty of any manner of trespass, and without prejudice to any remedies for arrears of rent or preceding breaches of covenants or conditions. Should Landlord elect to re-enter as provided herein or pursuant to legal proceedings, Landlord may, from time to time, without terminating this Lease, relet the Premises or any part thereof in Landlord's or Tenant's name, but for the account of Tenant, for such term or terms (which may be greater or less than the period which would otherwise have constituted the balance of the term of this Lease) and on such conditions and upon such other terms (which may include, but shall not be limited to, concessions of free Rent and alteration and repair of the Premises) as Landlord, in its sole discretion, may determine, and Landlord may collect and receive the rents therefore. Landlord shall in no way be responsible or liable for any failure to relet the Premises, or any part thereof, or for any failure to collect any rent due upon such reletting. No such re-entry or taking possession of the Premises by Landlord shall be construed as an election on Landlord's part to terminate this Lease unless a written notice of such intention is given to Tenant. No notice or lack thereof, from Landlord hereunder or under a forcible entry and detainer statute or similar law shall constitute an election by Landlord to terminate this Lease unless such notice specifically so states. Landlord reserves the right following any such re-entry and/or reletting to exercise its right to terminate this Lease by giving Tenant such written notice, in which event this Lease will terminate as specified in said notice. In the event that Landlord does not elect to terminate this Lease, but on the contrary, elects to take possession hereunder, Tenant shall pay to Landlord: (i) the rent and other sums as herein provided, which would be payable hereunder if such repossession had not occurred, less (ii) the net proceeds, if any, of any reletting of the Premises after deducting all Landlord's expenses in connection with such reletting, including, but without limitation, all repossession costs, brokerage commissions, legal expenses, attorneys' fees, expenses of employees, alteration and repair costs and expenses of preparation for such reletting. If, in connection with any reletting, the new lease term extends beyond the existing term, or the premises covered thereby include other premises not part of the Premises, a fair apportionment of the rent received from such reletting and the expenses incurred in connection therewith as provided above will be made in determining the net proceeds from such reletting. (c) Landlord may enter upon the Premises and do whatever Tenant is obligated to do under the terms of this Lease (and Tenant shall reimburse Landlord on demand for any expenses which Landlord may incur in effecting compliance with Tenant's obligations under this Lease, and Landlord shall not be liable for any damages resulting to the Tenant from such action). (d) Landlord may pursue any other remedy provided by law or in equity. [LANDLORD'S INITIALS ______] [TENANT'S INITIALS ______] 26 Upon the occurrence of an Event of Default identified in subparagraph (a) in Subsection 18.1, Landlord shall immediately have the option, at Landlord's election to pursue any remedy set forth in subparagraphs (a) through (d) of this Subsection 18.2 without notice to Tenant or any further opportunity to cure. If Tenant shall commit or allow to occur any Event of Default identified in subparagraphs (b) through (h) of Subsection 18.1 and Tenant shall thereafter, and within twelve (12) months of the prior Event of Default, commit or allow to occur the same or any substantially similar Event of Default, then the periods provided for Tenant to cure such later default shall be reduced from ten (10) days to three (3) days after written notice. The notice to Tenant required under this Lease are the exclusive notice requirements upon the occurrence of any Event of Default by Tenant, and are in lieu of any other notice requirements imposed by applicable law. Tenant hereby waives all other or additional notice requirements imposed by law, specifically including those set forth in chapter 83 of the Florida Statutes. 18.3 PERCENTAGE RENTS, OPERATING EXPENSES, AND BASE RENT ADJUSTMENTS UPON DEFAULT. In determining the rents due to Landlord under Subsection 18.2 in the Event of Default, if Percentage Rent shall have been paid or payable by Tenant during the two (2) Lease Years prior to the Event of Default, then the Percentage Rent for the Lease Year in which the Event of Default shall occur shall be conclusively presumed to be equal to the average Percentage Rent payable with respect to the said two (2) preceding Lease Years. For purposes of Subsection 18.2, if at the time a calculation of sums due to the Landlord shall be required, the actual amounts of the Base Rent adjustment under Subsection 5.6, or Tenant's share of Operating Expenses under Section 19, or both, shall not be definitely determinable for any current or future Lease Year or Lease Years, such amounts shall be conclusively presumed to equal the last amount which was definitely determinable. 18.4 EFFECT OF TERMINATION. Tenant agrees that upon the occurrence of an Event of Default, and after notice from Landlord to Tenant in accordance with the provisions of Subsection 18.2 that the Landlord has elected to terminate this Lease, each, every and all rights and claims of Tenant in and to this Lease and the Premises shall immediately terminate, cease, and expire. Tenant agrees that such termination shall be deemed to have been in accordance with the terms of the Lease effective as of the date specified in such notice. In the event that the Tenant shall thereafter seek protection under any provision of the United States Bankruptcy Code, the Tenant shall have no interest in the Lease or the Premises, no proceedings by the Landlord for recovery of physical possession of the Premises shall be subject the terms of any automatic stay entered incident to the filing of such petition after delivery of such notice of termination, and any attempt by the Tenant to assert that the Lease, or any purported interest of the Tenant in or to the Premises, is an asset of the Tenant, shall be conclusively presumed to be made in bad faith and a fraud upon the court. 18.5 REMEDIES CUMULATIVE. All the remedies of Landlord in the event of Tenant default shall be cumulative and, in addition, Landlord may pursue any other remedies permitted by law or in [LANDLORD'S INITIALS ______] [TENANT'S INITIALS ______] 27 equity. Forbearance by Landlord to enforce one or more of the remedies upon an Event of Default shall not constitute a waiver of such default. 18.6 EVENT OF DEFAULT BY LANDLORD. If Tenant asserts that Landlord has failed to meet its obligations under this Lease, Tenant shall give written notice (Notice of Default), to Landlord specifying the alleged failure to perform, and Tenant shall send by certified mail, return receipt requested, a copy of such Notice of Default to any mortgage holder (provided that Tenant has been previously advised of the address of the mortgage holder, by Assignment of Rents or otherwise). If Landlord shall not begin the cure of any failure of Landlord to meet its obligations under this Lease within thirty (30) days of receipt of the Notice of Default, and thereafter pursue such cure to completion, then Landlord shall be in default. If Landlord shall have failed to begin and pursue the cure of such failure within the time set forth above, then the mortgagees shall have an additional thirty (30) days within which to cure such failure, or if such failure cannot be cured within that time, then such additional time as may be necessary if within such thirty (30) days any mortgagee has commenced and is diligently pursuing the remedies necessary to cure such failure, including, but not limited to, commencement of foreclosure proceedings, if necessary, to effect such a cure, in which event the mortgagees, as assignees of Landlord, shall not be considered to be in default while such remedies are being so diligently pursued. Tenant agrees, as bargained for consideration for this Lease, that unless and until Tenant shall have provided each and every of the notices specified in this Subsection 18.6, and unless and until any and all times for cure set forth in this Subsection 18.6 shall have expired, Landlord shall not be deemed to have breached, or to be in default under, any term or provision of this Lease, or any obligation imposed by law upon the Landlord. In no event shall Tenant have the right to terminate or rescind this Lease as a result of Landlord's default as to any covenant or agreement contained in this Lease, or as a result of the breach of any promise or inducement hereof, whether in this Lease or elsewhere. Tenant hereby waives all remedies of self-help, set-off, termination, rescission, specific performance, and injunctive relief, and hereby agrees that Tenant's remedies for default hereunder and for breach of any promise or inducement shall be limited to a suit for damages only. SECTION 19 - OPERATING EXPENSES. -------------------------------- 19.1 PAYMENTS OF OPERATING EXPENSES. Tenant shall pay to Landlord, as additional rent, his proportionate share of Landlord's Operating Expenses for the Property. During the initial calendar year in the Lease Term, and until adjusted as provided in Subsection 19.2, Tenant shall pay to Landlord each month, in advance, on the first day of each month, the Estimated Monthly Operating Expenses set forth in Subsection 1.8 hereof. When actual annual Operating Expenses are determined, Landlord shall make the adjustments described in Subsection 19.3 to reconcile the sum of Tenant's payments of Estimated Monthly Operating Expenses for the year with Tenant's proportionate share of actual Operating Expenses for the year. [LANDLORD'S INITIALS ______] [TENANT'S INITIALS ______] 28 19.2 CALCULATION OF ACTUAL OPERATING EXPENSES. On the first day of February next after the Commencement Date and each subsequent February 1st, or as soon thereafter as the necessary information can reasonably be secured, Landlord shall calculate the amount of actual Operating Expenses for the calendar year immediately preceding. The actual Operating Expenses for the first calendar year that the Property is occupied by tenants shall be annualized if such initial occupancy occurs after the first day of January. The actual Operating Expenses so determined shall be multiplied by the Operating Expense Percentage set forth in Subsection 1.16 hereof in determining Tenant's proportionate share. From time to time Landlord, in its reasonable discretion, shall increase or decrease the Estimated Monthly Operating Expenses payable by Tenant so as to more accurately reflect the actual Operating Expenses for the year, and upon providing notice to Tenant of the amount of the new Estimated Monthly Operating Expenses, such amount shall be the revised Estimated Monthly Operating Expenses allocable to the Premises until subsequently adjusted hereunder. Landlord agrees that for purposes of determining the Tenant's actual share of Annual Operating Expenses, "Controllable Expenses" shall not increase at a greater annual rate than five percent (5%), compounded annually. "Controllable Expenses" shall mean and refer to those items of Operating Expenses excluding the items referred to in Subparagraphs (c), (d), and (e) of Subsection 19.4 hereof. 19.3 ANNUAL ADJUSTMENT. At the time that the Landlord computes the actual Operating Expenses, as provided in Subsection 19.2, Landlord shall determine what adjustment, if any, shall be required to reconcile the Estimated Monthly Operating Expenses paid during the preceding calendar year pursuant to Subsection 19.2 with the actual Operating Expenses for such preceding calendar year. If the product of the actual Operating Expenses multiplied by the Operating Expense Percentage shall exceed the sum of the Estimated Monthly Operating Expenses paid by Tenant for such calendar year, Tenant shall pay Landlord within thirty (30) days of Landlord's demand therefore an amount equal to the amount of such excess. If the sum of the Estimated Monthly Operating Expenses paid by Tenant for such year shall exceed the product of the actual Operating Expenses multiplied by the Operating Expense Percentage, Tenant shall be allowed a credit against the next installment or installments of rent and Estimated Monthly Operating Expenses coming due equal to such excess. Appropriate adjustment shall be made to all amounts computed pursuant to this Subsection to reflect Tenant's proportionate share of actual Operating Expenses for any calendar year during which the entire Premises were not rented to Tenant pursuant to this Lease. The obligations of Landlord and Tenant pursuant to this Subsection shall survive the expiration or prior termination of this Lease. Any amount which would otherwise be credited to rent by Landlord hereunder shall be refunded to Tenant if the Lease shall have expired, after deducting therefrom any other amounts which may be due to Landlord from Tenant. Landlord, upon request, shall deliver to Tenant, in reasonable detail, the materials that make up the actual Operating Expenses. Tenant shall have the right to audit said materials at its own expense provided Tenant furnished Landlord sixty (60) day written notice of its intention to audit said accounts. The written notice must be received by Landlord within sixty (60) days from the date Tenant receives the aforementioned materials from Landlord. The audit must be conducted at Landlord's office. If the Tenant does not request an audit [LANDLORD'S INITIALS ______] [TENANT'S INITIALS ______] 29 and / or back up materials within six (6) months of receipt of the actual Operating Expenses, then Tenant is deemed to have waived its right to audit the actual Operating Expenses for that specific year. Landlord and Tenant agree that any discrepancy in the Operating Expenses that is discovered by an audit, that is within four (4%) percent of the actual total aggregate expense on the Operating Expenses, shall be considered an acceptable margin of error and no adjustment will be made between Landlord and Tenant. 19.4 OPERATING EXPENSES. It is intended that during the term of this Lease the Base Rent shall be absolutely net to Landlord of all expenses of Landlord incident to the Property and this Lease. "Operating Expenses" shall mean those items of cost and expense paid or incurred by, or on behalf of, Landlord for management, maintenance, repairs, replacements, and operation of the Property and the personal property of Landlord used in the maintenance, repair, and operation of the Property, including, but not limited to: (a) wages, salaries, and fees along with related employment taxes, insurance benefits and reimbursable expenses; (b) all operation, management, maintenance, inspection, repairs, painting, replacements, upkeep and servicing of the Property and the equipment therein or thereon, including all supplies, equipment, tools, and materials used therein and thereon and service contracts; (c) water, power, fuel and other utilities; (d) premiums and other charges with respect to insurance; (e) all taxes and assessments and governmental charges and fees imposed upon the Property and any other property used therein (including, without limitation, any ad valorem real property or personal property taxes, special or general assessments, occupancy, gross receipts or rental taxes imposed upon and paid by Landlord, but not income or franchise tax or any other taxes imposed or measured by Landlord's income or profits unless the same is in lieu of real estate taxes, and not sales or rental taxes on rent which Landlord separately collects from Tenant pursuant to Subsection 5.5); (f) the reasonable management fee paid to any management company managing the Property for the Landlord, provided that if Landlord self-manages the Property, Landlord shall be entitled to receive a reasonable management fee (provided that any management fee whether paid to any management company or reserved by Landlord shall not exceed four percent (4%) of gross rents received by Landlord from the Property); and (g) reasonable reserves or expenditures for paving, painting, roofing, HVAC, and other similar capital expenditures made by Landlord for necessary replacements to maintain the Property in Building Standard Condition, not to exceed three percent (3%) of the total Base Annual Rent from the entire Property, annually. In no event shall the term "Operating Expenses" include: 1. The cost of any repairs, alterations, additions, changes, replacement and other items done to the Property, which under generally accepted accounting principals, are classified as capital expenditures or capital improvements. 2. Payments of principal and interest or other finance or other finance charges, made on any debt, including without limitation, and debt secured by a mortgage on the Property. [LANDLORD'S INITIALS ______] [TENANT'S INITIALS ______] 30 3. Non-cash items, such as deductions or depreciation, amortization of debts or obsolescence of the Property, equipment or any improvements related hereto. 4. Leasing and/or brokerage commissions, attorney's fees, costs, disbursements and other expenses incurred in connection with negotiations of leases with tenants of the Property or disbursements or litigation with any such parties. 5. Costs or expenses relating to another tenant's or occupant's space which were incurred in rendering any service or benefit to such tenant or occupant that landlord was not required to provide, or were for a service or benefit in excess of the service or benefit that Landlord is required to provide Tenant hereunder. 6. Income, excess profits or franchise taxes, inheritance taxes, transfer taxes and fees or other such taxes imposed on or measured by the income of Landlord from the operation of the Property. 7. The cost, of repairing or restoring the property, or any part thereof, that may be damaged or destroyed by any casualty or affected by condemnation awards are recovered or are adequate for such purpose. 8. All costs, concessions (including, without limitation rent abatement and construction allowances) and expenses incurred in leasing or procuring new tenants or retaining old tenants, including, without limitation, advertising, printing supplies and promotional expenses, leasing commissions and expenses for preparation of leases or renovating space for new or old tenants, or in enforcing the terms of any lease of space in the Property or in connection with any change in the name of the Property. 9. The cost of all the items, goods and services, including utilities sold and supplied to tenants and the occupants of the Property, for which Tenant, occupant, or other third party, including insurers, directly reimburses Landlord. 10. The cost of installing, operating and maintaining any specialty service, such as but not limited to, an observatory, broadcasting facility, satellite dish antennae, luncheon club retail store, sundry shop newsstand, car wash, concession, athletic or recreational club. [LANDLORD'S INITIALS ______] [TENANT'S INITIALS ______] 31 11. Any Payment of or an account of fee (s) paid to any person or entity in connection with the termination of any management person, entity, consultant or third party retained to provide services to the Property. 12. Any costs or expenses incurred in connection with the sale, financing, refinancing, mortgaging, syndicating or change of ownership of the Property or any other part thereof, including without limitation, brokerage commissions, attorneys and accountant's fees, closing costs, title insurance premiums, appraisals, marketing studies, transfer taxes, "points" and interest charges. 13. Any insurance premium to the extent that the Landlord is entitled to be reimbursed therefore by any other tenant of the Property other than as a part of the Operating Expenses. 14. Any amount paid as a penalty as a result of a willful violation of Law by Landlord or resulting from the negligence or the willful misconduct of any tenant of the Property. 15. All Liabilities, damages, awards and judgments for injury or death to persons and for property damage rising from the ownership or operation of the Property, and all court costs, attorney's fee's, paralegal fee's, expert witness fees and disbursements incurred in connection therewith. 16. The cost of any items for which Landlord is reimbursed by insurance or which is otherwise recovered from third parties, however nothing herein shall be construed to exclude from Operating Expenses any funds expended to cover the reasonable deductible under any policy of insurance maintained in connection with the Property. 17. Any cost or expense otherwise constituting an Operating Expense, except for management fees provided for in Section 19.4 of the Lease which is paid to any related party or affiliate of Landlord or any general partner of Landlord and which is in excess of what is reasonable for comparable service from an independent party of comparable experience and skill. 18. Any payment made pursuant to a lease or similar arrangement relating to any asset or other item, excluding replacement items, the cost of which if the same were purchased, would be depreciated or amortized as capital expenditure in accordance with generally accepted accounting principals, [LANDLORD'S INITIALS ______] [TENANT'S INITIALS ______] 32 wheresuch lease or other arrangement is essentially a financed purchase of such asset or item. 19. Charitable and political contributions of Landlord. 20. Salaries, wages, and other compensations paid (directly or indirectly) to partners, officers, directors, shareholders, or other owners, or principals of Landlord and executives of Landlords or those of its affiliates not principally engaged in performing services at the Property. Tenant shall not be required to pay for any reserves as set forth in item 19.4(g) in the foregoing paragraph at any time when the reserve is equal to or greater than an amount equal to ten percent (10%) of the total Base Annual Rent received from the Property. Should the reserves fall below ten (10%0 percent of the total Base Annual Rent, then Landlord may collect additional reserves. 19.5 NO WAIVER. Failure of Landlord to furnish a statement of actual Operating Expenses or to give notice under Subsection 19.2 or 19.3 in a timely manner shall not prejudice or act as a waiver of Landlord's right to furnish such statement or give such notice at a subsequent time or to collect any adjustments for any preceding period. Not more frequently than once each Lease Year, Tenant shall be entitled to have an audit of the Operating Expenses performed, and if any discrepancy shall be revealed, appropriate adjustments shall be made between Landlord and Tenant. SECTION 20 - PEACEFUL ENJOYMENT. -------------------------------- Tenant shall, and may peacefully enjoy the Premises against all persons claiming by, through or under Landlord, subject to the other terms hereof, provided that Tenant pays the rent and other sums herein required to be paid by the Tenant and performs all of Tenant's covenants and agreements in this Lease. SECTION 21 - HOLDING OVER. -------------------------- If Tenant holds over without Landlord's written consent after expiration or other termination of this Lease, or if Tenant continues to occupy the Premises after termination of Tenant's right of possession pursuant to the provisions of Subsection 18.2, Tenant shall be deemed to be a trespasser, and shall be liable to Landlord for damages for such holdover throughout the entire hold-over period, equal to double the Base Rent which would have been payable had the term of this Lease continued through the period of such holding over by the Tenant. No possession of the Premises by Tenant after this Lease shall have expired or been terminated shall be construed to extend the term of this Lease unless Landlord has consented to such possession in writing. [LANDLORD'S INITIALS ______] [TENANT'S INITIALS ______] 33 SECTION 22 - SUBORDINATION, ATTORNMENT, AND TENANT ESTOPPEL. ------------------------------------------------------------ 22.1 SUBORDINATION. This Lease is and shall continue to be subject and subordinate to any first mortgage, whether presently existing or hereafter arising upon the Property or Premises, and to any renewals, modifications, refinancing or extensions thereof. This clause shall be self-operative, and no further instrument of subordination shall be required; however, at any time and from time to time Tenant shall execute any instrument subordinating this Lease and agreeing to attorn to the holder of any such first mortgage, as Landlord shall require, provided however that Tenant's obligation shall be contingent upon said lender granting Tenant a non-disturbance agreement is a standard commercially reasonable form. The failure of Tenant to provide the complete and executed instrument of subordination described herein within ten (10) days after request by Landlord therefore shall constitute an Event of Default. In the event a mortgage encumbers the Property or the Premises on or before the Commencement Date, Landlord shall provide to Tenant a subordination, non-disturbance and attornment agreement on the part of the lender in a commercially reasonable form. 22.2 LANDLORD ATTORNEY-IN-FACT. If Tenant should fail to execute any subordination or other agreement required by this Subsection promptly as requested, Tenant hereby irrevocably constitutes Landlord as its attorney-in-fact to execute such instrument in Tenant's name, place and stead, it being agreed that such power is one coupled with an interest, but the execution of such instrument by Landlord shall not waive the breach of this Lease occasioned by Tenant's failure to provide such an instrument. 22.3 ESTOPPEL LETTER. Tenant agrees that it will from time to time, upon request by Landlord, execute and deliver to such persons as Landlord shall designate a statement in recordable form certifying that this Lease is unmodified and in full force and effect (or if there have been modifications, that the same is in full force and effect as so modified), stating the dates to which rent and other charges payable under this Lease have been paid, stating that Landlord is not in default hereunder (or if Tenant alleges a default, stating the nature of such alleged default), stating the amount of any security deposit or advance rent held by Landlord under this Lease, providing that Tenant shall be estopped to deny any matter set forth in said statement, and further stating such other matters as Landlord, or such persons as Landlord shall designate, shall reasonably require. The failure of Tenant to provide the complete and executed statement described herein within ten (10) days after request by Landlord therefore shall constitute an Event of Default. 22.4 ATTORNMENT. Tenant shall, in the event of the sale or assignment of all Landlord's interest in the Property or Premises, or in the event that any proceedings shall be brought for the foreclosure of any mortgage made by Landlord covering the Property or the Premises, attorn to the purchaser and recognize the purchaser as Landlord under this Lease. 22.5 FINANCIAL INFORMATION. Tenant agrees that it will from time to time, upon request by Landlord, provide Landlord financial statements and such other documents and information, in such [LANDLORD'S INITIALS ______] [TENANT'S INITIALS ______] 34 form as Landlord shall direct, as Landlord shall require as to Tenant's financial condition, and such statements and other documents and information shall be certified to be correct by an officer of Tenant. Landlord agrees to keep all such information confidential, and to use its best efforts to prevent the disclosure of same to competitors of Tenant; provided, however, that Tenant expressly authorizes Landlord to disclose all such information to any prospective purchaser of the Property or the Premises, and to any prospective lender of Landlord whose loan would be secured by an assignment of Landlord's interest in this Lease, the rents hereunder, the Property, the Premises, or all, or any combination, of the above. Tenant agrees to provide such financial statements and other documents and information to Landlord within ten (10) days after Landlord's request therefore. SECTION 23 - LANDLORD'S LIEN. ----------------------------- 23.1 GRANT OF LIEN. Tenant hereby grants to Landlord a lien and security interest on all property of Tenant now or hereafter placed in or upon the Premises, and such property shall be and remain subject to such lien and security interest of Landlord for payment of all rent and other sums agreed to be paid by Tenant herein. Notwithstanding the foregoing, the Landlord agrees that its lien shall be subordinate to the lien from any lending institution, supplier, or leasing company, if the security interest of such lending institution, supplier or leasing company has its origin a commercially reasonable arms-length transaction, whereby Tenant acquired such equipment, furniture, or other tangible personal property. Upon written request by Tenant, Landlord shall execute a subordination agreement, consistent with, and confirming the foregoing. 23.2 SECURITY AGREEMENT. The provisions of this subsection relating to such lien and security interest shall constitute a security agreement under and subject to the Uniform Commercial Code of the State of Florida so that Landlord shall have and may enforce a security interest on all property of Tenant now or hereafter placed in or on the Premises, in addition to and cumulative of the Landlord's liens and rights provided by law or by the other terms and provisions of this Lease. 23.3 FINANCING STATEMENTS. Tenant agrees to execute as debtor such financing statement or statements and such other documents as Landlord may now or hereafter request in order to protect or further perfect Landlord's security interest. Notwithstanding the above, Landlord shall neither sell nor withhold Tenant's business records from Tenant. SECTION 24 - ATTORNEYS' FEES. ----------------------------- Tenant will pay upon demand, as additional rent in addition to the rents and other sums agreed to be paid hereunder, all collection and court costs incurred by Landlord, and Landlord's reasonable attorneys' fees incurred for the collection of unpaid rents, or the enforcement, defense or interpretation of Landlord's rights under this Lease. Such fees and costs shall be due and payable to Landlord, if Landlord prevails in such litigation, at trial, on appeal, in bankruptcy proceedings, and in post-judgment collection or enforcement proceedings, including costs and attorneys fees incurred in [LANDLORD'S INITIALS ______] [TENANT'S INITIALS ______] 35 establishing and recovering costs and attorney's fees, whether in the main action or in a separate action brought solely for recovery of such costs and attorneys fees. Any judgment entered in any such suit, action, or proceedings shall provide for the retention of jurisdiction for the award of all Landlord's post-judgment costs and attorneys fees. Landlord shall also be entitled to recover from Tenant reasonable attorney's fees and costs incurred incident to the preparation or review of documents or materials in connection with any proposed assignment and subletting by Tenant, any financing by Tenant, or any modification or amendment to this Lease. SECTION 25 - NO IMPLIED WAIVER. ------------------------------- 25.1 NO WAIVER. The failure of Landlord to insist at any time upon the strict performance of any covenant or agreement or to exercise any option, right, power or remedy contained in this Lease shall not be construed as a waiver or a relinquishment thereof for the future. 25.2 PARTIAL PAYMENTS. No payment by Tenant or receipt by Landlord of a lesser amount than the entire amount claimed by Landlord to be due under this Lease shall be deemed to be other than a partial payment. No endorsement or statement on any check or any letter accompanying any check or payment shall be deemed an accord and satisfaction, and Landlord may accept such check or payment without waiving Landlord's right to collect the entire amount claimed to be due and owing to Landlord, or pursue any other remedy provided in this Lease. No acceptance of any payment of rent or other sum shall constitute a waiver by Landlord of any other default or breach on the part of Tenant, or preclude Landlord from exercising any rights it may have on account of such default or breach. SECTION 26 - PERSONAL LIABILITY OF LANDLORD. -------------------------------------------- The liability of Landlord to Tenant for any default by Landlord under this Lease shall be limited to the interest of Landlord in the Premises, and Tenant agrees to look solely to Landlord's interest in the Premises (or the proceeds thereof) for the recovery of any judgment from the Landlord, it being intended that Landlord shall not be personally liable for any judgment or deficiency. SECTION 27 - SECURITY DEPOSIT. INTENTIONALLY DELETED ---------------------------------------------------- SECTION 28 - FORCE MAJEURE. --------------------------- Whenever a period of time is herein prescribed for the taking of any action by Landlord, Landlord shall not be liable or responsible for, and there shall be excluded from the computation of such period of time, any delays due to strikes, riots, acts of God, shortages of labor or materials, war, governmental laws, regulations or restrictions, lending institution requirements, or any other cause whatsoever beyond the control of Landlord. Landlord shall not be liable to Tenant, Tenant's employees, agents, customers, guests, licensees, or invitees for any loss or damage to any [LANDLORD'S INITIALS ______] [TENANT'S INITIALS ______] 36 property or person occasioned by theft, fire, act of God, public enemy, injunction, riot, strike, insurrection, war, court order, requisition, or order of governmental body or authority or by any other cause beyond the control of Landlord. Nor shall Landlord be liable for any damage or inconvenience, which may arise through repair or alterations of any part of the Property or Premises. SECTION 29 - RELATIONSHIP OF PARTIES. ------------------------------------- Nothing contained in this Lease shall be deemed or construed by the parties hereto, nor by any third party, as creating the relationship of principal and agent or of partnership or of joint venture between Landlord and Tenant, it being understood and agreed that neither the method of computation of rent, nor any other provision contained herein, nor any acts of the parties herein shall be deemed to create any relationship between the parties hereto other than the relationship of Landlord and Tenant. SECTION 30 - UTILITIES. ----------------------- The Tenant shall, at its own cost and expense, pay all charges (together with any applicable taxes or assessments thereon) for utilities serving the Premises. Such utilities shall include, without limitation, as applicable, water, gas, electricity, air conditioning, heat, sewer, refuse collection, telephones, and any other utility charges or similar items in connection with the use or occupancy of the Premises. If any utilities shall not be separately metered to the Premises by the applicable utility, Tenant may be billed monthly by Landlord for Tenant's share of such utility service, as determined by Landlord, in addition to Tenant's monthly Operating Expenses pursuant to Section 19 hereof. Payment shall be due and payable upon receipt of the billing by Tenant. SECTION 31 - MISCELLANEOUS. --------------------------- 31.1 SEVERABILITY. If any term or provision of this Lease, or the application thereof to any person or circumstance shall, to any extent, be invalid or unenforceable, the remainder of this Lease or the application of such term or provision to the persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby, and each term and provision of this Lease shall be valid and enforced to the fullest extent permitted by law. 31.2 RECORDATION. Tenant agrees not to record this Lease but Landlord may record this Lease at its sole discretion. The parties shall execute a memorandum of lease, which Landlord shall record in the Public Records of Orange County, Florida. The memorandum shall identify the Premises, the parties and the term of the Lease, and shall contain any notices relating to construction or mechanics' lien law, as Landlord desires. Tenant waives the right to file a notice of lis pendens against the Property, the Premises, and any interest therein or any part thereof. The filing of a notice of lis pendens by or on behalf of Tenant shall be an event of default by Tenant, for which no notice or opportunity to cure shall be provided, notwithstanding any contrary provision of this Lease. [LANDLORD'S INITIALS ______] [TENANT'S INITIALS ______] 37 31.3 GOVERNING LAW. This Lease and the rights and obligations of the parties hereto are governed by the laws of the State of Florida. 31.4 TIME OF PERFORMANCE. Except as expressly otherwise herein provided, time is of the essence of this Lease. 31.5 TRANSFERS BY LANDLORD. Landlord shall have the right to transfer and assign, in whole or in part, all its rights and obligations hereunder and in the Property and the Premises referred to herein, and in such event and upon such transfer, Landlord shall be released from any further obligations hereunder, and Tenant agrees to look solely to such successor in interest of Landlord for the performance of such obligations accruing after such transfer. 31.6 BROKER. Tenant represents that Tenant has not dealt with any real estate broker, sales person, finder, or any other person who may be entitled, or claim to be entitled to a commission in connection with this Lease, except the Brokers identified in Subsection 1.4 hereof, and no such other person initiated or participated in the negotiation of this Lease, or showed the Premises or Property to Tenant. Tenant agrees to indemnify and hold harmless Landlord from and against any liabilities and claims for commissions and fees arising out of a breach of the foregoing representation. 31.7 EFFECT OF DELIVERY OF THIS LEASE. Landlord has delivered a copy of this Lease to Tenant for Tenant's review only, and the delivery hereof does not constitute an offer to Tenant or an option to lease. This Lease shall not be effective unless and until a copy executed by both Landlord and Tenant is delivered to and accepted by Landlord. 31.8 SECTION HEADINGS. The section or subsection headings are used for convenience of reference only and do not define, limit or extend the scope or intent of the paragraphs. 31.9 DEFINITIONS. The definitions set forth in Section 1 are hereby made part of this Lease. 31.10 EXHIBITS. The following exhibits are attached hereto and incorporated herein and made a part of this Lease for all purposes: EXHIBIT NUMBER DESCRIPTION -------------- ----------- Exhibit "A" Property Legal Description Exhibit "B" Preliminary Site Plan Exhibit "C" Development Agreement Exhibit "D" Work Schedule [LANDLORD'S INITIALS ______] [TENANT'S INITIALS ______] 38 Exhibit "E" Timeshare Lease Agreement Exhibit "F" Sign Schedule Exhibit "G" Restricted Uses Exhibit "H" Building Rules Exhibit "I" Utilities Exhibit "J" Pad 31.11 NOTICES. The Tenant shall pay the rent and shall forward all notices to Landlord at 5728 Major Boulevard., Suite 174, Orlando, FL 32819, or at such other place as Landlord may hereafter designate in writing. The Landlord shall forward all notices to Tenant at the address of Tenant indicated on the first page hereof. Any notice provided for in this Lease must, unless otherwise expressly provided herein, be in writing, and may, unless otherwise expressly provided, be given or be served by depositing the same in the United States mail, postage pre-paid, registered or certified, and addressed to the party to be notified, with return receipt requested, or by delivering the same, in person or by Federal Express or other nationally recognized courier service, to such address. Any notice to Tenant delivered to the Premises or other address specified for the Tenant shall be complete when delivered to any agent or employee of Tenant therein. Notice deposited in the mail in the manner hereinabove indicated shall be effective upon receipt, unless such mail is unclaimed, refused, rejected, or undeliverable due to a change of address, in which event notice shall be effective five (5) days after the date of mailing. Notice sent by Federal Express or other nationally recognized courier service in the manner hereinabove indicated shall be effective upon receipt, unless such notice is unclaimed, refused, rejected, or undeliverable due to a change of address, in which event notice shall be effective on the date delivery is first attempted, as set forth on the records of the courier service. 31.12 INTEREST. Interest at the highest contract rate allowable by law shall accrue upon all sums due Landlord from Tenant, whether rent or otherwise, from the date that each such sum shall be due and payable to Landlord until it shall be paid in full. 31.13 APPLICATION OF PAYMENTS. Tenant waives the right to direct application of payments due hereunder, and Landlord shall have the right to apply any payment hereunder made to any sum then claimed by Landlord to be due and owing by Tenant, whether Tenant shall have specifically directed the application of such payment or not. 31.14 AUTHORITY OF REPRESENTATIVES. Tenant and the individuals signing this Lease on its behalf represent to Landlord that the individual or individuals executing this Lease is or are authorized to do so by the board of directors of Tenant, if Tenant shall be a corporation, and by the partners or other governing body or persons, if not a corporation, and that the execution and delivery of this Lease is legal, valid, and binding upon Tenant. [LANDLORD'S INITIALS ______] [TENANT'S INITIALS ______] 39 31.15 NUMBER AND GENDER. Whenever used herein, the singular number shall include the plural and the plural shall include the singular and the use of one gender shall include all genders. Any individuals identified as Tenant herein shall be jointly and severally liable for the performance by Tenant of all Tenant's obligations hereunder, and any notice provided to one shall constitute notice to all. 31.16 AMENDMENT AND ENTIRE AGREEMENT. The provisions of this Lease and the attached Exhibits, constitute the entire agreement between Landlord and Tenant, and supersede and revoke all prior agreements, representations, warranties, negotiations, promises, covenants, agreements, assurances, understandings, brochures, letters of intent, and information conveyed or provided, between or among the parties concerning the Premises, the Property, or the obligations of any party hereunder, whether oral or written ("Representations and Agreements"). There are no other Representations and Agreements which are not set forth herein between the parties, or their respective representatives, or any other person, including, without limitation, the Broker, if any, purporting to represent the Landlord or the Tenant. The Tenant acknowledges that it has not been induced to enter into this Lease by any Representations and Agreements not set forth in this Lease, it has not relied upon any such Representations and Agreements, no such Representations and Agreements shall be used in the interpretation or construction of this Lease, and the Landlord shall have no liability for any consequences arising as a result of any such Representations and Agreements. This Lease may only be modified or amended by an agreement in writing executed by the parties hereto. 31.17 DUPLICATE ORIGINALS. This Lease may be executed in duplicate, and each such executed duplicate shall constitute an original. 31.18 LATE PAYMENTS AND RETURNED CHECKS. If any payment of rent or other sums due hereunder from Tenant shall not be made to Landlord within five (5) days of the due date fixed in this Lease, then for each such occurrence Tenant shall pay to Landlord an additional sum equal to five percent (5%) of the late payment. If any check, draft or money order presented by Tenant to Landlord in payment of rent or other sums due hereunder shall not be honored and shall be returned, whether for insufficient funds or otherwise, then for each such occurrence Tenant shall pay to Landlord an additional sum equal to One Hundred And No/100 Dollars ($100). The above amounts shall be payable in addition to all other amounts which may be due by Tenant hereunder, and the Landlord's rights thereto shall be in addition to all other remedies it may have hereunder. The above amounts shall constitute agreed liquidated damages for Landlord for its expense and inconvenience incurred by reason of such late payments or returned checks, the amounts of which may be impossible to determine with specificity, and shall not be a penalty. 31.19 RIGHT TO DEDICATE TO OR VACATE CONDOMINIUM. Landlord, and any other owner of the Property, shall have the right to dedicate all or part of the Property, including the Premises, to condominium ownership, or to impose restrictive covenants upon all or part of the Property, or to [LANDLORD'S INITIALS ______] [TENANT'S INITIALS ______] 40 vacate any declaration of condominium, or restrictive covenants affecting the Property. Tenant's right in and to the Premises and the Property shall automatically be subordinate to any dedication of condominium or declaration of restrictive covenants now or hereafter imposed by Landlord or such owners, provided that nothing therein shall prohibit the use of the Premises for its Permitted Use for so long as Tenant shall not be in default hereunder. Tenant agrees that the execution hereof shall be its written subordination agreement or consent to vacation; however, Tenant further agrees that it shall execute a separate written subordination agreement or consent to vacation evidencing the agreements of this subsection within five (5) days after written demand by Landlord. 31.20 SHOPPING CENTER LEASE. This is a Lease of real property in a "Shopping Center" within the meaning of Section 365 (b) (3) of the Bankruptcy Code, 11 USC Section 365 (b) (3). 31.21 CONSTRUCTION. Landlord and Tenant agree that the terms hereof were negotiated by and between the parties, that both parties may be viewed as the drafters of this Lease, and that ambiguities shall not be construed against either party as the drafter. 31.22 WAIVER OF JURY TRIAL. Landlord and Tenant hereby mutually waive any and all rights which any one of them may have to request a jury trial in any proceeding at law or in equity in any court of competent jurisdiction relating to, or arising out of, or in connection with any rights or obligations created under the terms of this Lease Agreement or the relationship between Landlord and Tenant created hereunder and by operation of law. 31.23 ADDENDA. One or more Addenda may be attached hereto, and if executed and attached to this Lease, shall supersede and control any conflicting provisions of this Lease. SECTION 32 [DELETED INTENTIONALLY] SECTION 33 - RENEWAL. --------------------- Provided that the Tenant shall not be in default in any of the terms, covenants and conditions of this Lease, Landlord agrees that Tenant shall have the right and option to renew the term of this Lease for the Renewal Terms. The first such renewal term, if exercised, shall commence upon the expiration of the Lease Term. Each subsequent Renewal Term, if exercised, shall commence upon the expiration of the preceding Renewal Term. In order to exercise the option to renew the term of this Lease for the first Renewal Term, Tenant must give Landlord written notice of its intention to do so not less than one hundred eighty (180) days prior to the expiration of the Lease Term. In order to exercise each subsequent Renewal Term option, Tenant must have first exercised each prior option to renew and, in addition, must give Landlord written notice of its intention to exercise such subsequent Renewal Term option not less than one hundred eighty (180) days prior to the expiration of the preceding Renewal Term. In the event that Tenant fails to deliver said written notice of renewal to the Landlord, as specified hereinabove, then the option granted Tenant [LANDLORD'S INITIALS ______] [TENANT'S INITIALS ______] 41 hereunder to renew this Lease shall terminate and be null and void and this Lease shall terminate on the last day of the Lease Term, or on the last day of the last properly exercised Renewal Term, whichever shall be applicable. In interpreting the Lease Agreement during any Renewal Term as to which the Tenant shall have properly exercised its renewal option, those provisions of the Lease Agreement which make reference to the Lease Term shall be interpreted, where the context shall so permit, to mean and include the Renewal Term as to which such renewal option shall have been exercised, provided that under no circumstances shall this be construed to provide Tenant more than the number of Renewal Terms set forth in Subsection 1.20 hereof. During each Renewal Term the rights of Landlord and Tenant shall be governed by the terms and conditions of this Lease Agreement, and during the Renewal Terms the Base Rent specified in Subsection 1.3 of the Lease Agreement, and Percentage Rent shall continue to be due to Landlord as provided in Subsection 5.7 of the Lease Agreement. [LANDLORD'S INITIALS ______] [TENANT'S INITIALS ______] 42 IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease in multiple original counterparts as of the day and year first above written. "LANDLORD" SIGNED, SEALED AND DELIVERED E.D.I. II INVESTMENTS, INC., A FLORIDA IN THE PRESENCE OF: CORPORATION ___________________________________ BY:_________________________________ (_________________________________) MOHAMMED DIAB PRINT NAME BELOW SIGNATURE AS ITS: VICE PRESIDENT ___________________________________ (_________________________________) PRINT NAME BELOW SIGNATURE "TENANT" FAMILY STEAK HOUSES OF FLORIDA, INC., A FLORIDA CORPORATION, D/B/A RYAN'S GRILL, BUFFET & BAKERY __________________________________ BY:_________________________________ (_________________________________) EDWARD B. ALEXANDER PRINT NAME BELOW SIGNATURE AS ITS: CHIEF FINANCIAL OFFICER ___________________________________ (_________________________________) PRINT NAME BELOW SIGNATURE 43 LEGAL DESCRIPTION ----------------- Lots 4 and 5, Florida Center Unit 21, as recorded in Plat book 7, Page 82 of the Public Records of Orange County, Florida, less the Northerly 8 feet for Road right-of-Way of International Drive. EXHIBIT "A" 44 EX-99.1 6 ex991-802.txt CERTIFICATION Exhibit 99.1: Certification of Periodic Reports CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Family Steak Houses of Florida, Inc.'s (the "Company") Quarterly Report on Form 10-Q for the period ending July 3, 2002, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Glen F. Ceiley, Principal Executive Officer/Chairman of the Board of the Company, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that,: (1). The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and (2). The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: August 15, 2002 By: /s/ Glen F. Ceiley ------------------------------------ Glen F. Ceiley Principal Executive Officer/ Chairman of the Board EX-99.2 7 ex992-802.txt CERTIFICATION Exhibit 99.2: Certification of Periodic Reports CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Family Steak Houses of Florida, Inc.'s (the "Company") Quarterly Report on Form 10-Q for the period ending July 3, 2002, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Edward B. Alexander, Executive Vice President/ Chief Financial Officer of the Company, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that,: (1). The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and (2). The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: August 15, 2002 By: /s/ Edward B. Alexander ----------------------- Edward B. Alexander Executive Vice President/ Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----