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Exhibit 10.24
OPERATING AGREEMENT
FOR
BORDER GRILL LAS VEGAS, LLC
A LIMITED-LIABILITY COMPANY
THE SECURITIES REPRESENTED BY THIS AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 NOR REGISTERED NOR QUALIFIED UNDER ANY STATE SECURITIES
LAWS. SUCH SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED
FOR SALE, SOLD, DELIVERED AFTER SALE, TRANSFERRED, PLEDGED, OR HYPOTHECATED
UNLESS QUALIFIED AND REGISTERED UNDER APPLICABLE STATE AND FEDERAL SECURITIES
LAWS OR UNLESS, IN THE OPINION OF COUNSEL SATISFACTORY TO THE COMPANY, SUCH
QUALIFICATION AND REGISTRATION IS NOT REQUIRED. ANY TRANSFER OF THE SECURITIES
REPRESENTED BY THIS AGREEMENT IS FURTHER SUBJECT TO OTHER RESTRICTIONS, TERMS
AND CONDITIONS WHICH ARE SET FORTH HEREIN.
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TABLE OF CONTENTS
ARTICLE I DEFINITIONS .................................................. 1
ARTICLE II ORGANIZATIONAL MATTERS ....................................... 6
ARTICLE III CAPITAL CONTRIBUTIONS AND LOANS .............................. 7
ARTICLE IV MEMBERS ...................................................... 9
ARTICLE V MANAGEMENT AND CONTROL OF THE COMPANY ........................ 13
ARTICLE VI PROFITS AND LOSSES ........................................... 17
ARTICLE VII DISTRIBUTIONS AND OTHER MEMBER PAYMENTS ...................... 20
ARTICLE VIII TRANSFER AND ASSIGNMENT OF INTERESTS ......................... 22
ARTICLE IX ACCOUNTING, RECORDS AND REPORTING ............................ 23
ARTICLE X DISSOLUTION AND WINDING UP ................................... 27
ARTICLE XI INDEMNIFICATION AND INSURANCE ................................ 29
ARTICLE XII MISCELLANEOUS ................................................ 30
EXHIBITS
Exhibit A - Capital Contributions, Percentage Interests and Addresses of
Members and Managers
Exhibit B - Opening Budget
Exhibit C - Procedure for Determining Fair Market Value and Payment Terms
Exhibit D - Description of Reimbursements to Manager and Affiliates
Exhibit E - License Agreement
Exhibit F - Management Agreement
Exhibit G - Lease
(i)
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EXHIBIT 10.24
OPERATING AGREEMENT
FOR
BORDER GRILL LAS VEGAS, LLC
A NEVADA LIMITED-LIABILITY COMPANY
This Operating Agreement is made as of November 12, 1998, by and among
TT&T, LLC, a Nevada limited-liability company ("TT&T"; or the "Managing
Member") and Vantage Bay Group, Inc., a Nevada corporation (sometimes referred
to as "Vantage" or the "Non-managing Member").
A. On September 29, 1998, Articles of Organization for Border Grill Las
Vegas, LLC (the "Company"), a limited-liability company under the laws of the
State of Nevada, were filed with the Nevada Secretary of State.
B. The parties desire to adopt and approve this operating agreement for
the Company.
NOW, THEREFORE, the parties (hereinafter sometimes collectively referred
to as the "Members," or individually as a "Member") by this Agreement set forth
the operating agreement for the Company under the laws of the State of Nevada
upon the terms and subject to the conditions of this Agreement.
ARTICLE I
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 I shall have the meanings set forth elsewhere in this Agreement):
1.1 "Act" shall mean Chapter 86 of Nevada Revised Statutes, as the same
may be amended from time to time.
1.2 "Adjusted Balance" shall mean the Capital Account balance of a Member,
increased by any Company Minimum Gain or Member Minimum Gain attributable to
Member nonrecourse debt allocable to such Member under Regulations Section
1.704-2.
1.3 "Adjusted Capital Account Deficit" shall mean, with respect to any
Member, at any time, the deficit balance, if any, of a Member's Capital Account,
after giving effect to the following adjustments:
A. credit to such Capital Account any amounts which such Member is
obligated to restore pursuant to any provision of this Agreement or is deemed to
be obligated to restore pursuant to Sections 1.704-2(g)(1) and 1.704-2(i)(5) of
the Regulations; and
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B. debit to such Capital Account the items described in Section
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 consistently therewith.
1.4 "Affiliate" shall mean any individual, partnership, corporation, trust
or other entity or association, directly or indirectly, through one or more
intermediaries, controlling, 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.
1.5 "Agreement" shall mean this Operating Agreement, as originally
executed and as amended in accordance with the applicable provisions hereof from
time to time.
1.6 "Articles" shall mean the Articles of Organization for the Company
originally filed with the Nevada Secretary of State and as amended in accordance
with the applicable provisions hereof from time to time.
1.7 "Assignee" shall mean the owner of an Economic Interest who has not
been admitted to the Company as a Substitute Member in accordance with Article
VII.
1.8 "Available Cash" for any Fiscal Quarter or other period shall mean the
amount of cash from all sources other than proceeds of Liquidating Transactions,
as reasonably determined by Manager, which the Manager deems available for debt
service on Member-Loans and/or for distributions to the Members after paying or
creating reserves for (i) all debts, liabilities and obligations then due
(excluding debt service on all Member Loans), (ii) working capital, and (iii)
such additional reserves as the Manager, in its reasonable discretion, deems
necessary in order to satisfy known or reasonably foreseeable or contingent
liabilities of the Company (which reserves may include a reasonable estimate of
amounts required in future periods to fund required debt service on Member Loans
and the Tax Distribution Entitlement). In determining the adequacy of the
Company's reserves, the Manager shall take into account the amount and timing of
cash receipts that are expected to be received by the Company in future periods
as a result of its normal operations. In the event the aggregate reserves
(excluding reserves for debt service on Member Loans and Tax Distribution
Entitlements) established are to exceed $250,000, the Manager shall consult with
the Non-managing Member prior to establishing such reserves.
1.9 "Bankruptcy" shall mean: (a) the filing of an application by a Member
for, or his or her or its consent to, the appointment of a trustee, receiver, or
custodian of his, her or its 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,
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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, her or its 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 such Member's inability
to pay such Member's debts as they become due.
1.10 "Capital Account" shall mean with respect to any Member the capital
account which the Company shall establish and maintain for such Member pursuant
to Section 3.4.
1.11 "Capital Contributions" of any Member at any time shall mean the
total value of the cash and the fair market value of property theretofore
contributed to the Company by such Member.
1.12 "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
1.13 "Company" shall mean Border Grill Las Vegas, LLC, a Nevada
limited-liability company.
1.14 "Company Minimum Gain" shall have the meaning ascribed to the term
"partnership minimum gain" in Regulations Sections 1.704-2(b)(2) and 1.704-2(d).
1.15 "Crossover" shall mean the date on which the Unrecovered Capital of
the Non-managing Member has been reduced to zero and the Non-managing Member has
received full payment of its First Priority Return.
1.16 "Dissolution Event" shall mean with respect to a Member, the
Bankruptcy or dissolution of such Member, unless the other Member consents to
continue the business of the Company pursuant to Section 10.2.
1.17 "Economic Interest" shall mean a Member's or Economic Interest
Owner's right to share in one or more of the Company's Profits, Losses, and
distributions of the Company's cash and other 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, the Company.
1.18 "Economic Interest Owner" shall mean the owner of an Economic
Interest who is not a Member.
1.19 "Excess Balance" shall mean at any time (i) with respect to the
Non-managing Member, the excess of the Adjusted Balance of the Non-managing
Member over the sum of (a) the Unrecovered Capital of the Non-managing Member,
and (b) the Unpaid First Priority Return of the Non-managing Member, and (ii)
with respect to the Managing Member, the excess of the Adjusted Balance of the
Managing Member over the Unrecovered Capital of the Managing Member.
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1.20 "First Priority Return" shall mean, with respect to the Non-managing
Member, for each Fiscal Quarter of the Company from inception through the end of
the Fiscal Quarter in which Crossover occurs, an amount equal to 5% per annum,
non-compounded, on the Non-managing Member's Unrecovered Capital for such Fiscal
Quarter (properly adjusted to reflect fluctuations in the amount of such
Unrecovered Capital on each day of such Fiscal Quarter). Once Crossover is
reached, the First Priority Return shall cease and to the extent permitted by
law, shall not be returnable under Section 7.4 or otherwise.
1.21 "Fiscal Year" shall mean the Company's fiscal year, which shall be
the calendar year; and "Fiscal Quarter" shall mean each calendar quarter or
partial calendar period of a Fiscal Year or partial Fiscal Year.
1.22 "Initial Member Loan" shall mean a Member Loan to be made by the
Non-managing Member of up to $175,000 as described in Section 3.7A.
1.23 "Lease" shall mean the Restaurant Lease dated November 12, 1998 to be
entered into between the Company as Tenant and Mandalay Corp. as Landlord, for
restaurant space to be built in the Mandalay Bay Hotel and Casino Project in Las
Vegas, Nevada, in the form and with the side letters attached hereto as Exhibit
G.
1.24 "License Agreement" shall mean the non-exclusive license agreement
between the Company and Dancing Pigs, Inc., a California corporation wholly
owned by ▇▇▇▇▇ ▇▇▇▇▇▇▇, and ▇▇▇▇, Inc., a California corporation wholly owned by
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, a copy of which is attached hereto as Exhibit E.
1.25 "Liquidating Transactions" shall mean one or more sales or other
dispositions of the Company's assets in one or more transactions leading to or
constituting the winding up or dissolution of the Company.
1.26 "Management Agreement" shall mean the restaurant management agreement
between the Company and Mundo Management Group, LLC, a California limited
liability company, which is an Affiliate of Manager, a copy of which is attached
hereto as Exhibit F.
1.27 "Manager" shall mean one or more managers, who may but need not be a
Member. Specifically, "Manager" shall mean TT&T, or any other Person (or
Persons) that succeeds it in such capacity in accordance with the terms hereof.
1.28 "Managing Member" shall mean TT&T.
1.29 "Member" shall mean 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 is a transferee of a Membership Interest that
becomes a substitute Member in accordance with Article VIII and (b) has not
resigned, withdrawn, or been expelled subject to and to the extent permitted by
the terms and conditions of this Agreement, or, if other than an individual,
dissolved.
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1.30 "Member Loan" shall mean any loan made to the Company by a Member as
described in Section 3.7.
1.31 "Member Minimum Gain" shall have the meaning of "partner nonrecourse
debt minimum gain" set forth in Regulations Section 1.704-2(i)(2).
1.32 "Member Nonrecourse Deductions" shall have the meaning of "partner
nonrecourse deductions" set forth in Sections 1.704-2(i)(1) and 1.704-2(i)(2) of
the Regulations.
1.33 "Membership Interest" shall mean 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.
1.34 "Non-managing Member" shall mean all Members other than the Managing
Member. Specifically, Vantage is initially the only Non-managing Member.
1.35 "NRS" shall mean the Nevada Revised Statutes, as amended from time to
time, and the provisions of succeeding law.
1.36 "Opening Budget" shall mean the budget for the start-up of the
Company's operations, which is attached hereto as Exhibit B and incorporated
herein.
1.37 "Percentage Interest" shall mean the percentage interest of a Member
set forth opposite the name of such Member under the column "Member's Percentage
Interest" in Exhibit A hereto, as such percentage may be adjusted pursuant to
Section 3.3.
1.38 "Person" shall mean an individual, general partnership, limited
liability partnership, limited partnership, limited-liability company,
corporation, trust, estate, real estate investment trust, association or any
other entity.
1.39 "Profits" or "Losses" shall mean, for each Fiscal Year, an amount
equal to the Company's taxable income or loss for such Fiscal Year determined in
accordance with Code Section 703(a) (for this purpose, all items of income,
gain, loss or deduction required to be stated separately pursuant to Code
Section 703(a)(1) shall be included in taxable income or loss), with the
following adjustments:
A. any income or gain of the Company that is exempt from federal
income tax and not otherwise taken into account in computing Profits or Losses
shall be added to such taxable income or loss;
B. any expenditures of the Company described in Code Section
705(a)(2)(B) or treated as Section 705(a)(2)(B) expenditures pursuant to Section
1.704-1(b)(2)(iv)(i) of the Regulations, and not otherwise taken into account in
computing Profits or Losses, shall be subtracted from such taxable income or
loss;
C. if the Company's assets and the Members' Capital Accounts have
been revalued pursuant to Regulations Section 1.704-1(b)(2)(iv)(f), the
amount of such adjustments shall be treated as an item of gain or loss and
included in the computation of Profits and Losses,
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and the Company's gains, losses, depreciation and amortization shall thereafter
be determined in accordance with the requirements of Regulations Sections
1.704-1(b)(2)(iv)(f) and 1.704-1(b)(2)(iv)(g); and
D. any items of income, gain, loss or deduction which are
individually allocated pursuant to Section 6.2 shall not be taken into account
in computing Profits or Losses.
1.40 "Regulations" shall mean the federal income tax regulations
promulgated by the United States Treasury Department under the Code.
1.41 "Restaurant" shall mean that certain Mexican restaurant to be known
as "Border Grill" pursuant to and subject to the terms of the License Agreement
and any applicable terms of the Lease, and developed and operated by the Company
pursuant to the Lease.
1.42 "Tax Distribution Entitlement" shall mean, for each Fiscal Quarter,
an amount equal to the sum of (a) the product of the highest applicable combined
effective federal and California tax rates for individual taxpayers and a
reasonable estimate of the net taxable income allocable to the Managing Member
pursuant to any provision of Article VI for such Fiscal Quarter (adjusted to
reflect any tax losses allocated to the Managing Member during prior Fiscal
Quarters to the extent such tax losses have not previously offset net taxable
income for purposes of calculating a Tax Distribution Entitlement for a prior
Fiscal Quarter), and (b) the cumulative amount of the Managing Member's Tax
Distribution Entitlements accrued but not previously distributed to the Managing
Member with respect to prior Fiscal Quarters.
1.43 "Tax Matters Partner" shall mean the Manager or its successor as
designated pursuant to Section 9.8.
1.44 "Unpaid First Priority Return" shall mean, at any time of
determination, the excess of (i) the cumulative First Priority Return of the
Non-managing Member for all prior Fiscal Quarters of the Company, over (ii) the
aggregate amount theretofore distributed to the Non-managing Member pursuant to
Section 7.1D.
1.45 "Unrecovered Capital" shall mean at any time, (i) with respect to the
Non-managing Member, the excess of (a) the Capital Contributions of such
Member, over (b) the aggregate amount theretofore distributed to the
Non-managing Member pursuant to Section 7.1E, and (ii) with respect to the
Managing Member, the excess of (c) the Capital Contributions of such Member,
over (d) the aggregate amount theretofore distributed to the Managing Member
pursuant to any provision of Section 7.1.
ARTICLE II
ORGANIZATIONAL MATTERS
2.1 Formation. Pursuant to the Act, the Members have formed a Nevada
limited liability company under the laws of the State of Nevada by filing the
Articles with the Nevada Secretary of State and entering into this Agreement.
The rights and liabilities of the Members shall be determined pursuant to the
Act and this Agreement. To the extent that the rights or
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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 "Border Grill Las Vegas, LLC",
or such other name as may be approved by the Members. Subject to the provisions
of the License Agreement, the business of the Company may be conducted under
that name or, upon compliance with applicable laws and any applicable provisions
of the Lease, any other name that the Manager, with the prior consent of the
Non-managing Member, deems appropriate or advisable. The Manager shall file any
fictitious name certificates and similar filings, and any amendments thereto,
that the Manager considers appropriate or advisable.
2.3 Term. The term of the Company began on the filing of the Articles and
shall continue until September 30, 2014, unless the Company is earlier dissolved
in accordance with the provisions of this Agreement or the Act.
2.4 Office and Agent. The Company shall continuously maintain a registered
agent in the State of Nevada as required by the Act. The location of the
principal office of the Company shall be determined by the Manager and initially
shall be at the address of the Company's registered agent in Nevada set forth
below and upon completion of the Restaurant, shall be at the Lease premises at
▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇. The initial registered agent
in the State of Nevada is Paracorp Incorporated, ▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇. The Company also may have such other offices,
anywhere within and without the State of Nevada, as the Manager from time to
time may determine. The registered agent shall be as stated in the Articles or
as otherwise determined by the Manager.
2.5 Addresses of the Members and Managers. The respective addresses of the
Members and the Managers are set forth on Exhibit A and shall be maintained in
the records of the Company.
2.6 Purpose of Company. The Company's principal purpose shall be to own
and operate the Restaurant, and all general business activities related or
incidental to the foregoing stated business purpose.
2.7 Tax Treatment of Company. The Members intend that the Company will be
treated as a partnership for federal and applicable state income tax purposes
and that the information tax returns of the Company shall be filed on such
basis. The Manager is authorized, after prior notice to the Non-managing Member,
to execute and file, on behalf of the Company, any tax elections or forms that
may be necessary or helpful to establish the Company's status as a partnership
for tax purposes. The Company shall not make any elections inconsistent with
such status without the consent of the Members.
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ARTICLE III
CAPITAL CONTRIBUTIONS AND LOANS
3.1 Capital Contributions. The Non-managing Member hereby agrees to
contribute to the Company a cash Capital Contribution in the aggregate amount of
Two Million Seven Hundred Fifty Thousand Dollars ($2,750,000), of which the
Non-managing Member shall contribute $250,000 upon execution of this Agreement
and the balance of said capital in installments within five (5) business days of
a written request therefor from the Manager setting forth the amount of the
installment. The Managing Member has agreed to make a cash Capital Contribution
of $1,000 to the Company upon execution of this Agreement. The capital shall be
deemed contributed on the date it is deposited in the Company's bank account.
3.2 Guaranty and Default of Capital Contribution of the Non-managing
Member. American Vantage Companies, Inc., a Nevada corporation and the parent
company holding all of the issued stock of Vantage, by execution of this
Agreement, hereby guarantees the obligations of Vantage to make its full Capital
Contribution required by Section 3.1 and the Initial Member Loan described in
Section 3.7A. In the event the Non-managing Member fails to make an installment
of its required Capital Contribution or the Initial Member Loan, the
Non-managing Member shall be in material default of this Agreement and the
Manager may, upon the consent of the other Member, remove the Non-managing
Member as a Member upon written notice to the Non-managing Member.
Notwithstanding anything in this Agreement to the contrary, thereafter, Vantage
shall be an Economic Interest Owner and shall have no right to receive any
Unpaid First Priority Return, and the Company, at the remaining Member's option,
may at any time purchase Vantage's Economic Interest for an amount equal to the
amount of its Unrecovered Capital on the date it is converted to an Economic
Interest Owner, less an amount equal to the costs incurred by the Company in
removing the Non-managing Member and admitting additional Member(s) or obtaining
financing for the balance of the unpaid Capital Contributions and Initial Member
Loan, not to exceed $100,000, which purchase price shall be paid, if at all, by
the Company in installments out of Available Cash, if any, after all remaining
Members have received distributions equivalent to their aggregate Capital
Contributions, plus an amount equivalent to a ten percent (10%) per annum
return on their unreturned Capital Contributions from time to time.
3.3 No Additional Capital Contributions. No Member shall be required to
make any capital contributions except as provided in Section 3.1. If the
Manager determines that additional capital contributions are necessary or
appropriate for the conduct of the Company's business and upon the prior written
consent of all Members, the Members may make additional Capital Contributions.
In such event, the Members shall have the opportunity, but not the obligation,
to participate in such additional Capital Contributions on a pro rata basis in
accordance with their respective Percentage Interests. If, with the consent of
the Members, the Members do not contribute such additional Capital Contributions
in proportion to their respective Percentage Interests, then immediately
following any such disproportionate additional Capital Contributions, the
Percentage Interests shall be adjusted by the Manager to reflect the
disproportionate additional Capital Contributions.
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3.4 Capital Accounts. The Company shall establish an individual Capital
Account for each Member which shall be maintained strictly in accordance with
Regulations Section 1.704-(b)(2)(iv). If a Member transfers all or a part of
its Membership Interest in accordance with this Agreement, such Member's Capital
Account attributable to the transferred Membership Interest shall carry over to
the new owner of such Membership Interest pursuant to Regulations Section
1.704-1(b)(2)(iv)(1).
3.5 No Interest. Except as provided herein, no Member shall be entitled to
receive any interest on its Capital Contributions or Capital Account.
3.6 No Right to Withdraw Capital. No Member shall be entitled to make
withdrawals from, or to receive repayment of, its Capital Account except as
expressly provided herein. Each Member shall look solely to the assets of the
Company, and no Member shall look to any other Member or to the Manager for the
return of its Capital Contributions or any amount in its Capital Account.
3.7 Loans by Members. If operating funds are needed beyond the Capital
Contributions described in Section 3.1, in the reasonable determination of the
Manager with the consent of the Members, the Members may make unsecured loans
("Member Loans") on a pro rata basis in accordance with their respective
Percentage Interests for the amount of funds necessary, on commercially
reasonable terms, with an interest rate not to exceed the lesser of ten percent
(10%) or the maximum permitted by law, repayable as set forth in Section 7.1,
on terms approved by the Members. If the Non-managing Member does not consent to
making such a loan to which the Managing Member has consented, and acceptable
third party financing is not available, then the Company shall dissolve.
A. Initial Member Loan. It is anticipated that the Company may
require funds in addition to the Capital Contributions required in Section 3.1.
The Non-managing Member agrees to make a Member Loan, without a corresponding
Member Loan from the Managing Member, in an amount up to $175,000 (the "Initial
Member Loan"). The Initial Member Loan shall accrue interest at 10% per annum,
compounding annually, with principal and interest payable as set forth in
Section 7.1.
ARTICLE IV
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. It is not contemplated that
additional members will be admitted to the Company. However, additional Members
may be admitted by the Manager, subject to the following:
A. The Manager determines that additional capital is needed for the
Company's business and the Non-managing Member (or American Vantage Companies,
Inc., on
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the Non-managing Member's behalf) does not contribute the Non-managing Member's
required Capital Contribution under Section 3.1 or 3.2, as applicable, or the
Initial Member Loan as required by Section 3.7A; or
B. All Members consent to the admission of additional Members.
4.3 Withdrawals, Resignations, or Removals.
A. The Managing Member may only withdraw as a Member from the
Company after Crossover, upon providing 90 days written notice to the other
Members; and thereupon, the Company shall be dissolved pursuant to Section 10.
1. Each of ▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, by executing this Agreement,
hereby promises and agrees to continue being one of the controlling principals
of the Manager of the Company and of the Restaurant management company (Mundo)
or any permitted assignee or successor under the Management Agreement, and will
oversee and manage the business of the Company and the operation of the
Restaurant until Crossover, except in the case of death, disability or other
involuntary cause, provided however the maximum liability, in the aggregate, for
a breach or breaches by either or both of them of this promise shall be the
amount of any Unpaid First Priority Return and Unrecovered Capital. For purposes
of this Section 4.3A, "disability" shall mean the inability of a person to
perform substantially all of her managerial duties due to a physical or mental
health impairment that continues for a period of more than ninety (90) days and,
in the written opinion of a qualified physician, has resulted in such person's
inability to so perform such duties; and "involuntary cause" shall mean the
occurrence of an event, beyond the reasonable control of a person, that for
reasonably justifiable non-business reasons, results in the inability of such
person to perform substantially all of her managerial duties.
B. The Non-managing Member may not withdraw, resign or otherwise
cease for any reason, voluntarily or involuntarily, being a Member of the
Company without the written consent of the Manager and the remaining Members. If
the Manager and the remaining Members consent to such termination, the
Non-managing Member shall cease being a Member and may continue as an Economic
Interest Owner, provided however that the Company will be entitled, but not
required, to purchase the Membership Interest of the former Member for a
purchase price equal to the greater of (i) the fair-market value of such
interest determined in accordance with the procedures and on the terms
specified in Exhibit C hereto, and (ii) any due and Unpaid First Priority Return
and/or Unrecovered Capital.
C. In the event any Member withdraws, resigns or otherwise ceases
being a Member in breach of Section 4.3A or B, other than as provided in
Section 3.2 and 4.3D below, (i) such Member shall not be entitled to be paid for
its Membership Interest; however, the Company shall have the right to purchase
the Membership Interest at one-half its fair market value determined in
accordance with the procedures and on the terms specified in Exhibit C hereto
(the Non-managing Member shall have no right to receive any Unpaid First
Priority Return and/or Unrecovered Capital if the Non-managing Member is in
breach of this Agreement) and, beginning on the date of termination as a Member,
such former Member shall no longer be a Member and shall have only the rights of
an Economic Interest Owner and then only the right to distributions to which a
holder of an Economic Interest would be entitled under this Agreement, and (ii)
the Company shall be entitled to recover any damages incurred by it as a result
of such
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breach, including but not limited to, by offsetting such damages against any
amounts distributable to such withdrawn Member.
D. In the event the Non-managing Member is determined to be
unsuitable by any Regulatory Authority, as defined in the Lease, such that the
landlord under the Lease would have the right to terminate the Lease, the
Non-managing Member shall at the election of the Managing Member, be removed as
a Member and shall sell its Membership Interest in the Company to the landlord
under the Lease pursuant to the side letter relating to the Lease attached
hereto as Exhibit G; provided, however, that the landlord shall be entitled
upon such purchase to become only an Economic Interest Owner, and the Company
shall have a right of first refusal to purchase such Economic Interest on the
same terms as to be paid by the landlord. In the event that the landlord does
not elect to purchase the Non-managing Member's Membership Interest as set
forth therein, then the Non-managing Member may seek a bona fide offer from an
unaffiliated third party in compliance with Section 15.2 of the Lease to
purchase such Membership Interest; subject, however, to the requirement that
any such unaffiliated third party would be entitled to become only an Economic
Interest Owner after such purchase and the Company shall have a right of first
refusal to purchase such Economic Interest on the same terms. If the
Non-managing Member does not obtain such an offer within ten (10) business days
(unless any greater or lesser time is permitted or required by the Regulatory
Authority to avoid termination of the Lease), upon request of the Manager, the
Non-managing Member shall convey its Economic Interest to the Company in
consideration of the Company agreeing to pay the Non-managing Member an amount
equal to the lesser of (i) the Unpaid First Priority Return and Unrecovered
Capital, if any, or (ii) the unamortized portion of the TI Costs (as defined in
the Lease) which the landlord acknowledges it would pay pursuant to the Lease
if it terminated the Lease as a result of the Non-managing Member having been
found to be unsuitable by a Regulatory Authority, payable in installments out
of Available Cash after all Members have received distributions equivalent to
their aggregate Capital Contributions, but before the remaining Members receive
additional distributions.
4.4 Transactions With The Company. Subject to the limitations set forth
in this Agreement, including Sections 3.7, 5.7 and 5.8, and with the prior
approval of the Manager and the Members, a Member may lend money to and
transact other business with the Company. Subject to applicable law, such
Member has the same rights and obligations with respect thereto as a Person who
is not a Member.
4.5 Remuneration To Members. Except as otherwise provided for (see
Section 5.8), or authorized in, this Agreement, no Member is entitled to
remuneration for acting in the Company business, subject to the entitlement of
the Manager or Members winding up the affairs of the Company to reasonable
compensation pursuant to Section 10.4
4.6 Members Are Not Agents. Pursuant to Section 5.1 and the Articles, the
management of the Company is vested in the Manager. No Member, acting solely in
the capacity of a Member, is an agent of the Company nor can any Member in such
capacity bind or execute any instrument on behalf of the Company.
4.7 Voting Rights. Except as expressly provided in this Agreement or the
Articles or required by the Act, Members shall have no voting, approval or
consent rights. All matters to be
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submitted to the Members must be approved by the Manager (except removal of the
Manager). Members shall have the right to approve or disapprove matters as
specifically stated in this Agreement, as follows:
A. the admission of additional or substitute Members pursuant to
Section 4.2B or Section 8.4 by consent of all Members;
B. the removal of any Manager or the termination of the Management
Agreement for cause, by the Non-Managing Member;
C. the election of any Manager, by consent of all Members;
D. the amendment of this Agreement, by consent of all Members;
E. any amendment of the Articles, by consent of all Members;
F. any increase in the Restaurant management fee which is not
determined by an independent expert under and in accordance with the Management
Agreement, or any change in the reimbursement procedures set forth in Exhibit
D, by the Non-managing Member;
G. the approval of any additional fees to Manager or its Affiliates,
including without limitation fees as described in Section 5.8D, by the
Non-managing Member;
H. (i) the sale or closure (other than temporary closure for
remodeling or other valid business purpose) of the Restaurant before Crossover,
(ii) the sale, but not the closure, of the Restaurant after Crossover, if such
sale is not an independent sale negotiated at arm's length with an unaffiliated
buyer in a stand-alone transaction (provided, however such a sale shall be
considered independent even if ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ and/or ▇▇▇▇▇ ▇▇▇▇▇▇▇ or their
Affiliate receives a consulting fee for up to one year following the sale for
actual services to be rendered, so long as such consulting fee is not a
recharacterization of the Restaurant sales price), or (iii) any other act that
would make it impossible to carry on the ordinary business of the Company, by
consent of all Members;
I. the voluntary withdrawal of the Manager prior to Crossover, by
the Non-managing Member;
J. the withdrawal, resignation or other termination of the
Non-managing Member as a Member, with the consent of the remaining Members;
K. entering into the Lease and termination of the Lease (other than
by expiration of its term), by the Members;
L. change of the name of the Company or the Restaurant, by the
Members;
M. the contribution of additional capital or the making of a Member
Loan to the Company, by consent of all Members;
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N. the confession of a judgment against the Company, by
consent of all Members;
O. any expenditure which would cause any category of expense
in the Opening Budget to exceed 110% of the amount in the Opening Budget, unless
the total revised Opening Budget does not increase by more than 10%, by consent
of all Members;
P. any financing obtained prior to Crossover, other than
customary trade accounts and equipment leases, by consent of the Non-managing
Member; and
Q. the dissolution of the Company, by consent of all Members.
4.8 Competing Activities. The Members, the Manager, their Affiliates,
and the officers, directors, shareholders, partners, members, managers, agents,
employees of each 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 other Member shall have any right in or to such other ventures or
activities or to the income or proceeds derived therefrom. The Members and the
Manager 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, the Manager and their Affiliates shall have the right to hold any
investment opportunity or prospective economic advantage for its own account or
to recommend such opportunity to Persons other than the Company. The Members
acknowledge that the Manager and its Affiliates own and/or manage other
businesses, including businesses that may compete with the Company and for the
Manager's time. The Members hereby waive any and all rights and claims which
they may have against the Manager and its Affiliates and their officers,
directors, shareholders, partners, members, managers, agents, employees, as a
result of any of such activities, unless and except for activities which
otherwise give rise to a breach of this Agreement. Notwithstanding the
foregoing, the Manager agrees that neither it nor its Affiliates will engage or
invest in any full-service Mexican or Latin American cuisine restaurant located
in the Restricted Area as defined in the Lease, prior to Crossover or in
violation of the Lease.
ARTICLE V
MANAGEMENT AND CONTROL OF THE COMPANY
5.1 Management of the Company by Manager. The business, property and
affairs of the Company shall be managed exclusively by Manager. Except for
situations in which the approval of the Members is expressly required by the
Articles or this Agreement, 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 any and all other acts or activities customary or incident to the
management of the Company's business, property and affairs.
5.2 Election of Managers.
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A. Number, Term, and Qualifications. The Company shall
initially have one Manager. Unless it resigns or is removed as permitted by, and
in accordance with this Agreement, the Manager shall hold office until a
successor shall have been elected and qualified.
B. Resignation. The Managing Member may not resign as Manager
prior to Crossover, unless an Affiliate of the Managing Member controlled by
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ or ▇▇▇▇▇ ▇▇▇▇▇▇▇ or both of them becomes the Manager, or with
the consent of all Members. After Crossover, the Managing Member may voluntarily
resign as Manager at any time by giving written notice to the Members without
prejudice to the rights, if any, of the Company under any contract to which the
Company, the Manager or its Affiliate is a party. The permitted voluntary
resignation of any Manager shall take effect 90 days after receipt of that
notice or at such later time as shall be specified in the notice; and, the
acceptance of the voluntary resignation shall not be necessary to make it
effective. The voluntary resignation of a Manager who is also a Member shall not
affect such Person's rights as a Member and shall not constitute a withdrawal of
such Person as a Member.
C. Removal for Good Cause Only. A Manager may be removed as
Manager of the Company only for "good cause" and by the vote of the Non-managing
Member. Such removal of a Manager who is also a Member shall not affect such
Person's rights as a Member and shall not constitute a withdrawal of such Person
as a Member. The term "good cause" shall mean either (i) a willful breach by a
Manager of this Agreement or (ii) a willful breach by a Manager of its fiduciary
duties to the Company as set forth in this Agreement, including but not limited
to misappropriation of Company assets, fraud, manifest dishonesty, bad faith
exercise of management authority or a willful failure to perform the duties of
Manager pursuant to this Agreement; provided, however, that with respect to a
breach which is curable, such breach has not been cured by a Manager within ten
(10) business days after receipt of written notice specifying such breach or, if
such breach cannot be cured within such 10 business day period, failure of the
Manager to take good faith reasonable efforts within such period to commence a
cure of such breach and to thereafter diligently prosecute its complete cure. In
the event a Manager disputes any attempted removal pursuant to the provisions of
this Section 5.2C, such dispute shall be submitted to binding arbitration in
accordance with the provisions of Section 12.8 of this Agreement.
D. Vacancies. Any vacancy occurring for any reason in the
Manager shall be filled by the written consent of all Members. If the Members
cannot agree on a replacement Manager within 30 days after the vacancy in
accordance with the terms and conditions of this Agreement, the Company shall be
dissolved pursuant to Section 10.1 hereof.
5.3 Powers of Manager.
▇. ▇▇▇▇▇▇ of Manager. Without limiting the generality of
Section 5.1, but subject to Section 5.3B and to the express limitations set
forth elsewhere in this Agreement, the Manager shall have all necessary powers
to manage and carry out the purposes, business, property, and affairs of the
Company, including, without limitation, the power to exercise on behalf and in
the name of the Company all of the powers described in NRS Section 86.281.
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B. Limitations on Power of Manager. Notwithstanding any other
provisions of this Agreement, the Manager shall not have authority hereunder to
cause the Company to engage in the matters set forth in Section 4.7 without
first obtaining the requisite affirmative vote or written consent of the
Members, as may be required under the respective provisions of Section 4.7.
5.4 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. Unless expressly and duly authorized in writing to do so by the
Manager, no Member shall have any power or authority to bind or act on behalf of
the Company in any way, to pledge its credit, or to render it liable for any
purpose.
5.5 Fiduciary Duty; Performance of Duties; Liability of Manager. The
Manager owes a duty of loyalty to account to the Company and hold as trustee for
the Company all property and profit of the Company, or derived from winding up
the Company's business or the use of Company property, and to refrain from
dealing with the Company as a party having an adverse interest to the Company,
other than as permitted by this Agreement or consented to by the Non-managing
Member. 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 and to the extent
the loss or damage shall have been the result of fraud, manifest dishonesty,
gross negligence, reckless or intentional misconduct, or a knowing violation of
law by the Manager.
5.6 Devotion of Time. The Manager shall not be obligated to devote all
of its time or business efforts to the affairs of the Company. The Manager,
directly or through its Affiliates, shall devote such time, effort, and skill as
is customary for the operation of the Company and its business so that the
Restaurant is operated in compliance with the Lease.
5.7 Transactions between the Company and the Manager. Notwithstanding
that it may constitute a conflict of interest, the Manager may, and may cause
its Affiliates to, engage in any transaction (including, without limitation, the
purchase, sale, lease, or exchange of any Restaurant equipment, fixtures or
furnishings, 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 (i) the transaction is disclosed to the Non-managing Member; and if the
transaction provides for a payment of $25,000 or more to the Manager or its
Affiliate, the prior approval of the Non-managing Member is obtained, (ii) such
transaction is not expressly prohibited by this Agreement and, if applicable, is
in compliance with this Agreement, and (iii) so long as the terms and
conditions of such transaction, on an overall basis, are fair and reasonable to
the Company and are at least as favorable to the Company as those that are
generally available from Persons capable of similarly performing them and in
similar transactions between parties operating at arm's length. Notwithstanding
the foregoing, the reimbursements to Manager and its Affiliates and procedures
set forth in Exhibit D are hereby approved by the Manager and the Non-managing
Member. Any material change shall require the approval of the Non-managing
Member, not to be unreasonably withheld.
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5.8 Payments to Manager or Affiliates. Any payments to Manager or its
Affiliates pursuant to Sections 5.8A, 5.8C and 5.8D below shall be subject to
compliance with the requirements of Section 5.7 above.
A. Restaurant Management Fees; Expenses and Costs. It is
contemplated that the Restaurant will be managed by Mundo Management Group, LLC
("Mundo"), an Affiliate of the Manager, pursuant to the Management Agreement
attached hereto as Exhibit E, which is hereby approved by the Non-managing
Member. The Restaurant management fees provided under the Management Agreement
may be increased as provided therein. Otherwise, the management fee will not be
increased without the approval of the Non-managing Member. Under the Management
Agreement, in addition to the management fee to be paid by the Company, the
restaurant manager will receive reimbursement for certain expenses related to
the lease, ownership, maintenance, operation and promotion of the Restaurant as
specified in accordance with Exhibit D, which is Exhibit A to the Management
Agreement, including but not limited to salaries (other than for ▇▇▇▇▇ ▇▇▇▇▇▇▇
and ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, who may receive only the benefits set forth in such
Exhibit, unless approved by the Non-managing Member), benefits and related
overhead expenses, as specifically provided in said Exhibit.
B. License Fee. It is contemplated that the Company will enter
into a nonexclusive license agreement with an Affiliate of Manager on terms set
forth in the License Agreement attached hereto as Exhibit , which is hereby
approved by the Non-managing Member. The Non-managing Member acknowledges that
the licensor under the License Agreement makes no representation or warranty to
the Company regarding the licensor's ownership of or rights to use the tradename
Border Grill, except as provided in the License Agreement.
C. Services Performed by Manager or Affiliates; Reimbursement.
Subject to Section 5.7, the Manager may employ Affiliates, including but not
limited to Mundo, to handle the day-to-day operations of the Company. The
Manager and any Affiliate who performs services for the Company shall be
entitled to reimbursement for reasonable costs and expenses incurred in
connection with providing such services as described in Exhibit D.
D. Extraordinary Services. The Manager shall be entitled, with
the approval of the Non-managing Member, to reasonable fees for performing
extraordinary services for the Company including services rendered in connection
with the remodeling or relocation of the restaurant.
E. Guaranteed Payments. Any fees paid to the Managing Member
pursuant to this Agreement or any management agreement or license agreement
entered into between the Managing Member and the Company shall be treated as
guaranteed payments subject to Section 707(c) of the Code and not as a
distribution of Available Cash.
5.9 Acts of Manager as Conclusive Evidence of Authority. Any lease,
note, mortgage, evidence of indebtedness, contract, certificate, statement,
conveyance, or other instrument in writing, and any amendment, 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 Manager in the absence of actual
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knowledge on the part of the other Person that the Manager had no authority to
execute the same. For purposes of all actions taken by the Managing Member as
Manager, the signature of either ▇▇▇▇▇ ▇▇▇▇▇▇▇ or ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ on behalf of
the Managing Member on behalf of the Company shall be evidence of the authority
of the Managing Member on behalf of the Company.
5.10 Officers. The Manager may, but shall not be required to, appoint
officers at any time. The officers of the Company, if deemed necessary by the
Manager, may include a chairperson, president, vice president, secretary, and
chief financial officer. 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. If a Manager is not
an individual, such Manager's officers may serve as officers of the Company if
elected by the Members. The officers shall exercise such powers and perform such
duties as specified in this Agreement and as shall be determined from time to
time by the Manager. Notwithstanding any other provision of this Agreement to
the contrary, in no event shall any chairmanship, presidency or other similar
executive position of the Company be held by any person or persons other than
either or both of ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ or ▇▇▇▇▇ ▇▇▇▇▇▇▇.
5.11 Limited Liability. No person who is a Member, Manager or 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 Member, Manager or officer of the Company.
ARTICLE VI
PROFITS AND LOSSES
6.1 Allocation of Profits and Losses.
A. Allocation of Profits from Operations. Subject to Sections
6.2 and 10.5, Profits of the Company for any Fiscal Year or other period (other
than Profits realized from a Liquidating Transaction) shall be allocated to the
Members as follows and in the following order of priority:
(1) Profits shall first be allocated to the Members
in proportion to, and to the extent of the excess, for each Member, of (a) the
aggregate Losses previously allocated to such Member pursuant to Sections 6.1C,
over (b) the amount of Profits previously allocated to such Member pursuant
to this Section 6.1A(1);
(2) Profits shall next be allocated to the
Non-managing Member in an amount equal to the excess of (a) the First Priority
Return of the Non-managing Member for such Fiscal Year or other period and all
prior Fiscal Years or other periods, over (b) the aggregate amount of Profits
previously allocated to the Non-managing Member pursuant to this Section
6.1A(2); and
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(3) Any remaining Profits shall be allocated to the
Members in accordance with their respective Percentage Interests.
B. Allocation of Profits from Liquidating Transactions. After
adjusting the Members' Capital Accounts to reflect all distributions of
Available Cash and all allocations pursuant to Sections. 6.1A and 6.1C of
Profits and Losses other than from Liquidating Transactions for all prior Fiscal
Years or other periods of the Company, any Profits realized by the Company from
Liquidating Transactions shall, subject to and after applying Section 6.2, be
allocated to the Members in the following order of priority:
(1) Profits shall first be allocated to the Members
having deficit Adjusted Balances in proportion to, and to the extent of, such
deficit Adjusted Balances;
(2) Next, if the Adjusted Balance of the Non-managing
Member is less than the sum of (i) its Unrecovered Capital, and (ii) its Unpaid
First Priority Return, Profits shall be allocated to the Non-managing Member
until the Adjusted Balance of the Non-managing Member is equal to such sum;
(3) Next, if the Adjusted Balance of the Managing
Member is less than the amount of its Unrecovered Capital, Profits shall be
allocated to the Managing Member until its Adjusted Balance is equal to the
amount of its Unrecovered Capital;
(4) Next, Profits shall be allocated to all of the
Members in the proportions required so that the Excess Balances of the Members
shall stand as nearly as possible in proportion to their respective Percentage
Interests; and
(5) Next, any remaining Profits shall be allocated to
the Members in accordance with their respective Percentage Interests.
C. Allocation of Losses from Operations. After adjusting the
Members' Capital Accounts to reflect all distributions of Available Cash made
during such Fiscal Year, Losses shall, subject to Section 6.2, be allocated to
the Members in accordance with the priorities set forth in Subsections ▇.▇▇(1),
(2), (3) and (4). If, pursuant to this Section 6.1C, a Member would receive an
allocation of Losses that would cause or increase an Adjusted Capital Account
Deficit for such Member, the portion of such allocation that would cause or
increase such Adjusted Capital Account Deficit shall be reallocated to the other
Members in proportion to their respective percentage Interests (unless such
reallocation would cause or increase an Adjusted Capital Account Deficit for
another Member).
D. Allocation of Losses from Liquidating Transactions. After
adjusting the Members' Capital Accounts to reflect all distributions of
Available Cash and all allocations pursuant to Sections 6.1A and 6.1C of
Profits and Losses other than from Liquidating Transactions for all Fiscal Years
or other periods of the Company, any Losses realized by the Company as a result
of Liquidating Transactions shall, subject to Section 6.2, be allocated to the
Members in the following order of priority:
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(1) Losses shall first be allocated to all of the
Members in the proportions required so that the Excess Balances of the Members
shall stand as nearly possible in proportion to their respective Percentage
Interest.
(2) Losses shall next be allocated to the Members in
proportion to their respective Excess Balances until such Excess Balances are
reduced to zero;
(3) Losses shall next be allocated to the Members in
proportion to, and to the extent of, their remaining positive Adjusted Balances;
and
(4) Any remaining Losses shall be allocated to the
Members in accordance with their respective Percentage Interests.
6.2 Regulatory Allocations.
A. Minimum Gain Chargeback. Notwithstanding any other
provision of this Agreement, to the extent required by Section 1.704-2(f) of the
Regulations, if there is a net decrease in Company Minimum Gain during any
Fiscal Year, each Member shall be specially allocated items of Company income
and gain for such Fiscal Year (and, if necessary, in subsequent Fiscal Years) in
an amount equal to such Member's share of the net decrease in Company Minimum
Gain, determined in accordance with Regulations Section 1.704-2(g)(2). This
Section 6.2A is intended to comply with the minimum gain chargeback requirement
contained in Regulations Section 1.704-2(f) and shall be interpreted and applied
consistently therewith.
B. Chargeback of Minimum Gain Attributable to Member
Nonrecourse Debt. Notwithstanding any other provision of this Agreement (other
than Section 6.2A), to the extent required by Section 1.704-2(i)(4) of the
Regulations, if during any Fiscal Year there is a net decrease in Member Minimum
Gain, each Member who has a share of such Member Minimum Gain (determined in
accordance with Regulations Section 1.704-2(i)(5)), shall be specially allocated
items of Company income and gain for such Fiscal Year (and, if necessary, in
subsequent Fiscal Years) in an amount equal to such Member's share of the net
decrease in Member Minimum Gain (which share of such net decrease shall be
determined in accordance with Regulations Section 1.704-2(i)(4)). This Section
6.2B is intended to comply with the minimum gain chargeback requirement
contained in Regulations Section 1.704-2(i)(4) and shall be interpreted and
applied consistently therewith.
C. Nonrecourse Deductions. Notwithstanding Section 6.1, any
nonrecourse deductions (as defined in Regulations Section 1.704-2(b)(1)) for any
Fiscal Year or other period shall be allocated to the Members in proportion to
their respective Percentage Interests.
D. Member Nonrecourse Deductions. Notwithstanding Section 6.1,
Member Nonrecourse Deductions for any Fiscal Year or other period shall be
specially allocated to the Member that bears the economic risk of loss with
respect to the member nonrecourse debt to which such items are attributable in
accordance with Regulations Section 1.704-2(i).
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E. Loss Limitation and Qualified Income Offset. If a Member
unexpectedly receives any adjustments, allocations, or distributions described
in Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6), or any other event
creates an Adjusted Capital Account Deficit for such Member, items of Company
income and gain shall be specially allocated to such Member in an amount and
manner sufficient to eliminate such Adjusted Capital Account Deficit as quickly
as possible. The preceding sentence is intended to constitute a "qualified
income offset" within the meaning of Regulations Section 1.704-1(b)(a)(ii)(d)
and shall be interpreted and applied consistently therewith.
F. Curative Allocations. In the event that Manager determines
that any item allocated pursuant to this Section 6.2 causes the relative Capital
Account balances of the Members to diverge from the balances targeted pursuant
to Section 6.1, subsequent allocations of income, gain, loss and deduction as
computed for book purposes shall be made, to the extent permissible by
Regulations Sections 1.704-1(b) and 1.704-2, so that the Capital Account balance
of each Member shall, to the extent possible, be as targeted pursuant to Section
6.1, so that distributions to a Member in accordance with its positive Capital
Account balance as provided in Section 10.6 would be equal to the distributions
such Member would receive if liquidation proceeds were instead distributed as
provided in Section 7.1.
6.3 Code Section 704(c) Allocations. Notwithstanding any other
provision in this Article VI, in accordance with Code Section 704(c) and the
Regulations promulgated thereunder, income, gain, loss, and deduction with
respect to any property contributed to the capital of the Company shall, solely
for tax purposes, be allocated among the Members so as to take account of any
variation between the adjusted basis of such property to the Company for federal
income tax purposes and its fair market value on the date of contribution in
accordance with any permissible method under the Regulations which the Manager
shall select in its sole discretion. In the event the Company's assets are
revalued pursuant to Regulation Section 1.704-1(b)(2)(iv)(f), the partners'
distributive shares of depreciation, depletion, amortization and gain or loss,
as computed for tax purposes with respect to such assets shall be determined so
as to take account of the variation between the adjusted tax basis and book
value of such property in accordance with the principles of Code Section 704(c)
and Regulations Section 1.704-1 (b)(2)(iv)(f). Allocations pursuant to this
Section 6.3 are solely for purposes of federal, state and local taxes and shall
not affect or in any way be taken into account in computing a Member's Capital
Account or share of Profits, Losses, or distributions pursuant to this
Agreement.
6.4 Allocation of Net Profits and Losses in Respect of a Transferred
Interest. If any Membership Interest is transferred, or is increased or
decreased by reason of the admission of a new Member or otherwise, during any
Fiscal Year of the Company, each item of income, gain, loss, deduction, or
credit of the Company for such Fiscal Year shall be allocated between transferor
and transferee by the Manager in accordance with any method permitted under the
Code.
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ARTICLE VII
DISTRIBUTIONS AND OTHER MEMBER PAYMENTS
7.1 Distributions and Payments. Subject to applicable law,
periodically, but no less frequently than 30 days following the end of each
Fiscal Quarter, the Manager shall determine the amount of the Company's
Available Cash and distribute or pay such Available Cash in accordance with the
following priorities:
A. First, to the Managing Member, in the amount of its Tax
Distribution Entitlement; provided, however, that distributions shall be made
pursuant to this Section 7.1A only for a Fiscal Quarter in which distributions
or payments are made pursuant to Sections 7.1B through F;
B. Next, to the Members in proportion to the relative amounts
of any accrued but unpaid interest on Member Loans;
C. Next, to the Members in proportion to the relative amounts
of the then-outstanding principal balances of Member Loans;
D. Next, to the Non-managing Member in the amount of its
Unpaid First Priority Return; provided, however, that no distributions shall be
made pursuant to this Section 7.1D for any period following the end of the
Fiscal Quarter in which Crossover occurs;
E. Next, to the Non-managing Member in the amount of its
Unrecovered Capital;
F. Next, to the Non-managing Member until the Non-managing
Member has received aggregate distributions pursuant to this Section 7.1F equal
to 49% of an amount determined by dividing the aggregate amount of distributions
made to the Managing Member pursuant to Section 7.1A by.51. [For example, if
the aggregate distributions to the Managing Member pursuant to Section 7.1A
were $800,000, then the aggregate distributions to the Non-managing Member under
this Section 7.1F would be $768,627 ($800,000/.51 = $1,568,627 x 49% =
$768,627).];
G. Thereafter, to the Members in accordance with their
respective Percentage Interests.
7.2 Form of Distribution. A Member, regardless of the nature of the
Member's Capital Contribution, shall have no right to demand or receive any
distribution from the Company in any form other than money. No Member may be
compelled to accept from the Company a distribution of any asset in kind in lieu
of a proportionate distribution of money being made to other Members.
7.3 Restriction on Distributions.
A. No distribution shall be made if, after giving effect to
the distribution:
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(i) The Company would not be able to pay its debts as
they become due in the usual course of business.
(ii) The Company's total assets would be less than
the sum of its total liabilities.
B. The Manager may base a determination that a distribution is
not prohibited on any of the following:
(i) Financial statements prepared by an independent
accountant for the Company on the basis of accounting practices that are
reasonable in the circumstances.
(ii) A fair valuation performed by an independent
certified public accountant.
Except as provided in NRS 86.343, 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.
7.4 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 VIII
TRANSFER AND ASSIGNMENT OF INTERESTS
8.1 Transfer and Assignment of Interests. Other than as permitted in
Section 8.3, a Member shall be entitled to transfer, assign, convey, or sell all
or any part of its Membership Interest only with the prior consent of Manager,
which consent may be given or withheld, conditioned or delayed at the Manager's
sole discretion. after the consummation of any permitted transfer of a
Membership Interest (or part thereof), the membership interest (or part thereof)
so transferred shall continue to be subject to the terms and provisions of this
Agreement, and any further transfers shall be subject to the restrictions in
this Article VIII. For purposes of this Agreement, a transfer, voluntary or
involuntary, of more than 20% of the ownership interests in any Member or a
change in control of any Member shall be deemed a transfer of a Membership
Interest and shall be governed by this Article VIII. Notwithstanding anything
herein to the contrary, prior to Crossover, without the prior consent of the
Non-managing Member, the Managing Member may not transfer its Membership
Interest in the Company or be deemed to transfer its Membership Interest as a
result of a change in the ownership interest of the
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Managing Member or a change in control of the Managing Member, if as a result of
such transfer, neither ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ nor ▇▇▇▇▇ ▇▇▇▇▇▇▇ shall control the
Managing Member.
8.2 Further Restrictions on Transfer of Interests. In addition to other
restrictions found in this Agreement, no Member shall transfer, assign, convey,
sell, encumber or in any way alienate all or any part of its Membership
Interest: (i) without complying with all applicable federal and state securities
laws; (ii) if the Membership Interest to be transferred, when added to the total
of all other Membership Interests transferred in the preceding twelve (12)
consecutive months prior thereto, would cause the termination of the Company
under Section 708 of the Code unless the Company determines, based on the
opinion of legal counsel to the Company, that any such termination would not
have a material adverse effect on the Company or any Member; (iii) if such
transfer would jeopardize the Company's classification as a partnership for
federal or applicable state income tax purposes, or (iv) if such transfer would
cause a breach of the Lease.
8.3 Permitted Transfers. The Economic Interest of any Member may be
transferred subject to compliance with Section 8.2, and without the prior
written consent of Manager as required by Section 8.1, but with notice to
Manager, (i) by inter vivos gift or by testamentary transfer to any spouse,
domestic partner, parent, sibling, in-law, child or grandchild of the Member, or
to a trust for the benefit of the Member or such spouse, domestic partner,
parent, sibling, in-law, child or grandchild of the Member, or (ii) to any
Affiliate of the Member; provided in the case of the Managing Member, that the
Managing Member is still controlled by ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ and/or ▇▇▇▇▇ ▇▇▇▇▇▇▇.
8.4 Substitution of Members.
A. Substitute Members. An Assignee of a Membership Interest
shall have the right to be admitted to the Company as a substitute Member only
if (i) the Manager provides prior written consent to such admission, which
consent may be withheld in the Manager's sole discretion; (ii) the Members
consent as provided in Section 4.7; (iii) such Assignee executes an instrument
satisfactory to the Company accepting and adopting the terms and provisions of
this Agreement; and (iv) such Assignee pays any reasonable expenses in
connection with his or her admission as a substitute Member. The admission of an
Assignee as a substitute Member shall not in and of itself result in the release
of the Member who assigned the Membership Interest from any liability that such
Member may have to the Company. An Assignee, including a successor upon death,
who has not been admitted to the Company as a substitute Member shall have only
the rights of an owner of an Economic Interest.
B. Effective Date of Permitted Transfers. Any permitted
transfer of all or any portion of a Membership Interest or an Economic Interest
shall be effective as of the date upon which the applicable requirements of
Sections 8.1, 8.2 and 8.4A have been met (or upon such later date as may be
agreed to by Manager). Any permitted transferee of a Membership Interest shall
take subject to the restrictions on transfer imposed by this Agreement.
8.5 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
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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 its legal representative or successor. However, the legal
representative shall have no right to participate in the management or affairs
of the Company, nor to vote.
8.6 No Effect to Transfers in Violation of Agreement. Any purported
transfer of all or any part of a Membership Interest or Economic Interest in
contravention of this Agreement shall be null and void ab initio and of no force
or effect.
ARTICLE IX
ACCOUNTING, RECORDS AND REPORTING
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 the accounting methods followed for federal income tax purposes.
The books and records of the Company shall reflect all the Company's
transactions and shall be appropriate and adequate for the Company's business
and not contain any material inaccuracies or fail to reflect any items that
would result in any material inaccuracy. The Company shall maintain at its
principal office, which may be outside of Nevada, all of the following:
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;
B. A current list of the full name and business or residence
address of each Manager;
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;
D. Copies of the Company's federal, state, and local income
tax or information returns and reports, if any, for the three most recent
taxable years;
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;
F. The Company's books and records as they relate to the
internal affairs of the Company for at least the current and past two Fiscal
Years; and
G. A true and correct copy of the Lease, Management Agreement,
License Agreement, and any and all amendments, written side agreements or other
modifications to any of them.
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9.2 Delivery to Members and Inspection.
A. 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 deliver to the requesting Member or
Economic Interest Owner, a copy of the information required to be maintained by
Sections 9.1A, B, C, D, E and G.
B. On reasonable notice to the Company, each Member, Manager
and Economic Interest Owner, at such party's own expense, shall have 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
and without causing unreasonable disruption in the operation of the Company,
any of the Company records described in Sections 9.1A 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.
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 authorized agent or attorney.
D. The Manager shall within three (3) business days after
receipt thereof, furnish to the Members copies of any written notices, demands,
correspondence or other documentation delivered to or given by the Company in
connection with an alleged default under the Lease or any material modification,
waiver, consent, amendment or side agreement relating to the Lease.
9.3 Budgets ad Statements.
A. The Manager shall promptly provide the Members with a copy
of each budget provided to the Company pursuant to the Management Agreement.
B. The Manager shall cause monthly financial statements,
consisting of a balance sheet, income statement and statement of changes in
financial position, to be sent, along with copy of the general ledger, to each
Member not later than 21 days after the end of each calendar month during the
term hereof. Such statements shall reflect in reasonable detail all
reimbursements to and employee benefits and burdens allocated by Manager and its
Affiliates in accordance with Exhibit D hereto.
C. The Manager shall cause an annual report to be sent to each
of the Members not later than 90 days after the close of each Fiscal Year. The
report shall contain a balance sheet as of the end of the Fiscal Year and an
income statement and statement of changes in financial position for the Fiscal
Year. Such statements shall reflect in reasonable detail all
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reimbursements to and employee benefits and burdens allocated by Manager and its
Affiliates in accordance with Exhibit D hereto. Such financial statements shall
be accompanied by the report thereon, if any, of the independent accountants
engaged by the Company or, if there is no report, the certificate of a Manager
that the financial statements were prepared without audit from the books and
records of the Company; provided however, that as long as Vantage is a Member
and Vantage or its parent company, American Vantage Companies, Inc., is a public
reporting company, (i) such financial statements shall be audited by, and
accompanied by a report of, an independent certified public accountant engaged
by the Company, and (ii) the Company shall reimburse Vantage for its accounting
costs incurred in reviewing the Company's audited financial statements for the
purpose of including such information in Vantage's or American Vantage
Companies' financial statements, not to exceed $5,000 per year for the initial
term of the Lease.
D. The Manager shall cause to be prepared at least annually,
at Company expense, information necessary for the preparation of the Members'
and Economic Interest Owners' federal and state income tax returns. The Manager
shall send or cause to be sent to each Member or Economic Interest Owner within
90 days after the end of each taxable 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.
E. The Manager shall cause to be timely filed with the Nevada
Secretary of State all statements and amendments thereto required under NRS
86.263.
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. The Company
shall retain the financial records of the Company until the expiration of the
applicable statute of limitations for tax matters, or six years, whichever is
greater. Following dissolution of the Company, the financial records may be
destroyed any time after such holding period has expired, unless either Member
requests such financial records, in which case they may be kept by the Manager
or provided to such Member, at the Manager's election.
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. Prior to filing, the Manager shall give the Non-managing Member an
opportunity to review and consult, at its expense, with Manager on the tax
treatment of any substantial item. 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,
subject to the right of the Members as provided herein to consent to such
matters.
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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 Non-managing Member may advise the Manager of any tax
or accounting matters concerning the Non-managing Member and the Manager shall
consult with the Non-Managing Member in administering such matters in the best
interests of the Company. The Manager may rely upon the advice of the Company's
accountants in administering this Agreement.
9.8 Tax Matters for the Company Handled by Manager and Tax Matters
Partner. The Manager shall from time to time cause the Company to make such tax
elections as it deems in its sole discretion to be in the best interests of the
Company and the Members. The Tax Matters Partner, as defined in Section 6231 of
the Code, shall represent the Company (at the Company's expense) in connection
with all examinations of the Company's affairs by tax authorities, including any
resulting judicial and administrative proceedings, and shall be authorized to
expend the Company's funds for necessary professional services and reasonable
costs associated therewith. If for any reason the initial Tax Matters Partner or
any successor Tax Matters Partner ceases to be the Manager, the new Manager
elected pursuant to Section 4.7 shall serve as the Tax Matters Partner;
provided, however that if such successor Manager is not a Member, the Tax
Matters Partner shall be such Member as may be designated by the predecessor Tax
Matters Partner, or, if no Member is so designated or such designation does not
satisfy the requirements of the Code, a new Tax Matters Partner shall be
selected by the Members in accordance with the requirements of the Code. The
Non-managing Member may advise the Manager of any tax or accounting matters
concerning the Non-managing Member and the Manager shall consult with the
Non-Managing Member in administering such matters in the best interests of the
Company.
ARTICLE X
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:
A. Upon the consent of the Manager and all of the Members;
B. The occurrence of a Dissolution Event and the failure of a
majority interest of the percentage interests of the Remaining Members (as
defined in Section 10.2) to consent in accordance with Section 10.2 to continue
the business of the Company within ninety (90) days after the occurrence of such
event;
C. The sale or other liquidation of all or substantially all
of the assets of the Company or the cessation of its primary business;
D. Expiration of the term as described in Section 2.3;
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E. Withdrawal of the Managing Member from the Company pursuant
to Section 4.3A;
F. Termination of the Lease; or
G. The failure of the Non-managing Member to make a Member
Loan which the Managing Member has agreed to make.
10.2 Continuation of Company. Upon the occurrence of a Dissolution
Event, the Company shall not be dissolved and its affairs shall not be wound up
if the remaining Members ("Remaining Members") holding a majority of the
remaining Membership Interests vote or consent to continue the business of the
Company within 90 days of the happening of the Dissolution Event.
10.3 Articles of Dissolution. As soon as possible following the
occurrence of any of the events specified in Section 10. 1, the Manager who has
not wrongfully dissolved the Company or, if none, the Members, shall execute
Articles of Dissolution in such form as shall be prescribed by the Nevada
Secretary of State and file the Articles as required by the Act.
10.4 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 shall be responsible for overseeing the winding up
and liquidation of the Company (unless the Manager has wrongfully dissolved the
Company in which case the Members other than the Manager shall be responsible
for overseeing such liquidation and winding up). 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. The Manager or Members winding up the affairs of the
Company shall be entitled to reasonable compensation for such services. The
persons winding up the affairs of the Company shall take full account of the
assets and liabilities of the Company, and shall cause its assets to be sold and
liquidated into cash. No Member shall be required to take any distribution of
property in kind, without the consent of such Member.
10.5 Adjustment of Capital Accounts and Allocation of Profits and
Losses. Prior to making any liquidating distributions of the company's assets,
the Members' Capital Accounts shall be adjusted to reflect all prior
distributions to the Members and the allocation of all Profits, Losses and
income, gain, deduction or loss attributable to the Company's operations and its
Liquidating Transactions, and any unrealized gain or loss inherent on any assets
or properties to be distributed to the Members in kind (if any). Profits, Losses
and any other items of income, gain, deduction or loss resulting from
Liquidating Transactions, and any unrealized gain or loss inherent on any assets
or properties to be distributed to the Members in kind (if any), shall be
allocated to the Members as provided in Section 6.1B or 6.1D, as applicable.
If, in any year in which a Liquidating Transaction occurs, the Manager
determines, in its reasonable discretion, that the amount of Profits from
Liquidating Transactions (including both Profits already realized and estimated
Profits yet to be realized) subject to allocation under Section 6.1B is, or is
likely to be, insufficient to permit the Capital Accounts of the Members (as
adjusted to reflect allocations to the Members of such Profits from Liquidating
Transactions) to reflect the economic
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agreement of the Members (as set forth in Section 7.1), then the Manager is
authorized to specially allocate Profits (or, if necessary, gross income) for
such year (other than Profits from Liquidating Transactions) according to the
priorities set forth in Section 6.1B, rather than according to the priorities
set forth in Section 6.1 A, so that the Capital Accounts of Members shall, to
the extent possible, reflect the economic agreement of the Members (as set forth
in Section 7.1).
10.6 Order of Payments Upon Dissolution. After determining that all
known debts and liabilities of the Company, including, without limitation, debts
and liabilities to Members who are creditors of the Company, have been paid or
adequately provided for, the remaining assets of the Company shall be liquidated
into cash and all cash shall be distributed to the Members in accordance with
their respective positive Capital Account balances, as adjusted pursuant to
Section 10.5.
10.7 No Obligation to Restore Deficit. No Member shall be required to
restore to the Company, to any other Member, or to the creditors of the Company
any deficit balance in such Member's Capital Account following the liquidation
and dissolution of the Company.
10.8 Providing for Debts. The payment of a debt or liability, whether
the whereabouts of the creditor is known or unknown, has been adequately
provided for if the payment thereof has been assumed or guaranteed in good faith
by one or more financially responsible persons or by the United States
government or any agency thereof, and the provision, including the financial
responsibility of the Person, was determined in good faith and with reasonable
care by the Members to be adequate at the time of any distribution of the assets
pursuant to this Section. This Section 10.8 shall not prescribe the exclusive
means of making adequate provision for debts and liabilities.
10.9 Certificate of Cancellation. The Manager or Members who filed
the Articles of Dissolution shall obtain from the Nevada Secretary of State a
certificate of dissolution upon the completion of the winding up of the affairs
of the Company.
10.10 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 or provided for under this Agreement. 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 Members have failed to liquidate the Company as required by this
Article X, 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 Articles 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 10.10 shall be 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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ARTICLE XI
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 of the Manager 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. The Manager shall be authorized, on behalf of the Company, to enter into
indemnity agreements from time to time with any Person entitled to be
indemnified by the Company hereunder, upon such terms and conditions as the
Manager deems appropriate in his business judgment.
11.2 Liability 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. To
the extent reasonable, any Member, at its request, will be named as an
additional insured on liability insurance maintained by or for the Company.
11.3 Key Person Insurance. Prior to Crossover, the Company shall for
its benefit purchase and maintain insurance on the life (and insuring against
the long-term disability) of ▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, if insurable,
in an amount equal to the Non-managing Member's Unrecovered Capital from time to
time. Thereafter, the Company may, with the consent of the Members, maintain
such insurance. The Company shall, in the event of its receipt of any proceeds
as beneficiary of such insurance, pay an amount of such proceeds to the
Non-managing Member up to the amount of the Non-managing Member's Unrecovered
Capital; and any excess proceeds shall, in the discretion of the Manager, be
retained by the Company as working capital or distributed to the Members in
accordance with their Percentage Interests.
ARTICLE XII
MISCELLANEOUS
12.1 Investment Representations. The Members and Economic Interest
Owners, if any, understand (1) that the Membership Interests and Economic
Interests evidenced by this Agreement have not been registered under any Federal
or State securities laws (the "Securities Acts") because the Company is issuing
and intends to issue, all Membership Interests and Economic Interests in
reliance upon the exemptions from the registration requirements of the
Securities Acts providing for issuance of securities not involving a public
offering, (2) that the
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Company has relied upon the fact that the Membership Interests and Economic
Interests are to be held by each Member or Economic Interest Owner for
investment, and (3) that exemption from registration under the Securities Acts
may not be available if the Membership Interests and Economic Interests were
acquired by a Member or Economic Interest Owner with a view to distribution.
Accordingly, each Member and Economic Interest Owner hereby confirms to
the Company that such Member and Economic Interest Owner is acquiring the
Membership Interests and Economic Interests for such own Member's and Economic
Interest Owner's account, for investment and not with a view to the resale or
distribution thereof. Each Member and Economic Interest Owner agrees not to
transfer, sell or offer for sale any of portion of the Membership Interests or
Economic Interests unless there is an effective registration or other
qualification relating thereto under any applicable Securities Acts or unless
the holder of Membership Interests or Economic Interests delivers to the Manager
an opinion of counsel, satisfactory to the Company, that such registration or
other qualification under such Act and applicable state securities laws is not
required in connection with such transfer, offer or sale. Each Member and
Economic Interest Owner understands that the Company is under no obligation to
register the Membership Interests or Economic Interests or to assist such Member
or Economic Interest Owner in complying with any exemption from registration
under the Securities Acts if such Member or Economic Interest Owner should at a
later date, wish to dispose of the Membership Interest or Economic Interest.
Furthermore, each Member realizes that the Membership Interests and Economic
Interests are unlikely to qualify for disposition under Rule 144 of the
Securities and Exchange Commission unless such Member or Economic Interest Owner
is not an "affiliate" of the Company and the Membership Interest or Economic
Interest has been beneficially owned and fully paid for by such Member or
Economic Interest Owner for at least two years.
SF KF MM RT
-------- --------
Initials Initials
For T,T.&T For Vantage
12.2 Counsel to the Company. Counsel to the Company is also counsel to
the Managing Member, Mundo Management Group, LLC, ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇▇, and their Affiliates. The Members, by subscribing to this Agreement,
hereby confirm their consent to the representation of the Company under these
circumstances. The Company has selected the Law Offices of ▇▇▇▇▇ ▇. ▇▇▇▇▇, a
Professional Corporation ("Company Counsel") as legal counsel to the Company.
Each Member acknowledges that Company Counsel does not represent the Member in
the formation or operation of the Company. Company Counsel shall owe no duties
directly to a Member, but only to the Company. Notwithstanding any adversity
that may develop, in the event any dispute or controversy arises between any
Members and the Company, or between any Members or the Company, on the one hand,
and another Member (or Affiliate of a Member) that Company Counsel represents,
on the other hand, then each Member agrees that Company Counsel may represent
either the Company or such Member (or his or her Affiliate), or both, in any
such dispute or controversy to the extent permitted by the California Rules of
Professional Conduct or similar rules in any other jurisdiction, and each Member
hereby consents to such representation. Each Member further acknowledges that
Company Counsel has not represented the interests of the
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Members individually in connection with the formation of the Company and the
preparation and negotiation of this Agreement and each Member has been advised
to seek independent counsel. The Non-managing Member represents that it has been
represented by ▇▇▇ ▇. ▇▇▇▇▇, Esquire and ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esquire, of ▇▇▇▇
▇▇▇▇ Peek ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and Anderson, in connection with its investment in the
Company, and in the event of any adversarial proceeding or other dispute of any
nature, by, between or among the Non-managing Member and the Company, the
Managing Member or any of their respective Affiliates, the Non-managing Member
may be represented by ▇▇▇ ▇. ▇▇▇▇▇ or ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ or any member of any
law firm of which she is a member, and each other Member and the Manager consent
to such representation.
SF KF MM RT
-------- --------
Initials Initials
For TT&T For Vantage
12.3 Intentionally omitted.
12.4 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, including but not limited to that certain letter dated
July 29, 1998 from the Company's counsel to ▇▇▇ ▇. ▇▇▇▇▇, Esq., and executed by
American Vantage Companies. 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.
12.5 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.
12.6 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 permitted 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.
12.7 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.
12.8 Disputed Matters. 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 Las Vegas, Nevada or Los Angeles,
California, at the election of the Managing Member, before one arbitrator or a
panel of arbitrators, as the parties shall determine, under the
32
35
then current commercial arbitration rules of the American Arbitration
Association, JAMS/Endispute or other mutually agreeable arbitrator. 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 except (a) an action to compel arbitration pursuant
to this Section 12.8, (b) an action to enforce an award obtained in an
arbitration proceeding in accordance with this Section 12.8, or (c) an action
for a temporary restraining order and preliminary injunction (but not for
permanent injunction) pending arbitration of a dispute.
12.9 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.
12.10 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.
12.11 Notices. Any notice to be given or to be served upon the Company,
any Member, the Manager or any Person 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 Exhibit A hereto. Any Member may, at any time by giving five (5)
days' prior written notice to the Company, designate any other address in
substitution of the foregoing address to which such notice will be given. In
addition to the foregoing, notice may be given by facsimile transmission to the
facsimile number included in Exhibit A, which notice shall be deemed given when
received during customary business hours prior to 5:00 PM local time of the
recipient, provided that a duplicate copy of such notice has been deposited in
the United States Mail, postage prepaid, on or prior to the date of
transmission.
12.12 Amendments. All amendments to this Agreement will be in writing
and signed by all of the Members.
12.13 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.
12.14 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.
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12.15 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 00\- reasonable fees, costs and expenses of enforcing any right of the
prevailing party, including, without limitation, reasonable attorneys' fees and
expenses.
12.16 Remedies Cumulative. The remedies under this Agreement are
cumulative and shall not exclude any other remedies to which any person may be
lawfully entitled.
12.17 No Waiver. The failure of a Member to seek redress for violation
of, or to insist upon the strict performance of any covenant or condition of
this Agreement shall not prevent a subsequent act which would have originally
constituted a violation, from having the effect of an original violation.
IN WITNESS WHEREOF, all of the Members of Border Grill Las Vegas, LLC,
a Nevada limited-liability company, have executed this Agreement, effective as
of the date written above.
MANAGING MEMBER
TT&T, LLC,
a Nevada limited-liability company
By: /s/ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
-----------------------------
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇,
Manager Member
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇,
Manager Member
By: /s/ R. ▇▇▇▇▇ ▇▇▇▇▇
-----------------------------
R. ▇▇▇▇▇ ▇▇▇▇▇,
Manager Member
(Signatures continued on next page.)
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37
NON-MANAGING MEMBER
Vantage Bay Group, Inc.,
a Nevada corporation
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-----------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, President
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38
By executing below, the undersigned hereby guarantees the obligations
of the Non-managing Member to make its Capital Contribution as required in
Section 3.1, which guarantee is given as set forth in Section 3.2 of this
Agreement.
American Vantage Companies, Inc.,
a Nevada corporation
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-----------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, President
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39
By executing below, the undersigned each hereby agrees to be bound by
her promise set forth in and subject to the provisions of Section 4.3A.
/s/ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
-----------------------------
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇
37
40
EXHIBIT A
CAPITAL CONTRIBUTIONS, PERCENTAGE INTERESTS AND ADDRESSES OF
MEMBERS AND MANAGERS
Initial
Capital
Member; Manager and Address Contributions Percentage Interest
-------------------------------------------------------------------------------
Managing Member:
Manager
TT&T, LLC $ 1,000 51%
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Non-managing Member:
Vantage Bay Group, Inc. $250,000 49%
c/o American Vantage Companies
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Total $251,000 100%
41
EXHIBIT B
OPENING BUDGET
42
EXHIBIT B
NEW RESTAURANT MANDALAY BAY
OPENING COSTS-RESTAURANT
based on 6,388 sf downstairs/3,522 sf upstairs/3,000 sf patio
Total per
Category
ACQUISITION
Legal 30,000
Accounting 2,000
Liquor license 10,000 42,000
CONSTRUCTION
Architect & Design Fees 96,300
Downstairs (6388 af @ 180/sf) 1,149,940
Upstairs (3522 sf @ 180/sf) 633,960
Patio (3000 sf @ 5O/sf) 150,000
Kitchen & Bar Equipment 375,000
Murals 60,000
Contingency 80,250 2,545,350
FURNITURE, FIXTURES & EQUIPMENT
Dining Room Tables (40 @ $250 ea) 10,000
Dining Room Chairs (170 @ $250 ea) 42,500
Mesa Grande Table (1 @ $750 ea) 750
Bar Tables (8 @ $150) 1,200
Bar Seats (44 @ $200 ea) 8,800
Patio Tables (37 @ $150 ea) 5,550
Patio Chairs (148 @ $150 ea) 22,200
Misc Furniture & Fixtures 10,000
Signage 20,000
Kitchen Equipment 25,000
POS 45,000
Music 25,000
Contingency 10,000 226,000
OPENING INVENTORY & SUPPLIES
Smallwares 20,000
China/Glass/Silver 30,000
Liquor Beer & wine 30,000
Food Inventory 11,000
Menus, matches & misc. supplies 15,000
Office Equipment, supplies & paper products 30,000
Uniforms 8,000
Contingency 10,000 154,000
PRE-OPENING EXPENSES
1st Month Rent 6,250
Staff training-dining room 15,000
Staff training-kitchen 15,000
Management salaries (chef,sous,gm,asst) 155,000
Management relocation & Training lodging 45,000
Travel, Meals & Lodging 45,000
Cost of goods-training 15,000
Pre-opening charity events 25,000
Insurance, utilities 15,000
Sales Tax Deposit (3 x Monthly Tax Liability) 105,000
Graphics, printing, advertising 20,000
Opening Management Fee 60,000
Contingency 15,000 536,250
LICENSES AND DEVELOPMENT COSTS
Permits & business license 15,000
Concept Licensing Fee 15,000 30,000
OFFERING EXPENSES
Legal 30,000
Accounting 5,000
Other 3,000 38,000
CONTINGENCY/RESERVE 29,400 50,000
TOTAL BUDGET 3,601,000 3,621,600
LESS LANDLORD FUNDED IMPROVEMENTS (675,000)
---------
2,926,000
INVESTOR CAPITAL 2,750,000
INVESTOR LOAN 175,000
---------
2,925,000
(Estimates only--For internal use-Numbers subject to change)
43
EXHIBIT C
PROCEDURE FOR DETERMINING FAIR MARKET VALUE AND PAYMENT TERMS
For purposes of Sections 4.3B and 4.3C, the fair market value of the Company
shall be determined as follows:
A. During the first year of operation of the Restaurant, 75% of
annualized net income before depreciation for the period from
the opening of the Restaurant through the end of the month
immediately preceding the "Calculation Date", shall be
multiplied by a factor of two (2), with the product increased
by any cash reserves and liquid tangible assets (i.e.,
collectible accounts receivables) and decreased by any
outstanding debt (i.e., accounts payable, accrued expenses,
contracts payable and notes payable) of the Company, to
establish the stipulated fair market value of the Company.
B. In the second year of operation, 85% of the net income before
depreciation of the Restaurant for the most recent 12 months
prior to the Calculation Date, multiplied by a factor of two
(2), with the product increased by any cash reserves and
liquid tangible assets (i.e., collectible accounts
receivables) and decreased by any outstanding debt (i.e.,
accounts payable, accrued expenses, contracts payable and
notes payable) of the Company, to establish the stipulated
fair market value of the Company.
C. In the third year of operation and thereafter, 100% of the net
income before depreciation of the Restaurant for the most
recent 12 months prior to the Calculation Date, multiplied by
a factor of two (2), with the product increased by any cash
reserves and liquid tangible assets (i.e., collectible
accounts receivables) and decreased by any outstanding debt
(i.e., accounts payable, accrued expenses, contracts payable
and notes payable) of the Company, to establish the stipulated
fair market value of the Company.
The Company may purchase some or all of the Non-managing Member's former
Membership Interest for an amount equal to the respective Percentage Interest
(i.e., up to 49% multiplied by the applicable stipulated fair market value of
the Company. The Company may pay the amount in full or elect, at its option, to
deliver a note to the Non-managing Member reflecting installment payments fully
amortizing over five (5) years at an interest rate equal to the prime rate of
interest announced by ▇▇▇▇▇ Fargo Bank.
For purposes of the foregoing provisions, the "Calculation Date" shall mean (i)
the date the Manager gives its consent to the withdrawal of the Non-managing
Member under Section 4.3B or (ii) the date the Company elects to acquire the
Membership Interest in the event of a breach as provided in Section 4.3C.
44
EXHIBIT D
DESCRIPTION OF REIMBURSEMENTS TO MANAGER AND AFFILIATES
Mundo will be the restaurant manager and as such, certain expenses described in
this Exhibit D and incurred in managing the Restaurant will be passed through to
the Restaurant, other than salaries for ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇ (the
"Owners"). Mundo will also perform "entity" management functions for the Manager
of the Company, such as overseeing and assisting in preparation of tax returns,
investor communications, financial statements and other obligations of the
Company as provided in the Operating Agreement.
Expenses that are incurred solely for the benefit of the Restaurant will be paid
by the Restaurant and all direct employees of the Restaurant will be paid by the
Restaurant. Mundo will maintain a principal business office, initially in Santa
Monica, California, which will include certain principal business office staff,
expenses, etc. Reasonable business expenses and salaries (other than for ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇) may be paid by Mundo but then reimbursed to
Mundo by the Restaurant to the extent described below. These reimbursements are
in addition to any management fee paid to Mundo by the Restaurant.
Mundo shall bear its own entity expenses, such as tax return preparation,
corporate or entity maintenance expenses, legal and accounting fees solely for
the benefit of Mundo, and any Mundo indebtedness.
The following categories of expenses would be allocated as follows.
1. Employee Salaries (including any bonuses) for Director of
Operations, Corporate Chef, Accounting personnel, Marketing
Manager, Catering Manager, MIS, administrative assistant(s)
for the Owners, and after Crossover, any additional principal
business office staff, i.e., risk manager, employee relations,
supporting clerical staff, etc., will be split equally among
the restaurants, unless an unusual amount of time is spent on
one restaurant over another; except Director of Operations and
Accounting Manager salaries will be split based on actual time
spent on each restaurant. The Director of Operations and
Accounting Manager will complete a memo periodically and
submit them to an Owner for approval of the allocation of
time and salaries. When salaries for other employees are
allocated unequally, a written memo will be approved by an
Owner or the Director of Operations or Accounting Manager,
setting forth the reason for such unequal allocation.
2. Employee benefits and burdens and all employee-related
expenses for the employees described in the foregoing
paragraph shall be allocated in the same manner as salaries.
Such benefits and burdens shall be limited to the following:
a. Health insurance.
1
EXHIBIT D
45
b. Long-term disability insurance for executive-level
employees.
c. Reasonable and actual business-related expenses.
d. Life insurance for executive-level employees.
e. Payroll tax costs (taxes, social
security, SDI, unemployment insurance, etc.).
f. Worker's compensation insurance.
g. Employer pension plan contribution, if any.
3. Promotional and Charity Events - to be determined on a
case-by-case basis. (For example: donation of food for
promotional event will be split evenly among all restaurants
if it will benefit all restaurants.)
4. Advertising - to be determined by Director of Operations or
Accounting Manager invoice by invoice, as to which restaurants
will directly benefit.
5. Direct Mail Marketing, Website Expense, Data Processing Fees,
Dues and Publications, Media Consultant - split evenly by all
restaurants.
6. Overhead expenses (e.g., office rent, telephone, utilities,
etc.) of principal business office staff and Owners - split
evenly by all restaurants, unless directly attributable to one
or more, but less than all, restaurants. Manager estimates
that not more than $900/month would be allocated to the
Restaurant in the first year.
7. Travel expenses of principal business office staff and Owners
will be allocated to the restaurant(s) receiving the benefit.
8. Research and development costs and R&D outside meals will be
allocated based on location being researched. Research for new
restaurant locations will be at the cost of Mundo or the
Owners, and not of the Restaurant.
9. Owners' benefits and burdens listed under item 2 above, will
be allocated among all restaurants equally. In addition,
Owners will have an expense allowance to cover dining,
entertainment, research and development, promotion, etc.,
which need not be directly related to any restaurant. The
amount of such expense allocated to the Restaurant shall not
exceed $15,000 in the first year, which maximum may increase
by CPI annually. And, the Owners and principal business office
staff may have a cellular phone allowance. The amount of such
allowance which is allocated to the Restaurant shall not
exceed $3,500 in the first year, with that maximum increasing
by CPI annually.
10. Any blanket property or liability insurance shall be allocated
equally among the restaurants benefited, unless the
independent insurance broker advises that another method is
more equitable, in which case the more equitable method shall
be used.
2
EXHIBIT D
46
EXHIBIT E
LICENSE AGREEMENT
47
BORDER GRILL LAS VEGAS
LICENSE AGREEMENT
THIS AGREEMENT is entered into February , 1999, effective as of
November 12, 1998, by and between Dancing Pigs, Inc., a California corporation
wholly owned by ▇▇▇▇▇ ▇▇▇▇▇▇▇, and ▇▇▇▇, Inc., a California corporation wholly
owned by ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ (collectively, "Licensor") and Border Grill
Las Vegas, LLC, a Nevada limited-liability company ("Licensee").
RECITALS
A. Licensor is the successor in interest to the ownership of the
trademark BORDER GRILL and all logos, designs, trade dress, copyrights, menus,
styles, recipes, and all other rights associated with and used in connection
with the operation of certain Mexican cuisine restaurants (the "Trademark").
B. The Trademark has previously been, and as of the effective date of
this Agreement continues to be, used with Licensor's permission on a
non-exclusive basis, by one or more other restaurants of which Licensor, or its
principals, are controlling members.
C. The Trademark is expected to be used with Licensor's prior
permission, on a non-exclusive basis by other restaurant operations of which
Licensor, or its principals, are controlling members.
D. Licensee desires to obtain the non-exclusive use of the Trademark
from Licensor for use in the operation of a restaurant ("Restaurant") to be
located in the Mandalay Bay Hotel and Casino project, at ▇▇▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ("location"), pursuant to that certain
Restaurant Lease between Licensee and Mandalay Bay Corp. dated November 12, 1998
("Lease"), on the terms and conditions and with the rights and obligations set
forth herein.
NOW, THEREFORE, in consideration of the covenants and promises
contained herein, it is hereby agreed as follows:
1. LICENSE.
1.1 Grant of License. Licensor hereby grants to Licensee, and
Licensee hereby accepts from Licensor, the non-exclusive (except for the radius
limitation, as provided below) right, privilege, and license ("License") to use
the Trademark in its operation of the Restaurant at the location only, subject
to the terms and conditions herein. The Trademark shall be used and displayed
in, on and at the Restaurant only in such manner as Licensor in its sole
discretion shall specify, and no other. Licensee acknowledges that the Trademark
has acquired and will acquire valuable secondary meaning and goodwill with the
public and that the restaurants using the Trademark have acquired a reputation
for high quality and style, excellent food, and professional and courteous
service. The Restaurant shall be operated by Licensee exclusively as a Mexican
cuisine restaurant and for no other purpose whatsoever without Licensor's
written consent.
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48
Licensee's use of the Trademark shall be solely in connection with the
Restaurant in accordance with the guidelines and directions furnished to
Licensee by Licensor, if any, and the quality of the Restaurant shall be
satisfactory to the Licensor, in its sole discretion. Provided that this
Agreement is in full force and effect and provided that Licensee has not
achieved "Crossover" as that term is defined in Licensee's Operating Agreement,
Licensor shall not license any third party to operate a full-service Mexican
cuisine restaurant under the Trademark within the Restricted Area as defined in
the Lease.
1.2 Term of License. Subject to earlier termination as provided in
Paragraph 9 hereof, the License shall be for a term of approximately ten (10)
years and ten (10) months commencing as of the date hereof and expiring at the
end of the Term of the Lease, and may be renewed by Licensee with 6 months prior
notice for one five (5) year renewal term if the Lease is extended, on the terms
set forth herein.
1.3 Reservation of Rights. All rights in and to the Trademark other
than those specifically granted herein are reserved to Licensor for its own use
and benefit, including but not limited to all rights in merchandising and other
goods. Licensee acknowledges that it shall not acquire any rights of any nature
whatsoever in the Trademark as a result of Licensee's use thereof, and that all
use of the Trademark, including but not limited to improvements in design by
Licensee, shall inure to the benefit of Licensor. Licensee agrees that it shall
not, directly or indirectly, during the term of this Agreement or thereafter,
attack the ownership by Licensor of the Trademark or the validity thereof or
attack the validity of the License herein granted to it. Licensee acknowledges
that Licensor will permit Licensee to distribute merchandise and other goods
using the Trademark, but that Licensor has and at all times shall retain
complete control over such merchandise and other goods, and the Trademark's use
in connection with such merchandise and other goods, notwithstanding that
Licensor may, in connection with any such distribution rights, require Licensee
to pay for some or all of the costs incurred for the design and manufacture of
such merchandise and other goods.
1.4 Assignments of License. The License herein granted is personal
to Licensee and may not be assigned, transferred, sub-licensed, pledged,
mortgaged or otherwise encumbered by Licensee in whole or in part without
Licensor's prior written consent. Licensor, in its sole and absolute discretion,
shall be entitled to assign the Trademark so long as such assignment is subject
to the terms and conditions of this Agreement.
2. PAYMENTS. In consideration for the grant of the License hereunder,
Licensee shall pay to Licensor the following:
2.1 an initial fee of $15,000;
2.2 One Hundred Dollars ($100) each year or partial year of the term
on January 1 of each year; and
2.3 $7,500 upon the giving of notice of the renewal of the License,
for the renewal term.
3. OBLIGATIONS OF LICENSOR. During the term of this Agreement and so
long as no
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49
event of default shall have occurred hereunder, Licensor shall provide to
Licensee all information in Licensor's possession or control relating to the
design and marketing of the Trademark or utilization and exploitation of the
Trademark, and shall assist Licensee and its officers, employees, agents,
managers, contractors, and other representatives to become familiar therewith.
4. OBLIGATIONS OF LICENSEE. During the term of this Agreement and so
long as no default shall have occurred hereunder, Licensee shall:
4.1 adhere to such reasonable standards regarding operations of the
Restaurant as Licensor, upon notice to Licensee, may set forth. Licensor may,
from time to time, change, revise, amend or expand such standards and
guidelines, upon notice to Licensee;
4.2 conduct its operations at the Restaurant in a first-class manner
so as to reflect credibly on Licensor and so as not to injure, damage or render
less valuable the Trademark and the goodwill connected therewith and use its
best efforts to enhance the reputation and popularity of BORDER GRILL
restaurants and to increase the BORDER GRILL clientele.
4.3 at all times maintain the interior and exterior of the
Restaurant and surrounding premises used in connection therewith in safe, good,
clean and attractive conditions, equal to the standard of first-class
restaurants and in compliance with Licensor's design requirements, and do such
lighting, painting, decorating, embellishing, repairing and restoring as may
from time to time be required to maintain such high standards and requirements.
Licensee shall comply with all of Licensor's reasonable requests in regard to
the maintenance of the physical plant of the Restaurant and improvements
thereto.
4.4 at all times serve such food and beverages prepared to the
highest quality standards customary of first-class restaurants, and cause the
food and beverages to be presented in an attractive manner.
4.5 employ a sufficient number of qualified personnel at the
Restaurant and require that all personnel perform their duties in a professional
and courteous manner.
4.6 use the Trademark in strict compliance with any and all
trademark laws;
4.7 display the Trademark only in such form and manner as shall be
specifically approved by Licensor and cause to appear on all material on or in
connection with which the Trademark is used, such legends, markings and notices
as Licensor may request in order to give appropriate notice of any trademark,
trade name or other rights therein or pertaining thereto; and
4.8 comply with all applicable laws, regulations, ordinances and
zoning codes.
5. REPRESENTATIONS AND WARRANTIES.
5.1 Licensor's Representations and Warranties. Licensor hereby
represents and warrants that:
(a) Licensor has the full right, power and authority to enter
into and
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50
perform its obligations under this Agreement and to consummate the transactions
contemplated herein, subject to the fact that Licensor has not registered the
Trademark, with no obligation to do so. This agreement constitutes a legal,
valid and binding agreement of licensor, enforceable in accordance with its
terms (except as the enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, or other laws of general application
relating to or affecting enforcement of creditors' rights and the application of
equitable principles in any action, legal or equitable).
(b) To the best of Licensor's knowledge, Licensor is the sole
and exclusive owner of the rights granted to Licensee hereunder and controls,
free of liens or other encumbrances, all rights granted to Licensee hereunder,
subject to the fact that the Trademark has not been registered. Licensor has no
obligation to register the Trademark. Licensor has not granted any right,
option, license, or other interest in or to the Trademark for use at the
Restaurant to any other person or in violation of the geographic limitation
contained in Paragraph 1.1 hereof.
(c) There is not now pending and, to the best of Licensor's
knowledge, there is not threatened, nor is there any basis for, any litigation,
action, suit or proceeding to which Licensor is or will be a party in, before or
by any court or governmental or regulatory agency or body, having, or which
insofar as can be foreseen in the future, may have, any adverse affect on
Licensor's ability to carry out its obligations hereunder. There is no judgment,
decree, injunction, rule or order of any court, governmental department,
commission, agency, instrumentality or arbitration outstanding against Licensor
having, or which insofar as can be foreseen in the future, may have, any adverse
affect on Licensor's ability to carry out its obligations hereunder.
(d) The execution, delivery and performance of this Agreement
will not result in any lien or encumbrance upon any asset of Licensor or in a
violation or breach of, or any conflict with, the terms or provisions of, or any
default under: (i) any statute, rule, regulation, judgment, order or decree of
any government, governmental instrumentality or court, domestic or foreign, to
which Licensor or any of his properties or assets is subject; or (ii) any
provision of any agreement, indenture, deed of trust, mortgage, loan agreement,
lease or other instrument to which Licensor is a party or by which it or any of
its assets is bound.
(e) Licensor has filed an application to register the
Trademark with the U.S. Patent Office and the application is pending. Licensor
makes no representation or warranty to Licensee that (i) such registration will
be granted, (ii) Licensor may not withdraw such registration if in its
reasonable judgment it determines to do so because a third party asserts or
threatens to assert a claim with respect to Licensor's or Licensee's use of the
Tradename, (iii) that no third party has a paramount right to the Trademark, nor
(iv) that Licensor may not determine in its reasonable judgment to terminate
this License as a result of a third party asserting or threatening to assert a
claim with respect to Licensor's or Licensee's use of the Tradename, as provided
in Section 9.2(g).
5.2 Licensee's Representations and Warranties. Licensee hereby
represents and warrants that:
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51
(a) Licensee is a limited-liability company duly organized,
validly existing and in good standing under the laws of the State of Nevada.
(b) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereunder have been duly
authorized by the Managing Member and approved by the Non-managing Member of
Licensee. This Agreement constitutes a legal, valid and binding agreement of
Licensee, enforceable in accordance with its terms (except as the enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
or other laws of general application relating to or affecting enforcement of
creditors' rights and the application of equitable principles in any action,
legal or equitable). Licensee has the full power and authority to perform its
obligations under this Agreement and the transactions contemplated herein.
(c) There is not now pending and, to the best of Licensee's
knowledge, there is not threatened, nor is there any basis for, any litigation,
action, suit or proceeding to which Licensee is or will be a party in, before or
by any court or governmental or regulatory agency or body, having, or which
insofar as can be foreseen in the future, may have, any adverse affect on
Licensee's ability to carry out its obligations hereunder. There is no judgment,
decree, injunction, rule or order of any court, governmental department,
commission, agency, instrumentality or arbitration outstanding against Licensee
having, or which insofar as can be foreseen in the future, may have, any adverse
affect on Licensee's ability to carry out its obligations hereunder.
(d) The execution, delivery and performance of this Agreement
will not result in any lien or encumbrance upon any asset of Licensee or in a
violation or breach of, or any conflict with, the terms or provisions of, or any
default under: (i) any statute, rule, regulation, judgment, order or decree of
any government, governmental instrumentality or court, domestic or foreign, to
which Licensee or any of its properties or assets is subject; or (ii) any
provision of any agreement, indenture, deed of trust, mortgage, loan agreement,
lease or other instrument to which Licensee is a party or by which it or any of
its assets is bound.
6. INDEMNITY.
6.1 Licensor. Licensor hereby agrees at all times to defend,
indemnify and hold harmless Licensee, its partners, members, officers,
directors, agents, employees, and contractors from and against any and all
claims, damages, liabilities, costs and expenses (including without limitation
reasonable attorneys' fees and costs) arising out of any breach by Licensor of
any material representation, warranty, covenant, condition or agreement made or
to be performed by Licensor under the terms of this Agreement. Any such
indemnitee shall have the right, at its sole option and at its own expense, to
retain independent counsel and to participate in the defense of any such claims.
Licensor shall have the sole right on behalf of all indemnitees to accept or
reject proposed settlement terms, so long as no indemnitee is, as a part of such
settlement, required to make any payments or perform any other act.
6.2 Licensee. Licensee hereby agrees at all times to defend,
indemnify and hold harmless Licensor, its partners, members, officers,
directors, agents, employees, and contractors from and against any and all
claims, damages, liabilities, costs and expenses (including
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52
without limitation reasonable attorneys' fees and costs) arising out of: (a) any
breach by Licensee of any material representation, warranty, covenant, condition
or agreement made or to be performed by Licensee under the terms of this
Agreement; (b) Licensee's display or use of the Trademark, in violation of this
Agreement; (c) Licensee's operation of the Restaurant; and (d) any other act or
failure to act by Licensee under or in violation of this Agreement. Any such
indemnitee shall have the right, at its sole option and at its own expense, to
retain independent counsel and to participate in the defense of any such claims.
Licensee shall have the sole right on behalf of all indemnitees to accept or
reject proposed settlement terms, so long as no indemnitee is, as a part of such
settlement, required to make any payments or perform any other act.
7. INSURANCE. Licensee agrees to obtain and maintain during the term of
this Agreement, at its own expense, commercial general liability insurance
providing protection (at a minimum, in the amount of $1,000,000 per
occurrence/$2,000,000 annual aggregate) applicable to any claims, liabilities,
damages, costs, or expenses arising out of Licensee's operation of the
Restaurant. Such insurance shall include coverage of Licensor, its partners,
shareholders, members, directors, officers, agents, employees, assignees, and
successors. Upon request of Licensor, Licensee shall cause the insurance company
issuing such policy to issue a certificate to Licensor confirming that such
policy has been issued and is in full force and effect and provides coverage of
Licensor, and also confirming that before any cancellation, modification, or
reduction in coverage of such policy, the insurance company shall give Licensor
thirty (30) days prior written notice of such proposed cancellation,
modification, or reduction.
8. CONFIDENTIALITY. Licensee acknowledges that it has gained and/or may
gain knowledge through Licensee's association with Licensor of certain
information that is confidential and proprietary to Licensor ("Proprietary
Information"). The Proprietary Information includes, without limitation: (i) the
Trademark; (ii) any and all marketing, competitive, contractual, financial or
other information available only to Licensor; and (iii) various trade secrets
that are or may in the future be owned by Licensor. Licensee agrees that it
shall not during the term of this Agreement or at any time thereafter use
(except as required by law or with the express prior written approval of
Licensor) any of the Proprietary Information either directly or indirectly. The
foregoing provision shall not be construed to prevent Licensee from making use
of or disclosing information that is in the public domain through no fault of
the Licensee; however, specific information shall not be deemed to be in the
public domain merely because it is encompassed by some general information that
is published or in the public domain or in Licensee's prior possession.
9. TERMINATION.
9.1 Causes of Termination. This Agreement shall terminate upon the
occurrence of any of the following events:
(a) The termination of this Agreement as set forth in
Paragraph 1.2 above; or
(b) Licensee becomes insolvent or is a subject of a petition
under state or federal bankruptcy or insolvency laws, or makes an assignment,
composition or disposition for the benefit of its creditors, or if a receiver,
trustee or other similar officer is appointed to ▇▇▇▇
▇
53
charge of Licensee's affairs, or Licensee admits in writing of its inability to
pay its debts as they become due or fails to pay its debts as they become due,
or Licensee takes any action in furtherance of the foregoing.
9.2 Licensor's Option to Terminate. Licensor shall have the right, in
its sole discretion, to terminate this Agreement upon the occurrence of any of
the following:
(a) Licensee transfers or agrees to transfer a substantial portion
of its assets or agrees to a merger, consolidation or other restructuring of
Licensee; or
(b) Licensee fails to comply with quality standards prescribed by
Licensor and fails to cure such noncompliance within fifteen (15) days of
Licensor's written demand therefor; or
(c) Licensee fails to pay the payments set forth in Paragraph 2
hereof and fails to cure such failure within fifteen (15) days of Licensor's
written demand therefor; or
(d) Licensee fails to use its best efforts to display, use, and
otherwise exploit the Trademark;
(e) After Crossover, neither ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ nor ▇▇▇▇▇ ▇▇▇▇▇▇▇ is
the executive chef of the Restaurant or, directly or indirectly, the principals
of the managing member of Licensee;
(f) Licensee fails to comply with any material term or provision of
this Agreement and fails to cure such default within fifteen (15) days of
Licensor's written demand therefor; or
(g) Licensor determines in its reasonable judgment to terminate this
License because a third party asserts or threatens to assert a claim with
respect to Licensor's or Licensee's use of the Tradename.
9.3 Effect of Termination.
(a) Upon any termination of this Agreement, any and all rights
granted to Licensee hereunder shall immediately cease and without further act or
instrument be assigned to and revert to Licensor, and Licensee shall immediately
terminate all further use of the Trademark and shall remove from the Restaurant
any and all signs, displays, menus and other items bearing the Trademark.
Licensee shall execute any instruments requested by Licensor which Licensor, in
his sole and absolute discretion, deems necessary, proper or appropriate to
accomplish or confirm the foregoing. Any such assignment, transfer or conveyance
shall be without consideration other than the mutual agreement contained herein.
(b) In the event of a termination pursuant to Section 9.2(g),
Licensor and Licensee agree to seek the approval of the Landlord under Section
7.5 of the Lease for the use of a new tradename and trademark owned by Licensor
or an Affiliate of Licensor. If the Landlord consents to such new trademark,
then Licensor or any such Affiliate of Licensor and
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Licensee shall enter into a license agreement substantially in the same form and
on the same terms as set forth in this License Agreement for a new license to
Licensee of the new trademark. If the new trademark is owned by an Affiliate of
Licensor, Licensor shall, so long as to do so does not breach any agreement, or
violate any law or paramount right of another party, cause such Affiliate of
Licensor to enter into such new license agreement as described in this Section
9.3(b).
10. MISCELLANEOUS.
(a) Agreement to Cooperate and Perform Necessary Acts. Each party
agrees, without further consideration, to cooperate and diligently perform any
further acts, deeds and things and to execute and deliver any documents that may
from time to time be reasonably required to consummate, evidence, confirm and/or
carry out the intent and provisions of this Agreement, all without undue delay
or expense.
(b) Attorneys' Fees and Costs or Suit. Should any party institute or
should the parties otherwise become a party to any action or proceeding in
arbitration pursuant to Subparagraph (d) hereof, or otherwise to enforce or
interpret this Agreement or any provision hereof, or for damages by reason of
any alleged breach of this Agreement or any provision hereof or for a
declaration of rights in connection herewith, or for any other relief, including
equitable relief, in connection herewith, the prevailing party in any such
action or proceeding shall be entitled to receive from the non-prevailing party
as a cost of suit, and not as damages, all costs and expenses of prosecuting or
defending the action or proceeding, whichever the case may be, including,
without limitation, reasonable actual attorneys' and other professional fees
such as accounting fees incurred by the prevailing party in connection with such
action or proceeding.
(c) California Law/Los Angeles County Venue. This Agreement and the
rights of each party under this Agreement shall be governed by, interpreted
under, and construed and enforced in accordance with the laws of the State of
California. This Agreement shall be construed as if made, and as if its
obligations are to be performed, wholly within the State of California, without
regard to principles of conflict of laws. Should litigation between the parties
be instituted, such litigation shall, subject to Subparagraph (d) pertaining to
arbitration, be filed in and heard solely before the state courts of California,
with venue exclusively in Los Angeles County. Each party waives such party's
right to assert the doctrine of "forum non conveniens" as it applies to venue
in said County, or to otherwise object to venue within said County.
(d) Mandatory and Binding Arbitration.
(i) The parties hereby agree that they will submit any and all
controversies, claims and matters of difference to binding arbitration in Los
Angeles County, California, according to the rules and practices of
JAMS-Endispute or other mutually acceptable private arbitration service, except
to the extent that such rules and practices are inconsistent with the provisions
of this Subparagraph (d). This submission and agreement to arbitrate shall be
specifically enforceable. Without limiting the generality of the foregoing, the
following shall be considered controversies for this purpose: (A) all questions
relating to the breach of any obligation, warranty, right or condition
hereunder; (B) the failure of any party to deny or reject a claim or demand of
any other party; and (C) any question as to whether the right to arbitrate a
certain dispute exists. Arbitration may proceed in the absence of any party if
reasonable written
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55
notice of the proceedings has been given to such party. The parties agree to
abide by all awards rendered in such proceedings, which shall be final and
binding on all parties. All awards may be filed with the clerk of the district
court in the county in which the prevailing party has his or its principal
office and/or in the county in which the residence or principal office of a
non-prevailing party is located, as a basis of judgment, and of the issuance of
execution for its collection and, at the election of the party making such
filing, with the clerk of one or more other courts, state or federal, having
jurisdiction over the party against whom such an award is rendered or such
party's property.
(ii) The parties shall mutually agree upon one (1) arbitrator
who shall be selected pursuant to the rules of the American Arbitration
Association.
(iii) The parties to any dispute hereunder shall have the
right to engage in any and all discovery pertaining to civil litigation as they
would be entitled to pursuant to the California Code of Civil Procedure
including, without limitation, all pre-hearing discovery as would be permitted
in civil litigation. Said discovery shall proceed pursuant to the provisions of
the California Code of Civil Procedure governing discovery in civil litigation
and all conditions and objections allowed under the rules of said California
Code of Civil Procedure shall be allowed with respect to such discovery. The
arbitrator shall rule upon motions to compel or limit discovery and shall have
the authority to impose sanctions, including attorneys' fees and costs, to the
same extent as a court of law or equity should the arbitrator determine that
discovery was sought without substantial justification or that discovery was
refused or objected to without substantial justification.
(iv) The arbitrator shall apply California law, or Federal law
if applicable, as though the arbitrator was bound by applicable statutes and
precedents in case law, and shall endeavor to decide the controversy as though
the arbitrator was a judge in a California court of law. The arbitrator shall
have the power to issue any award, judgment, decree or order of relief that a
court of law or equity could issue under California law including but not
limited to, money damages, specific performance, or injunctive relief; and for
such purposes it is hereby expressly acknowledged and agreed that damages at law
will be an inadequate remedy for a breach or threatened breach of any provision
of this Agreement, it being the intention of this sentence to make clear the
agreement of the parties hereto that the respective rights and obligations of
the parties hereto hereunder shall be enforceable in any arbitration proceedings
in accordance with principles of equity as well as of law. The arbitrator shall
prepare a written decision that will be supported by written findings of fact
and conclusions which adequately set forth the basis of the arbitrator's
decision and which cite the statutes and precedents applied and relied upon in
reaching said decision. The award, judgment, decree or order, and the findings
of the arbitrator, shall be final, conclusive and binding upon the parties
hereto, and the judgment upon the award and enforcement of any other judgment,
decree or order of relief granted by the arbitrator may be entered or obtained
in any court of competent jurisdiction upon the application of any party to the
dispute. This agreement to arbitrate shall be self-executing without the
necessity of filing any action in any court and shall be specifically
enforceable under the prevailing arbitration law.
(v) The parties acknowledge that, in the event of any dispute,
the parties are required to submit the dispute to arbitration under the
provisions of this Subparagraph
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(d), on award rendered by an arbitrator in accordance with these provisions is
absolutely binding on both parties, neither party shall be entitled to petition
any court for an order overturning any such award, and neither party is entitled
to submit any dispute to a judicial or administrative proceeding in violation of
the provisions herein.
(e) Entire Agreement/No Collateral Representations. The
parties expressly acknowledge and agree that this Agreement: (i) is the final,
complete and exclusive statement of the parties' agreement with respect to the
subject matter hereof, (ii) supersedes any prior or contemporaneous promises,
assurances, guarantees, representations, understandings, conduct, proposals,
conditions, commitments, acts, course of dealing, warranties, interpretations or
terms of any kind, oral or written (hereinafter collectively called the "Prior
Agreements"), and that any such Prior Agreements are of no force or effect
except as expressly set forth herein, and (iii) may not be varied, supplemented
or contradicted by evidence of such Prior Agreements, parol or extrinsic
evidence of any nature, or by evidence of subsequent oral agreements. Any
agreement hereafter made shall be ineffective to modify, supplement or discharge
the terms of this Agreement, in whole or in part, unless such agreement is in
writing and signed by the party against whom enforcement of the modification,
supplement or is sought.
(f) Waiver. No breach of any agreement or provision herein
contained, or of any obligation under this Agreement, may be waived, nor shall
any extension of time for performance of any obligations or acts be deemed an
extension of time for performance of any other obligations or acts contained
herein, except by written instrument signed by the party to be charged or by
such party's agent duly authorized in writing or as otherwise expressly
authorized herein. No waiver of any breach of any agreement or provision herein
contained shall be deemed a waiver of any preceding or succeeding breach
thereof, or a waiver or relinquishment of any other agreement or provision or
right or power herein contained.
(g) Remedies Cumulative. The remedies of each party under this
Agreement are cumulative and shall not exclude any other remedies to which such
party may be lawfully entitled.
(h) Severability. If any term or provision of this Agreement
or the application thereof to any person or circumstance shall, to any extent,
be determined to be invalid, illegal or unenforceable, then the performance of
the offending term or provision (but only to the extent its application is
invalid, illegal or unenforceable) shall be excused as if it had never been
incorporated into this Agreement, and the remaining part of this Agreement
(including the application of the offending term or provision to persons or
circumstances other than those as to which it is held invalid, illegal or
unenforceable) shall not be affected thereby and shall continue in full force
and effect to the fullest extent provided by law.
(i) Effect Upon Successors and Assigns. Any attempt by
Licensee to sell, assign, transfer, or otherwise convey Licensee's rights or
duties under this Agreement, in whole or in part, without the prior written
consent of Licensor, as required by this Agreement, shall be null and void and
shall vest no rights or interests in the purported assignee. Subject to the
foregoing, all of the representations, warranties, covenants, conditions and
provisions of this Agreement shall be binding upon and shall inure to the
benefit of each party and such party's respective heirs, executors,
administrators, legal representatives, successors and/or assigns,
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57
whichever the case may be.
(j) No Third Party Beneficiary. Notwithstanding anything else
herein to the contrary, the parties specifically disavow any desire or intention
to create a "third party" beneficiary contract, and specifically declare that no
person or entity, save and except for the parties or their permitted successors,
shall have any rights hereunder nor any right of enforcement hereof.
(k) Construction. The headings used in this Agreement are for
convenience purposes only, and shall not be used in construing or interpreting
the scope or intent of this Agreement or any provision hereof. References to
this Agreement shall include all amendments or renewals thereof. All
cross-references in this Agreement, unless specifically directed to another
agreement or document, shall be construed only to refer to provisions within
this Agreement, and shall not be construed to be referenced to the overall
transaction or to any other agreement or document. As used in this Agreement,
each gender shall be deemed to include each other gender, including neutral
genders or genders appropriate for entities, if applicable, and the singular
shall be deemed to include the plural, and vice versa, as the context requires.
(l) Notices. All notices, demands, requests, consents,
approvals or other communications (for the purposes of this Paragraph
hereinafter collectively called "Notices"), required or permitted to be given
hereunder, or which are given with respect to this Agreement, shall be in
writing, and shall be given by personal delivery, facsimile or by a nationally
recognized overnight delivery service (which forms of Notice shall be deemed to
have been given upon delivery), or by mailing in the United States mail by
registered or certified mail, return receipt requested, postage prepaid (which
forms of Notice shall be deemed to have been given upon the third (3rd) business
day following the date mailed). Notices shall be addressed to the appropriate
party(s) as set forth on the signature page of this Agreement, or to such other
address as the receiving party shall have specified most recently by like
Notice, with a copy to the other parties hereto. Any Notice given to the estate
of a party shall be sufficient if addressed to the party as provided in this
Paragraph. A copy of any Notice given by Licensor or Licensee under this
Agreement shall be provided to the Non-Managing Member, c/o American Vantage
Company, c/o ▇▇▇ ▇▇▇▇▇, Esq., Singer, ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇.
(Signatures on following page.)
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IN WITNESS WHEREOF, this Agreement is effective as of the date written above.
LICENSOR
Dancing Pigs, Inc., a California corporation
By _________________________________________
▇▇▇▇▇ ▇▇▇▇▇▇▇, President
▇▇▇▇, Inc., a California corporation
By _________________________________________
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, President
LICENSEE
Border Grill Las Vegas, LLC,
a Nevada limited-liability company
By TT&T, LLC,
Its Manager
By _________________________________
▇▇▇▇▇ ▇▇▇▇▇▇▇, Member Manager
By _________________________________
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, Member Manager
By _________________________________
R. ▇▇▇▇▇ ▇▇▇▇▇, Member Manager
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EXHIBIT F
MANAGEMENT AGREEMENT
60
BORDER GRILL LAS VEGAS
MANAGEMENT AGREEMENT
This Agreement is entered into February , 1999, effective as of November 12,
1998, by and between BORDER GRILL LAS VEGAS, LLC, a Nevada limited-liability
company (the "Company") and MUNDO MANAGEMENT GROUP, LLC, a California limited
liability company ("Manager").
RECITALS
A. The Company has been formed to acquire a leasehold interest in
restaurant premises to be located at ▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, in the
Mandalay Bay Hotel and Casino project, Las Vegas, Nevada, and further to
develop, construct, own, and operate in such premises a full service restaurant
serving Mexican cuisine under the concept and name "Border Grill", developed by
▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, or such other name as may be chosen by the
Company (the "Restaurant"). A copy of the operating agreement of the Company
(the "Operating Agreement") has been delivered to Manager and all terms used
herein shall, unless otherwise indicated, be defined as defined in the Operating
Agreement. A copy of the Lease also has been delivered to Manager.
B. The Company desires to retain Manager because of the expertise of
Manager's principals and its affiliates in planning, developing, managing and
operating restaurants and to obtain the services of ▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇ as the executive chefs of the Restaurant, at least until Crossover.
C. Manager desires to provide such services to the Company.
NOW, THEREFORE, in consideration of the mutual covenants and
obligations hereinafter set forth, the parties hereto agree as follows:
1. Term. Subject to Section 5 hereof, the Company hereby engages
Manager and Manager agrees to serve the Company for a term of five (5) years
(the "Term") commencing as of the date hereof. If Crossover has not been
achieved at the end of the Term, the Term shall be extended in one (1) year
increments on the same terms until Crossover is reached. Manager agrees to
provide the services of ▇▇▇▇▇ ▇▇▇▇▇▇▇ and/or ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, as long as they
are alive and able, as executive chefs of the Restaurant at least until
Crossover.
2. Scope. Manager shall prepare budgets which shall be submitted
to the Company (and the Company shall provide them to the Members) for the
services described below. The pre-opening budget has been approved by the
Company and is attached as Exhibit B to the Operating Agreement. A budget for
the initial operation of the Restaurant shall be prepared and submitted fifteen
(15) days prior to opening the Restaurant for business. Annual and semi-annual
budgets shall be prepared and delivered fifteen (15) days prior to January 1 and
July 1, respectively, of each year of operation of
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the Restaurant. Each budget shall reflect in reasonable detail the expenses
anticipated to be incurred by and reimbursed to the Manager or its Affiliates as
described in Sections 3 and 4 below,
A. Prior to Opening, on behalf of and at the expense of the
Company, Manager shall:
(i) obtain all permits, licenses, and other authority
necessary to construct the tenant improvements in and occupy and
operate the Restaurant;
(ii) secure final plans and drawings and a graphics program
for realization of the Restaurant concept;
(iii) purchase and install all furniture, fixtures and
equipment needed to operate the Restaurant;
(iv) plan and promote the opening of the Restaurant;
(v) interview, hire and train all kitchen, dining room, office
and maintenance personnel required, including, without limitation,
chefs, sous-chefs, general managers (one of whom may but need not be
▇▇▇▇▇ ▇▇▇▇▇), assistant managers and dining room/floor managers,
waiters, bussers, receptionists, hosts, bookkeepers, and assistants, as
Manager reasonably determines are necessary or desirable for full
operation of the Restaurant; and
(vi) create the menu and beverage/wine list.
B. After Opening, on behalf of and at the expense of the Company,
Manager shall:
(i) supervise all management, kitchen and food preparation,
dining room, maintenance, and office personnel at the Restaurant;
(ii) monitor, analyze and modify the menu and beverage/wine
list for the Restaurant;
(iii) purchase and stock food and dry goods inventories for
the Restaurant;
(iv) purchase and stock wine and beverage inventories for the
Restaurant;
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(v) manage all of the Restaurant's accounts payable and
receivable, cash, and payroll and tax functions;
(vi) prepare and transmit all financial reports, tax and lease
payments and other documents and materials required by and in
accordance with the applicable terms and conditions of the Lease and
the Operating Agreement, by the operation of the Restaurant and
applicable law, which financial reports to the Company shall reflect in
reasonable detail the expenses incurred by and reimbursed to the
Manager and its Affiliates as described in Sections 3 and 4 below; and
(vii) maintain a public relations effort for the Restaurant.
C. Insurance. Obtain in the Company's name, with its Members and
Manager insured as additional insureds (or in the Manager's name with
the Company and its Members as additional insureds), all liability,
property and other insurance coverage and in amounts determined by
Manager to be reasonable and appropriate to insure against losses
arising from the Company's business and the operation of the
Restaurant. In addition, until Crossover has occurred, "key person"
insurance coverage shall be maintained for the benefit of the Company
at the expense of the Company, on ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇,
if insurable, in an amount equivalent to the Unrecovered Capital from
time to time.
3. Personnel. With the exception of ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇
▇▇▇▇▇▇▇, Members of Manager who shall not be employees of the Restaurant or the
Company, all personnel, including but not limited to R. ▇▇▇▇▇ ▇▇▇▇▇, a member of
Manager, outside consultants, lawyers, architects, and contractors, general
managers, assistant managers, dining room/floor managers, chefs and waiters,
bussers, receptionists, hosts, bookkeepers and assistants, shall be employed on
behalf of the Company, either by Manager on behalf of the Company or as direct
employees of the Company itself, and the costs thereof shall be considered
Restaurant Expenses (as defined below). If Manager determines that it is in the
best interest of the Company, Manager may contract with a third party, including
an Affiliate, for the performance of the "back-office" financial management,
accounting, personnel and public relations services and to provide equipment
required by the Restaurant. The cost of such services (including accounting
set-up fees) shall be fair and reasonable in light of the services provided and
the equipment and personnel costs saved for the Restaurant, and shall not exceed
the cost for comparable services or for the use of comparable equipment which
would be customarily charged in an arm's-length transaction. Attached as Exhibit
A is a description of the procedures to be used by Manager in allocating and
reimbursing expenses incurred by Manager or an Affiliate, including the expenses
described in Sections 4C and D below. Any change in such allocation procedures
must be approved by the Company and its Members.
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4. Compensation. The following compensation shall be paid by the
Company to Manager. Attached as Exhibit A is a description of the procedures to
be used by Manager in allocating and reimbursing expenses incurred by Manager or
an Affiliate, including the expenses described in Sections 4C and D below. Any
change in such allocation procedures must be approved by the Company and its
Members.
A. Opening Fee. The Company shall pay to Manager a fee of $60,000,
in consideration for Manager's or its Affiliate's services in connection with
opening the Restaurant, including planning the Restaurant and the kitchen,
supervising the construction, fixturization and decoration of the Restaurant,
and other activities relating to the establishment of the Restaurant, including
the services described in Section 2A above (the "Opening Fee"). The Opening Fee
shall be in addition to any reimbursement due Manager for out-of-pocket expenses
for consultants, professionals, etc., incurred in connection with these or other
services.
B. Management Fee. Commencing on the date the Restaurant opens for
business, the Company shall pay Manager for the services set forth in Section 2B
above, an annual fee (the "Management Fee") equal to five percent (5%) of the
"Gross Revenues" from operations of the Company during each such year. The
Management Fee shall be paid on a monthly basis in arrears. For purposes of
calculating the Management Fee, "Gross Revenues" shall mean the actual receipts,
including room charges, of the Company, less all refunds or credits for returns
or rejection of food or services; provided, however, after Crossover, "Gross
Revenues" shall include the amount of the full retail price of all complimentary
or discounted meals or services, less all discounts on sales to employees and
complimentary meals served to employees or management personnel. Upon renewal
and after the fifth, tenth, fifteenth, etc., anniversary of this Agreement, if
Crossover has been achieved (and if not, at such time as Crossover is achieved),
during the term of this Agreement, the Management Fee may be increased as
provided in Section 6.
C. Restaurant Expenses: Fringe Benefits. The rent, Lease expenses,
taxes, payroll, food and liquor expenses, expenses for utilities, contract
payments, legal and accounting expenses and other charges attributable to the
operation of the Restaurant, together with all charges, expenses and costs of
operating the Company as described in the Operating Agreement shall be
"Restaurant Expenses" and shall be payable by the Company separate and apart
from the Opening Fee, and the Management Fee provided for in this Section. In
addition, subject to the provisions in Section 4 above, Manager shall be
reimbursed by the Company for fringe benefits (including fringe benefits for
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇), which still also constitute "Restaurant
Expenses" as such benefits are specifically described in Exhibit A.
D. Expenses. Subject to the provisions in Section 4 above, the
Company shall pay or reimburse Manager for all the reasonable and necessary
out-of-pocket business expenses incurred on behalf of the Restaurant (both
before and after opening) and for reasonable restaurant and travel expenses
related to the promotion of the
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Restaurant, as specifically described in Exhibit A, upon presentation of expense
statements or vouchers and such other supporting information as the Company may
from time to time reasonably request.
E. Company Distributions. No distributions by the Company to the
Managing Member of the Company in its capacity as a member of the Company shall
in any way reduce the compensation or reimbursements to which Manager is
entitled under this Agreement in its capacity as Manager of the Restaurant.
5. Termination.
A. Without Cause. The Company may not terminate this Agreement
without cause. Manager may not terminate this Agreement prior to Crossover.
B. With Cause.
(i) Reason. This Agreement may be terminated by the Company at
any time after Crossover for "Cause", which for purposes of this Agreement shall
mean only the following: (a) Manager's willful breach of or habitual neglect of,
or willful misconduct in the performance of Manager's material duties and
obligations as set forth in this Agreement, but only if such willful breach,
habitual neglect or willful misconduct continues, uncured, for a period of ten
(10) business days after receipt of notice thereof from the Company to Manager
or, (b) Manager's defrauding of the Company.
(ii) Effective Date. If Manager is terminated for Cause as
set forth above, such termination shall be effective thirty (30) days after
written notice thereof from the Company pursuant to Section 11 hereof.
(iii) Arbitration. If Manager is terminated by the Company for
Cause upon the consent of the Non-managing Member of the Company, then Manager
shall have the right, but not the obligation, to elect to have the propriety of
such termination determined by binding arbitration by delivering written notice
of such election to the Company in accordance with Section 11 hereof. Upon
receipt of notice of such election, the Company and Manager shall appoint an
arbitrator that is mutually acceptable. If the Company and Manager are unable to
agree upon an arbitrator within thirty (30) days, either party may request such
appointment by the American Arbitration Association or JAMS-Endispute. The
hearing of any such controversy or claim by the arbitrator shall be held within
a period of thirty (30) days (or such longer period as may be reasonable in
light of the circumstances) after the appointment of the arbitrator. If an
arbitrator shall die, become disqualified or incapacitated, or shall fail or
refuse to act, before such matter shall have been determined, then, in place of
such arbitrator, an arbitrator shall promptly be appointed in the same manner as
set forth herein. All arbitrations shall be determined in the Los Angeles or Las
Vegas area, at the option of the Company as determined by its Managing Member,
and shall be governed (except for the method of the selection of the
arbitrators) in accordance with the Rules of the American
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Arbitration Association or JAMS-Endispute (or any successor thereto) and the
judgment or the award rendered therein may be entered in any court having
jurisdiction. If the arbitrator determines that Cause was not present, the
Company shall bear the entire cost of the arbitration and the arbitration award
shall provide for the immediate reinstatement of Manager and payment to Manager
of all amounts due to Manager under this Agreement up to the date of Manager's
reinstatement, plus interest thereon from the date due until the date paid, at
the rate of 10%.
(iv) In the event Manager is terminated for Cause or Manager
terminates this Agreement prior to Crossover in breach of its obligation not to
terminate prior to Crossover, neither Manager nor any Affiliate of Manager nor
▇▇▇▇▇ ▇▇▇▇▇▇▇ or ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ nor an Affiliate of either of theirs shall
conduct any business in Mandalay Bay Hotel and Casino for a period of one (1)
year or until Crossover is achieved, whichever occurs first.
6. Renewal. Upon expiration of the Term, this Agreement shall be
automatically renewed for successive one-year terms, on the same terms and
conditions, except that after Crossover, either party may terminate the
Agreement upon four (4) months prior notice. On the fifth, tenth, fifteenth,
etc., anniversaries of this Agreement if Crossover has been achieved (and if
not, at such time as Crossover is achieved), during the term of this Agreement,
the Management Fee may be increased to reflect the success of the Restaurant and
the value of Manager's services, reputation and contribution to the Restaurant,
to a fee which cannot exceed the lesser of (a) the then-customary restaurant
management fee in the restaurant industry as determined by an independent
restaurant expert ("Expert"), or (b) an increase by an additional one percent
(1%) of Gross Revenues (i.e., the first increase could not be more than an
increase from 5% to 6% of Gross Revenues) or as approved by the consent of the
Non-managing Member of the Company. The Expert (a) must be acceptable to the
Company with the approval of the Non-managing Member, (b) have experience in
appraising management fees paid for restaurants located in casinos of similar
status as Mandalay Bay, and (c) have no prior course of dealing with either the
Manager or the Non-managing Member or their Affiliates. The Company will bear
all costs and expenses of any determination by an Expert under this Section.
7. Assignment; Transfer. Manager shall not assign, delegate or
otherwise transfer in whole or in part its rights or obligations under this
Agreement, other than to an Affiliate controlled by ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ or ▇▇▇▇▇
▇▇▇▇▇▇▇ or both of them, prior to Crossover. After occurrence of Crossover,
Manager shall be permitted to assign or otherwise transfer its rights hereunder
to a qualified manager or management company experienced in the management of
similar quality restaurant facilities and qualified to direct and manage the
Restaurant.
8. Binding Agreement. This Agreement shall extend to and be binding
upon Manager and the Company and their respective successors and assigns, except
as provided herein. The Company and Manager shall cooperate in good faith with
each other to maximize the success, gross sales and profitability of the
Restaurant.
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9. Indemnification. The Company shall defend, indemnify and hold
Manager harmless from and against any and all losses, liabilities, damages,
expenses (including reasonable attorney's fees and costs), actions, causes of
actions or proceedings arising directly or indirectly from Manager's performance
of this Agreement, except to the extent any loss, liability, damage and/or
expense arises from the gross negligence or willful misconduct of Manager.
Manager may retain its own counsel to defend it in such actions at the sole cost
and expense of the Company, provided that the Manager shall reimburse the
Company for such defense cost and expense, to the extent the Manager is finally
determined in such action(s) to have been grossly negligent or found to have
committed willful misconduct. The Company shall add Manager and the Company's
Members as an additional insured on all property, liability and risk policies of
insurance which the Company obtains in connection with its operation or
operation of the Restaurant. This indemnification shall be in addition to any
right of exculpation or indemnification to which Manager or its affiliate may be
entitled under the Operating Agreement in its capacity as Managing Member of the
Company and shall survive the expiration or termination of the Term of this
Agreement.
10. Attorneys' Fees and Costs. If any action at law or in equity is
necessary to enforce or interpret the terms of this Agreement, the prevailing
party shall be entitled to reasonable attorneys' fees, costs, and necessary
disbursements, in addition to any other relief to which he may be entitled.
11. Notices. Any notice required to be given hereunder shall be deemed
sufficiently given when personally delivered or sent by registered or certified
mail:
(a) To the Company:
Border Grill Las Vegas, LLC
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
With a copy to its Non-managing Member:
c/o American Vantage Companies, Inc.
c/o ▇▇▇ ▇. ▇▇▇▇▇, Esq.
Singer, ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(b) To Manager:
Mundo Management Group, LLC
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
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or at such other address as either party may designate in writing to the other.
12. Amendments; Interpretation. This Agreement contains the entire
agreement and, except as expressly referred to herein, the parties hereto have
made no agreements, representations or warranties relating to the subject matter
of this Agreement. No modification of this Agreement shall be valid unless made
in writing and signed by the parties hereto, and any material Amendment,
modification or revision shall not be effective, unless approved by the
Non-managing Member. The waiver or breach of any term or condition of this
Agreement shall not be deemed to constitute the waiver of any other breach of
the same or any other term or condition. This Agreement shall be construed in
accordance with and governed by the laws of the State of California.
13. Definitions. All terms not otherwise defined herein shall have the
same meaning as set forth in the Operating Agreement.
(Signatures on following page.)
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IN WITNESS WHEREOF, the Company and Manager have each caused this
Agreement to be executed by its duly authorized representative, as of the date
written above.
"Manager" "Company"
Mundo Management Group, LLC, Border Grill Las Vegas, LLC,
a California limited liability company a Nevada limited-liability company
By TT&T, LLC,
a Nevada limited-liability company,
By: __________________________________ Its Managing Member
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, Member
By: _________________________________
By: __________________________________ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, Member Manager
▇▇▇▇▇ ▇▇▇▇▇▇▇, Member
By: _________________________________
By: __________________________________ ▇▇▇▇▇ ▇▇▇▇▇▇▇, Member Manager
R. ▇▇▇▇▇ ▇▇▇▇▇, Member
By: _________________________________
R. ▇▇▇▇▇ ▇▇▇▇▇, Member Manager
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EXHIBIT A
DESCRIPTION OF REIMBURSEMENTS TO MANAGER AND AFFILIATES
Manager will be the restaurant manager and as such, certain expenses described
in this Exhibit A and incurred in managing the Restaurant will be passed through
to the Restaurant, other than salaries for ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇
(the "Owners"). Manager will also perform "entity" management functions for the
Manager of the Company, such as overseeing and assisting in preparation of tax
returns, investor communications, financial statements and other obligations of
the Company as provided in the Operating Agreement.
Expenses that are incurred solely for the benefit of the Restaurant will be paid
by the Restaurant and all direct employees of the Restaurant will be paid by the
Restaurant. Manager will maintain a principal business office, initially in
Santa Monica, California, which will include certain principal business office
staff, expenses, etc. Reasonable business expenses and salaries (other than for
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇) may be paid by Manager but then reimbursed
to Manager by the Restaurant to the extent described below. These reimbursements
are in addition to any management fee paid to Manager by the Restaurant.
Manager shall bear its own entity expenses, such as tax return preparation,
corporate or entity maintenance expenses, legal and accounting fees solely for
the benefit of Manager, and any Manager indebtedness.
The following categories of expenses would be allocated as follows.
1. Employee Salaries (including any bonuses) for Director of
Operations, Corporate Chef, Accounting personnel, Marketing
Manager, Catering Manager, MIS, administrative assistant(s)
for the Owners, and after Crossover, any additional principal
business office staff, i.e., risk manager, employee relations,
supporting clerical staff, etc., will be split equally among
the restaurants, unless an unusual amount of time is spent on
one restaurant over another; except Director of Operations and
Accounting Manager salaries will be split based on actual time
spent on each restaurant. The Director of Operations and
Accounting Manager will complete a memo periodically and
submit them to an Owner for approval of the allocation of time
and salaries. When salaries for other employees are allocated
unequally, a written memo will be approved by an Owner or the
Director of Operations or Accounting Manager, setting forth
the reason for such unequal allocation.
2. Employee benefits and burdens and all employee-related
expenses for the employees described in the foregoing
paragraph shall be allocated in the same manner as salaries.
Such benefits and burdens shall be limited to the following:
a. Health insurance.
b. Long-term disability insurance for executive-level
employees.
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c. Reasonable and actual business-related expenses.
d. Life insurance for executive-level employees. e.
Payroll tax costs (taxes, social security, SDI,
unemployment insurance, etc.).
f. Worker's compensation insurance.
g. Employer pension plan contribution, if any.
3. Promotional and Charity Events - to be determined on a
case-by-case basis. (For example: donation of food for
promotional event will be split evenly among all restaurants
if it will benefit all restaurants.)
4. Advertising - to be determined by Director of Operations or
Accounting Manager invoice by invoice, as to which restaurants
will directly benefit.
5. Direct Mail Marketing, Website Expense, Data Processing Fees,
Dues and Publications, Media Consultant-split evenly by all
restaurants.
6. Overhead expenses (e.g., office rent, telephone, utilities,
etc.) of principal business office staff and Owners - split
evenly by all restaurants, unless directly attributable to one
or more, but less than all, restaurants. Manager estimates
that not more than $900/month would be allocated to the
Restaurant in the first year.
7. Travel expenses of principal business office staff and Owners
will be allocated to the restaurant(s) receiving the benefit.
8. Research and development costs and R&D outside meals will be
allocated based on location being researched. Research for new
restaurant locations will be at the cost of Manager or the
Owners, and not of the Restaurant.
9. Owners' benefits and burdens listed under item 2 above, will
be allocated among all restaurants equally. In addition,
Owners will have an expense allowance to cover dining,
entertainment, research and development, promotion, etc.,
which need not be directly related to any restaurant. The
amount of such expense allocated to the Restaurant shall not
exceed $15,000 in the first year, which maximum may increase
by CPI annually. And, the Owners and principal business office
staff may have a cellular phone allowance. The amount of such
allowance which is allocated to the Restaurant shall not
exceed $3,500 in the first year, with that maximum increasing
by CPI annually.
10. Any blanket property or liability insurance shall be allocated
equally among the restaurants benefited, unless the
independent insurance broker advises that another method is
more equitable, in which case the more equitable method shall
be used.
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EXHIBIT G
LEASE