EXHIBIT 10.25
2003 AMENDMENT
TO FRANCHISE AGREEMENT
This 2003 Amendment to Franchise Agreement (this
"Amendment") is entered into as of December 17, 2003 by and
between Ryan's Properties, Inc. ("Ryan's") and Family Steak
Houses of Florida, Inc. ("FSH").
WHEREAS, Ryan's and FSH are parties to that certain
Franchise Agreement, dated as of September 16, 1987, as amended
prior to the date hereof (the "Existing Franchise Agreement";
the Existing Franchise Agreement as amended by this Amendment
shall be referred to as the "Franchise Agreement") (all
capitalized terms used herein that are not otherwise defined
herein to have the meanings ascribed to them in the Existing
Franchise Agreement); and
WHEREAS, FSH has informed Ryan's that FSH does not expect
to have in operation at December 31, 2003 a number of
Restaurants (defined as restaurants of FSH operating as Ryan's
Family Steak Houses) equal to at least 80% of the number of
Restaurants required to be in operation as of that date pursuant
to the terms of the Existing Franchise Agreement; and
WHEREAS, Section XV (Termination and Defaults) of the
Existing Franchise Agreement provides, among other matters, that
FSH shall be in default under the Existing Franchise Agreement
if "at the end of any calendar year the number of Restaurants in
operation is less than 80% of the number of Restaurants required
to be in operation as of that date pursuant to the terms of this
Agreement, as amended"; and
WHEREAS, the parties desire to wind down and terminate the
franchise relationship under the Existing Franchise Agreement in
an amicable manner that minimizes unnecessary disruption;
NOW, THEREFORE, for valuable consideration, the receipt and
sufficiency of which are acknowledged by each of the parties
hereto, the parties hereto agree as follows:
1. Termination or Conversion of Restaurants.
(a) FSH agrees that, in accordance with the
schedule set forth on the attached Exhibit A, FSH shall complete
as to each and every one of FSH's Restaurants:
(i) its sale to an unaffiliated third party
to be operated as a restaurant with a name and logo (immediately
upon consummation of such sale) that differs sufficiently from
"Ryan's Family Steak House" and "Fire Mountain" to avoid any
reasonable likelihood of confusion;
(ii) the termination of its operation as a
restaurant of any sort; and/or
(iii) the conversion of that Restaurant from
a "Ryan's Family Steak House" to a restaurant with a name and
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logo that differs sufficiently from "Ryan's Family Steak House"
and "Fire Mountain" to avoid any reasonable likelihood of
confusion between any of FSH's restaurants and any of Ryan's
restaurants; provided further, that, if at any time FSH changes
the exterior facade or interior design of any such Restaurant
(or former Restaurant), FSH shall cause the new exterior facade
or interior design (as applicable) to differ sufficiently from
Ryan's "Fire Mountain" and the `lodge look' of "Ryan's Family
Steak House" to avoid any reasonable likelihood of confusion
between any of FSH's restaurants and any of Ryan's restaurants.
(b) FSH shall cause each such Restaurant sale,
termination or conversion to be accomplished in as commercially
reasonable a manner as possible consistent with the requirements
of this Amendment.
(c) No later than five (5) business days after
the completion of the sale, termination or conversion of a
Restaurant pursuant to this Amendment, FSH shall certify that
fact in writing to Ryan's. Ryan's may request any and all such
information, and may make any and all such inspections, as may
be reasonably necessary to verify the sale, termination or
conversion of any or all Restaurants in accordance with this
Amendment.
(d) The Continuing Services and Royalty Fee set
forth in the Existing Franchise Agreement shall continue to
apply to the total gross receipts from each of FSH's Restaurants
until the date the sale, termination or conversion as
contemplated by this Amendment of such Restaurant is completed.
Payment of any unpaid Continuing Services and Royalty Fee for
any sold, terminated or converted Restaurant shall be made in
accordance with the Existing Franchise Agreement.
(e) From and after January 1, 2004, (i) Ryan's
shall have no further obligations under Paragraphs II
(Location), IV (Training and Assistance), Subparagraph B of
Paragraph V (Advertising) or Subparagraph D of Paragraph VI
(Confidential Operating Manual) of the Franchise Agreement, and
(ii) Attachment 1 to the July 13, 1992 letter agreement amending
the Franchise Agreement shall no longer be in effect. From and
after the date that the sale, termination or conversion as
contemplated by this amendment of an FSH Restaurant is
completed, Ryan's shall have no further obligations under any
provision of the Franchise Agreement with respect to such
Restaurant. Without limiting the preceding provisions, from and
after the earlier of (i) the date that all Restaurants are sold,
terminated or converted or (ii) June 30, 2005, FSH shall not be
entitled to receive supplies that are proprietary to Ryan's.
Nothing contained herein, however, shall impede FSH from
continuing to use recipes obtained from Ryan's and now used at
the Restaurants in its converted restaurants; provided, however,
that FSH shall remain obligated under Paragraph XIV.D and, to
the extent applicable, Paragraph VI.B with respect to such
recipes.
(f) FSH acknowledges that the deadlines set
forth in Exhibit A are of the essence. Accordingly, if FSH
fails to complete the sale, termination or conversion as
contemplated by this Amendment of the cumulative number of
Restaurants as contemplated by this Amendment by any applicable
date set forth on Exhibit A:
(i) (A) if such failure is with
respect to the requirement that all of the Restaurants be sold,
terminated or converted by June 30, 2005, such failure shall
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constitute a default under the Franchise Agreement, and, without
the necessity of any notice (including without limitation any
"Notice to Cure" or "Notice of Cure"), Ryan's shall have all
remedies available under the Franchise Agreement, at law and/or
in equity by reason of such breach; or
(B) if such failure is with
respect to the cumulative number of Restaurants require by this
Amendment to be sold, terminated or converted by any date other
than June 30, 2005, such failure shall constitute a default
under the Franchise Agreement if such failure is not fully cured
within one hundred eighty (180) days after the occurrence of
such failure, and in such event, without the necessity of any
notice (including without limitation any "Notice to Cure" or
"Notice of Cure"), Ryan's shall have all remedies available
under the Franchise Agreement, at law and/or in equity by reason
of such breach; and
(ii) without limiting clause (i) in any
way, during any quarterly period (except for the first thirty
(30) days of such quarterly period, if immediately prior to such
period FSH was in compliance with the Franchise Agreement) that
more FSH's Restaurants are in operation than permitted by this
Amendment (such excess number of Restaurants at any time being
hereinafter referred to as the "Excess Number"), the Continuing
Service and Royalty Fee during that quarter shall be equal to
the sum of (A) 4% of the total gross receipts of all of FSH's
Restaurants in operation, plus (B) the produce of (x) 2% of the
total gross receipts of all of FSH's Restaurants in operation,
multiplied by (y) the quotient of (1) the Excess Number, divided
by (2) the total number of FSH's Restaurants in operation.
Each of subparagraphs (i) (A), (i)(B) and (ii) of this paragraph
(f) is independent of the other, and Ryan's rights under any of
such subparagraphs shall not be affected by whether or not
Ryan's then has rights under the terms of any of the other such
subparagraphs.
2. Additional Agreements.
(a) Ryan's agrees that, unless and until FSH
defaults under any of its obligations under this Amendment or
any of its other obligations under the Franchise Agreement,
Ryan's shall not exercise any of the remedies (other than this
Amendment) available to it under the Franchise Agreement, at law
and/or in equity with respect to the failure by FSH to have in
operation as of December 31, 2003 a number of Restaurants at
least equal to 80% of the number of Restaurants required to be
in operation as of that date under the Existing Franchise
Agreement.
(b) For so long as FSH is not in default under
the Franchise Agreement, Ryan's shall make no derogatory remark
concerning FSH to any third party, and shall instruct its
officers and directors not to make any such derogatory remark.
For so long as Ryan's is not in default under the Franchise
Agreement, FSH shall make no derogatory remark concerning Ryan's
to any third party, and shall instruct its officers and
directors not to make any such derogatory remark.
(c) Unless required by law in the reasonable
judgment of a party, neither party shall make any public
announcement concerning this Amendment or the relationship
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between the parties without giving the other party a reasonable
opportunity to comment on the proposed announcement and without
the other party's consent, which consent shall not be
unreasonably withheld or delayed.
(d) FSH shall not construct or open any
additional Restaurant as a Ryan's Family Steak House.
(e) If not earlier terminated pursuant to the
terms of the Franchise Agreement, and subject to paragraph (f)
below, the Franchise Agreement shall terminate and expire at
such time as the sale, termination or conversion as contemplated
by this Amendment of all of FSH's Restaurants has been completed
and all payments due under the Franchise Agreement from any
party to the other party have been finally paid in full.
(f) This Amendment and the following provisions
of the Franchise Agreement shall survive the expiration and
termination of the Franchise Agreement:
(i) Clause 2 of Subparagraph A of
Paragraph III (Proprietary Marks);
(ii) Subparagraphs B and C of Paragraph
VI (Confidential Operating Manual);
(iii) Subparagraph C of Paragraph VIII
(Accounting and Records);
(iv) Paragraph XII (Insurance), to the
extent of any applicable statute of limitations, with respect to
insurance protecting Ryan's and its officers and employees
against any loss, liability or expense whatsoever from personal
injury, death, property damage or products liability, arising or
occurring upon or in connection with any Restaurant or by reason
of FSH's operation upon, from or occupancy of such Restaurant
prior to the date that such Restaurant is sold, terminated or
converted as contemplated by this Amendment;
(v) Subparagraphs B, D and E of
Paragraph XIV (Covenants);
(vi) Paragraph XVI (Rights and Duties of
Parties upon Expiration or Termination), other than Subparagraph
B thereof;
(vii) Subparagraph B of Paragraph XXI
(Independent Contractor);
(viii) Paragraph XXIV (Liability for
Breach), subject to Section 3 of this Amendment; and
(ix) Paragraphs XXII (Non-Waiver), XXIII
(Notice), XXVII (Applicable Law) and XXVIII (Arbitration).
Notwithstanding the termination of any provision of the
Franchise Agreement, but subject to Section 3 of this Amendment,
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a party shall be liable to the other party for any breach of any
such terminated provision that occurs prior to the date of
termination and expiration of the Franchise Agreement.
(g) Notwithstanding the terms of Subparagraph C
of Paragraph XIV (Covenants) of the Existing Franchise
Agreement, such Subparagraph C shall not survive the expiration
and termination of the Franchise Agreement pursuant to Section
2(e) of this Amendment. Ryan's acknowledges and agrees that FSH
is free to construct and operate restaurants at any time and
anywhere, even if such restaurants compete with Ryan's, so long
as FSH does not thereby violate the Franchise Agreement as then
in effect. Similarly, FSH acknowledges and agrees that Ryan's
is free to construct and operate restaurants at any time and
anywhere, under the name "Ryan's Family Steak House" or "Fire
Mountain" or any other name that Ryan's may then lawfully use,
even if such restaurants compete with FSH.
3. Releases.
(a) Subject to the limitations contained in
paragraph (b) of this Section 3, FSH, on behalf of itself and
its successors and assigns, hereby irrevocably and
unconditionally releases and forever discharges, individually
and collectively, Ryan's, and each of its officers, directors,
agents, employees, parent companies, subsidiaries, affiliates,
successors and assigns (hereinafter collectively the "Ryan's
Parties), of and from any and all charges, claims, complaints,
demands, liabilities, causes of action, losses, costs and
expenses (collectively, "Claims") of any kind whatsoever
(including related attorneys' fees and costs), whether arising
in contract or tort or under a statute or any other law or
otherwise, known or unknown, or suspected or unsuspected, that
FSH may now have or has ever had against any of the Ryan's
Parties by reason of any act, omission, transaction or event
occurring prior to or on the date of this Amendment. The final
release and discharge set forth in the immediately preceding
sentence constitutes a material part of the consideration
flowing from FSH to Ryan's under this Amendment, and each of the
individuals and entities included thin the term "Ryan's Parties"
is an intended beneficiary of this consideration.
(b) Notwithstanding anything to the contrary
herein, the releases and discharges contained in paragraph (a)
of this Section 3 do not release, discharge or otherwise affect
any of the following Claims:
(i) Claims relating to Ryan' obligations
under this Amendment or arising after the date hereof under the
Franchise Agreement; and
(ii) Claims arising from any fraud or
illegal activities of Ryan's.
(c) Subject to the limitations contained in
paragraph (d) of this Section 3, Ryan's, on behalf of itself and
its successors and assigns, hereby irrevocably and
unconditionally releases and forever discharges, individually
and collectively, FSH, and each of its officers, directors,
agents, employees, parent companies, subsidiaries, affiliates,
successors and assigns (hereinafter collectively the "FSH
Parties"), of an from any and all Claims of any kind whatsoever
(including related attorneys' fees and costs), whether arising
in contract or tort or under a statute or any other law or
otherwise, known or unknown, or suspected or unsuspected, that
Ryan's may now have or has every had against any of the FSH
Parties by reason or any act, omission, transaction or event
occurring prior to or on the date of this Amendment. The final
release and discharge set forth in the immediately preceding
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sentence constitutes a material part of the consideration
flowing from Ryan's to FSH under this Amendment, and each of the
individuals and entities included within the term "FSH Parties"
is an intended beneficiary of this consideration.
(d) Notwithstanding anything to the contrary
herein, the releases and discharges contained in paragraph (c)
of this Section 3 do not release, discharge or otherwise affect
any of the following Claims:
(i) Claims relating to FSH's obligations
under this Amendment or arising after the date hereof under the
Franchise Agreement;
(ii) Claims arising under the Franchise
Agreement for any unpaid Continuing Services and Royalty Fees,
whether such Fees are payable with respect to past or future
periods; and
(iii) Claims arising from any fraud or
illegal activities of FSH>
(e) The parties understand that the Claims
released and discharged under this Section 3 include, without
limitation, all such Claims arising from FSH's relationship with
Ryan's or any of its parent companies or subsidiaries, the
termination of such relationship and any other conduct or
negotiations occurring on or prior to the date of this
Amendment, except as specifically excluded in paragraph (b) or
(d) above.
(f) The releases and discharges set forth in
this Section 3 may be pleaded as a full and complete defense to,
and may be used as the basis for an injunction against, any
action, suit, or other proceeding that may be instituted,
prosecuted or attempted in breach of this Section 3.
(g) Each of FSH and Ryan's acknowledges and
agrees that the releases and other consideration described in
this Section 3 are offered and exchanged in good faith and will
not, for any purpose, be considered as admissions of liability
on the part of any party, which liability is expressly denied,
and no past or present wrongdoing on the part of any party is
implied by such releases or other consideration under the terms
of this Section 3.
(h) Each party warrants to the other party that
it has not assigned any Claim released herein.
4. Miscellaneous.
(a) Except as amended by this Amendment, the
Existing Franchise Agreement shall remain in full force and
effect.
(b) This Amendment shall bind and inure to the
benefit of the parties hereto and their respective successors
and assigns, and shall inure to the benefit of the Ryan's
Parties and the FSH Parties to the extent provided in Section 3
hereof.
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(c) This Amendment shall be construed as a
contract entered into under the laws of the State of South
Carolina, without regard to its rules respecting conflicts of
laws. Any dispute regarding this Amendment shall be subject to
the dispute resolution procedures set forth in the Franchise
Agreement.
(d) This Amendment and the Franchise Agreement
embody the entire agreement of the parties with respect to the
subject matter hereof and thereof, and there are no promises,
representations, warranties, covenants or undertakings of any
party to the other with respect to such subject matter other
than those expressly set forth herein and therein.
(e) No provision contained in this Amendment or
the Franchise Agreement shall be deemed to have been waived by
reason of any failure or delay to enforce the same, regardless
of the number of breaches or violations that may occur. All
waivers of any such provision shall be in writing executed by
the party against whom the same is sought to be enforced. This
Amendment and the Franchise Agreement may be amended only by a
writing executed by each party hereto.
(f) In the event any provision of this Amendment
is determined, in accordance with the dispute resolution
procedures set forth in the Franchise Agreement, to be
unenforceable for any reason, the remaining provisions hereof
shall remain in full force and effect and the unenforceable
provision(s) shall be interpreted and rewritten to give effect
to the parties' economic intentions.
(g) Each of Ryan's rights under this Amendment
is cumulative to its other rights under this Amendment or the
Franchise Agreement, at law or in equity.
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(h) This Amendment may be executed in several
counterparts, all of which shall form one and the same
agreement.
IN WITNESS WHEREOF, Ryan's and FSH have executed this
Amendment as of the date first set forth above.
RYAN'S:
RYAN'S PROPERTIES, INC.
a Delaware corporation
By: Charles D. Way
Name: Charles D. Way
Title: President
FSH:
FAMILY STEAK HOUSES OF FLORIDA, INC.
a Florida corporation
By: Edward B. Alexander
Name: Edward B. Alexander
Title: President
Attest: Cynthia Newton
Name: Cynthia Newton
Title: Executive Assistant
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EXHIBIT A
Cumulative Number of Restaurants Deadline
For Which Sale, Termination --------
or Conversion Has Been Completed
- --------------------------------
3 March 31, 2004
5 June 30, 2004
8 September 30, 2004
11 December 31, 2004
14 March 31, 2005
18 June 30, 2005