EXHIBIT 10.11
LIMITED LIABILITY COMPANY AGREEMENT
OF
WI-TENN RESTAURANTS, LLC,
A DELAWARE LIMITED LIABILITY COMPANY
THIS LIMITED LIABILITY COMPANY AGREEMENT is made and entered into as of
the 8th day of November, 2004, by and among O'CHARLEY'S INC., a Tennessee
corporation, whose address is ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
("O'CHARLEY'S"), and WI-TENN INVESTORS, LLC, a Delaware limited liability
company, having an address of ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("JV
PARTNER"), (each, together with the other persons who may become members under
the terms of this Agreement, a "MEMBER" and collectively, the "MEMBERS").
WITNESSETH:
WHEREAS, O'Charley's, as a result of the expenditure of time, skill,
effort and money, has developed and owns the rights to develop and operate a
unique system of full service varied menu casual dining restaurants which
feature freshly prepared items such as hand-cut and aged steaks, fresh chicken,
seafood, homemade yeast rolls and fresh-cut salads with special recipe dressing
and which serve alcoholic beverages through a full-service bar all under the
trademark O'Charley's(R) (the "SYSTEM");
WHEREAS, the distinguishing characteristics of the System include,
without limitation, distinctive exterior and interior design, decor, color
schemes, awnings, neon lighting and furnishings, special recipes and menu items,
uniform standards, specifications and procedures for operations, quality and
uniformity of products and services offered, procedures for inventory management
and financial control, training and assistance, and advertising and promotional
programs, all of which may be changed, improved and further developed by
O'Charley's from time to time;
WHEREAS, O'Charley's identifies the System by means of certain trade
names, service marks, trademarks, emblems and indicia of origin, including, but
not limited to, the ▇▇▇▇ ▇'▇▇▇▇▇▇▇'▇(R) and such other trade names, service
marks and trademarks as are now designated (and may hereafter be designated by
O'Charley's) for use in connection with the System (the "PROPRIETARY MARKS");
WHEREAS, O'Charley's continues to develop, use and control the use of
such Proprietary Marks in order to identify for the public the source of
services and products marketed thereunder and under the System, and to represent
the System's high standards of quality, appearance and service;
WHEREAS, the Members hereto desire to enter into this Agreement for the
purpose of (a) forming a limited liability company under and pursuant to the Act
(as defined below), to
conduct business as an owner and operator of O'Charley's restaurants as a
limited liability company, and to set forth the mutual rights and obligations of
the Members in this Agreement; (b) owning and operating one or more O'Charley's
restaurants utilizing the System; and (c) obtaining a franchise from O'Charley's
for that purpose; and
WHEREAS, O'Charley's, as franchisor, and the LLC, as franchisee, will
contemporaneously herewith enter into a Franchise Agreement and a Development
Agreement.
NOW, THEREFORE, in consideration of the mutual promises, covenants, and
undertakings hereinafter contained, and other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the Members hereby
agree as follows:
ARTICLE I.
DEFINITIONS
1.1 DEFINITIONS. As used herein the following terms have the indicated
meanings:
1.1.1 "Act" means the Delaware Limited Liability Company Act,
being Title 6, Sections 18-101 to 18-1109 of the Delaware Code Annotated, as
amended from time to time, and any corresponding provisions of any successor
legislation.
1.1.2 "Adjusted Capital Account Deficit" means, with respect
to any Member and with respect to any period of time, the deficit balance, if
any, in such Member's Capital Account as of the end of such period, after giving
effect to the following adjustments:
(i) Credit to such Capital Account any amounts that
such Member is deemed to be obligated to restore pursuant to the penultimate
sentences in Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5), and
(ii) Debit to such Capital Account the items
described in Regulations Sections 1.704-1(b)(2)(ii)(d)(4),
1.704-1(b)(2)(ii)(d)(5) , and 1.704-1(b)(2)(ii)(d)(6) .
The foregoing definition of Adjusted Capital Account Deficit
is intended to comply with the provisions of Regulations Section
1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.
1.1.3 "Affiliate" means any person directly or indirectly
controlling, controlled by, or under common control with such person.
1.1.4 "Agreement" means this Limited Liability Company
Agreement, as amended from time to time.
1.1.5 "Assign" means to make an Assignment.
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1.1.6 "Assignment" means any transfer, alienation, sale,
conveyance, assignment, or other disposition of all or any part of an existing
Membership Interest in the LLC, by operation of law or otherwise, hypothecation,
mortgage, lien, pledge, encumbrance, or granting of a security interest.
1.1.7 "Available Cash Flow" means all cash, revenues, and
funds received by the LLC, less the sum of the following to the extent paid or
set aside by the LLC (which shall be paid from the cash, revenues and funds
received by the LLC in the following priority): (a) all trade payables and
expenses of the LLC; (b) all principal and interest payments due on senior
indebtedness and capitalized leases, including all principal and interest
payments due on indebtedness of the LLC owed to GE Capital Franchise Finance
Corporation (or any other lender, from time to time, providing senior debt
financing to the LLC); (c) all principal and accrued interest outstanding under
the Revolving Loan Agreement; and (d) such approved capital expenditures and
reserves as the Board deems reasonably necessary for the proper operation of the
LLC's business.
1.1.8 "Board" means the Board of Managers of the LLC
established pursuant to Article VII.
1.1.9 "Board Member" has the meaning given to such term in
Section 7.3 hereof.
1.1.10 "Capital Account" in respect of any Member means the
account established for that Member pursuant to Section 5.1 hereof, as such
account may be adjusted from time to time in accordance with this Agreement.
1.1.11 "Capital Contribution" shall mean any contribution to
the capital of the LLC in cash or the initial Gross Asset Value of any property
(other than cash) contributed by a Member whenever made.
1.1.12 "Certificate of Formation" means the Certificate of
Formation of the LLC filed in the Office of the Secretary of State of the State
of Delaware, as amended from time to time.
1.1.13 "Closing" has the meaning given to such term in Section
11.7 hereof.
1.1.14 "Code" means the Internal Revenue Code of 1986, as
amended from time to time, and any corresponding provisions of any successor
legislation.
1.1.15 "Company Minimum Gain" has the same meaning as the term
"partnership minimum gain" in Regulations Sections 1.704-2(b)(2) and 1.704-2(d).
1.1.16 "Depreciation" means, for each fiscal year or other
shorter period, an amount equal to the depreciation, amortization, or other cost
recovery deduction allowable with respect to an asset for such year or period,
except that if the Gross Asset Value of an asset differs from its adjusted basis
for federal income tax purposes at the beginning of such year or period,
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Depreciation shall be an amount that bears the same ratio to such beginning
Gross Asset Value as the federal income tax depreciation, amortization, or other
cost recovery deduction for such year or period bears to such beginning adjusted
tax basis; provided, however, that if the adjusted basis for federal income tax
purposes of an asset at the beginning of such year or period is zero,
Depreciation shall be determined with reference to such beginning Gross Asset
Value using any reasonable method selected by the Board.
1.1.17 "Development Agreement" means that certain Development
Agreement, of even date herewith, between the LLC, the JV Partner and
O'Charley's.
1.1.18 "Dissolution Event" has the meaning given to such term
in Section 12.2 hereof.
1.1.19 "Entity" means any corporation, partnership, trust,
limited liability company, or other entity.
1.1.20 "Financial Rights" means a Member's rights as a member
of the LLC (a) to share in Net Income and Net Loss to the extent provided in
this Agreement, and (b) to share in distributions to the extent provided in this
Agreement.
1.1.21 "Franchise Agreement(s)" means any or all of those
certain Operating Agreements between the LLC, the JV Partner and O'Charley's
relating to restaurants to be developed pursuant to the Development Agreement.
1.1.22 "Governance Rights" means all of a Member's rights as a
member of the LLC other than Financial Rights.
1.1.23 "Gross Asset Value" means with respect to any asset,
the asset's adjusted basis for federal income tax purposes, except as follows:
(i) The initial Gross Asset Value of any asset
contributed by a Member to the Company shall be the gross fair market value of
such asset, as agreed to in writing by the Board and such Member;
(ii) The Gross Asset Values of all Company assets
shall be adjusted to equal their respective gross fair market values (taking
Code Section 7701(g) into account), as determined by the Board, as of the
following times: (A) the acquisition of an additional interest in the Company by
any new or existing Member in exchange for more than a de minimis Capital
Contribution; (B) the distribution by the Company to a Member of more than a de
minimis amount of Company property as consideration for an interest in the
Company; and (C) the liquidation of the Company within the meaning of
Regulations Section 1.704-1(b)(2)(ii)(g), provided that an adjustment described
in clauses (A) and (B) of this paragraph shall be made only if the Board
reasonably determines that such adjustment is necessary to reflect the relative
economic interests of the Members in the Company;
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(iii) The Gross Asset Value of any item of Company
assets distributed to any Member shall be adjusted to equal the gross fair
market value (taking Code Section 7701(g) into account) of such asset on the
date of distribution as agreed to in writing by the Board and such Member; and
(iv) The Gross Asset Values of Company assets shall
be increased (or decreased) to reflect any adjustments to the adjusted basis of
such assets pursuant to Code Section 734(b) or Section 743(b), but only to the
extent that such adjustments are taken into account in determining Capital
Accounts pursuant to Regulations Section 1.704-1(b)(2)(iv)(m) and subparagraph
(vi) of the definition of "Net Income" and "Net Loss" or Section 5.4(g) hereof;
provided, however, that Gross Asset Values shall not be adjusted pursuant to
this subparagraph (iv) to the extent that an adjustment pursuant to subparagraph
(ii) is required in connection with a transaction that would otherwise result in
an adjustment pursuant to this subparagraph (iv). If the Gross Asset Value of an
asset has been determined or adjusted pursuant to subparagraph (i), (ii), or
(iv), such Gross Asset Value shall thereafter be adjusted by the Depreciation
taken into account with respect to such asset, for purposes of computing Net
Income and Net Loss.
1.1.24 "Gross Sales" has the meaning set forth in the
Franchise Agreement.
1.1.25 "JV Partner" means Wi-Tenn Investors, LLC, a Delaware
limited liability company having an address of ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
1.1.26 "LLC" or "Company" means Wi-Tenn Restaurants, LLC, a
Delaware limited liability company.
1.1.27 "Loan Program" means the financing program provided by
GE Capital Franchise Finance Corporation under that certain Program Agreement
dated as of November __, 2004 with O'Charley's and the LLC or any successor
senior indebtedness.
1.1.28 "Majority in Interest" and "majority in interest of the
remaining Members" each mean Members (other than any Members excluded from the
applicable vote, consent or other action by the terms of this Agreement or the
Act) holding an interest in over fifty percent (50%) of the capital and profits
of the LLC.
1.1.29 "Majority of the Membership Interests" and "majority of
the voting power" each mean over fifty percent (50%) of the Membership
Percentages (exclusive of any Membership Percentages excluded from the
applicable vote, consent or other action by the terms of this Agreement or the
Act).
1.1.30 "Members" means the persons who are, from time to time,
admitted as members of the LLC pursuant to the Act and this Agreement and whose
names are set forth on Exhibit A which is attached hereto and made part of this
Agreement, as such Exhibit A may be amended from time to time.
1.1.31 "Member Nonrecourse Debt" has the same meaning as the
term "partner nonrecourse debt" in Regulations Section 1.704-2(b)(4).
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1.1.32 "Member Nonrecourse Debt Minimum Gain" means an amount,
with respect to each Member Nonrecourse Debt, equal to the Company Minimum Gain
that would result if such Member Nonrecourse Debt were treated as a Nonrecourse
Liability, determined in accordance with Regulations Section 1.704-2(i)(3).
1.1.33 "Member Nonrecourse Deductions" has the same meaning as
the term "partner nonrecourse deductions" in Regulations Sections 1.704-2(i)(1)
and 1.704-2(i)(2).
1.1.34 "Membership Interest" means a Member's interest in the
LLC, which, when expressed as a percentage of all Membership Interests in the
LLC, shall be equal to such Member's Membership Percentage.
1.1.35 "Membership Percentage" means the percentage interest
of a Member as shown on Exhibit A, as amended from time to time, as provided in
Section 4.6 hereof or as otherwise required by this Agreement, the Act, or the
Code.
1.1.36 "Nonrecourse Deductions" has the meaning set forth in
Regulations Sections 1.704-2(b)(1) and 1.704-2(c).
1.1.37 "Nonrecourse Liability" has the meaning set forth in
Regulations Section 1.704-2(b)(3).
1.1.38 "Net Income" and "Net Loss," for each fiscal year or
other period, means an amount equal to the Company's taxable income or loss for
such year or other period, determined in accordance with Code Section 703(a)
(for this purpose, all items of income, gain, loss, or deduction required to be
stated separately pursuant to Code Section 703(a)(1) shall be included in
taxable income or loss), with the following adjustments (without duplication):
(i) Any income of the Company that is exempt from
federal income tax and not otherwise taken into account in computing Net Income
or Not Loss pursuant to this definition of "Net Income" and "Net Loss" shall be
added to such taxable income or loss;
(ii) Any expenditures of the Company described in
Code Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures
pursuant to Regulations Section 1.704-1(b)(2)(iv)(i) , and not otherwise taken
into account in computing Net Income or Net Loss pursuant to this definition of
"Net Income" and "Net Loss," shall be subtracted from such taxable income or
loss;
(iii) In the event the Gross Asset Value of any
Company asset is adjusted pursuant to subparagraphs (ii) or (iii) of the
definition of "Gross Asset Value," the amount of such adjustment shall be
treated as an item of gain (if the adjustment increases the Gross Asset Value of
the asset) or an item of loss (if the adjustment decreases the Gross Asset Value
of the asset) from the disposition of such asset and shall be taken into account
for purposes of computing Net Income or Net Loss;
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(iv) Gain or loss resulting from any disposition of
property with respect to which gain or loss is recognized for federal income tax
purposes shall be computed by reference to the Gross Asset Value of the property
disposed of, notwithstanding that the adjusted tax basis of such property
differs from its Gross Asset Value;
(v) In lieu of the depreciation, amortization, and
other cost recovery deductions taken into account in computing such taxable
income or loss, there shall be taken into account Depreciation for such year or
other period, computed in accordance with the definition of Depreciation;
(vi) To the extent an adjustment to the adjusted tax
basis of any Company asset pursuant to Code Section 734(b) is required, pursuant
to Regulations Section 1.704-(b)(2)(iv)(m)(4), to be taken into account in
determining Capital Accounts as a result of a distribution other than in
liquidation of a Member's interest in the Company, the amount of such adjustment
shall be treated as an item of gain (if the adjustment increases the basis of
the asset) or loss (if the adjustment decreases such basis) from the disposition
of such asset and shall be taken into account for purposes of computing Net
Income or Net Loss; and
(vii) Notwithstanding any other provision of this
definition, any items that are specially allocated pursuant to Section 5.4 or
Section 5.5 hereof shall not be taken into account in computing Net Income or
Net Loss. The amounts of the items of Company income, gain, loss, or deduction
available to the specially allocated pursuant to Section 5.4 and 5.5 hereof
shall be determined by applying rules analogous to those set forth in
subparagraphs (i) through (vi) above.
1.1.39 "New Member" means any person other than the JV Partner
and O'Charley's.
1.1.40 "O'Charley's" means O'Charley's Inc., a Tennessee
corporation.
1.1.41 "Regulations" means the federal income tax regulations,
including temporary regulations, promulgated under the Code, as such regulations
are amended from time to time.
1.1.42 "Regulatory Allocations" has the meaning set forth in
Section 5.4 hereof.
1.1.43 "Restaurant(s)" has the meaning set forth in Section
3.1 hereof.
1.1.44 "Revolving Loan Agreement" means the Revolving Loan
Agreement between the LLC and O'Charley's pursuant to which O'Charley's will
make available to the LLC, subject to the terms of the Revolving Loan Agreement,
a revolving line of credit in the maximum principal amount of Seven Hundred
Fifty Thousand and No/100 Dollars ($750,000.00).
1.1.45 "Successor" means a person's executor, administrator,
guardian, conservator, other legal representative, or successor or assign.
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1.1.46 "TMM" means the person designated by the Board to be
the Tax Matters Member.
1.1.47 "Year of Termination" means the fiscal year during
which the final distribution of assets is completed.
ARTICLE II.
ORGANIZATION
2.1 FORMATION. On October 12, 2004, the LLC was formed by the filing of
the Certificate of Formation in the Office of the Secretary of State of the
State of Delaware.
2.2 ADOPTION OF AGREEMENT. The Members hereto hereby adopt this
Agreement as the limited liability company agreement of the LLC, as the term
"limited liability company agreement" is used in the Act, to set forth the
rules, regulations, and provisions regarding the governance of the LLC, the
conduct of its business, and the rights and privileges of its Members.
2.3 NAME. The name of the LLC shall be Wi-Tenn Restaurants, LLC. The
LLC may adopt and conduct its business under such assumed or trade names as may
be determined by the Board from time to time. The LLC shall file any assumed or
fictitious name certificates as may be required to conduct business in any
state.
2.4 PRINCIPAL PLACE OF BUSINESS. The initial registered agent and
registered office of the LLC shall be The Corporation Trust Company, Corporation
Trust Center, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, New Castle County.
The principal executive office of the LLC shall be located at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or such other place as the Board
may from time to time determine.
ARTICLE III.
PURPOSE AND POWERS
3.1 PURPOSE. The exclusive purpose of the LLC shall be to own and
operate those certain casual restaurants know as O'Charley's to be established
by the LLC pursuant to the Development Agreement, (individually, a "RESTAURANT,"
or collectively, the "RESTAURANTS"), utilizing the System and Proprietary Marks
owned by O'Charley's. Each Restaurant shall be operated pursuant to a separate
Franchise Agreement to be executed between O'Charley's, as franchisor, and the
LLC, as franchisee. The LLC shall not engage in any other business or activities
except those activities necessary or incidental to the accomplishment of its
purpose set forth herein. The purpose, authority, and scope of the LLC shall
extend no further than the purpose set forth in this Section 3.1. This Agreement
shall not be deemed or construed to create a relationship between the Members
with respect to any activities whatsoever, except for those activities required
for the accomplishment of the LLC's purpose as specified in this Section 3.1.
Each Member acknowledges that neither the LLC nor any Member (except
O'Charley's) shall
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have the right to establish any O'Charley's restaurants, except such Restaurants
as the LLC may establish pursuant to executed Franchise Agreements. Each Member
acknowledges and agrees that O'Charley's is the sole and exclusive owner of the
System and the Proprietary Marks and neither the LLC nor any Member (except
O'Charley's) has any right, title or interest in or to the System or the
Proprietary Marks, except as specifically provided in executed Franchise
Agreements. Nothing contained herein shall be construed as obligating
O'Charley's to approve additional restaurants on behalf of the LLC (except as
specifically contemplated by the Development Agreement), or to grant additional
franchises or to execute additional Franchise Agreements with the LLC. Except as
otherwise provided in the Development Agreement or any Franchise Agreement,
nothing contained herein shall be construed as limiting O'Charley's right to
open, or license others to open, O'Charley's restaurants at any location, and
neither the LLC nor any Member (except O'Charley's) shall have any interest in
such restaurants.
3.2 POWERS. The LLC may exercise all powers that may be legally
exercised by limited liability companies under the Act necessary or convenient
to carry out its business and affairs and to effectuate the purpose described in
Section 3.1 hereof.
ARTICLE IV.
CAPITAL CONTRIBUTIONS AND MEMBERSHIP INTERESTS
4.1 INITIAL CAPITAL CONTRIBUTION. The JV Partner shall be credited with
having made an initial Capital Contribution to the LLC in cash in the amount of
Two Hundred Fifty Thousand and No/100 Dollars ($250,000.00), which shall be
contributed upon the execution hereof.
4.2 INTEREST ON AND RETURN OF CAPITAL ACCOUNTS. Except as set forth in
the next succeeding sentence, no Member shall be entitled to any interest from
his Capital Account or on its Capital Contribution and, except as otherwise
provided herein, no Member shall have the right to demand or to receive the
return of all or any part of his Capital Account or of his Capital
Contributions. Notwithstanding the preceding sentence, the initial cash Capital
Contribution by JV Partner shall be entitled to a preferred return accruing on
the balance of such contribution remaining unexpended by the LLC, from time to
time, at a rate equal to the "Overnight Repurchase Rate" as set forth in The
Wall Street Journal (to be set for each calendar quarter on the first business
day of such calendar quarter), until such amount is fully expended by the LLC in
accordance with the provisions of this Agreement. The preferred return accruing
from time to time on such unexpended balance shall be disbursed quarterly on the
last business day at each calendar quarter by the LLC to the JV Partner by
remittance of a check drawn on the operating account of the LLC payable as the
JV Partner may direct from time to time.
4.3 ADDITIONAL CONTRIBUTIONS.
4.3.1 ADDITIONAL CONTRIBUTION PROCEDURES; SECURITY FOR
ADDITIONAL CONTRIBUTIONS. The JV Partner shall also contribute, from time to
time, as needed for the LLC's business, additional amounts up to an aggregate of
Two Hundred Fifty Thousand and No/Dollars ($250,000.00) in cash. Such additional
capital contributions shall be made in increments of not less than Fifty
Thousand and No/100 Dollars ($50,000.00) each (each such contribution herein
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referred to an "ADDITIONAL CONTRIBUTION") on such dates as may be reasonably
necessary for the purposes set forth in this Section 4.3.1.
Each such Additional Contribution shall be funded by JV Partner on not
less than ten (10) business days' advance written notice to the JV Partner by
the LLC, in the case of Section 4.4(ii) or (iii), and by O'Charley's, in the
case of Section 4.4(i) or (iv), which notice shall specify the date the
Additional Contribution is due, describe in reasonable detail the proposed use
for such Additional Contribution and confirm the resulting capital account
balance of the JV Partner after giving affect to each such Additional
Contribution.
Each Additional Contribution shall constitute additional equity from
the JV Partner and, in the case of Section 4.4(ii) or (iii) shall be expended by
the LLC promptly in furtherance of the LLC's business purposes in accordance
with the stated purposes of the LLC as set forth in Section 3.1. The JV Partner
shall be entitled to a preferred return as described in Section 4.2 with respect
to any balance of any Additional Contribution remaining unexpended by the LLC
from time to time. The JV Partner shall not be entitled to demand or receive a
return of all or any part of any such Additional Contributions, except as
otherwise provided herein.
To assure availability of monies to fund each Additional Contribution
as and when required pursuant to this Section 4.3.1, JV Partner shall provide,
or cause its members to provide, the LLC with one or more irrevocable letters of
credit issued by a commercial bank, federally chartered savings and loan
association or other nationally-recognized financial institution satisfactory to
the LLC and O'Charley's in an aggregate amount which shall at all times be
sufficient to satisfy the requirements set forth herein for the aggregate
Additional Contribution. Such letter(s) of credit must be able to be drawn upon
within the States of Tennessee or Wisconsin by the LLC, in the case of Section
4.4(ii) or (iii) (if such Additional Contribution is not otherwise paid by the
JV Partner), and by O'Charley's, in the case of Section 4.4(i) or (iv). In the
event that notice of non-renewal of any such letter of credit is received and a
replacement letter of credit is not provided by the JV Partner (or the
respective member) at least thirty (30) days prior to the date such letter of
credit is set to expire, O'Charley's shall have the right to draw upon such
letter of credit up to the maximum amount of Additional Contributions
then-owing. By mutual written agreement of each of the parties hereto,
alternative methods of assuring the availability of monies to fund each
Additional Contribution may be substituted in place of providing irrevocable
letters of credit.
4.3.2 PRE-OPENING BUDGET. The amounts required under the
Pre-Opening Budget (as defined in Section 10.6 hereof) for each Restaurant shall
be funded as follows:
(i) first, in the case of the initial Restaurant,
from the initial Capital Contribution funded by the JV Partner and, in
the case of any subsequent Restaurant, from the Additional
Contributions required to be made pursuant to Section 4.3.1;
(ii) next, up to Two Million Five Hundred Thousand
and No/100 Dollars ($2,500,000.00) under the Loan Program; and
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(iii) next, up to Two Hundred Fifty Thousand and
No/100 (Dollars ($250,000.00) under the Revolving Loan Agreement.
4.3.3 OPERATING CAPITAL DEFICIENCIES. In the event of any
deficiency in the amounts required to fund the Unit Operating Budget (as defined
in Section 10.7 hereof) or the Operating Budget (as defined in Section 10.8
hereof), such cash flow deficiencies shall be funded as follows:
(i) first, from amounts available as Additional
Contributions required to be made pursuant to Section 4.3.1; and
(ii) next, from the Revolving Loan Agreement.
4.3.4 ADDITIONAL CAPITAL CONTRIBUTIONS. Except as specifically
set forth herein, no Member shall be required to make any additional Capital
Contribution. Members may make such additional Capital Contributions as may be
approved, from time to time, by the Board.
4.4 USE/DISBURSEMENT OF CAPITAL CONTRIBUTIONS. The initial Capital
Contribution and the Additional Contributions shall be disbursed by the LLC as
follows:
(i) first, to O'Charley's in the amount of One
Hundred Thousand and No/100 Dollars ($100,000.00) in the event the
first Restaurant to be developed by the LLC is not opened in accordance
with the Development Agreement;
(ii) next, to any operating capital required for the
initial Restaurant under Section 4.3.3 hereof;
(iii) next, to any capital required to construct and
open subsequent Restaurants, if any, under Section 4.3.2 hereof; and
(iv) next, to the repayment of amounts outstanding
under the Revolving Loan Agreement if a second Restaurant is not opened
in accordance with the Development Agreement or upon the election by
O'Charley's to exercise the O'Charley's Purchase Option pursuant to
Section 11.6 hereof.
4.5 WITHDRAWAL OR REDUCTION OF MEMBERS' CAPITAL CONTRIBUTIONS. No
Member shall have the right to withdraw from the LLC. A Member shall not receive
out of the LLC's property all or any part of such Member's Capital
Contributions, except as provided in Sections 5.7 and 12.3 hereof.
4.6 MEMBERSHIP INTERESTS AND AMENDMENTS TO EXHIBIT A. Each Member shall
be credited with the Membership Interest (expressed as a percentage of all
Membership Interests) and Capital Contribution set forth opposite such Member's
name on Exhibit A. The amounts shown on Exhibit A with respect to Capital
Contributions and Membership Interests shall, from time to time, be
appropriately amended to reflect changes to such amounts as a result of any
additional Capital Contributions by Members, any withdrawals or reductions in
Capital
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Contributions, admission of any New Members to the LLC, or any Assignments of
Membership Interests. Exhibit A shall also be amended from time to time to
reflect any changes in the addresses of Members.
4.7 LOANS AND GUARANTEES BY O'CHARLEY'S.
4.7.1 REVOLVING LOAN AGREEMENT. O'Charley's will enter into
the Revolving Loan Agreement with the LLC on the terms and subject to the
conditions set forth in the Revolving Loan Agreement to fund in accordance with
Section 4.3.2 the Pre-Opening Budget and in accordance with Section 4.3.3, to
fund cash flow deficiencies under the Operating Budget.
4.7.2 DISCRETIONARY LOANS. In the event the LLC is in need of
additional funds, O'Charley's may, but shall not be obligated to, make loans to
the LLC. Any such loan shall bear interest at a rate, and shall have repayment
terms, as the Board shall approve.
4.7.3 LOAN PROGRAM GUARANTY. O'Charley's shall provide a
guaranty of the Loan Program on such terms and conditions as O'Charley's and GE
Capital Franchise Finance Corporation, or its Successor, shall agree, from time
to time. If required under the Loan Program, the JV Partner (or its members)
shall provide a guaranty of the Loan Program. O'Charley's shall use its good
faith efforts to assist the JV Partner in obtaining the release of the
O'Charley's guaranty upon the exercise of the JV Partner Purchase Option on the
one hand, and the release of the JV Partner's guaranty (or guaranty of its
members) upon the exercise of the O'Charley's Purchase Option on the other hand.
ARTICLE V.
ALLOCATION OF INCOME AND LOSSES; CASH DISTRIBUTIONS
5.1 CAPITAL ACCOUNTS. The LLC will maintain a Capital Account for each
Member in accordance with the following provisions:
(i) To each Member's Capital Account there shall be credited (A)
such Member's Capital Contributions, (B) such Member's distributive share of Net
Income and any items in the nature of income or gain that are specially
allocated pursuant to Section 5.4 or Section 5.5 hereof, and (C) the amount of
any LLC liabilities assumed by such Member or that are secured by any property
distributed to such Member. The principal amount of a promissory note that is
not readily traded on an established securities market and that is contributed
to the LLC by the maker of the note (or a Member related to the maker of the
note within the meaning of Regulations Section 1.704-1(b)(2)(ii)(c)) shall not
be included in the Capital Account of any Member until the LLC makes a taxable
disposition of the note or until (and to the extent) principal payments are made
on the note, all in accordance with Regulations Section 1.704-1(b)(2)(iv)(d)(2),
(ii) To each Member's Capital Account there shall be debited (A)
the amount of money and the Gross Asset Value of any property distributed to
such Member pursuant to any provision of this Agreement, (B) such Member's
distributive share of Net Loss and any items in
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the nature of expenses or losses that are specially allocated pursuant to
Section 5.4 or Section 5.5 hereof, and (C) the amount of any liabilities of such
Member assumed by the Company or that are secured by any Property contributed by
such Member to the LLC,
(iii) In the event Membership Interests are Transferred in
accordance with the terms of this Agreement, the transferee shall succeed to the
Capital Account of the transferor to the extent it relates to the Transferred
Membership Interests, and
(iv) In determining the amount of any liability for purposes of
subparagraphs (i) and (ii) above there shall be taken into account Code Section
752(c) and any other applicable provisions of the Code and Regulations.
The foregoing provisions and the other provisions of this Agreement
relating to the maintenance of Capital Accounts are intended to comply with
Regulations Section 1.704-1(b), and shall be interpreted and applied in a manner
consistent with such Regulations. In the event the Board shall determine that it
is prudent to modify the manner in which the Capital Accounts, or any debits or
credits thereto (including, without limitation, debits or credits relating to
liabilities that are secured by contributed or distributed property or that are
assumed by the LLC or any Members), the Board may make such modification,
provided that it is not likely to have a material effect on the amounts
distributed to any Person pursuant to Article XII hereof upon the dissolution of
the Company. The Board also shall (i) make any adjustments that are necessary or
appropriate to maintain equality between the Capital Accounts of the Members and
the amount of capital reflected on the LLC's balance sheet, as computed for book
purposes, in accordance with Regulations Section 1.704-1(b)(2)(iv)(q) and (ii)
make any appropriate modifications in the event unanticipated events might
otherwise cause this Agreement not to comply with Regulations Section
1.704-1(b).
5.2 NET INCOME. After giving effect to the special allocations set
forth in Sections 5.4 and 5.5, Net Income for any fiscal year or other shorter
period shall be allocated to the Members as follows:
(a) First, to the JV Partner until the cumulative allocations of Net
Income under this Section 5.2(a) for all periods is equal to the cumulative
preferred returns actually distributed to the JV Partner pursuant to Section 4.2
for all periods; and
(b) Thereafter, to the Members in proportion to their Membership
Percentages.
5.3 NET LOSSES. After giving effect to the special allocations set
forth in Sections 5.4 and 5.5 and subject to Section 5.6, Net Loss for any
fiscal year or other period shall be allocated to the Members in proportion to
their Membership Percentages.
5.4 SPECIAL ALLOCATIONS. The following special allocations shall be
made in the following order:
(a) MINIMUM GAIN CHARGEBACK. Except as otherwise
provided in Regulations Section 1.704-2(f), notwithstanding any other provision
of this Article V, if there is
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a net decrease in Company Minimum Gain during any fiscal year or other period,
each Member shall be specially allocated items of income and gain for such year
or period (and, if necessary, subsequent years or periods) in an amount equal to
such Member's share of the net decrease in Company Minimum Gain, determined in
accordance with Regulations Section 1.704-2(g). Allocations pursuant to the
previous sentence shall be made in proportion to the respective amounts required
to be allocated to each Member pursuant thereto. The items to be so allocated
shall be determined in accordance with Regulations Sections 1.704-2(f)(6) and
1.704-2(j)(2). This Section 5.4(a) is intended to comply with the minimum gain
chargeback requirement in Regulations Section 1.704-2(f) and shall be
interpreted consistently therewith.
(b) MEMBER MINIMUM GAIN CHARGEBACK. Except as
otherwise provided in Regulations Section 1.704-2(i)(4), notwithstanding any
other provision of this Article V, if there is a net decrease in Member
Nonrecourse Debt Minimum Gain attributable to a Member Nonrecourse Debt during
any fiscal year or other period, each Member who has a share of the Member
Nonrecourse Debt Minimum Gain attributable to such Member Nonrecourse Debt,
determined in accordance with Regulations Section 1.704-2(i)(5), shall be
specially allocated items of income and gain for such year or period (and, if
necessary, subsequent years or periods) in an amount equal to such Member's
share of the net decrease in Member Nonrecourse Debt, determined in accordance
with Regulations Section 1.704-2(i)(4). Allocations pursuant to the previous
sentence shall be made in proportion to the respective amounts required to be
allocated to each Member pursuant thereto. The items to be so allocated shall be
determined in accordance with Regulations Sections 1.704-2(i)(4) and
1.704-2(j)(2). This Section 5.4(b) is intended to comply with the minimum gain
chargeback requirement in Regulations Section 1.704-2(i)(4) and shall be
interpreted consistently therewith.
(c) QUALIFIED INCOME OFFSET. In the event any Member
unexpectedly receives any adjustments, allocations, or distributions described
in Regulations Section 1.704-1(b)(2)(ii)(d)(4), Section 1.704-1(b)(2)(ii)(d)(5),
or Section 1.704-1(b)(2)(ii)(d)(6), items of income and gain shall be specially
allocated to such Member in an amount and manner sufficient to eliminate, to the
extent required by the Regulations, the Adjusted Capital Account Deficit of the
Member as quickly as possible, provided that an allocation pursuant to this
Section 5.4(c) shall be made only if and to the extent that the Member would
have an Adjusted Capital Account Deficit after all other allocations provided
for in this Article V have been tentatively made as if this Section 5.4(c) were
not in the Agreement.
(d) GROSS INCOME ALLOCATION. In the event any Member
has a deficit Capital Account at the end of any fiscal year or other period that
is in excess of the sum of (i) the amount such Member is obligated to restore
pursuant to the penultimate sentences of Regulations Sections 1.704-2(g)(1) and
1.704-2(i)(5), each such Member shall be specially allocated items of income and
gain in the amount of such excess as quickly as possible, provided that an
allocation pursuant to this Section 5.4(d) shall be made only if and to the
extent that such Member would have a deficit Capital Account in excess of such
sum after all other allocations provided for in this Article V have been made as
if Section 5.4(c) and this Section 5.4(d) were not in the Agreement.
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(e) NONRECOURSE DEDUCTIONS. Nonrecourse Deductions
for any fiscal year or other period shall be specially allocated to the Members
in proportion to their respective Membership Percentage.
(f) MEMBER NONRECOURSE DEDUCTIONS. Any Member
Nonrecourse Deductions for any fiscal year or other period shall be specially
allocated to the Member who bears the economic risk of loss with respect to the
Member Nonrecourse Debt to which such Member Nonrecourse Deductions are
attributable in accordance with Regulations Section 1.704-2(i)(1).
(g) SECTION 754 ADJUSTMENTS. To the extent an
adjustment to the adjusted tax basis of any Company asset, pursuant to Code
Section 734(b) or Section 743(b) is required, pursuant to Regulations Section
1.704-1(b)(2)(iv)(m)(2) or Section 1.704-1(b)(2)(iv)(m)(4), to be taken into
account in determining Capital Accounts as the result of a distribution to a
Member in complete liquidation of such Member's interest in the LLC, the amount
of such adjustment to Capital Accounts shall be treated as an item of gain (if
the adjustment increases the basis of the asset) or loss (if the adjustment
decreases such basis) and such gain or loss shall be specially allocated to the
Members in accordance with their interests in the LLC in the event Regulations
Section 1.704-1(b)(2)(iv)(m)(2) applies, or to the Member to whom such
distribution was made in the event Regulations Section 1.704-1(b)(2)(iv)(m)(4)
applies.
5.5. CURATIVE ALLOCATIONS. The allocations set forth in Sections 5.4
and 5.6 (the "REGULATORY ALLOCATIONS") are intended to comply with certain
requirements of the Regulations. It is the intent of the Members that, to the
extent possible, all Regulatory Allocations shall be offset either with other
Regulatory Allocations or with special allocations of other items of LLC income,
gain, loss, or deduction pursuant to this Section 5.5. Therefore,
notwithstanding any other provision of this Article V (other than the Regulatory
Allocations), the Board shall make such offsetting special allocations of LLC
income, gain, loss, or deduction in whatever manner it determines appropriate so
that, after such offsetting allocations are made, each Member's Capital Account
balance is, to the extent possible, equal to the Capital Account balance such
Member would have had if the Regulatory Allocations were not part of the
Agreement and all Company items were allocated pursuant to Sections 5.2 and 5.3.
5.6 LOSS LIMITATION. Net Losses allocated pursuant to Section 5.3
hereof shall not exceed the maximum amount of Net Losses that can be allocated
without causing any Member to have an Adjusted Capital Account Deficit at the
end of any fiscal year or shorter period. In the event some but not all of the
Members would have Adjusted Capital Account Deficits as a consequence of an
allocation Net of Losses pursuant to Section 5.3 hereof, the limitation set
forth in this Section 5.6 shall be applied on a Member by Member basis and
Losses not allocable to any Member as a result of such limitation shall be
allocated to the other Members in accordance with the positive balances in such
Member's Capital Accounts so as to allocate the maximum permissible Losses to
each Member under Regulations Section 1.704-1(b)(2)(ii)(d).
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5.7 OTHER ALLOCATION RULES.
(a) For purposes of determining the Net Income, Net
Loss, or any other items allocable to any period, Net Income, Net Loss, and any
such other items shall be determined on a daily, monthly, or other basis, as
determined by the Board using any permissible method under Code Section 706 and
the Regulations thereunder.
(b) The Members are aware of the income tax
consequences of the allocations made by this Article V and hereby agree to be
bound by the provisions of this Article V in reporting their shares of LLC
income and loss for income tax purposes.
(c) Solely for purposes of determining a Member's
proportionate share of the "excess nonrecourse liabilities" of the Company
within the meaning of Regulations Section 1.752-3(a)(3), the Members' interests
in Company profits are in proportion to their Membership Percentages.
(d) To the extent permitted by Regulations Section
1.704-2(h)(3), the Board shall endeavor to treat distributions of Available Cash
Flow as having been made from the proceeds of a Nonrecourse Liability or a
Member Nonrecourse Debt only to the extent that such distributions would cause
or increase an Adjusted Capital Account Deficit for any Member.
5.8 TAX ALLOCATIONS: CODE SECTION 704(C). In accordance with Code
Section 704(c) and the Regulations thereunder, income, gain, loss, and deduction
with respect to any property contributed to the capital of the LLC shall, solely
for tax purposes, be allocated among the Members so as to take account of any
variation between the adjusted basis of such property to the LLC for federal
income tax purposes and its initial Gross Asset Value (computed in accordance
with the definition of Gross Asset Value) using any method permissible under the
Regulations promulgated under Section 704(c) as determined by the Board. In the
event the Gross Asset Value of any LLC asset is adjusted pursuant to
subparagraph (ii) of the definition of Gross Asset Value, subsequent allocations
of income, gain, loss, and deduction with respect to such asset shall take
account of any variation between the adjusted basis of such asset for federal
income tax purposes and its Gross Asset Value in the same manner as under Code
Section 704(c) and the Regulations thereunder. Any elections or other decisions
relating to such allocations shall be made by the Board in any manner that
reasonably reflects the purpose and intention of this Agreement. Allocations
pursuant to this Section 5.8 are solely for purposes of federal, state, and
local taxes and shall not affect, or in any way be taken into account in
computing, any Member's Capital Account or share of Net Income, Net Loss, other
items, or distributions pursuant to any provision of this Agreement.
5.9 DISTRIBUTION OF AVAILABLE CASH FLOW. The LLC may, in its
discretion, make current distributions out of Available Cash Flow at such times
as the Board may determine. Distributions shall be made in the following
priority:
5.9.1 PROPORTIONAL DISTRIBUTIONS. The LLC shall distribute
Available Cash Flow to the Members in proportion to their respective Membership
Percentages.
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5.9.2 DISTRIBUTION OF TAX AMOUNT. Notwithstanding anything
else in this Article V to the contrary, the LLC shall distribute cash to the
Members as provided in this Section 5.9.2 prior to each April 15 following the
close of a fiscal year (or, at a Member's election, at such times during such
year so as to coincide with the due dates of federal income tax estimated
payments). In the event the federal income taxes that will be owed by any Member
with respect to such fiscal year (computed as if such Member were an individual
subject to federal income tax at the highest marginal rate for ordinary income
of individuals) on any taxable income of the LLC allocated to such Member
pursuant to this Agreement for the fiscal year is greater than the cumulative
amount of distributions made to such Member pursuant to this Article V (other
than this Section 5.9.2) during such year, then the LLC shall distribute
additional cash to such Member (solely to the extent there is Available Cash
Flow) in an amount equal to such excess. Any distribution made to a Member
pursuant to this Section 5.9.2 shall be treated as an advance of future amounts
otherwise distributable to such Member pursuant to this Agreement (excluding
this Section 5.9.2) and shall be recouped from the first such future
distributions. Solely for purposes of this Section 5.9.2, Available Cash Flow
shall be determined without regard to any principal amounts outstanding under
the Revolving Loan Agreement.
5.10 DISTRIBUTIONS UPON TERMINATION. Upon termination of the LLC,
distributions will be made in accordance with Section 12.3.
5.11 CONSEQUENCES OF DISTRIBUTIONS. Upon the determination to
distribute, remit, or pay funds in any manner expressly provided in this Article
V, made in good faith, no Member or Board Member shall incur any liability on
account of such distribution, even though such distribution may have resulted in
the LLC retaining insufficient funds for the operation of its business, which
insufficiency resulted in loss to the LLC or necessitated the borrowing of funds
by the LLC.
ARTICLE VI.
MEMBERS AND MEETINGS
6.1 MEETINGS. The Members shall meet at least once each fiscal year at
such place, on such date and at such time as may be fixed by the Board for the
purpose of electing Board Members and for the transaction of such other lawful
business as may come before the meeting. Special meetings of the Members may be
called by the President, the Board or any Member holding a Percentage Interest
of at least twenty-five percent (25%), upon provision of written notice of
demand to the Members or the Secretary of the Company. No business shall be
acted upon at a special meeting that is not stated in the notice of the meeting.
Member meetings may be held by telephone or any other communications equipment
by means of which all participating Members can simultaneously hear each other
during the meeting.
6.2 QUORUM. No action may be taken at a meeting of the Members unless a
quorum consisting of at least Members holding a Majority of the Membership
Interests is present in person or by proxy. Once a Member is represented at any
meeting, such Member is deemed to be present for the remainder of that meeting
and for any adjournment. A meeting may be
17
adjourned, and notice of an adjourned meeting is not necessary if the date, time
and place to which the meeting is adjourned are announced at the meeting at
which the adjournment is taken.
6.3 ACTION BY WRITTEN CONSENT. Any action which may be taken by the
Members under this Agreement may be taken without a meeting if consents in
writing setting forth the action so taken are signed by the Members who own
Membership Percentages having voting power to cast not less than the minimum
number of votes necessary for such action to be taken by the Members. All
Members who do not participate in taking the action by written consent shall be
given written notice thereof by the Secretary of the LLC promptly after such
action has been taken.
6.4 VOTING RIGHTS; REQUIRED VOTE. Each Member shall have voting power
equal to such Member's Membership Percentage. At any meeting of the Members,
each Member present (in person or by proxy) and entitled to vote shall have a
number of votes equal to such Member's Membership Percentage. At any meeting of
the Members at which a quorum is present (in person or by proxy), a majority of
the voting power present (in person or by proxy) at the time the vote is taken
is required to take action on a matter unless a vote of greater proportion is
otherwise required by this Agreement, the Certificate or the Act.
6.5 NOTICE OF MEMBERS' MEETINGS. Written or printed notice stating the
place, date, and time of any meeting and, in the case of any special meeting, a
statement of the purposes of the meeting and the person or persons calling the
meeting, shall be sent by hand delivery or by first class, certified or
registered United States mail. Such notice must be given no fewer than ten (10)
days nor more than two (2) months before the date of the meeting, and the notice
shall be deemed to be delivered (a) when deposited in the United States mail,
postage prepaid, addressed to each Member at his or her respective address as it
appears on the records of the Company; or (ii) when received, if sent by hand
delivery.
6.6 WAIVERS OF NOTICE. Whenever the giving of any notice to Members is
required by statute or this Agreement, a waiver thereof, in writing and
delivered to the LLC signed by the person or persons entitled to said notice,
whether before or after the event as to which such notice is required, shall be
deemed equivalent to notice. Attendance of a Member at a meeting or execution of
a written consent to any action shall constitute a waiver of notice of such
meeting or action.
6.7 PROXIES. At all meetings of the Members, a Member may vote in
person or by proxy executed in writing by a Member or by a duly authorized
attorney-in-fact. Such proxy shall be filed with the LLC before or at the time
of the meeting. No proxy shall be valid after eleven (11) months from the date
of its execution, unless otherwise provided in the proxy.
6.8 MATTERS REQUIRING APPROVAL OF MEMBERS. Notwithstanding any other
provision hereof, no action shall be taken, sum expended, decision made or
obligation incurred with respect to a matter within the scope of any of the
major decisions enumerated below ("MEMBER MAJOR DECISIONS"), unless such Member
Major Decision has been approved by Members holding in the aggregate Percentage
Interests of at least seventy-five percent (75%). The Major Decisions are:
18
(i) amendment of this Agreement;
(ii) the sale, exchange, assignment, mortgage, pledge
or other transfer or encumbrance of a material amount of LLC property,
except in the ordinary course of a Restaurant's business;
(iii) borrowing money in the name of the LLC or using
LLC property as collateral for debt;
(iv) requiring any Capital Contributions to the LLC
in addition to those required pursuant to Section 4.1 and Section 4.3;
(v) any act that would prevent the LLC from
conducting its business, operating the Restaurants, or would constitute
a breach of or default under a Franchise Agreement or the Development
Agreement;
(vi) confession of a judgment on behalf of the LLC;
(vii) submission of an LLC claim or liability to
arbitration;
(viii) the lending of money or extension of credit to
anyone or the guarantee of the obligations of another party, except
with respect to credit purchases of goods and services by customers of
a Restaurant, in the normal course of business;
(ix) the sale, assignment, mortgage, pledge or other
transfer or encumbrance of a Member's interest in the LLC or the
execution of any agreement which would purport to give to a third party
any interest in the LLC, unless said transfer is accomplished pursuant
to the procedures established in Article XII hereof; and
(x) admission of New Members.
ARTICLE VII.
BOARD OF MANAGERS
7.1 MANAGEMENT BY BOARD OF MANAGERS. The Members hereby unanimously
agree that full responsibility for management of the business and affairs of the
LLC shall be delegated to the Board.
7.2 POWER AND AUTHORITY OF BOARD OF MANAGERS. Except as otherwise
expressly provided in this Agreement, the Board (acting on behalf of the LLC)
shall have the right, power, and authority to manage, operate and control the
business and affairs of the LLC and to do or cause to be done any and all acts,
at the expense of the LLC, deemed by the Board to be necessary or appropriate to
effectuate the purposes of the LLC. Except as otherwise expressly provided in
this Agreement or as may be approved by the Board, no Member shall have any
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authority, right or power, by virtue of being a Member, to bind the LLC, or to
manage or control, or to participate in the management or control of, the
business and affairs of the LLC in any manner whatsoever. Without limiting the
generality of the foregoing, the Board shall have the right, power and authority
on behalf of the LLC:
7.2.1 subject to the terms of any Franchise Agreement, to
develop, review and approve policies, operating guidelines, and other key
operational items for the LLC;
7.2.2 to elect officers of the LLC in accordance with Section
8.1;
7.2.3 to arrange for such personnel as may be necessary or
convenient to carry out the business and affairs of the LLC;
7.2.4 to establish such reasonable cash reserves to provide
for anticipated expenses of the LLC as the Board determines to be necessary for
timely payment of such expenses; and
7.2.5 except as relates to a Member Major Decision, to direct
the President or any other duly appointed officer of the LLC to make, execute,
assign, acknowledge, and file on behalf of the LLC any and all documents or
instruments of any kind which the Board may deem necessary or appropriate in
carrying out the business and affairs of the LLC, including, without limitation,
powers of attorney, agreements of indemnification, documents, or instruments of
any kind or character, and amendments thereto.
Except as may be approved by the Board, no Board Member, acting
individually, shall have any authority, right or power, by virtue of being a
Board Member, to bind the Company.
7.3 MATTERS REQUIRING APPROVAL OF THE BOARD. Notwithstanding any other
provision hereof, no action shall be taken, sum expended, decision made or
obligation incurred with respect to a matter within the scope of any of the
major decisions enumerated below ("BOARD MAJOR DECISION"), unless such Board
Major Decision has been approved by the Board in accordance with this Article
VII:
(i) approval of each Pre-Opening Budget, Unit
Operating Budget and Operating Budget;
(ii) the purchase or lease of any real property or
any personal property involving a purchase price or aggregate lease
payments in excess of Ten Thousand and No/100 Dollars ($10,000.00)
individually, or Twenty Thousand and No/100 Dollars ($20,000.00) in the
aggregate in any fiscal year, unless in each case previously approved
as part of a Pre-Opening Budget or Operating Budget;
(iii) the making, execution or delivery, on behalf of
the LLC of any promissory note, mortgage, deed of trust, security
agreement, guarantee, indemnity bond, surety bond, accommodation paper
or endorsement, lease or purchase agreement, or other
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instrument purporting to evidence any debt or obligation, and/or
renewal and extension of any of the foregoing;
(iv) entering into any transaction with any Member or
any affiliate of any Member; and
(v) the assignment, transfer, pledge, compromise or
release of any claim of or debt owning to the LLC except upon payment
in full to the LLC of such claim or debt.
7.4 NUMBER; QUALIFICATIONS. The Board shall at all times be composed of
four (4) managers (each, a "BOARD MEMBER"). Each Board Member shall be a natural
person, but need not be a resident of the State of Delaware or a Member.
7.5 ELECTION. A Majority in Interest of the Members cast in favor of
each candidate for Board Member at the duly-called annual meeting of Members (or
any duly-called and convened special meeting called for such purpose) shall be
required for the election of each Board Member. Each Board Member shall hold
office for a term of one year or until his or her successor is elected and
qualified, or until his or her earlier death, resignation or removal.
Notwithstanding anything herein to the contrary, the Members shall take
all appropriate actions to fix and maintain a Board consisting of four (4)
persons. Each Member hereby agrees to vote all of such Member's Percentage
Interest in favor of the election of ▇▇▇ ▇▇▇▇▇▇▇▇ (representative of
O'Charley's), ▇▇▇▇▇ ▇▇▇▇▇▇ (representative of O'Charley's), ▇▇▇▇ ▇▇▇▇▇
(representative of the JV Partner) and ▇▇▇▇▇ ▇▇▇▇ (representative of the JV
Partner), as Board Members at any meeting of Members at which Board Members are
to be elected. If any Board Member for any reason is unable or unwilling to
serve as a Board Member, or ceases to serve as a Board Member during his term of
office, the resulting vacancy on the Board shall be filled by a nominee
recommended by the Member for whom such vacating Board Member was a
representative (as indicated above), and each Member hereby agrees to vote all
of such Member's Percentage Interest in favor of the election of such nominee at
any meeting of Members at which Board Members are to be elected. Voting in favor
of the Board Members as set forth herein by the Members shall include, but shall
not be limited to, the voting of their Percentage Interests in the LLC, the
execution of written consents, the filling of vacancies on the Board, the
waiving of notice, the granting of proxies or the attending of meetings for the
purpose of electing and maintaining such persons as Board Members, and the
taking of such action as to prevent the removal of the Board Members.
7.6 INITIAL BOARD OF MANAGERS. The Members do hereby elect the
following persons to serve as the initial Board Members: ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇.
7.7 VACANCIES. In the event of any vacancy in the office of a Board
Member as a result of the death, incapacity, resignation or removal of a Board
Member, such vacancy shall be filled by the Member for whom such vacating Board
Member was a representative (as indicated in Section 7.5). The Board Member
elected to fill any vacancy shall hold office until the next
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annual meeting of the Members for the election of Board Members and until such
Board Member's successor is duly elected and qualified.
7.8 REMOVAL OF BOARD MEMBERS. Any Board Member may be removed, with or
without cause, by the Member for whom such Board Member was a representative (as
indicated in Section 7.5).
7.9 MEETINGS OF THE BOARD. Regular meetings of the Board shall be held
at least monthly on such date and at such place and time as may be fixed from
time to time by the Board (unless such meeting shall be waived by all of the
Board Members). Regular meetings of the Board shall be held on not less than ten
(10) days' notice to all Board Members. Special meetings of the Board may be
called by the President and shall be called by the President or Secretary upon
the request of any Board Member, upon two (2) days' notice to all Board Members.
No business shall be acted upon at a special meeting that is not stated in the
notice of the meeting unless approved by the Board. Meetings of the Board may be
held by conference telephone or other communications equipment by means of which
all participating Board Members can simultaneously hear each other during the
meeting.
7.10 QUORUM. No action may be taken at a meeting of the Board unless a
quorum consisting of at least a majority of the Board Members then in office is
present in person or by proxy.
7.11 ACTION BY WRITTEN CONSENT. Any action which may be taken by the
Board under this Agreement may be taken without a meeting if consents in writing
setting forth the action so taken are signed by all of the Board Members.
7.12 VOTING RIGHTS; REQUIRED VOTES. Each Board Member shall be entitled
to cast one vote with respect to any matter coming before the Board. Any action
required or permitted to be taken by the Board must be approved by the
affirmative vote of a majority of the Board Members then in office.
7.13 BOARD IMPASSE. In the event of and during the continuance of a
"BOARD IMPASSE" as hereinafter defined, the Board shall elect an Independent
Board Member (as hereinafter defined) whose vote as a member of the Board in
accordance with the provisions of this Article VII shall be used to resolve the
Board Impasse. A Board Impasse shall mean a decision on a matter to be approved
by the Board which has not been resolved after three (3) attempts to reach
approval on such matter in accordance with this Article VII. The term
"INDEPENDENT BOARD MEMBER" shall mean a Board Member who is not and has not been
at any time during the preceding five (5) years: (i) a stockholder, director,
officer, employee or partner of O'Charley's or the JV Partner or any of their
respective affiliates; (ii) a customer, supplier or other person who derives
more than ten percent (10%) of its purchases or revenues from its activities
with O'Charley's or the JV Partner or any of their affiliates; (iii) a person or
other entity controlling or under common control with any such stockholder,
partner, customer, supplier or other person; or (iv) a member of the immediate
family of any such stockholder, director, officer, employee, partner, customer,
supplier or other person. As used herein, the term "CONTROL" means the
possession, directly or indirectly, of the power to direct or cause the
22
direction of management, policies or activities of a person or entity, whether
through ownership of voting securities, by contract or otherwise. The
Independent Board Member shall also be a person with a minimum of ten (10) years
of top executive-level experience in the casual dining segment of the restaurant
industry, all as may be determined in good faith to be mutually acceptable to
O'Charley's and JV Partner. Upon selection and agreement of the Independent
Board Member to same, such Independent Board Member shall be entitled to be paid
a reasonable fee or compensation by the LLC for such service and shall be fully
indemnified and held harmless for his actions by the LLC and its Members absent
willful misconduct in fulfilling his duties.
7.14 NOTICE OF BOARD MEETINGS. Written or printed notice stating the
place, date, and time of any meeting and, in the case of any special meeting, a
statement of the purposes of the meeting and the person or persons calling the
meeting, shall be sent by hand delivery or by first class, certified or
registered United States mail. Such notice shall be deemed to be delivered (a)
when deposited in the United States mail, postage prepaid, addressed to each
Board Member at his or her respective address as it appears on the records of
the Company; or (ii) when received, if sent by hand delivery.
7.15 WAIVERS OF NOTICE. Whenever the giving of any notice to Board
Members is required by statute or this Agreement, a waiver thereof, in writing
and delivered to the LLC signed by the Person or Persons entitled to said
notice, whether before or after the event as to which such notice is required,
shall be deemed equivalent to notice. Attendance of a Board Member at a meeting
or execution of a written consent to any action shall constitute a waiver of
notice of such meeting or action, except when a Board Member attends for the
express purpose of objecting at the beginning of the meeting to the transaction
of any business because the meeting is not lawfully called.
7.16 COMPENSATION OF BOARD MEMBERS. Board Members, as such, shall not
receive any compensation for their services; provided that nothing herein
contained shall be construed to preclude any Board Member from serving the LLC
in any other capacity and receiving compensation therefor.
7.17 RESIGNATIONS. Any Board Member may resign at any time by giving
written notice to the Board or to the President or the Secretary of the Company.
Any such resignation shall take effect at the time specified therein, or, if no
time is specified, upon receipt thereof, and unless otherwise specified therein,
acceptance of such resignation shall not be necessary to make it effective.
7.18 FIDUCIARY RELATIONSHIP. No Board Member shall be liable to the LLC
or its Members for monetary damages for breach of fiduciary duty as a Board
Member or otherwise liable, responsible or accountable to the LLC or its Members
for monetary damages or otherwise for any acts performed, or for any failure to
act; provided, however, that this provision shall not eliminate or limit the
liability of a Board Member (i) for any breach of the Board Member's duty of
loyalty to the LLC or its Members, (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, or (iii)
for any transaction from which the Board Member received any improper personal
benefit.
23
7.19 DELEGATION OF RIGHTS AND AUTHORITY. Except as otherwise expressly
provided in this Agreement, neither the Board nor any Member or Board Member may
delegate to any Person or Persons the rights and powers of the Board or of such
Member or Board Member to manage and control the business and affairs of the
Company.
7.20 NO EXCLUSIVE DUTY. Each Member and Board Member may have other
business interests and may engage in other activities in addition to those
relating to the LLC. Neither the LLC nor any Member or Board Member shall have
any right to share or participate in such other investments or activities of any
other Member or Board Member based on the fact that each are members of the LLC.
No Member or Board Member shall incur any liability to any other Member or the
LLC as a result of engaging in any other business or venture.
ARTICLE VILI.
OFFICERS
8.1 NUMBER, ELECTION AND TERM OF OFFICE. The officers of the LLC shall
be a President and Chief Executive Officer, and a Secretary, and may at the
discretion of the Board include one or more Vice Presidents, a Treasurer,
Assistant Secretaries, Assistant Treasurers and other officers. The initial
officers shall be ▇▇▇▇ ▇▇▇▇▇, the LLC's President and Chief Executive Officer,
▇▇▇▇ ▇▇▇▇▇▇▇▇, the LLC's Secretary, ▇▇▇▇▇▇ ▇▇▇▇, the LLC's Assistant Secretary,
and ▇▇▇▇▇ ▇▇▇▇, the LLC's Executive Vice President and Chief Operating Officer,
all of whom shall hold their respective offices until the first meeting of the
Board held immediately after the first annual meeting of the Members for the
election of Board Members and until their successors are duly elected and
qualified. The officers of the LLC subsequently shall be elected annually by the
Board at its first meeting held after the annual meeting of the Members for the
election of Board Members and shall hold their respective offices until their
successors are duly elected and qualified or until their earlier death,
resignation or removal. Except as otherwise provided by law, any number of
offices may be held by the same person.
8.2 PRESIDENT. Subject to the direction of the Board and the provisions
of this Agreement, the President and Chief Executive Officer (i) shall have full
responsibility and authority for management of the day-to-day operations of the
LLC and (ii) shall perform other duties customarily performed by a chief
executive officer.
8.3 SECRETARY. The Secretary, at the direction of the Board, shall
prepare and distribute promptly to each Board Member written minutes of all
meetings of the Board. The Secretary shall also be responsible for preparing and
distributing to the Board Members any notices received by the LLC or otherwise
called for by this Agreement to be given by the LLC.
8.4 OTHER OFFICERS. The Board may appoint such other officers and
agents of the LLC as the Board shall deem necessary or appropriate to carry out
the business of the LLC upon such terms and conditions as the Board may
determine. Any such officer shall hold his or her respective office for the term
specified by the Board unless earlier removed by the Board.
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8.5 RESIGNATION. Any officer or agent of the LLC may resign at any time
by giving written notice to the Board or to the President or the Secretary of
the LLC. Any such resignation shall take effect at the time specified therein
or, if no time is specified, upon receipt thereof, and unless otherwise
specified therein, acceptance of such resignation shall not be necessary to make
it effective.
8.6 REMOVAL; VACANCIES; TRANSFER OF DUTIES. Any officer or agent of the
LLC may be removed from office, with or without cause, by the Board at a meeting
called for that purpose. Any vacancy in the office of President and Chief
Executive Officer or Secretary for any reason shall be filled by a person
designated by the Board for the unexpired term of the vacant office. The Board,
in its sole and absolute discretion, may transfer the power and duties, in whole
or in part, of any officer to any other officer, or persons, notwithstanding the
provisions of this Agreement, except as otherwise provided by the laws of the
State of Delaware.
8.7 COMPENSATION. The officers of the LLC shall be entitled to
aggregate annual compensation to be treated as an expense of the LLC in an
amount determined by the Board based upon the compensation guidelines attached
hereto as Exhibit B, as such guidelines may be amended hereafter from time to
time by the approval of the Board. Such compensation shall be allocated or
divided among the officers of the LLC not affiliated with O'Charley's in such
manner as the JV Partner shall determine, with the approval of the Board (which
approval shall not be unreasonably withheld).
8.8 THIRD PARTY RELIANCE. Third parties dealing with the LLC shall be
entitled to rely conclusively upon the power and authority of the officers of
the LLC as set forth herein.
ARTICLE IX.
INDEMNIFICATION
9.1 AUTHORITY TO INDEMNIFY. The LLC shall indemnify, and upon request
may advance expenses to, any Member, Board Member, officer, employee, or agent
of the LLC, including without limitation the Independent Director, if any, or
any person who is serving at the request of the LLC in any such capacity with
another Entity, to the extent, consistent with public policy, permitted by
applicable law.
9.2 INSURANCE. The LLC shall purchase and maintain insurance on behalf
of an individual who is or was a Board Member, officer, employee, independent
contractor, or agent of the LLC or who, while a Board Member, officer, employee,
independent contractor, or agent of the LLC, is or was serving at the request of
the LLC as a manager, officer, employee, independent contractor, agent, partner,
or trustee of another foreign or domestic limited liability company,
corporation, partnership, joint venture, trust, employee benefit plan, or other
enterprise, against liability asserted against or incurred by such individual in
that capacity or arising from such individual's status as a Board Member,
officer, employee, independent contractor or agent of the LLC whether or not the
LLC would have the power to indemnify such individual against the same liability
as provided in Section 9.1 hereof.
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9.3 NON-EXCLUSIVE RIGHT. The indemnification granted pursuant to or
provided by this Article IX shall not be deemed exclusive of any other rights to
which a person seeking indemnification may be entitled, whether contained in
this Article IX, the Certificate of Formation, in the Act, in a resolution of
the Members, in a resolution of the Board or an agreement providing for such
indemnification. This Section 9.3 does not limit the LLC's power to pay or
reimburse expenses incurred by any person in connection with his or her
appearance as a witness in a proceeding at a time when he or she has not been
named defendant or respondent to the proceeding.
ARTICLE X.
FISCAL MATTERS
10.1 BOOKS AND RECORDS. Full and accurate books and records of the LLC
(including without limitation all information and records required by the Act)
shall be maintained in accordance with accounting principles generally accepted
in the United States at its principal place of business showing all receipts and
expenditures, assets and liabilities, profits and losses, and all other records
necessary for recording the LLC's business and affairs. All Members shall have
the right to inspect and copy the books and records of the LLC, during regular
business hours, at the LLC's principal place of business, upon provision of
notice in writing by any Member to the LLC at least five (5) business days
before the date on which such Member desires to inspect and copy said books and
records.
10.2 FISCAL YEAR. The fiscal year of the LLC shall end on the last
Sunday in December of each year.
10.3 ACCOUNTING SERVICES. O'Charley's will provide all accounting for
the LLC, including banking and treasury functions, credit card processing,
general ledger accounting, financial reporting, accounts payable processing,
fixed assets and such other accounting related services as O'Charley's and the
LLC shall mutually agree. Notwithstanding the foregoing sentence, O'Charley's
obligation to provide the accounting services described above shall terminate in
the event the JV Partner exercises the JV Partner Purchase Option. Either Member
shall have the right to inspect and make copies (at its own expense) of all
accounting records and work papers of the LLC, whether maintained by O'Charley's
or the LLC, on reasonable request, during normal business hours and on
reasonable notice.
10.4 TAX STATUS. Each of the Members recognizes that it is the
intention of the LLC to be treated as a "partnership" for federal and all
relevant state tax purposes and (ii) the LLC will be treated as a "partnership"
for federal and all relevant state tax purposes and shall make all available
elections to be so treated. All provisions of the LLC's Certificate of Formation
and this Agreement are to be construed so as to preserve that tax status. Within
ninety (90) days after the end of each fiscal year, the LLC will cause to be
delivered to each person who was a Member at any time during such fiscal year a
Form K-I and such other information, if any, with respect to the LLC as may be
necessary for the preparation of each Member's federal, state or local income
tax (or information) returns, including a statement showing each Member's share
of income, gain or loss, and credits for the fiscal year.
26
10.5 TAX MATTERS MEMBER. O'Charley's shall be the initial Tax Matters
Member. The TMM shall promptly give notice to all Members of any administrative
or judicial proceeding pending before the Internal Revenue Service involving any
Company item and the progress of all proceedings. The TMM shall have all the
powers provided to a tax matters partner under Sections 6221 through 6233 of the
Code, including the specific power to extend the statute of limitations with
respect to any matter that is attributable to any Company item or affecting any
item pending before the Internal Revenue Service and to select the forum to
litigate any tax issue or liability arising from LLC items. The TMM may resign
the position by giving thirty (30) days' written notice to the Board, whereupon
the Board shall promptly vote to designate a new TMM. The Board may, without
cause, remove the TMM, whereupon the Board shall promptly vote to designate a
new TMM. The TMM shall be entitled to reimbursement for any and all reasonable
expenses incurred with respect to any administrative and/or judicial proceedings
affecting the LLC.
10.6 PRE-OPENING BUDGET. Within ninety (90) days of the scheduled
opening of any Restaurant under the Development Agreement, the President and
Chief Executive Officer shall prepare and submit to the Board for its
consideration and approval a budget ("PRE-OPENING BUDGET") setting forth the
estimated costs and expenditures of the LLC for the establishment and operation
of such Restaurant through the first day of opening to the public. The
Pre-Opening Budget shall set forth, without limitation, cost of land, estimated
lease costs, costs of improvements to the Restaurant premises, furniture,
fixtures and equipment, training and payroll, supplies, inventory, and
advertising. The Board shall approve or disapprove of the Pre-Opening Budget in
writing within thirty (30) days after its submission. Subject to the foregoing
and upon approval of a Pre-Opening Budget, the President and Chief Executive
Officer shall implement the Pre-Opening Budget under the direction of the Board
and shall be authorized, without the need for further approval to make the
expenditures and incur the obligations provided for in the Pre-Opening Budget.
The President and Chief Executive Officer shall not have authority, without the
further consent of the Board, to deviate materially from the Pre-Opening Budget.
For purposes of this Section 10.6, a material deviation means a deviation of ten
percent (10%) or more in any expense category set forth in the Pre-Opening
Budget.
10.7 UNIT OPERATING BUDGET. Within sixty (60) days of the scheduled
opening of any Restaurant under the Development Agreement, the President and
Chief Executive Officer shall prepare and submit to the Board for its
consideration and approval a budget ("UNIT OPERATING BUDGET") setting forth the
estimated costs and expenditures of the LLC for operation of such Restaurant for
the first year of its operation following the opening to the public. The Board
shall approve or disapprove of the Unit Operating Budget in writing within
thirty (30) days after its submission. Subject to the foregoing and upon
approval of a Unit Operating Budget, the President and Chief Executive Officer
shall implement the Unit Operating Budget under the direction of the Board and
shall be authorized, without the need for further approval to make the
expenditures and incur the obligations provided for in the Unit Operating
Budget. The President and Chief Executive Officer shall not have authority,
without the further consent of the Board, to deviate materially from the Unit
Operating Budget. For purposes of this Section 10.7, a material deviation means
a deviation in any expense category of more than either Ten Thousand
27
and No/100 Dollars ($10,000.00) in any four week accounting period or Fifty
Thousand and No/100 Dollars ($50,000.00) in the aggregate during any fiscal
year.
10.8 OPERATING BUDGET. Within sixty (60) days prior to the beginning of
each fiscal year, the President and Chief Executive Officer shall prepare and
submit to the Board for its consideration and approval a budget ("OPERATING
BUDGET"), setting forth the estimated costs and expenditures of the LLC for the
next fiscal year. The Board shall approve or disapprove an Operating Budget in
writing within thirty (30) days of its submission. Subject to the foregoing and
provided the President and Chief Executive Officer shall not deviate materially
therefrom without the consent of the Board, upon approval of an Operating
Budget, the President shall implement the Operating Budget and shall be
authorized, without the need for further approval to make the expenditures and
incur the obligations provided for in the Operating Budget. For purposes of this
Section 10.8, a material deviation means a deviation in any expense category of
more than either Ten Thousand and No/100 Dollars ($10,000.00) in any four week
accounting period or Fifty Thousand and No/100 Dollars ($50,000.00) in the
aggregate during any fiscal year.
ARTICLE XI.
ASSIGNMENT AND TRANSFER OF MEMBERSHIP INTERESTS
11.1 TRANSFER OF MEMBERSHIP INTERESTS. Except as otherwise provided in
this Article XI, a Member may not Assign all or any part of such Member's
Membership Interest in the LLC (including any Financial Rights, Governance
Rights, or other rights pertaining to a Membership Interest) to any person
without the prior written consent of the Members. Neither JV Partner, nor any
member of JV Partner, nor any successor or assign of JV Partner or any member of
JV Partner shall sell, assign, transfer, convey, give away, pledge, mortgage or
otherwise dispose of or encumber any direct or indirect interest in JV Partner
without the prior written consent of O'Charley's. Any purported assignment or
transfer, by operation of law or otherwise, not having the written consent of
O'Charley's shall be null and void. Securities or other ownership interests in
JV Partner may be offered to prospective investors, including existing
investors, by private offering or otherwise, only with the prior written consent
of O'Charley's. O'Charley's shall have the right to Assign all or any part of
its Membership Interest in the LLC (including any Financial Rights, Governance
Rights or other rights pertaining to its Membership Interest) on the terms set
forth in Article VIII of the Development Agreement.
11.2 RESTRICTIONS ON ASSIGNMENT NOT UNREASONABLE. Each of the Members
hereby agrees and acknowledges that the restrictions on Assignment contained in
this Article XI are not unreasonable in view of the nature of the parties and
their relationships to one another and the nature of the business of the LLC.
11.3 ADMISSION OF NEW MEMBERS. An Assignment effected in accordance
with this Article XI shall become effective and the assignee shall become a New
Member and entitled to the rights of a Member under this Agreement upon (a)
executing a copy of this Agreement and agreeing to be bound hereby and (b)
delivering such executed copy to the LLC in accordance with Section 13.1 hereof.
Upon receipt of such executed copy, the LLC will cause Exhibit A to
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be amended appropriately and will deliver to all Members, including the New
Member, in accordance with Section 13.1 hereof, a copy of amended Exhibit A.
11.4 RIGHTS AND OBLIGATIONS OF FORMER MEMBERS. A Member who Assigns all
of his, her, or its Membership Interest shall cease to be a Member; provided,
however, that such former Member or any Successor shall remain liable to the LLC
(a) for any obligations of such Member for wrongful distributions under Section
18-607 of the Act, and (b) pursuant to any contribution agreements with the LLC
existing at the time of the Assignment of all such Membership Interest.
11.5 JV PARTNER PURCHASE OPTION. In the event that the LLC (i) has
opened three (3) Restaurants in accordance with the Development Agreement; (ii)
is not in default of the terms of any of the Franchise Agreements or this
Agreement; and (iii) has received a commitment for financing the remaining
Restaurants under the Development Agreement on terms reasonably satisfactory to
O'Charley's, the JV Partner shall thereupon have the right, but not the
obligation, for a period beginning on the date that is six (6) months following
the opening of the third Restaurant under the Development Agreement and ending
on the date that is twenty-five (25) months after the opening of the third
Restaurant under the Development Agreement, to purchase all, but not less than
all, of O'Charley's' Membership Interest in the LLC by giving written notice
(the "JV ELECTION NOTICE") to the LLC and O'Charley's. As a condition to the JV
Partner's exercise of such option, the JV Partner (or the LLC) will be required
at Closing to: (a) pay O'Charley's the amount set forth in the table below for
each of the three (3) Restaurants based on the trailing twelve (12) months'
Gross Sales for each Restaurant at the time of the exercise of the option, it
being understood that for any Restaurant that has been open less than twelve
(12) months, the Gross Sales shall be determined by annualizing the average
monthly Gross Sales for each full month of any such Restaurant's operation; (b)
pay O'Charley's the applicable development fees for the exclusive right to
develop the remaining Restaurants under the terms of the Development Agreement;
(c) continue to pay the royalty and other fees under the Franchise Agreements
for the existing and future Restaurants; (d) pay all amounts outstanding under
the Revolving Loan Agreement; (e) obtain a release of O'Charley's' guaranty of
any debt or other obligations of the LLC, including the Loan Program; and (f)
provide satisfactory evidence to O'Charley's of the commitment for financing
referred to in subsection (iii) above.
ANNUALIZED RESTAURANT GROSS SALES PAYMENT PER RESTAURANT
-----------------------------------------------------------------------------
Less than $2.7 Million $175,000.00
$2.7 Million > $2.8 Million $150,000.00
$2.8 Million > $2.9 Million $125,000.00
$2.9 Million > $3.0 Million $100,000,00
Greater than $3.0 Million $ 50,000.00
11.6 O'CHARLEY'S PURCHASE OPTION. In the event that (i) the JV Partner
does not exercise its option to purchase O'Charley's' Membership Interest in the
LLC pursuant to Section 11.5 hereof prior to the expiration of such option; (ii)
the JV Partner is not entitled to exercise its option to purchase O'Charley's'
Membership Interest pursuant to Section 11.5 hereof; or (iii)
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O'Charley's has terminated the Development Agreement or any of the Franchise
Agreements in accordance with their terms, O'Charley's shall thereupon have the
right for a period of 180 days thereafter, but not the obligation, to purchase
all, but not less than all, of the JV Partner's Membership Interest in the LLC
by giving written notice (the "O'CHARLEY'S NOTICE") to the LLC and the JV
Partner. As a condition to O'Charley's exercise of such option, O'Charley's will
be required at the Closing to: (a) pay the JV Partner the amount set forth in
the table below for each of the then-existing Restaurants based on the trailing
twelve (12) months' Gross Sales for each Restaurant at the time of the exercise
of such option, it being understood that for any Restaurant that has been open
less than twelve (12) months, the Gross Sales shall be determined by annualizing
the average monthly Gross Sales for each full month of any such Restaurant's
operation; and (b) obtain a release of the JV Partner's guaranty of any debt or
other obligations of the LLC.
ANNUALIZED RESTAURANT GROSS SALES PAYMENT PER RESTAURANT
-----------------------------------------------------------------------------
Less than $2.7 Million $ 50,000.00
$2.7 Million > $2.8 Million $ 75,000.00
$2.8 Million > $2.9 Million $125,000.00
$2.9 Million > $3.0 Million $150,000.00
Greater than $3.0 Million $200,000.00
11.7 CLOSING. The sale or purchase of any Member's Membership Interest,
or portion thereof, pursuant to this Article XI and payment therefor (the
"CLOSING") shall take place at the principal offices of the LLC on such date as
the parties to the transaction may, acting reasonably, agree upon. At Closing,
in addition to any obligations of the selling Member set forth in Section 11.5,
the selling Member shall deliver to the purchasing Member the following executed
documentation, in form reasonably acceptable to the purchasing Member:
(i) An assignment of its Membership Interest;
(ii) The resignation of each of its designees who are
acting as members of the Board or officers of the LLC;
(iii) A representation and warranty by the selling
Member that its Membership Interest is free and clear of all options,
liens, charges and encumbrances whatsoever, which representation and
warranty will survive Closing and will continue forever;
(iv) A general release of all claims against the LLC
and the purchasing Member relating to LLC matters; and
(v) Such other documentation as the purchasing Member
may reasonably require in order to vest in the purchasing Member or its
designee full right, title and interest in and to the Membership
Interest of the selling Member.
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At Closing, the purchasing Member will deliver to the selling Member (i) the
purchase price in immediately available funds and (ii) an indemnity indemnifying
the selling Member against any claims arising from the conduct of the business
of the LLC from and after the time of Closing.
ARTICLE XII.
DISSOLUTION, WINDING UP, AND TERMINATION OF THE LLC'S EXISTENCE
12.1 TERM. The duration of the LLC shall be perpetual and shall
continue until terminated in accordance with the provisions of this Agreement or
the Act.
12.2 EVENTS CAUSING DISSOLUTION AND WINDING UP. The LLC shall be
dissolved and its affairs wound up upon the occurrence of any of the following
events (individually, a "DISSOLUTION EVENT"):
(i) At any time with the prior approval of a Majority
of interest of the Members; or
(ii) As may be otherwise required by law.
Upon the occurrence of a Dissolution Event, the LLC shall be terminated when the
winding up of the LLC's affairs has been completed following dissolution.
12.3 WINDING UP AFFAIRS ON DISSOLUTION. Upon dissolution of the LLC,
the officers, Board Members or other persons required or permitted by law to
carry out the winding up of the affairs of the LLC shall promptly notify all
Members of such dissolution; shall wind up the affairs of the LLC; shall prepare
and file all instruments or documents required by law to be filed to reflect the
dissolution of the LLC; and, after collecting the debts and obligations owed to
the LLC and after paying or providing for the payment of all liabilities and
obligations of the LLC, shall distribute any remaining assets to the Members in
accordance with the positive balances in their respective Capital Accounts. In
the event of a distribution of assets in kind (in whole or in part), the fair
market value of the assets shall be determined and each Member's Capital Account
shall be adjusted as if such asset were sold for its fair market value. Each
Member shall receive an undivided interest in the assets of the LLC equal in
value to the portion of the proceeds to which the Member would have been
entitled if the assets had been sold or otherwise converted to cash at the
assets' fair market values and the distribution had been solely in the form of a
cash distribution. Division of the property may be made on a non-pro rata basis
upon the consent of all of the Members, so that certain Members own certain
assets while other Members own other assets. In the event the LLC is
"liquidated" within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g),
distributions shall be made pursuant to this Article XII to the Members who have
positive Capital Accounts in compliance with Regulations Section
1.704-1(b)(2)(ii)(b)(2). If any Member has a deficit balance in his Capital
Account (after giving effect to all contributions, distributions and allocations
for all periods, including the period during which such liquidation occurs),
such Member shall have no obligation to make any contribution to the capital of
the LLC with respect to such deficit, and such deficit shall not be considered a
debt owed to the LLC or to any other person for any purpose whatsoever.
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12.4 WAIVER OF RIGHT TO PARTITION AND DECREE OF DISSOLUTION. As a
material inducement to each Member to execute this Agreement, each Member
covenants and represents to each other Member that, during the period beginning
on the date of this Agreement, no Member, nor such Member's heirs,
representatives, successors, transferees, or assigns, will attempt to make any
partition whatever of the assets of the LLC or any interest therein whether now
owned or hereafter acquired, and each Member waives all rights of partition
provided by statute or principles of law or equity, including partition in kind
or partition by sale. The Members agree that irreparable damage would be done to
the goodwill and reputation of the LLC if any Member should bring an action in a
court to dissolve the LLC. The Members agree that there are fair and just
provisions for payment and liquidation of the interest of any Member in the LLC,
and fair and just provisions to prevent a Member from selling or otherwise
alienating his or her interest in the LLC. Accordingly, each Member hereby
waives and renounces his, her or its right to such a court decree of dissolution
or to seek the appointment by court of a liquidator or receiver for the LLC.
12.5 DEEMED CONTRIBUTION AND DISTRIBUTION. In the event the LLC is
terminated within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g) but no
Dissolution Event has occurred, the property shall not be liquidated, the LLC's
debts and other liabilities shall not be paid or discharged, and the LLC's
affairs shall not be wound up. Instead, solely for federal income tax purposes,
the LLC shall be deemed to have contributed all property and liabilities to a
new limited liability company in exchange for an interest in such new limited
liability company and, immediately thereafter, the LLC will be deemed to
liquidate by distributing interests in the new limited partnership to the
Members.
ARTICLE XIII.
GENERAL PROVISIONS
13.1 NOTICES. All notices and other communications required or
permitted to be given in respect of this Agreement shall be in writing, and sent
by facsimile, courier service, hand delivery or certified or registered mail
(return receipt requested and first-class postage prepaid). Written notice by
the LLC to the Members is effective when mailed, if mailed and correctly
addressed to the Member's address as reflected in the LLC's records. Written
notice to the LLC may be addressed to the LLC's registered agent at its
registered office or to the LLC's Secretary at the LLC's principal executive
office. Written notice to the LLC is effective at the earliest of the following:
(a) when received; (b) five (5) days after its deposit in the United States
mail, if correctly addressed and first class postage affixed thereon; or (c) on
the date shown in the return receipt, if sent by registered or certified mail,
return receipt requested, and the receipt is signed by or on behalf of the
addressee.
13.2 INTEGRATION. This Agreement embodies the entire agreement and
understanding among the Members relating to the formation and operation of the
LLC and supersedes all prior agreements and understandings, if any, among and
between the Members relating to the subject matter hereof.
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13.3 APPLICABLE LAW. This Agreement and the rights of the Members shall
be governed by and construed and enforced in accordance with the laws of the
State of Delaware and specifically the Act. All actions or proceedings relating
to this Agreement (whether to enforce a right or obligation or obtain a remedy
or otherwise) will be brought solely in the state or federal courts located in
or for Davidson County, Tennessee. Each party hereby unconditionally and
irrevocably consents to the jurisdiction of such courts and waives its rights to
bring any action or proceeding against the other party except in such courts.
Process in any action or proceeding referred to in the preceding sentence may be
served on any party anywhere in the world. Each of the parties irrevocably
waives any right to a jury trial with respect to any matter arising out of or in
connection with this Agreement. If any party seeks to enforce its right under
this Agreement by joining another party to a judicial proceeding before a jury
in which such third party is a party, the parties will request the court to try
the claims between the parties to this Agreement without submitting the matter
to the jury.
13.4 SEVERABILITY. In case any one or more of the provisions contained
in this Agreement or any application thereof shall be invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein and any other application thereof shall
not in any way be affected or impaired thereby.
13.5 BINDING EFFECT. Except as herein otherwise provided to the
contrary, this Agreement shall be binding upon, and inure to the benefit of, the
Members and their respective heirs, executors, administrators, successors,
transferees and assigns.
13.6 TERMINOLOGY. All personal pronouns used in this Agreement, whether
used in the masculine, feminine, or neuter gender, shall include all other
genders; and the singular shall include the plural, and vice-versa. Titles and
Articles are for convenience only and neither limit nor amplify the provisions
of this Agreement itself.
13.7 AMENDMENT. This Agreement may be amended, modified, or
supplemented in writing (a) with the consent of the Members as required in
Section 6.8 and (b) with respect to Exhibit A hereto, under the circumstances
set forth in Section 4.6. No other written or oral agreement, understanding,
instrument or writing other than this agreement or any amendment hereto shall
constitute part of the limited liability company agreement of the LLC.
Notwithstanding anything herein to the contrary, no amendment or modification
that disproportionately affects the interests of any Member in the capital, Net
Profits or Net Losses of, or distributions or allocations with respect to, the
LLC shall be effective as to any Member unless the same has been set forth in a
document duly executed by such Member.
13.8 EXECUTION OF ADDITIONAL INSTRUMENTS. Each Member hereby agrees to
execute such other and further statements of interest and holdings,
designations, powers of attorney, and other instruments necessary to comply with
any laws, rules, or regulations.
13.9 WAIVERS. The failure of any party to seek redress for violation of
or to insist upon the strict performance of any covenant or condition of this
Agreement shall not prevent a subsequent act, which would have originally
constituted a violation, from having the effect of an original violation.
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13.10 RIGHTS AND REMEDIES CUMULATIVE. The rights and remedies provided
by this Agreement are cumulative and the use of any one right or remedy by any
party shall not preclude or waive the right to use any or all other remedies.
Said rights and remedies are given in addition to any other rights the Members
may have by law, statute, ordinance, or otherwise.
13.11 HEIRS, SUCCESSORS, AND ASSIGNS. Each and all of the covenants,
terms, provisions and agreements herein contained shall be binding upon and
inure to the benefit of the Members hereto and, to the extent permitted by this
Agreement, their respective heirs, legal representatives, successors, and
assigns.
13.12 CREDITORS. None of the provisions of this Agreement shall be for
the benefit of or enforceable by any creditors of the LLC.
13.13 COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed an original but all of which shall constitute one
and the same instrument.
13.14 INTERPRETATION OF ADDITIONAL DOCUMENTS. The parties hereby agree
that, to the extent that any provision of any of the other documents entered
into by and among the parties hereto and the LLC (or any of them) in connection
with the Development Agreement (including, without limitation, the Development
Agreement, the Revolving Loan Agreement, the Master Secured Promissory Note and
the Security Agreement) is inconsistent with the provisions of this Agreement,
the provisions of this Agreement shall control.
[SIGNATURE PAGE TO FOLLOW.]
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IN WITNESS WHEREOF, the undersigned hereby agrees, acknowledges and
certifies that the foregoing Agreement constitutes the limited liability company
agreement of Wi-Tenn Restaurants, LLC, adopted by the Members of the LLC as of
the 8th day of November, 2004.
WI-TENN INVESTORS, LLC
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Authorized Member
O'CHARLEY'S INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chairman and CEO
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EXHIBIT A
Members Name and Address Capital Contribution Membership
Percentages
MEMBER'S NAME AND ADDRESS: CAPITAL CONTRIBUTION: MEMBERSHIP PERCENTAGES:
--------------------------------------------------------------------------------------------------------------
Wi-Tenn Investors, LLC $250,000.00 50%
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
O'Charley's Inc. -0- 50%
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
----------- ---
TOTAL: $250,000.00 100%
=========== ===
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EXHIBIT B
COMPENSATION GUIDELINES
(attached)
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SALARY COMPENSATION GUIDELINES
1. The annual salary drawn by this Joint Venture Partner will be $100,000
paid weekly.
2. This draw will commence no sooner than 120 days before the projected
opening of the first restaurant.
3. Ninety days after the opening of the first restaurant the Board of
Directors will conduct a financial analysis based on actual results and
projected annual results to determine the fixed charge coverage ratio as
defined by the financing documents. If the fixed charge coverage ratio as
determined by the Board (including the projected salary increase) meets or
exceeds 1.35/1, the Board will grant an annual salary increase of $25,000
to be paid weekly. This will increase the annual salary to $125,000.
4. Ninety days after the opening of the second restaurant the Board of
Directors of the LLC will conduct a financial analysis based on
consolidated actual and projected results to determine the fixed charge
coverage ratio as defined by the financial documents. If the fixed charge
coverage ratio as determined by the Board (including the projected salary
increase) meets or exceeds 1.4/1 the Board will grant an additional
annual salary increase of $50,000 to be paid weekly. This will increase
the annual salary to $175,000.
5. The Board will conduct a financial analysis approximately every ninety
days to determine the fixed charge coverage ratio as defined by the
financial documents. If at any time the analysis produces an actual or
projected fixed charge coverage ratio of less than the defined amounts
above the Board will reduce the annual salary compensation to appropriate
levels but not below the original base salary of $100,000.
EXHIBIT C
DEVELOPMENT AGREEMENT
(attached)
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