Exhibit 10.7
OPERATING AGREEMENT
FOR
SAN ▇▇▇▇ GRILL LLC
A CALIFORNIA LIMITED LIABILITY COMPANY
THIS OPERATING AGREEMENT is made as of June ___, 1997, by and among the parties
listed on the signature pages hereof, with reference to the following facts:
A. HOTEL EQUITY FUND III, L.P. has an ownership interest in the San ▇▇▇▇
Fairmont Hotel located in San Jose, California. Grill Concepts, Inc. operates
The Grill Restaurant in Beverly Hills, California and owns the uniform
restaurant operating system necessary for the establishment and operation of
distinctive restaurants with distinctive features, equipment, equipment designs,
food formulas, inventory, manuals, training systems and accounting systems (the
"Operating System") which restaurant and operating systems are identified by the
service and trademarks "The Grill" and related words and symbols (the "Existing
Marks") identifying these restaurants and their goods and services. The term
"Marks" shall include the Existing Marks and such other tradenames, service
marks, logo types, trade symbols, emblems, signs, slogans, insignias,
trademarks, designs, patents and copyrights as Grill Concepts, Inc. now owns or
may hereafter acquire, develop or adopt or designate for use in connection with
the Operating System.
B. HOTEL EQUITY FUND III, L.P. and Grill Concepts, Inc. desire to form this
Company to own and operate a "Grill" restaurant ("Restaurant") on the Premises
in the San ▇▇▇▇ Fairmont pursuant to the lease agreement executed concurrently
herewith between this Company and the San ▇▇▇▇ Fairmont (the "Lease"). The
parties desire to adopt and approve an operating agreement for the Company to
own and operate the Restaurant.
NOW, THEREFORE, the parties (hereinafter sometimes collectively referred to as
the "Members," or individually as the "Member") by this Agreement set forth the
operating agreement for the Company under the laws of the State of California
upon the terms and subject to the conditions of this Agreement.
ARTICLE 1.
DEFINITIONS
When used in this Agreement, the following terms shall have the meanings
set forth below (all terms used in this Agreement that are not defined in this
Article 1 shall have the meanings set forth elsewhere in this Agreement):
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1.
1.1 "Act" means the California Limited Liability Company Act, Calif. Corps.
Code Section 17000 et seq., as the same may be amended from time to time.
1.2 "Adjusted Capital Account Deficit" means, with respect to any Member,
the deficit balance, if any, in such Member's Capital Account as of the end of
the relevant fiscal year, after giving effect to the following adjustments:
1.2(a) Credit to such Capital Account any amounts which such Member is
obligated to restore pursuant to this Agreement or is deemed to be
obligated to restore pursuant to Regulations Section 1.704-1(b)(2)(ii)(C)
after taking into account any changes during such year in Company minimum
gain and in minimum gain attributable to any Company nonrecourse debt under
Regulations Section 1.704-2(d)(2) and (3); and
1.2(b) Debit to such Capital Account the items described in Sections
1.704-1(b)(2)(ii)(d)(4), (5), and (6) of the Regulations.
The foregoing definition of Adjusted Capital Account Deficit is intended to
comply with the provisions of Section 1.704- 1(b)(2)(ii)(d) of the Regulations
and shall be interpreted con- sistently therewith.
1.3 "Affiliate" means any individual, partnership, corporation, trust or
other entity or association, directly or indirectly controlled by, or under
common control with the Member. The term "control," as used in the immediately
preceding sentence, means, with respect to a corporation or limited liability
company the right to exercise, directly or indirectly, more than fifty percent
(50%) of the voting rights attributable to the controlled corporation or limited
liability company, and, with respect to any individual, partnership, trust,
other entity or association, the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of the
controlled entity.
1.4 "Agreement" means this Operating Agreement, as originally executed and
as amended from time to time, which shall constitute "regulations" for purposes
of the Act.
1.5 "Articles" means the Articles of Organization for the Company
originally filed with the California Secretary of State and as amended from time
to time.
1.6 "Assignee" means a person who has acquired an Economic Interest in the
Company but who has not been admitted as a Substituted Member.
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2.
1.7 "Bankruptcy" means: (a) the filing of an application by a Member for,
or his or her consent to, the appointment of a trustee, receiver, or custodian
of his or her other assets; (b) the entry of an order for relief with respect to
a Member in proceedings under the United States Bankruptcy Code, as amended or
superseded from time to time; (c) the making by a Member of a general assignment
for the benefit of creditors; (d) the entry of an order, judgment, or decree by
any court of competent jurisdiction appointing a trustee, receiver, or custodian
of the assets of a Member unless the proceedings and the person appointed are
dismissed within ninety (90) days; or (e) the failure by a Member generally to
pay his or her debts as the debts become due within the meaning of Section
303(h)(1) of the United States Bankruptcy Code, as determined by the Bankruptcy
Court, or the admission in writing of his or her inability to pay his or her
debts as they become due.
1.8 "Capital Account" means with respect to any Member the capital account
which the Company establishes and maintains for such Member pursuant to Section
3.3.
1.9 "Capital Contributions" means the total value of cash and fair market
value of property (including promissory notes) contributed and/or services
rendered or to be rendered to the Company by Members.
1.10 "Code" means the Internal Revenue Code of 1986, as amended from time
to time, the provisions of succeeding law, and to the extent applicable, the
Regulations.
1.11 "Company" means SAN ▇▇▇▇ GRILL LLC.
1.12 "Company Minimum Gain" shall have the meaning ascribed to the term
"Partnership Minimum Gain" in Regulations Section 1.704- 2(d)(1).
1.13 "Dissolution Event" means with respect to any Manager one or more of
the following: the death, insanity, bankruptcy, dissolution or withdrawal,
retirement, resignation, or expulsion as a Member, or occurrence of any other
event which terminates the continued membership of any Manager unless the
non-Manager Members consent to continue the business of the Company pursuant to
Section 8.1. The occurrence of any of the foregoing events with respect to a
Member other than the Manager shall not be a Dissolution Event.
1.14 "Distributable Cash" means the amount of cash which the Manager deems
available for distribution to the Members, taking into account all Company
debts, liabilities and obligations of the Company then due and amounts which the
Manager deems necessary to place into reserves for customary and usual claims
with respect to the Company's business. Payment of the Management Fee pursuant
to
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the Management Agreement is an expense of the Company and is not a distribution
of Distributable Cash.
1.15 "Distribution" means any money or other property transferred without
consideration to Members with respect to their Membership Interests in the
Company, but shall not include any payments to the Manager pursuant to Section
5.
1.16 "Economic Interest" means a Member's or Economic Interest Owner's
share of one or more of the Company's taxable income, taxable losses, and
distributions of the Company's assets pursuant to this Agreement and the Act,
but shall not include any other rights of a Member, including, without
limitation, the right to vote or participate in the management, or any right to
information concerning the business and affairs of Company.
1.17 "Economic Interest Owner" means the owner of an Economic Interest who
is not a Member.
1.18 "Fiscal Year" means the Company's fiscal year, which shall be the
calendar year.
1.19 "Former Member" shall have the meaning ascribed to it in Section 8.1.
1.20 "Former Member's Interest" shall have the meaning ascribed to it in
Section 8.1.
1.21 "Gross Asset Value" means, with respect to any asset of the Company,
the asset's adjusted basis for federal income tax purposes; provided, however,
that (i) the Gross Asset Value of any asset contributed by a Member to the
Company or distributed to a Member by the Company shall be the gross fair market
value of such asset (without taking into account Section 7701(g) of the Code),
as reasonably determined by the contributing or distributee Member, as the case
may be, and the Company; (ii) the Gross Asset Values of all Company assets shall
be adjusted to equal their respective gross fair market values (without taking
into account Section 7701(g) of the Code), upon the termination of the Company
for federal income tax purposes pursuant to Section 708(b)(1)(B) of the Code;
and (iii) the Gross Asset Values of all Company assets may be adjusted in the
sole and absolute discretion of the Manager to equal their respective gross fair
market values (taking into account Section 7701(g) of the Code), as reasonably
determined by the Member, as of (A) the date of the acquisition of an additional
interest in the Company by any new or existing Member in exchange for more than
a de minimis contribution to the capital of the Company or (B) upon the
distribution by the Company to a retiring or continuing Member of more than a de
minimis amount of Company property including money in reduction of such Member's
interest in the Company.
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1.22 "Liquidation" means in respect to the Company the earlier of the date
upon which the Company is terminated under Section 708(b)(1) of the Code or the
date upon which the Company ceases to be a going concern (even though it may
exist for purposes of winding up its affairs, paying its debts and distributing
any remaining balance to its Members), and in respect to a Member where the
Company is not in Liquidation means the date upon which occurs the termination
of the Member's entire interest in the Company by means of a Distribution or the
making of the last of a series of Distributions (in one or more years) to the
Member by the Company.
1.23 "Majority Interest" means Members holding more than 50% of the
Percentage Interests.
1.24 "Management Agreement"means the agreement attached hereto as Exhibit
"A".
1.25 "Manager" means Grill Concepts, Inc. or any successor Manager
designated herein elected pursuant to Section 5.2. Each Manager shall serve
until his, her or its successor has been elected and qualified.
1.26 "Member" means each Person who (a) is an initial signatory to this
Agreement, has been admitted to the Company as a Member in accordance with the
Articles or this Agreement or an assignee who has become a Member in accordance
with Article 7 and (b) has not resigned, withdrawn, been expelled or, if other
than an individual, dissolved.
1.27 "Member Nonrecourse Debt" shall have the meaning ascribed to the term
"partner nonrecourse debt" in Regulations Section 1.704-2(b)(4).
1.28 "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)(2).
1.29 "Member Nonrecourse Deductions" shall have the meaning ascribed to the
term "partner nonrecourse deductions" in Regulations Section 1.704-2(i).
1.30 "Membership Interest" means a Member's entire interest in the Company
including the Member's Economic Interest, the right to vote on or participate in
the management, and the right to receive information concerning the business and
affairs, of the Company.
1.31 "Minimum Return Event" shall mean the receipt by the Members of all
amounts due them under the Subordinated Debt and Section 6.12(a), (b) and (c)
prior to July 1, 2002. If such amount is not paid by such time, the Minimum
Return Event will not have occurred.
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1.32 "Nonrecourse Debt" shall have the meaning set forth in Regulations
Section 1.704-2(b)(3).
1.33 "Nonrecourse Deductions" shall have the meaning, and the amount
thereof shall be, as set forth in Regulations Section 1.704- 2(c).
1.34 "Nonrecourse Liability" shall have the meaning set forth in
Regulations Section 1.704-2(b)(3).
1.35 "Percentage Interest" means the percentage interest of a Member in the
Company as set forth opposite the name of such Member under the column "Member's
Percentage Interest" on the Schedule.
1.36 "Person" means an individual, general partnership, limited
partnership, limited liability company, corporation, trust, estate, real estate
investment trust association or any other entity.
1.37 "Preferred Return" means, for each Member, a cumulative return
compounded annually of ten percent (10%) per annum (pro rated for periods of
less than 365 days) on the unpaid balance of such Member's Adjusted Capital
Contribution. For this purpose, a Member's Adjusted Capital Contribution shall
mean the excess of (1) the Member's Initial Capital Contribution to the Company,
over (2) Distributions to such Member under Section 6.12(a)(ii) of this
Agreement.
1.38 "Premises"means the property described in the Lease.
1.39 "Pro Rata Share" is defined in Section 7.9(b).
1.40 "Profits" and "Losses" means for each fiscal year or other period, an
amount equal to the Company's taxable income or loss, as the case may be, for
such year or period, determined in accordance with Section 703(a) of the Code
(for this purpose, all items of income, gain, loss and deduction required to be
stated separately pursuant to Section 703(a)(1) of the Code shall be included in
taxable income or loss); provided, however, for purposes of computing such
taxable income or loss: (i) any deductions for depreciation, cost recovery or
amortization attributable to any assets of the Company shall be determined by
reference to their Gross Asset Value, except that if the Gross Asset Value of an
asset differs from its adjusted tax basis for federal income tax purposes at any
time during such year or other period, the deductions for depreciation, cost
recovery or amortization attributable to such asset from and after the date
during such year or period in which such difference first occurs shall bear the
same ratio to the Gross Asset Value as of such date as the federal income tax
depreciation, amortization or other cost recovery deduction for such year or
other period from and after such date bears to the adjusted tax basis as of such
date; (ii) any
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gain or loss attributable to the taxable disposition of any property shall be
determined by the Company as if the adjusted tax basis of such property as of
such date of disposition was such Gross Asset Value reduced by all amortization,
depreciation and cost recovery deductions (determined in accordance with clause
(i) above) which are attributable to said property; (iii) the computation of all
items of income, gain, loss and deduction shall be made without regard to any
basis adjustment under Section 743 of the Code, which may be made by the
Company; (iv) any receipts of the Company that are exempt from federal income
tax and are not otherwise included in taxable income or loss shall be added to
such taxable income or loss; and (v) any expenditures of the Company described
in Section 705(a)(2)(B) of the Code or treated as expenditures described in
Section 705(a)(2)(B) of the Code pursuant to Regulations Section 1.704-1(b)
shall be subtracted from such taxable income or loss.
1.41 "Regulations" means, unless the context clearly indicates otherwise,
the regulations currently in force as final or temporary that have been issued
by the U.S. Department of Treasury pursuant to its authority under the Code, and
the corresponding provisions of any successor regulations.
1.42 "Remaining Members" shall have the meaning ascribed to it in Section
8.1.
1.43 "Schedule" means the attachment hereto identifying the Members, their
residential or business addresses, their Percentage Interests, and the Capital
Contributions.
1.44 "Special Fee" shall have the meaning ascribed to it in Section 5.5.
1.45 "Subordinated Debt" means the debt in the sum of $800,000 which bears
interest at the rate of 10% per annum on the unpaid balance of the debt at the
end of each year of the debt, which interest shall be added to principal for the
following year, which is payable prior to the payment of any Distributions
hereunder, but subordinated to the other creditors of the Company and to a Tax
Draw all as set forth in the Subordinated Note instrument. The Subordinated Note
is a Member Nonrecourse Debt.
1.46 "Supermajority Interest" means the vote of Members holding more than
80% of the Percentage Interest.
ARTICLE 2.
ORGANIZATIONAL MATTERS
2.1 Formation. Pursuant to the Act, the Members have formed a California
limited liability company under the laws of the State of California by filing
the Articles with the California Secretary of State on June 6, 1997.
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The rights and liabilities of the Members shall be determined pursuant to the
Act and this Agreement. To the extent that the rights or obligations of any
Member are different by reason of any provision of this Agreement than they
would be in the absence of such provision, this Agreement shall, to the extent
permitted by the Act, control.
2.2 Name. The name of the Company shall be "SAN ▇▇▇▇ GRILL LLC." The
business of the Company may be conducted under the name "The Grill". The Manager
shall file or cause to be filed any fictitious name certificates and similar
filings, and any amendments thereto, that the Manager considers appropriate or
advisable.
2.3 Term. The term of this Agreement shall be co-terminus with the period
of duration of the Company provided in the Articles, unless extended or sooner
terminated as hereinafter provided.
2.4 Office and Agent. The Company shall continuously maintain an office and
registered agent in the State of California as required by the Act. The
principal office of the Company shall be as the Manager may determine. The
Company also may have such offices, anywhere within and without the State of
California, as the Manager from time to time may determine, or the business of
the Company may require. The registered agent shall be as stated in the Articles
or as otherwise determined by the Manager.
2.5 Purposes of Company. The purpose of the Company is to engage in any
lawful activity for which a limited liability company may be organized under the
Act. Notwithstanding the foregoing, the Company shall not engage in any business
other than the business of owning and operating The Grill restaurant located in
the San ▇▇▇▇ Fairmont Hotel, San Jose, California without the consent of all
Members.
ARTICLE 3.
CAPITAL CONTRIBUTIONS
3.1 Initial Capital Contributions. Subject to Section 9.11, the Members
have agreed to contribute to the capital of the Company, in cash, in the ratio
of the Percentage Interests within 5 days of receipt of a written request
therefor from the Manager, the aggregate amount of $400,000 as set forth on the
Schedule (the "Initial Capital Contribution"). The Manager is the owner of all
right, title and interest, together with all goodwill connected therewith, in
and to the Operating System, "Existing Marks" and Marks (collectively, the
"License Rights") and shall grant to the Company, during the term of this
Agreement, the exclusive rights to use the License Rights at the location
covered by the Lease pursuant to the Management Agreement. The Manager shall
receive no credit to its Capital Account for such contribution, nor shall the
Manager receive any compensation for such contribution except as set forth
herein.
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3.2 Additional Capital Contributions. Except as provided in this Section
3.2 and Section 6.6, the Members shall not be required to contribute additional
capital to the Company. If, however, the Manager determines that additional
capital is necessary, the Manager may, from time to time, cause the Company to
attempt to borrow all or a portion of the necessary amount, or, by written
notice, call for the Members to make Additional Capital Contributions up to the
sum of $300,000. Such Additional Capital Contributions up to $300,000 shall be
contributed by the Members in the ratio of their Percentage Interests. The
obligation to make Additional Capital Contributions set forth in this
Section 3.2 shall be a personal liability of the Members which may be enforced
by any legal remedy.
3.3 Capital Accounts. The Company shall maintain on its books a Capital
Account for each Member. For this purpose, "Capital Account" means with respect
to each Member the amount of money contributed by such Member to the capital of
the Company, increased by the Gross Asset Value of any property contributed by
such Member to the capital of the Company (net of Liabilities securing such
contributed property that the Company is considered to assume or take subject to
under Section 752 of the Code), and the amount of any Profits allocated to such
Member, and decreased by the amount of money distributed to such Member by the
Company (exclusive of a guaranteed payment within the meaning of Section 707(c)
of the Code paid to such Member), the Gross Asset Value of any property
distributed to such Member by the Company (net of Liabilities securing such
distributed property that such Member is considered to assume or take subject to
under Section 752 of the Code), and the amount of any Losses charged to such
Member. To the extent an adjustment to the tax basis of any Company asset is
made pursuant to Code Sections 734(b) or 743(b), and such adjustment is required
by Regulations Section 1.704-1(b)(2)(iv)(m), to be taken into account in
determining Capital Accounts, the Capital Accounts of the Members shall be
adjusted to reflect an item of gain (if the adjustment increases the basis of
the asset) or loss (if the adjustment decreases such basis), which is specially
allocated to the Members in a manner consistent with the manner in which their
Capital Accounts are required to be adjusted pursuant to such Section of the
Regulations. In the event the Gross Asset Values of Company assets are otherwise
adjusted pursuant to the terms of this Agreement, the Capital Accounts of the
Members shall be adjusted simultaneously to reflect the aggregate net adjustment
as if the Company recognized gain or loss equal to the amount of such aggregate
net adjustment and such gain or loss was allocated to the Members pursuant to
the appropriate provisions of this Agreement. The foregoing Capital Account
definition 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. The transferee of all or a portion of an Economic Interest
shall succeed to that portion of the transferor's Capital Account which is
allocable to the portion of the Economic Interest transferred. A Member who has
more than one Economic Interest in the Company shall have a single Capital
Account that reflects all such Economic Interests, regardless of the class of
Economic Interests owned by such Member and of the time or manner in which the
Economic Interests were acquired.
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3.4 Treatment of Capital Contributions. Except as otherwise specifically
set forth in this Agreement, no Member shall:
3.4(a) receive any interest on its Capital Contributions or on the
balance in its Capital Account;
3.4(b) have the right to withdraw or reduce its Capital Contributions
or to receive any Distributions from the Company except for the
Distributions to be made in accordance with this Agreement;
3.4(c) have the right to demand or receive property other than cash in
return for its Capital Contributions or as Distributions;
3.4(d) be compelled to accept a Distribution of any asset in kind from
the Company in lieu of a proportionate Distribution of cash being made to
other Members; or
3.4(e) have priority over any other Member with respect to a return of
Capital Contributions or the allocations of Profits, Losses or
Distributions of Distributable Cash, except as set forth in this Agreement.
3.5 No Obligation to Fund Capital Account Deficit. Except as set forth in
this Article 3, if, after the Liquidation, allocations and Distributions
described in Section 10.5, a Member has a deficit balance in its Capital
Account, such Member shall not be required to fund any such deficit balance in
its Capital Account.
ARTICLE 4.
MEMBERS
4.1 Limited Liability. Except as required under the Act or as expressly set
forth in this Agreement, no Member shall be personally liable for any debt,
obligation, or liability of the Company, whether that liability or obligation
arises in contract, tort, or otherwise.
4.2 Admission of Additional Members. The Manager may admit to the Company
additional Members, from time to time, subject to the following:
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4.2(a) The Manager and Members holding a Supermajority Interest must
consent to the admission; and
4.2(b) The additional Member shall make a Capital Contribution in such
amount and on such terms as the Manager and the Members holding a
Supermajority Interest determine to be appropriate based upon the needs of
the Company, the net value of the Company's assets, the Company's financial
condition, and the benefits anticipated to be realized by the additional
Member.
4.3 Withdrawals or Resignations. A Member other than the Manager may
withdraw or resign from the Company, but such withdrawal will only result in the
conversion to an Economic Interest Owner and will not entitle the Member to any
distribution from the Company under Chapter 6 of the Act prior to the time he
would have received such distribution from the Company as a Member, nor shall
the withdrawing Member be relieved of any liabilities to the Company or its
creditors. The Manager may not withdraw as a Member.
4.4 Termination of Membership Interest. Upon the transfer of a Member's
Membership Interest in violation of this Agreement, the withdrawal of a Member
in accordance with Section 4.3, or the occurrence of an Event described in
Section 1.16 as to such Member which does not result in the dissolution of the
Company, unless the Company consents to the admission of a successor as a
Member, the Membership Interest of a Member shall be terminated by the Manager
and Articles 7 and 8 shall apply.
4.5 Transactions with the Company. Subject to Section 5.5 and any
limitations set forth in this Agreement and with the prior approval of the
Supermajority Interest after full disclosure of the Member's involvement, a
Member or its affiliate may lend money to and transact other business with the
Company. Subject to other applicable law, such Member has the same rights and
obligations with respect thereto as a Person who is not a Member.
4.6 Remuneration to Members. Except as specifically authorized in this
Agreement, no Member is entitled to remuneration for acting in the Company
business.
4.7 Voting Rights. Except as expressly provided in this Agreement or the
Articles, Members shall have no voting, approval or consent rights. The
following matters shall require the vote, approval or consent of a Supermajority
Interest of the Members in order to authorize or approve such act:
4.7(a) A decision to dissolve the Company;
4.7(b) Any amendment of the Articles or this Agreement;
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4.7(c) A decision to merge the Company with or into another entity;
4.7(d) The continuation or election of a Manager under Section 5.2(c)
and (d) (which shall only require the vote set forth in those Sections);
4.7(e) A decision to compromise the obligation of a Member to make a
Capital Contribution or return money or property paid or distributed in
violation of the Act;
4.7(f) A sale or other disposition of all or a substantial part of the
Company's assets;
4.7(g) The refinancing of the property of the Company if secured by
such property and any borrowing of the Company if in excess of $10,000
other than the Subordinated Debt; or
4.7(h) Approval of the Construction Budget and annual operating and
capital budget of the Company as presented by the Manager.
4.7(i) Approval of a material deviation in the operation of the
business from the Construction Budget and annual operating and capital
budgets;
4.7(j) A decision to change the nature of the business or any other
fundamental decisions covering the business operations or structural
organization of the Company;
4.7(k) Approval of transactions between the Company and any Member or
Manager, except as otherwise expressly set forth herein;
4.7(l) The admission of additional Members to the Company; and
4.7(m) The lending of any money of the Company or the guarantying or
becoming liable for, directly or indirectly, the debts, obligations or
liabilities of anyone other than the Company.
4.8 Meetings of Members. Meetings of Members may be held in accordance
with the Act.
ARTICLE 5.
MANAGEMENT AND CONTROL OF THE COMPANY
5.1 Management of the Company by Manager.
5.1(a) Exclusive Management by Manager. Except as otherwise provided
herein, the business, property and affairs of the Company shall be managed
exclusively by the Manager. Except for situations in which the approval of
the Members is expressly required by the Articles or this Agreement, the
Manager shall have full, complete and exclusive authority, power, and
discretion to manage and control the business, property and affairs of the
Company, to make all decisions regarding those matters and to, perform or
cause to be performed any and all other acts or activities customary or
incident to the management of the Company's business, property and affairs.
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5.1(b) Agency Authority of Manager. The Manager is authorized to
endorse checks, drafts, and other evidences of indebtedness made payable to
the order of the Company, and to sign contracts and obligations on behalf
of the Company. Notwithstanding the foregoing, during the construction of
the Restaurant, the expenditure of the funds set forth on the Construction
Budget submitted pursuant to Section 9.11 hereof shall require the
signature of the Manager and one representative of the Members other than
the Manager.
5.2 Appointment of Manager.
5.2(a) Number and Qualifications. The Company shall have one (1)
Manager which initially shall be Grill Concepts, Inc. The Manager must be a
Member.
5.2(b) Resignation. A Manager may resign in connection with the
Dissolution described in Section 8.1, and such resignation shall also be as
a Member.
5.2(c) Removal. The Members shall not have the right to remove a
Manager except for the Good Cause set forth in the Management Agreement by
a vote of the Majority Interest of the non- Manager Members. The removal of
a Member as a Manager is a Dissolution Event and shall affect the Manager's
rights as a Member and shall constitute a withdrawal of the Manager as a
Member.
5.2(d) Vacancies. Any vacancy occurring for any reason in the position
of Manager may be filled by the Majority Interest of the Members other than
the Manager as set forth in Section 4.7.
5.2(e) Members Have No Managerial Authority. The Members shall have no
power to participate in the management of the Company except as expressly
authorized by this Agreement or the Articles and except as expressly
required by the Act. No Member, acting solely in such capacity, is an agent
of the Company. Unless expressly and duly authorized in writing to do so by
a Manager or Managers, no Member shall have any power or authority to bind
or act on behalf of the Company in any way, to pledge its credit, to
execute any instrument on its behalf, or to render it liable for any
purpose.
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5.3 Performance of Duties: Liability of Managers. The Manager shall perform
his managerial duties in good faith, in a manner it reasonably believes to be in
the best interests of the Company and its Members, and with such care, including
reasonable inquiry, as an ordinarily prudent person in a like position would use
under similar circumstances. In performing its duties, the Manager shall be
entitled to rely on information, opinions, reports, or statements, including
financial statements and other financial data, of the following persons or
groups unless they have knowledge concerning the matter in question that would
cause such reliance to be unwarranted and provided that the Manager acts in good
faith and after reasonable inquiry when the need therefor is indicated by the
circumstances:
5.3(a) one or more officers, employees or other agents of the Company
whom the Manager reasonably believes to be reliable and competent in the
matters presented; or
5.3(b) any attorney, independent accountant, or other person as to
matters which the Manager reasonably believes to be within such person's
professional or expert competence.
A Manager who so performs the duties of Manager shall not have any liability by
reason of being or having been a Manager of the Company. A Manager shall not be
liable to the Company or to any Member for any loss or damage sustained by the
Company or any Member, unless the loss or damage shall have been the result of
fraud, deceit, gross negligence, reckless or intentional misconduct, or a
knowing violation of law by the Manager.
5.4 Devotion of Time. The Manager is not obligated to devote all of his
time or business efforts to the affairs of the Company. The Manager shall devote
whatever time, effort, and skill as is necessary and appropriate for the
operation of a first-class, fine dining restaurant in the same manner as the
Grill in Beverly Hills, California.
5.5 Transactions between the Company and the Manager. Notwithstanding that
it may constitute a conflict of interest, the Manager may, and may cause his
Affiliates to, engage in any transaction (including, without limitation, the
purchase, sale, lease, or exchange of any property or the rendering of any
service, or the establishment of any salary, other compensation, or other terms
of employment) with the Company so long as such transaction is approved by the
Supermajority Interest. The Members acknowledge and by their execution hereof
approve the management fee to the Manager, in addition to Distributions to the
Manager under Article 6, as a guaranteed payment of the Company equal to 5% of
the gross receipts from the operation of the business, excluding the sale of the
business and any extraordinary events, such as condemnation, insurance proceeds
pursuant to the Management Agreement, plus as a Special Fee, a payment of one
dollar ($1) for each nine dollars ($9) of principal and interest paid on the
Subordinated Debt as such amounts are paid. This Management Fee and Special Fee
(in addition to the share of Profits and Distributions under Article 6) shall be
the sole and entire payment to the Manager for its services hereunder, and there
shall be no other charge for overhead, administration, organization, accounting,
salaries or any other expenses which are not direct on- site expenses of the
Company at the Premises without the consent of a Supermajority Interest of the
Members or as is provided in the Management Agreement.
9512900003-629491.7
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5.6 Noncompetition.
5.6(a) The Lease in Section 57.b. contains a noncompetition clause
which applies to the Company in its relationship with Lessor. The Manager
and its Affiliates hereby agree that the provisions of such noncompetition
clause apply to Manager and its Affiliates as well as to the Company, so
the Manager and its Affiliates cannot open any restaurant without the
consent of the Supermajority Interest at the locations and during the
periods forbidden in the Lease.
5.6(b) Any Member (other than the Manager) and its officers,
directors, shareholders, partners, members, managers, agents, trustees,
employees or affiliates may engage or invest in, independently or with
others, any business activity of any type or description, including without
limitation, those that might be the same as or similar to the Company's
business and might be in direct or indirect competition with the Company.
Neither the Company nor any Member shall have any right in or to such other
ventures or activities, or to the income or proceeds derived therefrom. The
Members (other than the Manager) and their officers, directors,
shareholders, partners, members, managers, agents, trustees employees and
Affiliates may engage or invest in, independently or with others, any
business activity of any type or description, including without limitation
those that might be the same as or similar to the Company's business and
that might be in direct or indirect competition with the Company. Neither
the Company nor any Member shall have any right in or to such other
ventures or activities or to the income or proceeds derived therefrom. THE
MEMBERS ACKNOWLEDGE THAT ▇▇▇▇▇ ▇▇▇▇▇ IS A SUBSTANTIAL INVESTOR IN GRILL
CONCEPTS, INC., THE MANAGER AND IS A PARTNER WITH GRILL CONCEPTS, INC. AT
OTHER RESTAURANT LOCATIONS AND THAT THIS SECTION 5.6(b) APPLIES TO SUCH
INVESTMENTS.
5.6(c) The Members shall not be obligated to present any investment
opportunity or prospective economic advantage to the Company, even if the
opportunity is of the character that, if presented to the Company, could be
taken by the Company. The Members shall have the right to hold any
investment opportunity or prospective economic advantage for their own
account or to recommend such opportunity to Persons other than the Company.
The Members acknowledge that the Members and their Affiliates own and/or
manage other businesses, including businesses that may compete with the
Company and for the Members' time. Except as set forth herein, the Members
hereby waive any and all rights and claims which they may otherwise have
against the Members and their officers, directors, shareholders, partners,
trustees, members, managers, agents, employees and Affiliates as a result
of any of such activities.
9512900003-629491.7
15.
5.7 Expenses. The Company shall reimburse the Manager and its Affiliates
only for the actual cost of goods and materials used for or by the Company if
acquired from Manager.
5.8 Acts of Managers as Conclusive Evidence of Authority. Any note,
mortgage, evidence of indebtedness, contract, certificate, statement,
conveyance, or other instrument in writing, and any assignment or endorsement
thereof, executed or entered into between the Company and any other person, when
signed by the Manager is not invalidated as to the Company by any lack of
authority of the signing Manager in the absence of actual knowledge on the part
of the other person that the signing Manager had no authority to execute the
same.
5.9 Officers.
5.9(a) Appointment of Officers. The Manager may appoint employees of
the Company as officers at any time as necessary for the operation of the
Company. The officers shall serve at the pleasure of the Manager, subject
to all rights, if any, of an officer under any contract of employment. Any
individual may hold any number of offices. No officer need be a resident of
the State of California or citizen of the United States. The officers shall
exercise such powers and perform such duties as shall be determined from
time to time by the Manager.
5.9(b) Removal, Resignation and Filling of Vacancy of Officers.
Subject to the rights, if any, of an officer under a contract of
employment, any officer may be removed, either with or without cause, by
the Manager at any time. Any officer may resign at any time by giving
written notice to the Manager. Any resignation shall take effect at the
date of the receipt of that notice or at any later time specified in that
notice; and, unless otherwise specified in that notice, the acceptance of
the resignation shall not be necessary to make it effective. Any
resignation is without prejudice to the rights, if any, of the Company
under any contract to which the officer is a party.
5.9(c) Salaries of Officers. Subject to Sections 5.5 and 5.7, the
salaries of all on-site employees of the Company shall be fixed by the
Manager.
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16.
5.9(d) Acts of Officers as Conclusive Evidence of Authority. Any
contract, certificate, statement, or other instrument in writing which is
incurred in the ordinary course of business and the daily operation of the
Company, and any assignment or endorsement thereof, executed or entered
into between the Company and any other person, when signed by any officer
of the Company, is not invalidated as to the Company by any lack of
authority of the signing officers in the absence of actual knowledge on the
part of the other person that the signing officers had no authority to
execute the same.
5.10 Limited Liability. No person who is a Manager or officer or both a
Manager and officer of the Company shall be personally liable under any judgment
of a court, or in any other manner, for any debt, obligation, or liability of
the Company, whether that liability or obligation arises in contract, tort, or
otherwise, solely by reason of being a Manager or officer or both a Manager and
officer of the Company.
ARTICLE 6.
ALLOCATIONS OF PROFIT AND LOSS
AND DISTRIBUTIONS
6.1 Time of Allocations and Distributions. Distributions of Distributable
Cash and the determination of Profit and Loss allocations shall be made as soon
as practicable after the end of each fiscal year of the Company. The Manager
may, in its sole discretion, make distributions of Distributable Cash at
intervals during a fiscal year, and prior to the final determination of Profit
and Loss allocations and distributions to be made for that fiscal year. However,
any distributions prior to the end of a fiscal year shall be deemed only an
advance against the Distributions to be made at the end of that fiscal year and
shall be subject to a final determination of the actual amount to be distributed
for that fiscal year.
6.2 Allocations of Profits and Losses.
6.2(a) Except as set forth in 6.2(c) and (d) below, in each fiscal
year of the Company, Losses shall be allocated (i) to the Members in the
ratio and amount of the Additional Capital Contributions, if any, and
thereafter (ii) in the ratio of the Percentage Interests.
6.2(b) In each fiscal year of the Company, Profits shall be allocated
as follows:
(i) First, in the ratio and amount of Losses previously allocated
under Section 6.2(a)(ii) and next in the ratio and amount of Losses
previously allocated under Section 6.2(a)(i);
9512900003-629491.7
17.
(ii) Second, to the Manager in an amount equal to the cash
distributed to the Manager under Section 6.12(a)(i);
(iii) Third, to Members in the amount of the Preferred Return
accrued to the Members in proportion to such accrued Preferred Return;
and
(iv) Fourth, 831/3% to the Members in the ratio of their
Percentage Interests and 162/3% to the Manager;
6.2(c) In the event Profits have been allocated pursuant to
Section 6.2(b)(iii) and (iv) for any prior year, Losses shall be allocated
(i) first to offset any Profits allocated pursuant to Section 6.2(b)(iv),
and (ii) next to offset any Profits allocated pursuant to
Section 6.2(b)(iii) in each case pro rata among the Members in proportion
to their respective shares of the Profits being offset. To the extent any
allocation of Profits is offset pursuant to this Section 6.2(c), such
Profits shall be disregarded in computing subsequent allocations pursuant
to this Article 6.
6.2(d) Losses allocated pursuant to Section 6.2(a) hereof shall not
exceed the maximum amount of Losses that can be so allocated without
causing any Member to have an Adjusted Capital Account Deficit at the end
of any fiscal year. In the event some, but not all, of the Members would
have Adjusted Capital Account Deficits as a consequence of an allocation of
Losses pursuant to Section 6.2(a), the limitation set forth in this Section
6.2(d) shall be applied on a Member-by-Member basis so as to allocate the
maximum permissible Loss to each Member under Regulations Section
1.704-1(b)(2)(ii)(d). In the event Losses are allocated to any Member(s)
under this Section 6.2(d), Profits shall first be allocated to those
Members in proportion and up to the amount of such Losses, before any other
allocation of Profits under this Section 6.2.
6.3 Nonrecourse Deductions; Minimum Gain Chargeback.
6.3(a) Nonrecourse Deductions of the Company (other than Member
Nonrecourse Deductions) shall be aggregated with all other items of Company
income, gain, loss and deduction in determining Profits and Losses of the
Company.
6.3(b) Except as provided in Regulations Section 1.704-2(f)(2) and
(3), if there is a net decrease in Company Minimum Gain for a Company
taxable year, each Member shall be allocated items of Company income and
gain for that year equal to that Member's share of the net decrease in
Company Minimum Gain, as determined under Regulations Section
1.704-2(g)(2). Any Company Minimum Gain required to be charged back
pursuant to the preceding sentence shall consist first of gain recognized
from the disposition of Company property subject to one or more nonrecourse
9512900003-629491.7
18.
liabilities of the Company (other than any Member Nonrecourse Debt), and
then if necessary of a pro rata portion of the Company's other items of
income and gain for that year. If the amount of Company Minimum Gain
required to be recognized pursuant to the first sentence of this Section
6.3(b) exceeds the Company's income and gains for that year, such excess
shall carry over and be recognized under this Section 6.3(b) in each
succeeding year until such excess is eliminated.
6.4 Member Nonrecourse Deductions.
6.4(a) Member Nonrecourse Deductions for any fiscal year shall,
notwithstanding any other provision of this Article 6, be allocated to the
Member or Members who bear the economic risk of loss for the Member
Nonrecourse Debt to which the Member Nonrecourse Deductions are
attributable under Regulations Section 1.704-2(c). Economic risk of loss
shall be determined under the rules of Regulations Section 1.752-2. If more
than one Member bears the economic risk of loss for a Member Nonrecourse
Debt, any Member Nonrecourse Deduction attributable thereto shall be
allocated to the Members in accordance with the ratios in which they share
such risk of loss.
6.4(b) Except as provided in Regulations Section 1.704-2(i)(4), if
there is a net decrease in the minimum gain attributable to a Member
Nonrecourse Debt of the Company during a taxable year, then each Member
with a share of minimum gain attributable to Member Nonrecourse Debt at the
beginning of such taxable year shall be allocated income and gain for the
taxable year (and, if necessary, subsequent years) in proportion to, and to
the extent of the portion of the Member's share of the net decrease in
minimum gain attributable to such Member Nonrecourse Debt. Any minimum gain
required to be charged back pursuant to the preceding sentence shall
consist first of gains recognized from the disposition of Company property
subject to Member Nonrecourse Debt, and then if necessary of a pro rata
portion of the Company's other items of income and gain for that year.
6.5 Qualified Income Offset. Notwithstanding Section 6.2, after the
application of Sections 6.3 and 6.4, and in the event any Members unexpectedly
receive any adjustments, allocations, or distributions described in Regulations
Section 1.704-1(b)(2)(ii)- (d)(4), (5), or (6), items of Company profits shall
be specially allocated to such Members in an amount and manner sufficient to
eliminate the deficit balances in their Capital Accounts (excluding from such
deficit balance amounts Members are obligated to restore under this Agreement)
created by such adjustments, allocations, or distributions as quickly as
possible and in a manner which complies with Regulations Section
1.704-1(b)(2)(ii)(d).
6.6 Treatment of Special Allocations. Any special allocations of items of
Company income and gain pursuant to Sections 6.3, 6.4 and 6.5 are intended to
comply with the requirements of Regulations Section 1.704-2 and shall be
construed and applied consistent therewith. For so long as Revenue Procedure
95-10 is in effect, notwithstanding anything else herein, the Manager shall be
allocated the minimum amounts of Profits and Losses and shall make the minimum
amount of Capital Contributions, if any, required by such Revenue Procedure.
9512900003-629491.7
19.
6.7 Tax Credits. All tax credits shall, subject to the applicable
provisions of the Code and Regulations Section 1.704- 1(b), be allocated to the
Members in accordance with their respective Percentage Interests in the Company
as of the time the tax credit arises. Each Member's allocable share of any tax
credit recapture shall bear the same ratio to the total credit recapture as such
Member's share of the original tax credit subject to recapture.
6.8 Depreciation Recapture. To the extent possible, each Member's allocable
share of Company Profits which is characterized as ordinary income pursuant to
Sections 1245 or 1250 of the Code, with respect to the disposition of an item of
Company property shall bear the same ratio to the total Profits of the Company
so characterized as such Member's share of the past depreciation and/or cost
recovery deductions taken with respect to the item of property bears to all the
Member's past depreciation and/or cost recovery deductions with respect to that
property.
6.9 Differing Tax Basis; Tax Allocation. The Members shall cause
depreciation and/or cost recovery deductions and gain or loss with respect to
each item of property to be allocated among the Members for federal income tax
purposes in accordance with the principles of Section 704(c) of the Code and
Regulations promulgated thereunder, so as to take into account the variation, if
any, between the adjusted tax basis of such property and its Gross Asset Value.
Any elections or other decisions relating to such allocations shall be made by
the Manager in any manner that reasonably reflects the purpose and intention of
this Agreement. Allocations pursuant to this Section 6.9 are solely for purposes
of federal and state income taxes and shall not affect, or in any way be taken
into account in computing, any Member's Capital Account or share of Profits,
Losses, other items, or distributions pursuant to any provisions of this
Agreement.
6.10 Sharing Between Transferor and Transferee.
6.10(a) Upon the transfer of all or any part of the Interest of a
Member, Profits and Losses shall be allocated between the transferor and
transferee on the basis of the computation method which in the reasonable
discretion of the Manager is in the best interests of the partnership,
provided such method is in conformity with the methods prescribed by
Section 706 of the Code and Regulations Section 1.706-1(c)(2)(ii).
Distributions of Distributable Cash shall be made to the holder of record
of an Economic Interest on the date of distribution. Any transferee of an
Economic Interest shall succeed to the Capital Account of the transferor
Member to the extent it relates to the transferred Economic Interest;
provided, however, that if such transfer causes a termination of the
Company pursuant to Section 708(b)(1)(B) of the Code, the Capital Accounts
of all Members, including the transferee, shall be redetermined as of the
date of such termination in accordance with Regulations Section 1.704-1(b).
9512900003-629491.7
20.
6.10(b) Subject to the provisions of the Regulations Section
1.704-1(b), adjustments to the adjusted tax basis of Company property under
Section 743 and 732(d) of the Code shall not be reflected in the Capital
Account of the transferee Member or on the books of the Company, and
subsequent Capital Account adjustments for distributions, depreciation,
amortization, and gain or loss with respect to such property shall
disregard the effect of such basis adjustment.
6.11 Excess Nonrecourse Liability Safe Harbor. Pursuant to Regulations
Section 1.752-3(a)(3), solely for purposes of determining each Member's
proportionate share of the "excess nonrecourse liabilities" of the Company (as
defined in Regulations Section 1.752-3(a)(3)), the Members' respective interests
in Company profits shall be their Member Percentage Interests.
6.12 Distribution of Distributable Cash. In each fiscal year of the
Company, Distributions of Distributable Cash shall be made to the Members as
follows:
6.12(a) (i) First, 10% to the Manager and (ii) 90% to the Members in
the ratio of their Percentage Interests until the Members have received
under this 6.12(a)(ii) the amount of their Initial Capital Contributions of
$400,000;
6.12(b) Second, to the payment of the Preferred Return until the
entire accrued but unpaid Preferred Return has been paid pursuant to this
Section 6.12(b) in the proportion that the Preferred Return has accrued;
6.12(c) Third, to the Members in the ratio of their Percentage
Interests until the Additional Capital Contributions have been repaid under
this Section 6.12(c);
6.12(d) Thereafter, 162/3% to the Manager and 831/3% to the Members in
the ratio of their Percentage Interests.
6.12A Tax Draw. Notwithstanding Section 6.12, the Company shall make,
as a loan to the Manager, if Distributable Cash is available for such
purpose, prior to Distributions under Section 6.12 above and to payments on
the Subordinated Debt, an amount equal to (a) the maximum applicable
combined federal and state income tax rate times the cumulative net Profit
(net Profit in excess of net Losses) allocated to Manager pursuant to
Section 6.2 over the life of the Partnership, reduced by (b) the amount of
cash distributed to Manager as the Special Fee in Section 5.5 and the
Distributable Cash distributed to Manager as a Manager or Member under
Section 6.12 over the life of the Partnership. Such tax draw shall be a
loan which is a personal liability of the Manager to be repaid without
interest from the next Distributions due Manager under Section 6.12 as a
Manager or a Member, when Manager is no longer entitled to a tax draw under
this Section 6.12A. In any and all events, such tax draw shall be a
liability of the Manager to the Company upon the dissolution of the
Company.
9512900003-629491.7
21.
6.13 In-Kind Distributions. Assets of the Company (other than cash) shall
not be distributed in kind to the Members without the prior approval of all
Members. If any assets of the Company are distributed to the Members in kind for
purposes of this Agreement, such assets shall be valued on the basis of the
Gross Asset Values thereof (without taking into account Section 7701(g) of the
Code) on the date of distribution. Any Member entitled to any interest in such
assets shall receive such interest as a tenant-in-common with the other
Member(s) so entitled with an undivided interest in such assets in the amount
agreed to by such Members. Upon such distribution, the Capital Accounts of the
Members shall be adjusted to reflect the amount of gain or loss that would have
been allocated to the Members pursuant to the appropriate provisions of this
Agreement had the Company sold the assets being distributed for their Gross
Asset Values (taking into account Section 7701(g) of the Code) immediately prior
to their distribution.
6.14 Restriction on Distributions.
6.14(a) No Distribution shall be made if, after giving effect to the
Distribution:
(i) The Company would not be able to pay its debts as they become
due in the usual course of business; or
(ii) The Company's total assets would be less than the sum of its
total liabilities plus, unless this Agreement provides otherwise, the
amount that would be needed, if the Company were to be dissolved at
the time of the Distribution, to satisfy the preferential rights of
other Members, if any, upon dissolution that are superior to the
rights of the Member receiving the Distribution.
6.14(b) The Manager may base a determination that a Distribution is
not prohibited hereunder on any of the following:
(i) Financial statements prepared on the basis of accounting
practices and principles that are reasonable in the circumstances;
9512900003-629491.7
22.
(ii) A fair valuation; or
(iii) Any other method that is reasonable in the circumstances.
The effect of a Distribution is measured as of the date the Distribution is
authorized if the payment occurs within 120 days after the date of
authorization, or the date payment is made if it occurs more than 120 days of
the date of authorization.
6.14(c) A Member or Manager who votes for a Distribution in violation
of this Agreement or the Act is personally liable to the Company for the
amount of the Distribution that exceeds what could have been distributed
without violating this Agreement or the Act if it is established that the
Member or Manager did not act in compliance with Section 6.14(b) or Section
10.5. Any Member or Manager who is so liable shall be entitled to compel
contribution from (i) each other Member or Manager who also is so liable
and (ii) each Member for the amount the Member received with knowledge of
facts indicating that the distribution was made in violation of the
Agreement or the Act.
6.15 Return of Distributions. Except for Distributions made in violation of
the Act or this Agreement, no Member or Economic Interest Owner shall be
obligated to return any Distribution to the Company or pay the amount of any
Distribution for the account of the Company or to any creditor of the Company.
The amount of any Distribution returned to the Company by a Member or Economic
Interest Owner or paid by a Member or Economic Interest Owner for the account of
the Company or to a creditor of the Company shall be added to the account or
accounts from which it was subtracted when it was distributed to the Member or
Economic Interest Owner.
ARTICLE 7.
TRANSFER AND ASSIGNMENT OF INTERESTS
7.1 Transfer and Assignment of Interests. No Member shall be entitled to
transfer, assign, convey, sell, encumber or in any way alienate all or any part
of its, his or her Membership Interest except with the prior written consent of
the Supermajority Interest, which consent may be given or withheld, conditioned
or delayed (as allowed by this Agreement or the Act), as the Supermajority
Interest may determine. Transfers in violation of this Article 7 shall only be
effective to the extent set forth in Section 7.7. After the consummation of any
transfer of any part of a Membership Interest, the Membership Interest so
transferred shall continue to be subject to the terms and provisions of this
Agreement and any further transfers shall be required to comply with all the
terms and provisions of this Agreement.
7.2 Further Restrictions on Transfer of Interests. In addition to other
restrictions found in this Agreement, no Member
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shall transfer, assign, convey, sell, encumber or in any way alienate all or any
part of its, his or her Membership Interest: (i) without registration under
applicable federal and state securities laws, or if requested by the Manager,
unless the Member delivers an opinion of counsel satisfactory to the Manager
that registration under such laws is not required; and (ii) if the Membership
Interest to be transferred, assigned, sold or exchanged, when added to the total
of all other Membership Interests sold or exchanged in the preceding twelve (12)
consecutive months prior thereto, would cause the termination of the Company
under the Code, as determined by the Manager.
7.3 Substitution of Members. A transferee of a Membership Interest shall
have the right to become a substitute Member only if (i) the requirements of
Sections 7.1 and 7.2 relating to consent of Members, securities and tax
requirements hereof are met, (ii) such Person executes an instrument reasonably
satisfactory to the Manager accepting and adopting the terms and provisions of
this Agreement, and (iii) such person pays any reasonable expenses in connection
with his or her admission as a new Member. The admission of a substitute Member
shall not result in the release of the Member who assigned the Membership
Interest from any liability that such Member may have to the Company.
7.4 Intentionally Omitted.
7.5 Effective Date of Permitted Transfers. Any permitted transfer of all or
any portion of a Membership Interest shall be effective on the first day of the
month following the date upon which the requirements of Sections 7.1, 7.2 and/or
7.3 have been met. The Manager shall provide the Members with written notice of
such transfer as promptly as possible after the requirements of Sections 7.1,
7.2 and/or 7.3 have been met. Any transferee of a Membership Interest shall take
subject to the restrictions on transfer imposed by this Agreement.
7.6 Rights of Legal Representatives. If a Member who is an individual dies
or is adjudged by a court of competent jurisdiction to be incompetent to manage
the Member's person or property, the Member's executor, administrator, guardian,
conservator, or other legal representative may exercise all of the Member's
rights for the purpose of settling the Member's estate or administering the
Member's property, including any power the Member has under the Articles or this
Agreement to give an assignee the right to become a Member. If a Member is a
corporation, trust, or other entity and is dissolved or terminated, the powers
of that Member may be exercised by his or her legal representative or successor.
7.7 No Effect to Transfers in Violation of Agreement. Upon any transfer of
a Membership Interest in violation of this Article 7, the transferee shall have
no right to vote or participate in the management of the business, property and
affairs of the Company or to exercise any rights of a Member. Such transferee
shall only be entitled to become an Economic Interest Owner and thereafter shall
only receive the share of the Company's taxable income, taxable loss and
Distributions of the Company's assets to which the transferor of such Economic
Interest would otherwise be entitled. Notwithstanding the immediately preceding
sentences, if, in the determination of the Manager, a transfer in violation of
this Article 7 would cause the termination of the Company under Section 708(b)
of the Code, in the sole discretion of the Manager, the transfer shall be null
and void and the purported transferee shall not become either a Member or an
Economic Interest Owner.
9512900003-629491.7
24.
7.8 Right to Purchase Non-Economic Interest. Upon and contemporaneously
with any transfer, assignment, conveyance or sale (whether arising out of an
attempted charge upon that Member's Economic Interest by judicial process, a
foreclosure by creditor of the Member or otherwise) of all or any portion of a
Member's Economic Interest which does not at the same time transfer the balance
of the rights associated with the Membership Interest transferred by the Member
(including, without limitation, the rights of the Member to vote or participate
in the management of the business, property and affairs of the Company), the
Company shall purchase from the Member, and the Member shall sell to Company for
a purchase price of $1 for each Percentage Interest transferred, all remaining
rights and interests retained by the Member that immediately before the
transfer, assignment, conveyance or sale were associated with the transferred
Economic Interest. Such purchase and sale shall not, however, result in the
release of the Member from any liability to the Company as a Member. Each Member
acknowledges and agrees that the right of the Company to purchase such remaining
rights and interests from a Member who transfers a Membership Interest in
violation of this Article 7 is not unreasonable under the circumstances existing
as of the date hereof.
7.9 Right of First Refusal. Each time a Member proposes to transfer,
assign, convey, sell, encumber or in any way alienate all or any part of its,
his or her Membership Interest (or as required by operation of law or other
involuntary transfer to do so), such Member shall first offer such Membership
Interest to the Company and the non-transferring Members in accordance with the
following provisions:
7.9(a) Such Member shall deliver a written notice to the Company and
the other Members stating (i) such Member's bona fide intention to transfer
such Membership Interest, (ii) the name and address of the proposed
transferee, (iii) the Membership Interest to be transferred, and (iv) the
purchase price and terms of payment for which the Member proposes to
transfer such Membership Interest.
9512900003-629491.7
25.
7.9(b) Within thirty (30) days after receipt of the notice described
in Section 7.9(a), each non-transferring Member shall notify the Manager in
writing of its, his or her desire to purchase a portion of the Membership
Interest being so transferred. The failure of any Member to submit a notice
within the applicable period shall constitute an election on the part of
that Member not to purchase any of the Membership Interest which may be so
transferred. Each Member so electing to purchase shall be entitled to
purchase a portion of such Membership Interest in the same proportion that
such Member's Percentage Interest bears to the aggregate of the Percentage
Interests of all of the Members electing to so purchase the Membership
Interest being transferred (the "Pro Rata Share"). In the event any Member
elects to purchase less than all of its, his or her Pro Rata Share, then
the other Members can elect to purchase more than their Pro Rata Share. If
such Members fail to purchase the entire Membership Interest being
transferred, the Company may purchase any remaining share of such
Membership Interest.
7.9(c) Within ninety (90) days after receipt of the notice described
in Section 7.9(a) the Company and the Members electing to purchase such
Membership Interest shall have the first right to purchase or obtain such
Membership Interest upon the price and terms of payment designated in such
notice. If such notice provides for the payment of non-cash consideration,
the Company and such purchasing Members each may elect to pay the
consideration in cash equal to the good faith estimate of the present fair
market value of the non-cash consideration offered.
7.9(d) If the Company and/or the other Members elect not to purchase
all of the Membership Interest designated in such notice, then the
transferring Member may transfer the Membership Interest described in the
notice to the proposed transferee, providing such transfer (i) is completed
within thirty (30) days after the expiration of the Company's and the other
Members' right to purchase such Membership Interest, (ii) is made at the
price and terms designated in such notice, and (iii) the requirements of
Sections 7.1 and 7.2 relating to consent of the Members, securities and tax
requirements hereof are met. If such Membership Interest is not so
transferred, the transferring Member must give notice in accordance with
this Section prior to any other or subsequent transfer of such Membership
Interest.
ARTICLE 8.
CONSEQUENCES OF DEATH, DISSOLUTION,
RETIREMENT OR BANKRUPTCY
8.1 Dissolution Event. Upon the occurrence of any Dissolution Event, the
Company shall dissolve unless the remaining members ("Remaining Members")
holding a Majority Interest of the remaining Membership Interests consent within
ninety (90) days of the Dissolution Event to the continuation of the business of
the Company. In the event of a Dissolution Event with respect to the Manager or
the termination of the Management Agreement due to the fault of Manager, the
Manager hereby agrees that it shall sell its entire Membership Interest in the
Company back to the Company for the sum of One Dollar ($1), it being the
agreement of the Members that any voluntary withdrawal, retirement, resignation
of the Manager or removal of the Manager for Good Cause as set forth in the
Management Agreement and Section 5.2(c), which shall be an expulsion, or the
bankruptcy or dissolution of the Manager or the termination of the Management
Agreement due to the fault of Manager, so that the Manager no longer performs
its obligations hereunder and under the Management Agreement, is an event which
would cause such harm to the Company that such purchase is a fair payment to the
Manager for its Membership Interest and not a penalty or forfeiture. In the
event that the Remaining Members vote by a Majority Interest to continue the
Company, the Remaining Members voting by a Majority Interest shall elect a new
Manager.
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8.2 Withdrawal. A Member shall not have the right to withdraw from the
Company except as provided in Section 4.3. If a Member withdraws as provided in
Section 4.3, it, he or she will be treated as a Former Member. In the event of
the occurrence of an event described in Section 1.13 to a Member who is not a
Manager, the Member or his successor-in-interest shall become a Former Member
and shall only have an Economic Interest and not a Membership Interest as
described in Sections 7.6 and 7.7 unless the Members consent to the admission of
a successor-in-interest pursuant to Article 7.
8.3 Buyout Right.
8.3(a) In the event that the Minimum Return Event has occurred, the
Manager has the option exercisable for the five-year period commencing on
the first day of the fiscal year after the Minimum Return Event was
achieved to purchase the Membership Interests of the Members other than the
Manager for the sum of $2,000,000 (the "Purchase Price") which shall be
paid to such Members in the ratio of their Percentage Interests. The
Purchase Price will be reduced during the Option Period by an amount equal
to 20.833% of the Distributions under Section 6.12(d) during the Option
Period. The option will expire in the event that fifty percent (50%) of the
Distributions under Section 6.12(d) in any two years of the Option Period
are less than the sum of $200,000 per year. In the event fifty percent
(50%) of the Distributions under Section 6.12(d) are less than $200,000 in
a single year during the Option Period, and the option is thereafter
exercised, the Purchase Price will be increased by the amount by which the
sum of $200,000 exceeds fifty percent (50%) of the Distributions under
Section 6.12(d) for such year.
8.3(b) In the event the Manager determines to exercise the option, the
Manager shall send a written notice to each of the Members specifying a
closing date of not more than 60 days from the exercise of the option and
setting forth the computation of the Purchase Price. At the closing, the
Manager shall pay the Purchase Price in cash, and the Members shall perform
all such acts and execute all such documents and assurances as reasonably
may be required by Manager, to convey to Manager the Membership Interests
in the Company free and clear of all liens, claims or encumbrances.
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27.
ARTICLE 9.
ACCOUNTING, RECORDS, REPORTING BY MEMBERS
9.1 Books and Records. The books and records of the Company shall be kept,
and the financial position and the results of its operations recorded, in
accordance with Generally Accepted Accounting Principles. The books and records
of the Company shall reflect all the Company transactions and shall be
appropriate and adequate for the Company's business. The Company shall maintain
at its principal office all of the following:
9.1(a) A current list of the full name and last known business or
residence address of each Member and Economic Interest Owner set forth in
alphabetical order, together with the Capital Contributions, Capital
Account and Percentage Interest of each Member and Economic Interest Owner;
9.1(b) A current list of the full name and business or residence
address of each Manager;
9.1(c) A copy of the Articles and any and all amendments thereto
together with executed copies of any powers of attorney pursuant to which
the Articles or any amendments thereto have been executed;
9.1(d) Copies of the Company's federal, state, and local income tax or
information returns and reports, if any, for the six most recent taxable
years;
9.1(e) A copy of this Agreement and any and all amendments thereto
together with executed copies of any powers of attorney pursuant to which
this Agreement or any amendments thereto have been executed;
9.1(f) Copies of the financial statements of the Company, if any, for
the six most recent Fiscal Years; and
9.1(g) The Company's books and records as they relate to the internal
affairs of the Company for at least the current and past four Fiscal Years.
9.2 Delivery to Members and Inspection.
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28.
9.2(a) (i) Upon the request of any Member or Economic Interest Owner
for purposes reasonably related to the interest of that Person as a Member
or Economic Interest Owner, the Manager shall promptly deliver to the
requesting Member or Economic Interest Owner, at the expense of the
Company, a copy of the information required to be maintained by Sections
9.1(a), (b) and (d).
(ii) The Manager shall deliver to the Members at least quarterly
copies of the financial statements of the Company for the most recent
quarter and the year to date, containing at least a balance sheet,
profit and loss statement, and Manager's narrative explanation.
9.2(b) Each Member, Manager and Economic Interest Owner has the right,
upon reasonable request for purposes reasonably related to the interest of
the Person as Member, Manager or Economic Interest Owner, to:
(i) inspect and copy during normal business hours any of the
Company records described in Sections 9.1(a) through (g); and
(ii) obtain from the Manager, promptly after their becoming
available, a copy of the Company's federal, state, and local income
tax or information returns for each Fiscal Year.
9.2(c) Any request, inspection or copying by a Member or Economic
Interest Owner under this Section 9.2 may be made by that Person or that
Person's agent or attorney.
9.3 Annual Statements.
9.3(a) The Manager shall cause to be prepared at least annually, at
Company expense, information necessary for the preparation of the Members'
federal and state income tax returns. The Manager shall send or cause to be
sent to each Member or Economic Interest Owner as soon as practicable after
the end of each fiscal year such information as is necessary to complete
federal and state income tax or information returns, and, a copy of the
Company's federal, state, and local income tax or information returns for
that year.
9.3(b) The Manager shall cause to be filed at least annually with the
California Secretary of State the report required under Section 17060 of
the Act.
9.4 Financial and Other Information. The Manager shall provide such
financial and other information relating to the Company or any other Person in
which the Company owns, directly or indirectly, an equity interest, as a Member
may reasonably request. The Manager shall distribute to the Members, promptly
after the preparation or receipt thereof by the Manager, any financial or
other information relating to any Person in which the Company owns,
directly or indirectly, an equity interest, including any filings
by such Person under the Securities Exchange Act of 1934, as
amended, that is received by the Company with respect to any equity
interest of the Company in such Person.
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29.
9.5 Filings. The Manager, at Company,expense, shall cause the income tax
returns for the Company to be prepared and timely filed with the appropriate
authorities. The Manager, at Company expense, shall also cause to be prepared
and timely filed, with appropriate federal and state regulatory and
administrative bodies, amendments to, or restatements of, the Articles and all
reports required to be filed by the Company with those entities under the Act or
other then current applicable laws, rules, and regulations. If a Manager
required by the Act to execute or file any document fails, after demand, to do
so within a reasonable period of time or refuses to do so, any other Manager or
Member may prepare, execute and file that document with the California Secretary
of State.
9.6 Bank Accounts. The Manager shall maintain the funds of the Company in
one or more separate bank accounts in the name of the Company, and shall not
permit the funds of the Company to be commingled in any fashion with the funds
of any other Person.
9.7 Accounting Decisions and Reliance on Others. All decisions as to
accounting matters, except as otherwise specifically set forth herein, shall be
made by the Manager. The Manager may rely upon the advice of his accountants as
to whether such decisions are in accordance with accounting methods followed for
federal income tax purposes.
9.8 Tax Matters for the Company Handled by HOTEL EQUITY FUND III, L.P..
HOTEL EQUITY FUND III, L.P. shall from time to time cause the Company to make
such tax elections as it deems to be in the best interests of the Company and
the Members. HOTEL EQUITY FUND III, L.P. shall be designated as "Tax Matters
Partner" (as defined in Code Section 6231), to represent the Company (at the
Company's expense) in connection with all examinations of the Company's affairs
by tax authorities, including resulting judicial and administrative proceedings,
and to expend the Company funds for professional services and costs associated
therewith. In its capacity as "Tax Matters Partner", HOTEL EQUITY FUND III, L.P.
shall oversee the Company tax affairs in the overall best interests of the
Company.
9.9 Tax Status and Returns.
9.9(a) Accountants. The Company's accountant shall be selected by the
Manager.
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30.
9.9(b) Status as Company for Tax Purposes. Any provision hereof to the
contrary notwithstanding, solely for United States federal income tax
purposes, each of the Members hereby confirms that the Company will be
subject to all provisions of Subchapter K of Chapter 1 of Subtitle A of the
Code; provided, however, the filing of U.S. Partnership Returns of Income
shall not be construed to extend the purposes of the Company or expand the
obligations or liabilities of the Members.
9.10 Tax Withholding.
9.10(a) The Manager is authorized and directed to cause the Company to
withhold from or pay on behalf of any Member the amount of federal, state,
local or foreign taxes that the Manager, after consultation with such
Member, reasonably believes the Company is required to withhold or pay with
respect to any amount distributable or allocable to such Member pursuant to
this Agreement, including, without limitation, any taxes required to be
paid by the Company pursuant to Code Sections 1441, 1442, 1445 or 1446 and
any taxes imposed by any state or other taxing jurisdiction on the Company
as an entity. Without limiting the foregoing, the Manager shall cause the
Company to withhold (and remit to the appropriate governmental authority),
from amounts otherwise distributable to a Member, any taxes that such
Member notifies the Manager in writing should be withheld, which notice
shall be given by any Member who becomes aware of any withholding
obligation to which it is subject and shall specifically set forth, inter
alia, the rate at which tax should be withheld and the name and address to
which any amounts withheld should be remitted.
9.10(b) If the Company is required to withhold and pay over to taxing
authorities amounts on behalf of a Member exceeding available amounts then
remaining to be distributed to such Member, such payment by the Company
shall constitute a loan to such Member that is repayable by the Member on
demand, together with interest at the applicable federal rate determined
from time to time under Code Section 7872(f)(2) or the maximum rate
permitted under applicable law, whichever is less, calculated upon the
outstanding principal balance of such loan as of the first day of each
month. Any such loan shall be repaid to the Company, in whole or in part,
as determined by the Manager in its sole discretion, either (i) out of any
distributions from the Company which the Member is (or becomes) entitled to
receive, or (ii) by the Member in cash upon demand by the Member (said
Member bearing all of the Company's costs of collection, including
reasonable attorneys' fees, if payment is not remitted promptly by the
Member after such a demand for payment).
9.10(c) Each Member agrees to cooperate fully with all efforts of the
Company to comply with its tax withholding and information reporting
obligations and agrees to provide the Company with such information as the
Manager may reasonably request from time to time in connection with such
obligations.
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31.
9.11 The Manager shall prepare a Construction Budget for the opening of the
restaurant and deliver such Construction Budget to the Members at least
concurrently with the delivery of the detailed preliminary plans and
specifications required under paragraph 3 of the Lease. The Majority Interest of
the Members must approve such Construction Budget concurrently with the approval
of the Landlord of the Tenant's Plans under paragraph 3 of the Lease. The
Manager may not call for Initial Capital Contributions from the Members in
excess of $50,000 prior to the approval by the Supermajority Interest of the
Construction Budget and approval by the Landlord under paragraph 3 of the Lease.
In the event that Landlord does not approve of the Company's plans and
specifications or the Supermajority Interest does not approve of the
Construction Budget, the Company shall dissolve with no further obligations on
behalf of the Members or the Manager. In such event, any remaining assets of
the Company shall be distributed to the Members in the ratio of their Percentage
Interests.
9.12 The Manager shall present an annual operating budget and annual
capital improvements budget in December of each year for the following year
which must be approved by the Majority Interest pursuant to Section 4.7.
ARTICLE 10.
DISSOLUTION AND WINDING UP
10.1 Dissolution. The Company shall be dissolved, its assets shall be
disposed of, and its affairs wound up on the first to occur of the following:
10.1(a) Upon the happening of any event of dissolution specified in
the Articles;
10.1(b) Upon the entry of a decree of judicial dissolution pursuant to
the Act;
10.1(c) Upon the vote of the Members holding the Percentage Interests
set forth in Section 4.7;
10.1(d) The occurrence of a Dissolution Event and the failure of the
Remaining Members to consent in accordance with Section 8.1 to continue the
business of the Company within ninety (90) days after the occurrence of
such event; or
10.1(e) The sale of all or substantially all of the assets of the
Company.
10.2 Certificate of Dissolution. As soon as possible following the
occurrence of any of the events specified in Section 10.1, the Manager if he has
not wrongfully dissolved the Company or the Members, if he has shall execute a
Certificate of Dissolution in such form as shall be prescribed by the California
Secretary of State and file the Certificate as required by the Act.
9512900003-629491.7
32.
10.3 Winding Up. Upon the occurrence of any event specified in Section
10.1, the Company shall continue solely for the purpose of winding up its
affairs in an orderly manner, liquidating its assets, and satisfying the claims
of its creditors. The Manager if he has not wrongfully dissolved the Company, or
if he has, then the Members, shall be responsible for overseeing the winding up
and liquidation of Company, shall take full account of the liabilities and
assets of the Company, shall either cause its assets to be sold or distributed,
and if sold (as promptly as is consistent with obtaining the fair market value
thereof) shall cause the proceeds therefrom, to the extent sufficient therefor,
to be applied and distributed as provided in Section 10.5. The Persons winding
up the affairs of the Company shall give written notice of the commencement of
winding up by mail to all known creditors and claimants whose addresses appear
on the records of the Company.
10.4 Distributions in Kind. Any non-cash asset distributed to one or more
Members shall first be valued at its fair market value to determine the taxable
income or taxable loss that would have resulted if such asset were sold for such
value, such taxable income or taxable loss shall then be allocated pursuant to
Article 6, and the Members' Capital Accounts shall be adjusted to reflect such
allocations. The amount distributed and charged to the Capital Account of each
Member receiving an interest in such distributed asset shall be the fair market
value of such interest (net of any liability secured by such asset that such
Member assumes or takes subject to). The fair market value of such asset shall
be determined by the Manager or by the Members or if any Member objects by an
independent appraiser (any such appraiser must be recognized as an expert in
valuing the type of asset involved) selected by the Manager or liquidating
trustee and approved by the Members.
10.5 Order of Payment and Distribution Upon Dissolution. Upon a dissolution
of the Company, the Members shall take or cause to be taken a full account of
the Company's assets and liabilities as of the date of such dissolution and
shall proceed with reasonable promptness to liquidate the Company's assets and
to terminate its business. The cash proceeds from the liquidation, as and when
available therefor, shall be applied in the following order of priority:
10.5(a) to the payment of all taxes, debts and other obligations and
liabilities of the Company and the necessary expenses of liquidation;
provided, however, that all debts, obligations and other liabilities of the
Company as to which personal liability exists with respect to any Member
shall be satisfied, or a reserve shall be established therefor, prior to
the satisfaction of any debt, obligation or other liability of the Company
as to which no such personal liability exists; and provided, further, that
where a contingent debt, obligation or liability exists, a reserve, in such
amount as the Manager deems reasonable and appropriate, shall be
established to satisfy such contingent debt, obligation or liability, which
reserve shall be distributed as provided in this subsection (a) only upon
the termination of such contingency;
9512900003-629491.7
33.
10.5(b) the balance, if any, shall be distributed to the Members in
accordance with the Capital Accounts.
10.6 Limitations on Payments Made in Dissolution. Except as otherwise
specifically provided in this Agreement, each Member shall only be entitled to
look solely at the assets of Company for the return of its, his or her positive
Capital Account balance and shall have no recourse for its, his or her Capital
Contribution and/or share of taxable income (upon dissolution or otherwise)
against the Manager or any other Member except as provided in Article 11.
10.7 Certificate of Cancellation. The Manager or Members who filed the
Certificate of Dissolution shall cause to be filed in the office of, and on a
form prescribed by, the California Secretary of State, a certificate of
cancellation of the Articles upon the completion of the winding up of the
affairs of the Company.
10.8 No Action for Dissolution. Except as expressly permitted in this
Agreement, a Member shall not take any voluntary action that directly causes a
Dissolution Event. The Members acknowledge that irreparable damage would be done
to the goodwill and reputation of the Company if any Member should bring an
action in court to dissolve the Company under circumstances where dissolution is
not required by Section 10.1. This Agreement has been drawn carefully to provide
fair treatment of all parties and equitable payment in liquidation of the
Economic Interests. Accordingly, except where the Manager has failed to
liquidate the Company as required by this Article 10, each Member hereby waives
and renounces his or her right to initiate legal action to seek the appointment
of a receiver or trustee to liquidate the Company or to seek a decree of
judicial dissolution of the Company on the ground that (a) it is not reasonably
practicable to carry on the business of the Company in conformity with the
Article or this Agreement, or (b) dissolution is reasonably necessary for the
protection of the rights or interests of the complaining Member. Damages for
breach of this Section 10.8 shall be in monetary damages only (and not specific
performance) and the damages may be offset against distributions by the Company
to which such Member would otherwise be entitled.
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34.
ARTICLE 11.
INDEMNIFICATION AND INSURANCE
11.1 Indemnification of Agents. The Company shall indemnify any Person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding by reason of the fact that he or she is
or was a Member, Manager, officer, employee or other agent of the Company or
that, being or having been such a Member, Manager, officer, employee or agent,
he or she is or was serving at the request of the Company as a manager,
director, officer, employee or other agent of another limited liability company,
corporation, partnership, joint venture, trust or other enterprise (all such
persons being referred to hereinafter as an "agent"), to the fullest extent
permitted by applicable law in effect on the date hereof and to such greater
extent as applicable law may hereafter from time to time permit.
11.2 Insurance. The Company shall have the power to purchase and maintain
insurance on behalf of any Person who is or was an agent of the Company against
any liability asserted against such Person and incurred by such Person in any
such capacity, or arising out of such Person's status as an agent, whether or
not the Company would have the power to indemnify such Person against such
liability under the provisions of Section 11.1 or under applicable law.
11.3 Type of Insurance. Manager shall at all times during the term of this
Agreement, procure and maintain insurance as required by the Lease.
11.4 Policies and Endorsements.
11.4(a) The reasonable cost of all such insurance policies shall be an
expense chargeable to the Company. If any such policy of insurance covers
properties other than, or afford protection in connection with activities
occurring other than in connection with, the Premises, only an allocable
portion, reasonably determined by Manager, of the cost of such insurance
shall be an expense chargeable to the Premises.
11.4(b) All insurance provided for under Section 11 of this Agreement
shall be effected by policies issued by insurance companies of good
national reputation and adequate financial responsibility, licensed to do
business in the State.
11.4(c) Where permitted, all policies of insurance required under
Section 11 shall be carried in the name of Company and shall name Manager
as additional named insured.
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35.
ARTICLE 12.
MISCELLANEOUS
12.1 Counsel to the Company. Counsel to the Company may also be counsel to
any Manager or any Affiliate of a Manager. The Manager may execute, on behalf of
the Company and the Members, any consent to the representation of the Company
that counsel may request pursuant to the California Rules of Professional
Conduct or similar rules in any other jurisdiction. By his execution hereof,
each Member specifically acknowledges that ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Fields Claman &
Machtinger LLP has represented ▇▇▇▇▇ ▇▇▇▇▇ on an ongoing and continuous basis,
and that ▇▇▇▇▇▇, ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ has represented Manager on an ongoing and
continuous basis. Since there are actual and potential conflicts of interest
among the Members due to their differing classes and differing economic and
management interests in the Company, each Member should have separate
representation to avoid the possibility that ▇▇▇▇▇▇▇▇▇ Glusker Fields Claman &
Machtinger LLP may be influenced in its representation of the Company by its
representation of ▇▇▇▇▇ and his Affiliates and that ▇▇▇▇▇▇, ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇
may be influenced in its representation of the Company by its representation of
the Manager. It is possible that if each Member had separate counsel, such
counsel might structure the formation of the Company and the transaction in a
fashion different than the structure contemplated by the Company. By his
execution hereof, each Member confirms that either he has consulted with
separate counsel or has determined not to obtain such separate representation
and agrees to waive any conflict which is created by the representation of
▇▇▇▇▇▇▇▇▇ Glusker Fields Claman & Machtinger LLP of both ▇▇▇▇▇ and his
Affiliates and the Company and the representation of ▇▇▇▇▇▇, ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇
of both Manager and its affiliates and the Company.
12.2 Complete Agreement. This Agreement and the Articles constitute the
complete and exclusive statement of agreement among the Members and Manager with
respect to the subject matter herein and therein and replace and supersede all
prior written and oral agreements or statements by and among the Members and
Manager or any of them. No representation, statement, condition or warranty not
contained in this Agreement or the Articles will be binding on the Members or
Manager or have any force or effect whatsoever. To the extent that any provision
of the Articles conflict with any provision of this Agreement, the Articles
shall control.
12.3 Binding Effect. Subject to the provisions of this Agreement relating
to transferability, this Agreement will be binding upon and inure to the benefit
of the Members, and their respective successors and assigns.
12.4 Parties in Interest. Except as expressly provided in the Act, nothing
in this Agreement shall confer any rights or remedies under or by reason of this
Agreement on any Persons other than the Members and Manager and their respective
successors and assigns nor shall anything in this Agreement relieve or discharge
the obligation or liability of any third person to any party to this Agreement,
nor shall any provision give any third person any right of subrogation or action
over or against any party to this Agreement.
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36.
12.5 Pronouns; Statutory References. All pronouns and all variations
thereof shall be deemed to refer to the masculine, feminine, or neuter, singular
or plural, as the context in which they are used may require. Any reference to
the Code, the Regulations, the Act, Corporations Code or other statutes or laws
will include all amendments, modifications, or replacements of the specific
sections and provisions concerned.
12.6 Headings. All headings herein are inserted only for convenience and
ease of reference and are not to be considered in the construction or
interpretation of any provision of this Agreement.
12.7 Interpretation. In the event any claim is made by any Member relating
to any conflict, omission or ambiguity in this Agreement, no presumption or
burden of proof or persuasion shall be implied by virtue of the fact that this
Agreement was prepared by or at the request of a particular Member or his or her
counsel.
12.8 References to this Agreement. Numbered or lettered articles, sections
and subsections herein contained refer to articles, sections and subsections of
this Agreement unless otherwise expressly stated.
12.9 Power of Attorney. To the extent not inconsistent with the terms of
this Agreement, each Member hereby irrevocably constitutes and appoints the
Manager his true and lawful attorney- in-fact, with full power and authority, in
his name, place and ▇▇▇▇▇, to make, execute, consent to, swear to, seal,
acknowledge, record and file:
12.9(a) any certificate or other instruments which may be required to
be filed by the Company or the Member under the laws of the State of
California or any jurisdiction in which the Company is conducting, or
proposes to conduct, business;
12.9(b) any and all amendments or modifications of the instruments
described in subsection (a);
12.9(c) all certificates and other instruments which may be required
to effect the dissolution and termination of the Company pursuant to the
provisions of this Agreement;
12.9(d) subject to the provisions of Section 4.7 hereof, any deed,
promissory note, deed to secure debt, ▇▇▇▇ of sale and other instruments
necessary or appropriate in connection with the sale, leasing, development,
operation or financing of the Company's property or any part thereof; and
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37.
12.9(e) all such other instruments and agreements as such
attorney-in-fact may deem necessary or desirable in order to carry out the
provisions of this Agreement in accordance with its terms.
Each member hereby acknowledges and agrees that the power of attorney hereby
given is a power coupled with an interest and is irrevocable.
12.10 Disputed Matters; Arbitration. Except as otherwise provided in this
Agreement, any controversy or dispute arising out of this Agreement, the
interpretation of any of the provisions hereof, or the action or inaction of any
Member or Manager hereunder shall be submitted to arbitration in Los Angeles,
California before a retired California Superior Court or Court of Appeal judge
selected by the American Arbitration Association under the commercial
arbitration rules then obtaining of said Association. Any award or decision
obtained from any such arbitration proceeding shall be final and binding on the
parties, and judgment upon any award thus obtained may be entered in any court
having jurisdiction thereof. No action at law or in equity based upon any claim
arising out of or related to this Agreement shall be instituted in any court by
any Member or Manager except (a) an action to compel arbitration pursuant to
this Section 12.10 or (b) an action to enforce an award obtained in an
arbitration proceeding in accordance with this Section 12.10.
12.11 Exhibits. All Exhibits attached to this Agreement. are incorporated
and shall be treated as if set forth herein.
12.12 Severability. If any provision of this Agreement or the application
of such provision to any person or circumstance shall be held invalid, the
remainder of this Agreement or the application of such provision to persons or
circumstances other than those to which it is held invalid shall not be affected
thereby.
12.13 Additional Documents and Acts. Each Member agrees to execute and
deliver such additional documents and instruments and to perform such additional
acts as may be necessary or appropriate to effectuate, carry out and perform all
of the terms, provisions, and conditions of this Agreement and the transactions
contemplated hereby. In particular, each Member agrees that to the extent
required by any licensing authorities or any other public authority, such Member
shall cooperate and make available all reasonably necessary information and
execute all necessary documents to enable the Company to qualify for and obtain
all required licenses.
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38.
12.14 Notices. Any notice to be given or to be served upon the Company or
any party hereto in connection with this Agreement must be in writing (which may
include facsimile) and will be deemed to have been given and received when
delivered to the address specified by the party to receive the notice. Such
notices will be given to a Member or Manager at the address specified in
Schedule A hereto. Any party may, at any time by giving five (5) days prior
written notice to the other parties, designate any other Address in substitution
of the foregoing address to which such notice will be given.
12.15 Amendments. All amendments to this Agreement will be in writing and
approved as set forth in Section 4.7.
12.16 Reliance on Authority of Person Signing Agreement. If a Member is not
a natural person, neither the Company nor any Member will (a) be required to
determine the authority of the individual signing this Agreement to make any
commitment or undertaking on behalf of such entity or to determine any fact or
circumstance bearing upon the existence of the authority of such individual or
(b) be responsible for the application or distribution of proceeds paid or
credited to individuals signing this Agreement on behalf of such entity.
12.17 No Interest in Company Property; Waiver of Action for Partition. No
Member or Economic Interest Owner has any interest in specific property of the
Company. Without limiting the foregoing, each Member and Economic Interest Owner
irrevocably waives during the term of the Company any right that he or she may
have to maintain any action for partition with respect to the property of the
Company.
12.18 Multiple Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.
12.19 Attorney Fees. In the event that any dispute between the Company and
the Members or among the Members should result in litigation or arbitration, the
prevailing party in such dispute shall be entitled to recover from the other
party all reasonable fees, costs and expenses of enforcing any right of the
prevailing party, including without limitation, reasonable attorneys' fees and
expenses.
12.20 Time is of the Essence. All dates and times in this Agreement are of
the essence.
12.21 Remedies Cumulative. The remedies under this Agreement are cumulative
and shall not exclude any other remedies to which any person may be lawfully
entitled.
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39.
12.22 Governing Law. The local, internal laws of California govern the
validity of this Agreement, the construction of its terms and the interpretation
of the rights and duties of the Members. The Members agree that any appropriate
state or federal district court located in Los Angeles County, California, shall
have sole and exclusive jurisdiction over any case or controversy arising
hereunder and shall be the proper forum in which to adjudicate such case or
controversy. No attorney shall be precluded from representing a Member in
connection with any case, claim, controversy or dispute because of having
represented the Company and/or Manager.
IN WITNESS WHEREOF, all of the Members of SAN ▇▇▇▇ GRILL LLC, a California
limited liability company, have executed this Agreement, effective as of the
date written above.
GRILL CONCEPTS, INC.
By:
-----------------------------
Its:
-----------------------------
HOTEL EQUITY FUND III, L.P.,
a Delaware limited partnership
By Hotel Capital Partners III, L.P.,
a Delaware limited partnership
Its General Partner
By MW Partners III, L.L.C.,
a Delaware limited liability company
Its Administrative General Partner
By:
----------------------------
One of Its Members
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40.
SCHEDULE A
Member Capital Contribution Member's Percentage Interest
----------- -------------------- ----------------------------
Grill Concepts, Inc. $200,200 50.05
▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
HOTEL EQUITY FUND III, L.P. $199,800 49.95
c/▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, L.L.C.
▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
9512900003-629491.7
41.