EXHIBIT 10.24
OPERATING AGREEMENT
FOR
CHICAGO - THE GRILL ON THE ALLEY LLC,
an Illinois limited liability company
THIS OPERATING AGREEMENT (the "Agreement") is made as of February 1, 1999
by and between Grill Concepts, Inc., a Delaware corporation (sometimes herein
called "GCI"), and The Michigan Avenue Group, a general partnership (sometimes
herein called "MAG"), with reference to the following facts:
A. GCI, directly or through one or more of its subsidiaries, Grill Concepts,
Inc., a California corporation ("GCICA"), and The Grill on the Alley, Inc., a
California corporation ("GA"), operates The Grill on the Alley Restaurant in
Beverly Hills, California and owns the uniform restaurant operating system
necessary for the establishment and operation of distinctive restaurants with
distinctive features, equipment, equipment designs, food formulas, inventory,
manuals, training systems and accounting systems (the "Operating System") which
restaurant and operating systems are identified by the service and trademarks
"The Grill on the Alley" and related words and symbols (the "Existing Marks")
identifying these restaurants and their goods and services. The term "Marks"
shall include the Existing Marks and such other tradenames, service marks, logo
types, trade symbols, emblems, signs, slogans, insignias, trademarks, designs,
patents and copyrights as GCI now owns or may hereafter acquire, develop or
adopt or designate for use in connection with the Operating System.
B. MAG and GCI have formed Chicago - The Grill on the Alley LLC (the "Company')
to own and operate a "Grill on the Alley" restaurant ("Restaurant") on the
Premises in the hotel in Chicago, Illinois commonly known as The Westin Michigan
Avenue pursuant to the lease agreement dated February 16, 1999 between Company
and The Westin Chicago Limited Partnership (the "Lease"). The parties desire to
adopt and approve an operating agreement for the Company to own and operate the
Restaurant.
NOW, THEREFORE, the parties (hereinafter sometimes collectively referred to
as the "Members" or individually as the "Member") by this Agreement set forth
the operating agreement for the Company under the laws of the State of Illinois
upon the terms and subject to the conditions of this Agreement.
ARTICLE 1.
DEFINITIONS
When used in this Agreement, the following terms shall have the meanings
set forth below (all terms used in this Agreement that are not defined in this
Article I shall have the meanings set forth elsewhere in this Agreement):
1.1 "Act" means the Illinois Limited Liability Company Act, Section 805
Illinois Compiled Statutes, Act 180, as the same may be amended from time to
time.
1.2 "Adjusted Capital Account Deficit" means, with respect to any Member,
the deficit balance, if any, in such Member's Capital Account as of the end of
the relevant fiscal year, after giving effect to the following adjustments:
1.2(a) Credit to such Capital Account any amounts which such Member is
obligated to restore pursuant to this Agreement or is deemed to be obligated to
restore pursuant to Regulations Section 1.704-l(b)(2)(ii)(C) after taking into
account any changes during such year in Company minimum gain and in minimum gain
attributable to any Company nonrecourse debt under Regulations Section 1.704-
2(d)(2) and (3); and
1.2(b) Debit to such Capital Account the items described in Sections 1.704-
l(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-l(b)(2)(ii)(d) of the Regulations
and shall be interpreted consistently therewith.
1.3 "Affiliate" means any individual, partnership, corporation, trust or
other entity or association, directly or indirectly controlled by, or under
common control with the Member. The term "control," as used in the immediately
preceding sentence, means, with respect to a corporation or limited liability
company the right to exercise, directly or indirectly, more than fifty percent
(50%) of the voting rights attributable to the controlled corporation or limited
liability company, and, with respect to any individual, partnership, trust,
other entity or association, the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of the
controlled entity.
1.4 "Agreement" means this Operating Agreement, as originally executed and
as amended from time to time, which shall constitute "regulations" for purposes
of the Act.
1 .5 "Articles" means the Articles of Organization for the Company
originally filed with the Illinois Secretary of State and as amended from time
to time.
1.6 "Assignee" means a person who has acquired a Distributional Interest
in the Company but who has not been admitted as a Substituted Member.
1.7 "Bankruptcy" means: (a) the filing of an application by a Member for,
or his or her consent to, the appointment of a trustee, receiver, or custodian
of his or her other assets; (b) the entry of an order for relief with respect to
a Member in proceedings under the United States Bankruptcy Code, as amended or
superseded from time to time; (c) the making by a Member of a general assignment
for the benefit of creditors; (d) the entry of an order, judgment, or decree by
any court of competent jurisdiction appointing a trustee, receiver, or custodian
of the assets of a Member unless the proceedings and the person appointed are
dismissed within ninety (90) days; or (e) the failure by a Member generally to
pay his or her debts as the debts become due within the meaning of Section
303(h)(1) of the United States Bankruptcy Code, as determined by the Bankruptcy
Court, or the admission in writing of his or her inability to pay his or her
debts as they become due.
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1.8 "Capital Account" means with respect to any Member the capital account
which the Company establishes and maintains for such Member pursuant to Section
3.4.
1.9 "Capital Budgets" are the annual capital expense budgets described in
Section 9.12.
1.10 "Capital Contributions" means the total value of cash and fair market
value of property (including promissory notes) contributed and/or services
rendered or to be rendered to the Company by Members.
I.11 "Capital Expenditure Reserve" means amounts reserved for capital
expenditures as set forth in the annual Capital Budgets, approved as set forth
in Section 9.12, less aggregate actual capital expenditures utilizing amounts so
reserved.
1.12 "Code" means the Internal Revenue Code of 1986, as amended from time
to time, the provisions of succeeding law, and to the extent applicable, the
Regulations.
1.13 "Company" means CHICAGO - THE GRILL ON THE ALLEY LLC.
1.14 "Company Minimum Gain" shall have the meaning ascribed to the term
"Partnership Minimum Gain" in Regulations Section 1.704-2(d)(1).
1.15 "Construction Budget" is described in Section 9.11.
1.16 "Converted Capital Contribution" means, for each Member, the principal
balance of that portion of the MAG Loan from time to time converted into a
Membership Interest as provided for in Section 3.2 of this Agreement.
1.17 "Discretionary Additional Capital Contribution" is defined in Section
3.3.
1.18 "Dissociation Event" means with respect to any Member one or more of
the following: the death, insanity, bankruptcy, dissolution, withdrawal,
retirement, resignation or
expulsion as a Member; transfer of all or substantially all of his or its
Distributional Interest; or occurrence of any other event which terminates the
continued membership of any Member.
1.19 "Distributable Cash" means the amount of cash which the Manager deems
available for distribution to the Members, taking into account all Company
debts, liabilities and obligations of the Company then due and amounts which the
Manager deems necessary to place into reserves for customary and usual claims
with respect to the Company's business; provided, however, that reserves for
capital expenditures shall be established in the amount of the Capital
Expenditure Reserve, but reserves for capital expenditures in excess thereof may
be established only with the consent of a Supermajority Interest. Payment of the
Management Fee pursuant to the Management Agreement is an expense of the Company
and is not a Distribution of Distributable Cash. Payment of principal and
interest upon the MAG Loan, even if payable pari passu with Distributions, is
payment of a debt of the Company, or payment of interest on a debt of the
Company, and is not a Distribution of Distributable Cash.
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1.20 "Distribution" means any money or other property transferred without
consideration to Members with respect to their Membership Interests in the
Company, but shall not include any payments to the Manager pursuant to Section 5
or payments upon the MAG Loan.
1.21 "Distributional Interest" means a Member's or Distributional Interest
Owner's share of one or more of the Company's taxable income, taxable losses,
and distributions of the Company's assets pursuant to this Agreement and the
Act, but shall not include any other rights of a Member, including, without
limitation, the right to vote or participate in the management, or any right to
information concerning the business and affairs of Company.
1.22 "Distributional Interest Owner" means the owner of a Distributional
Interest who is not a Member.
1.23 "Equipment Loan" means money borrowed by Company prior to the date the
Restaurant opens for business for the purpose of acquiring equipment installed
in the Restaurant prior to the date it opens for business.
1.24 "Excluded Loans" means the Equipment Loan together with any additional
loans to the Company for the purpose of acquiring additional equipment for use
in the Restaurant after the Restaurant opens for business, if such additional
loans are approved by a Super majority Interest.
1.25 "Existing Marks" is defined in Recital A.
1.26 "Fiscal Year" means the Company's fiscal year, which shall be the
calendar year.
1.27 "Force Majeure" is defined in Section 6.14(c).
1.28 "Former Member" shall have the meaning ascribed to it in Section 8.2.
1.29 "Former Member's Interest" shall have the meaning ascribed to it in
Section 8.2.
1.30 "GCI" means Grill Concepts, Inc., a Delaware corporation.
I.31 "GCICA" means Grill Concepts, Inc., a California corporation.
1.32 "GCI Warrants" means warrants to purchase seven hundred eight thousand
three hundred thirty-three (708,333) shares of common stock of GCI (plus up to
an additional seventy thousand eight hundred thirty-three (70,833) shares under
certain circumstances) issued to the Non-Manager-Members in connection with the
formation of the Company and the making of the MAG Loan, the form of which is
attached hereto as Exhibit D.
1.33 "Gross Asset Value" means, with respect to any asset of the Company,
the asset's adjusted basis for federal income tax purposes; provided, however,
that (i) the Gross Asset Value of any asset contributed by a Member to the
Company or distributed to a Member by the Company shall be the gross fair market
value of such asset (without taking into account Section 7701 (g) of the Code),
as reasonably determined by the contributing or distributee Member, as
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the case may be, and the Company; (ii) the Gross Asset Values of all Company
assets shall be adjusted to equal their respective gross fair market values
(without taking into account Section 7701(g) of the Code), upon the termination
of the Company for federal income tax purposes pursuant to Section 708(b)(1)(B)
of the Code; and (iii) the Gross Asset Values of all Company assets may be
adjusted in the sole and absolute discretion of the Manager to equal their
respective gross fair market values (taking into account Section 7701 (g) of the
Code), as reasonably determined by the Member, as of (A) the date of the
acquisition of an additional interest in the Company by any new or existing
Member in exchange for more than a de minimis contribution to the capital of the
Company or (B) upon the distribution by the Company to a retiring or continuing
Member of more than a de minimis amount of Company property including money in
reduction of such Member's interest in the Company.
1.34 "Guaranty" means the guaranty of GCI provided for in Section 3.2, in
the form attached hereto as Exhibit B.
1.35 "Initial Capital Contribution" means the Capital Contributions
provided for in Section 3.1 of this Agreement.
1.36 "Landlord" means The Westin Chicago Limited Partnership as the
landlord under the Lease.
1.37 "Lease" is defined in Recital B.
1.38 "License Rights" is defined in Section 3.1(a) of this Agreement.
1.39 "Liquidation" means in respect to the Company the earlier of the date
upon which the Company is terminated under Section 708(b)(1) of the Code or the
date upon which the Company ceases to be a going concern (even though it may
exist for purposes of winding up its affairs, paying its debts and distributing
any remaining balance to its Members), and in respect to a Member where the
Company is not in Liquidation means the date upon which occurs the termination
of the Member's entire interest in the Company by means of a Distribution or the
making of the last of a series of Distributions (in one or more years) to the
Member by the Company.
1.40 "MAG Loan" means the obligation of Company to Members other than the
Manager pursuant to Section 3.2 of this Agreement.
1.41 "MAG Note" shall mean the promissory note evidencing the MAG Loan, the
form of which is attached hereto as Exhibit A.
1.42 "Majority Interest" means Members holding more than fifty percent
(50%) of the Percentage Interests.
1.43 "Management Agreement"means the agreement attached hereto as Exhibit
E.
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1.44 "Manager" means Grill Concepts, Inc. or any successor Manager
designated herein elected pursuant to Section 5.2. Each Manager shall serve
until his, her or its successor has been elected and qualified.
1.45 "Manager's Adjusted Additional Capital Contribution" means the excess
of the Mandatory Additional Capital Contribution and Discretionary Additional
Capital Contribution of Manager over Distributions to Manager under Sections
6.12(b)(iii) and 6.12(b)(iv) of this Agreement.
1.46 "Mandatory Additional Capital Contribution" means the required Capital
Contributions of GCI as set forth in Section 3.3.
1.47 "Marks" is defined in Recital A.
1.48 "Member" means each Person who (a) is an initial signatory to this
Agreement, has been admitted to the Company as a Member in accordance with the
Articles or this Agreement or an assignee who has become a Member in accordance
with Article 7, and (b) has not resigned, withdrawn, been expelled or, if other
than an individual, dissolved.
1.49 "Member Nonrecourse Debt" shall have the meaning ascribed to the term
"partner nonrecourse debt" in Regulations Section 1.704-2(b)(4).
1.50 "Member Nonrecourse Debt Minimum Gain" means an amount with respect to
each Member Nonrecourse Debt, equal to the Company Minimum Gain that would
result if such Member Nonrecourse Debt were treated as a Nonrecourse Liability,
determined in accordance with Regulations Section 1.704-2(i)(2).
1.51 "Member Nonrecourse Deductions" shall have the meaning ascribed to the
term "partner nonrecourse deductions" in Regulations Section 1.704-2(i).
1.52 "Membership Interest" means a Member's entire interest in the Company
including the Member's Distributional 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.
1.53 "Non-Manager-Members" means the Members other than Manager.
1.54 "Non-Manager-Member's Adjusted Capital Contributions" means, for
each Member other than Manager, the excess of (1) such Member's Initial Capital
Contribution to the Company plus such Member's Converted Capital Contribution,
over (2) Distributions to such Member under Section 6.12(b)(ii) of this
Agreement.
1.55 "Nonrecourse Debt" shall have the meaning set forth in Regulations
Section 1.704-2(b)(3)
1.56 "Nonrecourse Deductions" shall have the meaning, and the amount
thereof shall be, as set forth in Regulations Section 1.704-2(c).
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1.57 "Nonrecourse Liability" shall have the meaning set forth in
Regulations Section 1.704-2(b)(3).
1.58 "Operating System" is defined in Recital A.
1.59 "Payment Deficit" is defined in Section 6.14(a).
1.60 "Permitted Payment Deficit" is defined in Section 6.14(b).
1.61 "Percentage Interest" means the percentage interest of a Member in the
Company as set forth opposite the name of such Member under the column "Member's
Percentage Interest" on the Schedule, as adjusted from time to time.
1.62 "Person" means an individual, general partnership, limited
partnership, limited liability company, corporation, trust, estate, real estate
investment trust association or any other entity.
1.63 "Preferred Return" means, for each Member other than Manager, a
cumulative return of eight percent (8%) annually, not compounded, from the date
of such a Member's Initial Capital Contribution and Converted Capital
Contribution, respectively, to and including January 1, 2000; and, from and
after January 1, 2000, a cumulative return compounded quarterly of eight percent
(8%) per annum, on the unpaid balance of such Member's Non-Manager-Member's
Adjusted Capital Contribution.
1.64 "Premises" means the property described in the Lease.
1.65 "Pro Rata Share" shall have the meaning ascribed to it in Section
7.8(b).
1.66 "Profits" and "Losses" means for each fiscal year or other period, an
amount equal to the Company's taxable income or loss, as the case may be, for
such year or period, determined in accordance with Section 703(a) of the Code
(for this purpose, all items of income, gain, loss and deduction required to be
stated separately pursuant to Section 703(a)(1) of the Code shall be included in
taxable income or loss); provided, however, for purposes of computing such
taxable income or loss: (i) any deductions for depreciation, cost recovery or
amortization attributable to any assets of the Company shall be determined by
reference to their Gross Asset Value, except that if the Gross Asset Value of an
asset different from its adjusted tax basis for federal income tax purposes at
any time during such year or other period, the deductions for depreciation, cost
recovery or amortization attributable to such asset from and after the date
during such year or period in which such difference first occurs shall bear the
same ratio to the Gross Asset Value as of such date as the federal income tax
depreciation, amortization or other cost recovery deduction for such year or
other period from and after such date bears to the adjusted tax basis as of such
date; (ii) any gain or loss attributable to the taxable disposition of any
property shall be determined by the Company as if the adjusted tax basis of such
property as of such date of disposition was such Gross Asset Value reduced by
all amortization, depreciation and cost recovery deductions (determined in
accordance with clause (i) above) which are attributable to said property; (iii)
the computation of all items of income, gain, loss and deduction shall be made
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without regard to any basis adjustment under Section 743 of the Code, which may
be made by the Company; (iv) any receipts of the Company that are exempt from
federal income tax and are not otherwise included in taxable income or loss
shall be added to such taxable income or loss; and (v) any expenditures of the
Company described in Section 705(a)(2)(B) of the Code or treated as expenditures
described in Section 705(a)(2)(B) of the Code pursuant to Regulations Section
1.704-l(b) shall be subtracted from such taxable income or loss.
1.67 "Regulations" means, unless the context clearly indicates otherwise,
the regulations currently in force as final or temporary that have been issued
by the U.S. Department of Treasury pursuant to its authority under the Code, and
the corresponding provisions of any successor regulations.
1.68 "Remaining Members" shall have the meaning ascribed to it in Section
8.1.
1.69 "Restaurant" is defined in Recital B.
1.70 "Schedule" means the attachment hereto identifying the Members, their
residential or business addresses, their Percentage Interests, and the Capital
Contributions.
1.71 "Scheduled Repayment" means the aggregate combined scheduled repayment
(i) of principal and interest upon the MAG Loan, (ii) Distributions effecting
payment of Preferred Return attributable to the Initial Capital Contribution of
Non-Manager-Member and attributable to the Converted Capital Contribution of
Members, and (ii) Distributions effecting payment of the Initial Capital
Contribution of Non-Manager-Members and of the Converted Capital Contribution of
Members, all as set forth in Exhibit D attached hereto.
1.72 "Supermajority Interest" means the vote of (i) Members holding more
than eighty percent (80%) of the Percentage Interest, and (ii) Members holding a
Majority Interest of Non-Manager-Members.
ARTICLE 2.
ORGANIZATIONAL MATTERS
2.1 Formation. Pursuant to the Act, the Members have formed an Illinois
limited liability company under the laws of the State of Illinois by filing the
Articles with the Illinois Secretary of State. The rights and liabilities of the
Members shall be determined pursuant to the Act and this Agreement. To the
extent that the rights or obligations of any Member are different by reason of
any provision of this Agreement than they would be in the absence of such
provision, this Agreement shall, to the extent permitted by the Act, control.
2.2 Name. The name of the Company shall be "CHICAGO - THE GRILL ON THE
ALLEY LLC." The business of the Company may be conducted under the name "The
Grill on the Alley". The Manager shall file or cause to be filed any assumed or
fictitious name certificates and similar filings, and any amendments thereto,
that the Manager considers appropriate or advisable.
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2.3 Term. The term of this Agreement shall be co-terminus with the period
of duration of the Company provided in the Articles, unless extended or sooner
terminated as hereinafter provided.
2.4 Office and Agent. The Company shall continuously maintain a registered
office and registered agent in the State of Illinois as required by the Act. The
principal office of the Company shall be as the Manager may determine. The
Company also may have such offices, anywhere within and without the State of
Illinois, as the Manager from time to time may determine, or the business of the
Company may require. The registered agent shall be as stated in the Articles or
as otherwise determined by the Manager.
2.5 Purposes of Company. The purpose of the Company is to engage in any
lawful activity for which a limited liability company may be organized under the
Act. Notwithstanding the foregoing, the Company shall not engage in any business
other than the business of owning and operating Chicago - The Grill on the Alley
restaurant located in the Chicago Westin Hotel, Chicago, Illinois without the
consent of all Members.
ARTICLE 3.
CAPITAL CONTRIBUTIONS
3.1 Initial Capital Contributions. Subject to Section 9.11, the Members, as
their Initial Capital Contributions, shall contribute to the capital of the
Company the following:
3.1(a) Manager shall contribute, in cash, am amount equal to all formation
and closing costs in respect of the formation of the Company, the negotiation,
establishment and implementation of the MAG Loan and the Lease, including but
not limited to attorneys, accountants and other fees associated therewith, all
of which shall be paid by the Company. In addition, the Manager is the owner of
all right, title and interest, together with all goodwill connected therewith,
in and to the Operating System, "Existing Marks" and Marks (collectively, the
"License Rights") and shall grant to the Company, during the term of this
Agreement, the exclusive rights to use the License Rights at the location
covered by the Lease pursuant to, and subject to termination as provided by, the
Management Agreement. The Manager shall receive no credit to its Capital Account
for contribution of cash pursuant to this Section 3.1 (a) nor for contribution
of the License Rights, nor shall the Manager receive any compensation for such
contribution except as set forth herein.
3.1 (b) MAG shall contribute, in cash, the sum of One Thousand Dollars ($
1,000).
3.2 MAG Loan. Subject to Section 9.11, MAG shall lend to the Company the
sum of One Million Six Hundred Ninety-Nine Thousand Dollars ($1,699,000),
bearing interest at the rate of eight percent (8%) per annum, payable as set
forth in the form of the MAG Note attached hereto as Exhibit A and convertible
into Membership Interests as hereinafter set forth. The proceeds of
such loan shall be used solely for construction and design costs, approved
pursuant to the provisions of Section 9.11. The Company, so long as the MAG
Loan, or any portion thereof, is outstanding, shall not make any Distributions
to its Members which are prohibited by Section 6.15 of this Agreement. MAG may
convert all or any portion of such MAG Loan into
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Membership Interests at any time, and from time to time, on or before January
31, 2002. Upon such conversion, the Capital Account of MAG shall be increased in
an amount equal to the then-principal balance of the MAG Loan so converted. Any
interest accrued but unpaid with respect to the amount so converted shall be
deemed to be an accrued but unpaid Preferred Return. GCI and GCICA shall
guarantee repayment of the MAG Loan, together with interest thereon, and shall
guarantee repayment of the capital into which the MAG Loan is converted, if such
loan is so converted, all in the form of the Guaranty attached hereto as Exhibit
B. The Guaranty shall be secured by a Security Agreement in the form attached
hereto as Exhibit C. GCI also agrees that, except for the Equipment Loan, as
approved pursuant to Section 9.11, and except for additional loans to the
Company for the purpose of acquiring additional equipment installed after the
Restaurant opens for business, if such additional equipment loans are approved
by a Supermajority Interest or are within the Capital Expenditure Reserve,
Company and GCI and/or GCICA will not incur any subsequent indebtedness for
borrowed monies unless such Company indebtedness is expressly subordinated to
Company's obligations with respect to the MAG Loan and unless such GCI and/or
GCICA indebtedness is either expressly subordinate to GCI's and GCICA's
obligations with respect to the MAG Loan or is junior to the security for the
Guaranty; provided, however, that nothing herein contained shall prohibit GCI
and/or GCICA, as distinguished from Company, from borrowing funds which are not
so subordinated or junior for (i) equipment for additional restaurants opened by
GCI and/or GCICA after the date hereof; (ii) on a non-recourse basis in
connection with assets acquired by GCI and/or GCICA after the date hereof for
which the obligations are limited to such assets; or (iii) to refinance existing
Indebtedness of GCI and/or GCICA in the aggregate amount for both GCI and GCICA
not to exceed Three Million Two Hundred Thirty-nine Thousand Five Hundred
Dollars ($3,239,500) inclusive of any line of credit, and upon terms not
materially more onerous than the existing Indebtedness of GCI and/or GCICA
comprising such amount.
Upon such conversion, the Percentage Interests of the Members shall not be
affected, but only the rights to Distributable Cash pursuant to Sections
6.12(b)(i) and 6.12(b)(ii) shall be affected.
3.3 Additional Capital Contributions. Except as provided in this Section
3.3 and Section 6.6, the Members shall not be required to contribute additional
capital to the Company. GCI shall contribute to the capital of the Company, as
and when required, any and all funds necessary for the Company to complete the
Restaurant in such manner as to comply with the terms of the Lease, and,
additionally, in such a manner as is necessary for it to open for the operation
of its business ("Mandatory Additional Capital Contribution"); provided,
however, that, in lieu of contributions to provide funds, the Company may borrow
the funds constituting the Equipment Loan. GCI may contribute additional capital
to fund any operating losses, to fund payments of the MAG Loan or to fund
payments of the Preferred Return or the Scheduled Repayments of the Initial
Capital Contributions and Converted Capital Contributions ("Discretionary
Additional Capital Contributions").
3.4 Capital Accounts. The Company shall maintain on its books a Capital
Account for each Member. For this purpose, "Capital Account" means with respect
to each Member the amount of money contributed by such Member to the capital of
the Company, increased by the Gross Asset Value of any property contributed by
such Member to the capital of the Company
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(net of Liabilities securing such contributed property that the Company is
considered to assume or take subject to under Section 752 of the Code), and the
amount of any Profits allocated to such Member, and decreased by the amount of
money distributed to such Member by the Company (exclusive of a guaranteed
payment within the meaning of Section 707(c) of the Code paid to such Member),
the Gross Asset Value of any property distributed to such Member by the Company
(net of Liabilities securing such distributed property that such Member is
considered to assume or take subject to under Section 752 of the Code), and the
amount of any Losses charged to such Member. To the extent an adjustment to the
tax basis of any Company asset is made pursuant to Code Sections 734(b) or
743(b), and such adjustment is required by Regulations Section 1.704-
l(b)(2)(iv)(m), to be taken into account in determining Capital Accounts, the
Capital Accounts of the Members shall be adjusted to reflect an item of gain (if
the adjustment increases the basis of the asset) or loss (if the adjustment
decreases such basis), which is specially allocated to the Members in a manner
consistent with the manner in which their Capital Accounts are required to be
adjusted pursuant to such Section of the Regulations. In the event the Gross
Asset Values of Company assets are otherwise adjusted pursuant to the terms of
this Agreement, the Capital Accounts of the Members shall be adjusted
simultaneously to reflect the aggregate net adjustment as if the Company
recognized gain or loss equal to the amount of such aggregate net adjustment and
such gain or loss was allocated to the Members pursuant to the appropriate
provisions of this Agreement. The foregoing Capital Account definition and the
other provisions of this Agreement relating to the maintenance of Capital
Accounts are intended to comply with Regulations Section 1.704- l (b), and shall
be interpreted and applied in a manner consistent with such Regulations. The
transferee of all or a portion of a Distributional Interest shall succeed to
that portion of the transferor's Capital Account which is allocable to the
portion of the Distributional Interest transferred. A Member who has more than
one Distributional Interest in the Company shall have a single Capital Account
that reflects all such Distributional Interests, regardless of the class of
Distributional Interests owned by such Member and of the time or manner in which
the Distributional Interests were acquired.
3.5 Treatment of Capital Contributions. Except as otherwise specifically
set forth in this Agreement, no Member shall:
3.5(a) receive any interest on its Capital Contributions or on the balance
in its Capital Account;
3.5(b) have the right to withdraw or reduce its Capital Contributions or to
receive any Distributions from the Company except for the Distributions to be
made in accordance with this Agreement;
3.5(c) have the right to demand or receive property other than cash in
return for its Capital Contributions or as Distributions;
3.5 (d) be compelled to accept a Distribution of any asset in kind from the
Company in lieu of a proportionate Distribution of cash being made to other
Members; or
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3.5(e) have priority over any other Member with respect to a return of
Capital Contributions or the allocations of Profits, Losses or Distributions of
Distributable Cash, except as set forth in this Agreement.
3.6 No Obligation to Fund Capital Account Deficit. Except as set forth in
this Article 3, if, after the Liquidation, allocations and Distributions
described in Section 10.4, a Member has a deficit balance in its Capital
Account, such Member shall not be required to fund any such deficit balance in
its Capital Account.
ARTICLE 4.
MEMBERS
4.1 Limited Liability. Except as required under the Act or as expressly set
forth in this Agreement, no Member shall be personally liable for any debt,
obligation, or liability of the Company, whether that liability or obligation
arises in contract, tort, or otherwise.
4.2 Admission of Additional Members. The Manager may admit to the Company
additional Members, from time to time, subject to the following:
4.2(a) The Members holding a Super majority Interest must consent to the
admission; and
4.2(b) The additional Member shall make a Capital Contribution in such
amount and on such terms as the Members holding a Super majority Interest
determine to be appropriate based upon the needs of the Company, the net value
of the Company's assets, the Company's financial condition, and the benefits
anticipated to be realized by the additional Member.
4.3 Withdrawals or Resignations. A Member other than the Manager may
withdraw or resign from the Company, but such withdrawal will only result in the
conversion to a Distributional Interest Owner and will not entitle the Member to
any Distribution from or purchase by the Company under Section 35-60 of the Act
prior to the time he would have received such Distribution from the Company as a
Member or any other amount in respect of his Membership Interest, nor shall the
withdrawing Member be relieved of any liabilities to the Company or its
creditors. The Manager may not withdraw as a Member, but if the Manager
wrongfully withdraws as a Member, it will not be entitled to any Distribution
from or purchase by the Company under Section 35-60 of the Act, but its rights
will be governed by the provisions of Section 8.1 of this Agreement.
4.4 Termination of Membership Interest. Upon the transfer of a Non-Manager-
Member's Membership Interest in violation of this Agreement, the withdrawal of a
Non-Manager-Member in accordance with Section 4.3, or the occurrence of a
Dissociation Event as to such Non-Manager-Member, unless the Company consents to
the admission of a successor as a Member, the Membership Interest of such a
Member shall be terminated by the Manager and Articles 7 and 8 shall apply.
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4.5 Transactions with the Company. Subject to Section 5.5 and any
limitations set forth in this Agreement and with the prior approval of the
Supermajority Interest after full disclosure of the Member's involvement, a
Member or its affiliate may lend money to and transact other business with the
Company. Subject to other applicable law, such Member has the same rights and
obligations with respect thereto as a Person who is not a Member.
4.6 Remuneration to Members. Except as specifically authorized in this
Agreement, no Member is entitled to remuneration for acting in the Company
business.
4.7 Voting Rights. Except as expressly provided in this Agreement or the
Articles, Members shall have no voting, approval or consent rights. The
following matters shall require the vote, approval or consent of a Supermajority
Interest of the Members in order to authorize or approve such act:
4.7(a) A decision to dissolve the Company;
4.7(b) Any amendment of the Articles or this Agreement;
4.7(c) A decision to merge the Company with or into another entity;
4.7(d) The continuation or election of a Manager under Section 5.2(b) and
(c) (which shall only require the vote set forth in those Sections);
4.7(e) A decision to compromise the obligation of a Member to make a
Capital Contribution or return money or property paid or distributed in
violation of the Act;
4.7(f) A sale or other disposition of all or a substantial part of the
Company's assets;
4. 7(g) The refinancing of the property of the Company if secured by such
property and any borrowing of the Company if in excess of Ten Thousand Dollars
($10,000) other than the Equipment Loan or the MAG Loan;
4.7(h) Approval of the Construction Budget and any capital expense budget
providing for capital expenditures in excess of the Capital Expenditure Reserve;
4.7(i) Approval of a material deviation from the Construction Budget and
Capital Budgets;
4.7(j) A decision to change the nature of the business or any other
fundamental decisions covering the business operations or structural
organization of the Company;
4.7(k) Approval of transactions between the Company and any Member or
Manager, except as otherwise expressly set forth herein;
4.7(1) The admission of additional Members to the Company; and
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4.7(m) The lending of any money of the Company or the guarantying or
becoming liable for, directly or indirectly, the debts, obligations or
liabilities of anyone other than the Company.
4.8 Meetings of Members. Meetings of Members may be held in accordance
with the Act.
ARTICLE 5.
MANAGEMENT AND CONTROL OF THE COMPANY
5.1 Management of the Company by Manager.
5.1 (a) Exclusive Management by Manager. Except as otherwise provided
herein, the business, property and affairs of the Company shall be managed
exclusively by the Manager pursuant to the Management Agreement, to the extent
such Management Agreement is applicable. Except for situations in which the
approval of the Members is expressly required by the Articles or this Agreement,
the Manager shall have full, complete and exclusive authority, power, and
discretion to manage and control the business, property and affairs of the
Company, to make all decisions regarding those matters and to, perform or cause
to be performed any and all other acts or activities customary or incident to
the management of the Company's business, property and affairs.
5.1 (b) Agency Authority of Manager. The Manager is authorized to endorse
checks, drafts, and other evidences of indebtedness made payable to the order of
the Company, and to sign contracts and obligations on behalf of the Company.
Notwithstanding the foregoing, during the construction of the Restaurant, the
expenditure of the funds set forth on the Construction Budget submitted pursuant
to Section 9.11 hereof shall require the signature of the Manager and one
representative of the Members other than the Manager.
5.2 Appointment of Manager.
5.2(a) Number and Qualifications. The Company shall have one (1) Manager
which initially shall be Grill Concepts, Inc. The Manager must be a Member.
5.2(b) Removal. The Members shall not have the right to remove a Manager
except for the Good Cause set forth in the Management Agreement by a vote of the
Majority Interest of the Non-Manager-Members and except that this provision is
not intended to vary the rights granted under Section 35-45(6) of the Act. The
removal of a Member as a Manager, at the election of the Majority Interest of
the Non-Manager-Members, shall be a Dissociation Event and, upon such election,
shall affect the Manager's rights as a Member and shall constitute a withdrawal
of the Manager as a Member.
5.2(c) Vacancies. Any vacancy occurring for any reason in the position of
Manager may be filled by the Majority Interest of the Members other than the
Manager as set forth in Section 4.7.
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5.2(d) Members Have No Managerial Authority. The Members shall have no
power to participate in the management of the Company except as expressly
authorized by this Agreement or the Articles and except as expressly required by
the Act. No Member, acting solely in such capacity, is an agent of the Company.
Unless expressly and duly authorized in writing to do so by a Manager or
Managers, no Member shall have any power or authority to bind or act on behalf
of the Company in any way, to pledge its credit, to execute any instrument on
its behalf or to render it liable for any purpose.
5.3 Performance of Duties: Liability of Managers. The Manager shall perform
his managerial duties in good faith, in a manner it reasonably believes to be in
the best interests of the Company and its Members, and with such care, including
reasonable inquiry, as an ordinarily prudent person in a like position would use
under similar circumstances. In performing its duties, the Manager shall be
entitled to rely on information, opinions, reports, or statements, including
financial statements and other financial data, of the following persons or
groups unless they have knowledge concerning the matter in question that would
cause such reliance to be unwarranted and provided that the Manager acts in good
faith and after reasonable inquiry when the need therefor is indicated by the
circumstances:
5.3(a) one or more officers, employees or other agents of the Company whom
the Manager reasonably believes to be reliable and competent in the matters
presented; or
5.3(b) any attorney, independent accountant, or other person as to matters
which the Manager reasonably believes to be within such person's professional or
expert competence.
A Manager who so performs the duties of Manager shall not have any
liability by reason of being or having been a Manager of the Company. A Manager
shall not be liable to the Company or to any Member for any loss or damage
sustained by the Company or any Member, unless the loss or damage shall have
been the result of fraud, deceit, gross negligence, reckless or intentional
misconduct, or a knowing violation of law by the Manager.
5.4 Devotion of Time. The Manager is not obligated to devote all of his
time or business efforts to the affairs of the Company. The Manager shall devote
whatever time, effort, and skill as is necessary and appropriate for the
operation of a first-class, fine dining restaurant in the same manner as the
Grill in Beverly Hills, California.
5.5 Transactions between the Company and the Manager. Notwithstanding that
it may constitute a conflict of interest, the Manager may, and may cause his
Affiliates to, engage in any transaction (including, without limitation, the
purchase, sale, lease, or exchange of any property or the rendering of any
service, or the establishment of any salary, other compensation, or other terms
of employment) with the Company so long as such transaction is approved by the
Super majority Interest. The Members acknowledge and by their execution hereof
approve the management fee to the Manager, in addition to Distributions to the
Manager under Article 6, as a guaranteed payment of the Company equal to five
percent (5%) of the gross receipts from the operation of the business, excluding
the sale of the business and any extraordinary events, such as condemnation,
insurance proceeds pursuant to the Management Agreement, reduceable to three
percent (3%) pursuant to Section 6.13 of this Agreement. This Management Fee (in
15
addition to the share of Profits and Distributions under Article 6, shall be the
sole and entire payment to the Manager for its services hereunder, and there
shall be no other charge for overhead, administration, organization, accounting,
salaries or any other expenses which are not direct on-site expenses of the
Company at the Premises without the consent of a Supermajority Interest of the
Members or as is provided in the Management Agreement.
5.6 Conflicts.
5.6(a) Any Member (other than the Manager) and its officers, directors,
shareholders, partners, members, managers, agents, trustees, employees or
affiliates may engage or invest in, independently or with others, any business
activity of any type or description, including without limitation, those that
might be the same as or similar to the Company's business and might be in direct
or indirect competition with the Company. Neither the Company nor any Member
shall have any right in or to such other ventures or activities, or to the
income or proceeds derived therefrom. The Members (other than the Manager) and
their officers, directors, shareholders, partners, members, managers, agents,
trustees employees and Affiliates may engage or invest in, independently or with
others, any business activity of any type or description, including without
limitation those that might be the same as or similar to the Company's business
and that might be in direct or indirect competition with the Company. Neither
the Company nor any Member shall have any right in or to such other ventures or
activities or to the income or proceeds derived therefrom.
5.6(b) The Members shall not be obligated to present any investment
opportunity or prospective economic advantage to the Company, even if the
opportunity is of the character that, if presented to the Company, could be
taken by the Company. The Members shall have the right to hold any investment
opportunity or prospective economic advantage for their own account or to
recommend such opportunity to Persons other than the Company. The Members
acknowledge that the Members and their Affiliates own and/or manage other
businesses, including businesses that may compete with the Company and for the
Members' time. Except as set forth herein, the Members hereby waive any and all
rights and claims which they may otherwise have against the Members and their
officers, directors, shareholders, partners, trustees, members, managers,
agents, employees and Affiliates as a result of any of such activities.
5.7 Expenses. The Company shall reimburse the Manager and its Affiliates
only for the actual cost of goods and materials used for or by the Company if
acquired from Manager.
5.8 Acts of Managers as Conclusive Evidence of Authority. Any note,
mortgage, evidence of indebtedness, contract, certificate, statement,
conveyance, or other instrument in writing, and any assignment or endorsement
thereof, executed or entered into between the Company and any other person, when
signed by the Manager is not invalidated as to the Company by any lack of
authority of the signing Manager in the absence of actual knowledge on the part
of the other person that the signing Manager had no authority to execute the
same.
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5.9 Officers.
5.9(a) Appointment of Officers. The Manager may appoint employees of the
Company as officers at any time as necessary for the operation of the Company.
The officers shall serve at the pleasure of the Manager, subject to all rights,
if any, of an officer under any contract of employment. Any individual may hold
any number of offices. No officer need be a resident of the State of Illinois or
citizen of the United States. The officers shall exercise such powers and
perform such duties as shall be determined from time to time by the Manager.
5.9(b) Removal. Resignation and Filling of Vacancy of Officers. Subject to
the rights, if any, of an officer under a contract of employment, any officer
may be removed, either with or without cause, by the Manager at any time. Any
officer may resign at any time by giving written notice to the Manager. Any
resignation shall take effect at the date of the receipt of that notice or at
any later time specified in that notice; and, unless otherwise specified in that
notice, the acceptance of the resignation shall not be necessary to make it
effective. Any resignation is without prejudice to the rights, if any, of the
Company under any contract to which the officer is a party.
5.9(c) Salaries of Officers. Subject to Sections 5.5 and 5.7, the salaries
of all on-site employees of the Company shall be fixed by the Manager.
5.9(d) Acts of Officers as Conclusive Evidence of Authority. Any contract,
certificate, statement, or other instrument in writing which is incurred in the
ordinary course of business and the daily operation of the Company, and any
assignment or endorsement thereof, executed or entered into between the Company
and any other person, when signed by any officer of the Company, is not
invalidated as to the Company by any lack of authority of the signing officers
in the absence of actual knowledge on the part of the other person that the
signing officers had no authority to execute the same.
5.10 Limited Liability. No person who is a Manager or officer or both a
Manager and officer of the Company shall be personally liable under any judgment
of a court, or in any other manner, for any debt, obligation, or liability of
the Company, whether that liability or obligation arises in contract, tort, or
otherwise, solely by reason of being a Manager or officer or both a Manager and
officer of the Company.
ARTICLE 6.
ALLOCATIONS OF PROFIT AND LOSS
AND DISTRIBUTIONS
6.1 Time of Allocations. The determination of Profit and Loss allocations
shall be made as soon as practicable after the end of each Fiscal Year of the
Company.
6.2 Allocations of Profits and Losses. In each Fiscal Year of the Company,
Profits and Losses shall be allocated to the Manager, except that a gross income
allocation shall be made to the Non-Manager-Members in the amount of
Distributions to such Members pursuant to Sections 6.12(b)(i) and 6.12(b)(v).
17
6.3 Nonrecourse Deductions: Minimum Gain Chargeback.
6.3(a) Nonrecourse Deductions of the Company (other than Member Nonrecourse
Deductions) shall be aggregated with all other items of Company income, gain,
loss and deduction in determining Profits and Losses of the Company.
6.3(b) Except as provided in Regulations Section 1.704-2(f)(2) and (3), if
there is a net decrease in Company Minimum Gain for a Company taxable year, each
Member shall be allocated items of Company income and gain for that year equal
to that Member's share of the net decrease in Company Minimum Gain, as
determined under Regulations Section 1.704-2(g)(2). Any Company Minimum Gain
required to be charged back pursuant to the preceding sentence shall consist
first of gain recognized from the disposition of Company property subject to one
or more nonrecourse liabilities of the Company (other than any Member
Nonrecourse Debt), and then if necessary of a pro rata portion of the Company's
other items of income and gain for that year. If the amount of Company Minimum
Gain required to be recognized pursuant to the first sentence of this Section
6.3(b) exceeds the Company's income and gains for that year, such excess shall
carry over and be recognized under this Section 6.3(b) in each succeeding year
until such excess is eliminated.
6.4 Member Nonrecourse Deductions.
6.4(a) Member Nonrecourse Deductions for any fiscal year shall,
notwithstanding any other provision of this Article 6, be allocated to the
Member or Members who bear the economic risk of loss for the Member Nonrecourse
Debt to which the Member Nonrecourse Deductions are attributable under
Regulations Section 1 .704-2(c). Economic risk of loss shall be determined under
the rules of Regulations Section 1.752-2. If more than one Member bears the
economic risk of loss for a Member Nonrecourse Debt, any Member Nonrecourse
Deduction attributable thereto shall be allocated to the Members in accordance
with the ratios in which they share such risk of loss.
6.4(b) Except as provided in Regulations Section 1.704-2(i)(4), if there is
a net decrease in the minimum gain attributable to a Member Nonrecourse Debt of
the Company during a taxable year, then each Member with a share of minimum
gain attributable to Member Nonrecourse Debt at the beginning of such taxable
year shall be allocated income and gain for the taxable year (and, if necessary,
subsequent years) in proportion to, and to the extent of the portion of the
Member's share of the net decrease in minimum gain attributable to such Member
Nonrecourse Debt. Any minimum gain required to be charged back pursuant to the
preceding sentence shall consist first of gains recognized from the disposition
of Company property subject to Member Nonrecourse Debt, and then if necessary of
a pro rata portion of the Company's other items of income and gain for that
year.
6.5 Qualified Income Offset. Notwithstanding Section 6.2, after the
application of Sections 6.3 and 6.4, and in the event any Members unexpectedly
receive any adjustments, allocations, or distributions described in Regulations
Section 1.704-l(b)(2)(ii)(d)(4), (5), or (6), items of Company profits shall be
specially allocated to such Members in an amount and manner sufficient to
eliminate the deficit balances in their Capital Accounts (excluding from such
deficit
18
balance amounts Members are obligated to restore under this Agreement) created
by such adjustments, allocations, or distributions as quickly as possible and in
a manner which complies with Regulations Section 1.704-l(b)(2)(ii)(d).
6.6 Treatment of Special Allocations. Any special allocations of items of
Company income and gain pursuant to Sections 6.3, 6.4 and 6.5 are intended to
comply with the requirements of Regulations Section 1.704-2 and shall be
construed and applied consistent therewith. For so long as Revenue Procedure 95-
10 is in effect, notwithstanding anything else herein, the Manager shall be
allocated the minimum amounts of Profits and Losses and shall make the minimum
amount of Capital Contributions, if any, required by such Revenue Procedure.
6.7 Tax Credits. All tax credits shall, subject to the applicable
provisions of the Code and Regulations Section 1.704-l(b), be allocated to the
Members in accordance with their respective Percentage Interests in the Company
as of the time the tax credit arises. Each Member's allocable share of any tax
credit recapture shall bear the same ratio to the total credit recapture as such
Member's share of the original tax credit subject to recapture.
6.8 Depreciation Recapture. To the extent possible, each Member's
allocable share of Company Profits which is characterized as ordinary income
pursuant to Sections 1245 or 1250 of the Code, with respect to the disposition
of an item of Company property shall bear the same ratio to the total Profits of
the Company so characterized as such Member's share of the past depreciation
and/or cost recovery deductions taken with respect to the item of property bears
to all the Member's past depreciation and/or cost recovery deductions with
respect to that property.
6.9 Differing Tax Basis: Tax Allocation. The Members shall cause
depreciation and/or cost recovery deductions and gain or loss with respect to
each item of property to be allocated among the Members for federal income tax
purposes in accordance with the principles of Section 704(c) of the Code and
Regulations promulgated thereunder, so as to take into account the variation, if
any, between the adjusted tax basis of such property and its Gross Asset Value.
Any elections or other decisions relating to such allocations shall be made by
the Manager in any manner that reasonably reflects the purpose and intention of
this Agreement. Allocations pursuant to this Section 6.9 are solely for purposes
of federal and state income taxes and shall not affect, or in any way be taken
into account in computing, any Member's Capital Account or share of Profits,
Losses, other items, or distributions pursuant to any provisions of this
Agreement.
6.10 Sharing Between Transferor and Transferee.
6.10(a) Upon the transfer of all or any part of the Interest of a Member,
Profits and Losses shall be allocated between the transferor and transferee on
the basis of the computation method which in the reasonable discretion of the
Manager is in the best interests of the partnership, provided such method is in
conformity with the methods prescribed by Section 706 of the Code and
Regulations Section 1.706-l(c)(2)(ii). Distributions of Distributable Cash shall
be made to the holder of record of an Economic Interest on the date of
distribution. Any transferee of an Economic Interest shall succeed to the
Capital Account of the transferor Member to the extent it relates to the
transferred Economic Interest; provided, however, that if such transfer causes a
19
termination of the Company pursuant to Section 708(b)(1)(B) of the Code, the
Capital Accounts of all Members, including the transferee, shall be redetermined
as of the date of such termination in accordance with Regulations Section 1.704-
l(b).
6.10(b) Subject to the provisions of the Regulations Section 1.704-l(b),
adjustments to the adjusted tax basis of Company property under Section 743 and
732(d) of the Code shall not be reflected in the Capital Account of the
transferee Member or on the books of the Company, and subsequent Capital Account
adjustments for distributions, depreciation, amortization, and gain or loss with
respect to such property shall disregard the effect of such basis adjustment.
6.11 Excess Nonrecourse Liability Safe Harbor. Pursuant to Regulations
Section 1.752-3(a)(3), solely for purposes of determining each Member's
proportionate share of the "excess nonrecourse liabilities" of the Company (as
defined in Regulations Section 1.752-3(a)(3)), the Members' respective interests
in Company profits shall be their Member Percentage Interests.
6.12 Distribution of Distributable Cash.
6.12(a) The Manager shall make Distributions of Distributable Cash no less
frequently than quarterly during a Fiscal Year to the extent of Distributions
under Sections 6.12(b)(i) and 6.12(b)(ii), even though such Distributions are
necessarily prior to the final determination of Profit and Loss allocations and
Distributions to be made for that Fiscal Year. Any Distributions prior to the
end of a Fiscal Year shall be deemed only an advance against the Distributions
to be made at the end of that Fiscal Year and shall be subject to a final
determination of the actual amount to be distributed for that Fiscal Year. The
Manager shall make Distributions of the balance of the Distributable Cash
attributable to a Fiscal Year annually. Such Distributions shall be made
promptly upon determination of the actual Distributable Cash for such Fiscal
Year, but in all events within forty-five (45) days after the end of such Fiscal
Year.
6.12(b) Except as provided in Section 10.4, in each Fiscal Year of the
Company, Distributions of Distributable Cash shall be made to the Members as
follows:
(i) First, to the payment of the Preferred Return until the entire
accrued but unpaid Preferred Return has been paid pursuant to this Section
6.12(b)(i) in the proportion that the Preferred Return has accrued.
(ii) Second, to the Members other than the Manager in amounts
sufficient to pay their Initial Capital Contributions and their Converted
Capital Contributions on a quarterly
basis in accordance with the Scheduled Repayments.
(iii) Third, to the Manager in an amount sufficient to repay its
Discretionary Additional Capital Contributions; provided, however, that such
payments are subordinated to current payments then due and to prior payments
remaining outstanding under Sections 6.12(b)(i) and 6.12(b)(ii).
20
(iv) Fourth, to the Manager in an amount sufficient to repay its Mandatory
Additional Capital Contribution, without interest, in thirty-nine (39) equal
quarterly installments, the first payment of which will be made on April 1,
2000; provided, however, that such payments are subordinated to current payments
then due and to prior payments remaining outstanding, under Sections 6.12(b)(i)
and 6.12(b)(ii).
(v) Thereafter, to the Members in accordance with their Percentage
Interests.
6.13 In-Kind Distributions. Assets of the Company (other than cash) shall
not be distributed in kind to the Members without the prior approval of all
Members. If any assets of the Company are distributed to the Members in kind for
purposes of this Agreement, such assets shall be valued on the basis of the
Gross Asset Values thereof (without taking into account Section 7701(g) of the
Code) on the date of distribution. Any Member entitled to any interest in such
assets shall receive such interest as a tenant-in-common with the other
Member(s) so entitled with an undivided interest in such assets in the amount
agreed to by such Members. Upon such distribution, the Capital Accounts of the
Members shall be adjusted to reflect the amount of gain or loss that would have
been allocated to the Members pursuant to the appropriate provisions of this
Agreement had the Company sold the assets being distributed for their Gross
Asset Values (taking into account Section 7701 (g) of the Code) immediately
prior to their distribution.
6.14 Adjustment to Distributions.
6.14(a) In the event that any of the following occur, there shall be deemed
to be a Payment Deficit: (i) the Preferred Return is not paid on January 1, 2000
and thereafter on a quarterly basis; (ii) repayment of the Initial Capital
Contributions or the Converted Capital Contributions of the Members other than
the Manager are not made on a quarterly basis in accordance with the Scheduled
Repayments and Section 6.12(b)(ii); or (iii) payment of principal and interest
upon any portion of the MAG Loan from time to time outstanding is not timely
made on January 1, 2000 and thereafter on a quarterly basis. If a Payment
Deficit at any time exceeds the Permitted Payment Deficit, without limiting any
remedies under the MAG Note, in addition to the remedies under the MAG Note and
at the election of MAG, the following shall occur: (a) the Management Fee
provided for in Section 5.5 shall be reduced in perpetuity to three percent (3%)
and shall be subordinated to payments upon the MAG Loan and to Distributions
under Section 6.12(b)(i) and 6.12(b)(ii); and (b) the Percentage Interest of
Manager shall be reduced in perpetuity to one percent (1%) and the Percentage
Interests of the Members other than the Manager shall be increased to ninety-
nine percent (99%) proportionately to their Percentage Interests immediately
prior to such increase.
6.14(b) The Permitted Payment Deficit shall mean a Payment Deficit of up to
One Hundred Twenty-Six Thousand Three Hundred Eighty-One Dollars and Eighty-Nine
Cents ($126,381.89) which has not been outstanding for more than nine (9)
months; provided, however, that the total Payment Deficit does not exceed Two
Hundred Fifty-Two Thousand Seven Hundred Sixty-Three Dollars and Seventy-Eight
Cents ($252,763.78); and provided, further, that at any time a Payment Deficit
of $126,381.89 has been outstanding for more than nine (9) months, no more
recent Payment Deficit may exist. For purposes of the calculation or
21
determination of the amounts of a Payment Deficit, (a) all of the obligations
described in clauses (i), (ii) and (iii) above with respect to any quarterly
payment date shall be aggregated; and (b) any such quarterly payment which is
not paid in full shall be deemed to be unpaid in its entirety, in order to avoid
manipulation by partial payments. Payments shall be applied first to the most
recent payment due so as to preclude avoidance of a Payment Deficit by
selectively choosing the application of payments to particular installments. As
an example of the application of the preceding three sentences, if a payment of
Sixty-Three Thousand One Hundred Ninety Dollars and Ninety-Four Cents
($63,190.94) due on April 1 were not made, and if payments of $63,190.94 due on
the following July 1, October 1 and January 1 were not made, on the following
April 1, there would be $126,381.88 outstanding more than nine (9) months and
there would be $252,763.78 past due. In order to avoid a Payment Deficit in
excess of the Permitted Payment Deficit, a payment on April 1 of past due
amounts of $126,381.88 plus a payment of the then-current amount of $63,190.94
would be required. If such payments were not made on such April 1, the Payment
Deficit would exceed the Permitted Payment Deficit and the provisions of Section
6.14(a) would apply. If such payments were made on April 1, and if the full
payment due on July 1 were not made, there would then be a Payment Deficit in
excess of the Permitted Payment Deficit in that there would be a Payment Deficit
of $126,381.89 outstanding for more than nine (9) months and there would exist a
more recent Payment Deficit as well. It is the understanding of the parties that
there may exist at all times a Payment Deficit of $126,381.89, unless it has
been outstanding for more than nine (9) months and a more recent Payment Deficit
exists.
6.14(c) Notwithstanding the provisions of Sections 6.14(a) and 6.14(b), the
failure to make the payment of the Preferred Return due on January 1, 2000 or
the payment of interest due on January 1,2000 shall not be deemed to constitute
a Payment Deficit unless and until payment of both of such amounts are not made
on or before January 2, 2001. In the event such payments are not made on or
before January 2, 2001, they shall be deemed to have been a Payment Deficit from
and after January I,2000 in determining the existence of a Payment Deficit in
excess of the Permitted Payment Deficit. In addition, notwithstanding the
provisions of Section 6.14(b) which provide that "payments shall be applied
first to the most recent payment due," Manager may direct that any payments made
on or before January 2, 2001 be applied to either or both of the Preferred
Return due on January 1, 2000 or to the interest due on January 1, 2000.
6.14(d) Notwithstanding the provisions of Sections 6.14(a), 6.14(b) and
6.14(c), in the event the Restaurant is not open for business by reason of an
uninsured force majeure, payments due during the Force Majeure Period shall not
be deemed delinquent until the expiration of the Grace Period. At the election
of Company, payments deferred by reason of the Force Majeure Period may either
be paid in full together with interest thereon on or before the end of the Grace
Period or may be added to the balance of MAG Loan and the amortization of the
MAG Loan adjusted to provide for equal quarterly amortization over the balance
of the term of the MAG Loan (or, if applicable, the Distributions required by
Sections 6.12(b)(i) and 6.12(b)(ii)). The Force Majeure Period shall be the
lesser of (i) the length of time the Restaurant is not open for business by
reason of an uninsured force majeure, or (ii) one (1) year. The Grace Period
shall commence at the end of the Force Majeure Period and shall continue for a
length of time equal to the length of the Force Majeure Period. Force majeure is
an act or event beyond the control of Manager, providing Manager has taken
reasonable precautions against such act or event and
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providing such act or event cannot be attributed to the negligence or willful
nonperformance or misconduct of Manager. Such act or events include wars,
embargoes, riots, civil disturbances, fires, storms, floods, typhoons,
earthquakes and other natural calamities, strikes and labor disputes,
interruption of transportation and public-utility strikes, government act and
restrictions, and other causes which cannot be overcome or prevented by due
diligence. Such acts or events do not include any financial or economic
inability of Manager to perform.
6.14(e) Notwithstanding the application of payments for purposes of
determining the nature and extent of a Payment Deficit, all delinquent payments
of any of the obligations described in clauses (i), (ii) and (iii) of Section
6.14(a) shall bear interest at eight percent (8%) per annum until paid.
6.15 Special Restriction on Distributions. The Company shall not make any
Distributions of Distributable Cash to its Members, except for Distributions
pursuant to Sections 6.12(b)(i) and
6.12(b)(ii), pari passu with payments of principal and interest made upon
the MAG Loan, at any time there exists a Default on such MAG Loan, or if there
exists any condition, event or act which with the giving of notice or passage of
time or both would constitute a Default on the MAG Loan.
6.16 Restriction on Distributions.
6.16(a) No Distribution shall be made if, after giving effect to the
Distribution:
(i) The Company would not be able to pay its debts as they become due
in the usual course of business; or
(ii) The Company's total assets would be less than the sum of its
total liabilities plus, unless this Agreement provides otherwise, the amount
that would be needed, if the Company were to be dissolved at the time of the
Distribution, to satisfy the preferential rights of other Members, if any, upon
dissolution that are superior to the rights of the Member receiving the
Distribution.
6.16(b) The Manager may base a determination that a Distribution is not
prohibited hereunder on any of the following:
(i) Financial statements prepared on the basis of accounting
practices and principles that are reasonable in the circumstances;
(ii) A fair valuation; or
(iii) Any other method that is reasonable in the circumstances.
The effect of a Distribution is measured as of the date the Distribution is
authorized if the payment occurs within 120 days after the date of
authorization, or the date payment is made if it occurs more than 120 days of
the date of authorization.
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6.16(c) A Member or Manager who votes for a Distribution in violation of
this Agreement or the Act is personally liable to the Company for the amount of
the Distribution that exceeds what could have been distributed without violating
this Agreement or the Act if it is established that the Member or Manager did
not act in compliance with Section 6.14(b) or Section 10.5. Any Member or
Manager who is so liable shall be entitled to compel contribution from (i) each
other Member or Manager who also is so liable and (ii) each Member for the
amount the Member received with knowledge of facts indicating that the
distribution was made in violation of the Agreement or the Act.
6.17 Return of Distributions. Except for Distributions made in violation of
the Act or this Agreement, no Member or Distributional 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
Distributional Interest Owner or paid by a Member or Distributional 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 Distributional Interest Owner
ARTICLE 7.
TRANSFER AND ASSIGNMENT OF INTERESTS
7.1 Transfer and Assignment of Interests. No Member shall be entitled to
transfer, assign, convey, sell, encumber or in any way alienate all or any part
of its, his or her Membership Interest except with the prior written consent of
the Supermajority Interest, which consent may be given or withheld, conditioned
or delayed (as allowed by this Agreement or the Act), as the Supermajority
Interest may determine. Transfers in violation of this Article 7 shall only be
effective to the extent set forth in Section 7.7. After the consummation of any
transfer of any part of a Membership Interest, the Membership Interest so
transferred shall continue to be subject to the terms and provisions of this
Agreement and any further transfers shall be required to comply with all the
terms and provisions of this Agreement.
7.2 Further Restrictions on Transfer of Interests. In addition to other
restrictions found in this Agreement, no Member shall transfer, assign, convey,
sell, encumber or in any way alienate all or any part of its, his or her
Membership Interest: (i) without registration under applicable federal and state
securities laws, or if requested by the Manager, unless the Member delivers an
opinion of counsel satisfactory to the Manager that registration under such laws
is not required; and (ii) if the Membership Interest to be transferred,
assigned, sold or exchanged, when added to the total of all other Membership
Interests sold or exchanged in the preceding twelve (12) consecutive months
prior thereto, would cause the termination of the Company under the Code, as
determined by the Manager.
7.3 Substitution of Members. A transferee of a Membership Interest shall
have the right to become a substitute Member only if (i) the requirements of
Sections 7.1 and 7.2 relating to consent of Members, securities and tax
requirements hereof are met, (ii) such Person executes an instrument reasonably
satisfactory to the Manager accepting and adopting the terms and provisions of
this Agreement, and (iii) such person pays any reasonable expenses in connection
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with his or her admission as a new Member. The admission of a substitute Member
shall not result in the release of the Member who assigned the Membership
Interest from any liability that such Member may have to the Company.
7.4 Permitted Transfers.
7.4(a) The Membership Interest of any Member other than Manager may be
transferred subject to compliance with Section 7.2, and without the priorwritten
consent of Members as required by Section 7.1, by the Member (i) by inter vivos
gift or by testamentary transfer to any spouse, parent, sibling, in-law, child
or grandchild of the Member, or to a trust for the benefit of the Member or such
spouse, parent, sibling, in-law, child or grandchild of the Member, (ii) to any
Affiliate of the Member; it being agreed that in executing this Agreement, each
Member has consented to such transfers, or (iii) to any other Member, including
Manager. For purposes of this Section, a partner of MAG shall be deemed to be an
Affiliate of MAG.
7.4(b) The Membership Interest of Manager may be transferred subject to
compliance with Section 7.2 above, and without the prior written consent of
Members as required by Section 7.1 above, to a Person pursuant to a merger or
consolidation of Manager or the sale of all or substantially all of Manager's
assets; provided, however, that the successor has a net worth not less than that
of Manager at the time of such transfer, and that the successor expressly
assumes the obligations of Manager under this Agreement.
7.5 Effective Date of Permitted Transfers. Any permitted transfer of all or
any portion of a Membership Interest shall be effective on the first day of the
month following the date upon which the requirements of Sections 7.1, 7.2, 7.3
and/or 7.4 have been met. The Manager shall provide the Members with written
notice of such transfer as promptly as possible after the requirements of
Sections 7.1, 7.2, 7.3 and/or 7.4 have been met. Any transferee of a Membership
Interest shall take subject to the restrictions on transfer imposed by this
Agreement.
7.6 Rights of Legal Representatives. If a Member who is an individual dies
or is adjudged by a court of competent jurisdiction to be incompetent to manage
the Member's person or property, the Member's executor, administrator, guardian,
conservator, or other legal representative may exercise all of the Member's
rights for the purpose of settling the Member's estate or administering the
Member's property, including any power the Member has under the Articles or this
Agreement to give an assignee the right to become a Member. If a Member is a
corporation, trust, or other entity and is dissolved or terminated, the powers
of that Member may be exercised by his or her legal representative or successor.
7.7 No Effect to Transfers in Violation of Agreement. Upon any transfer of
a Membership Interest in violation of this Article 7, the transferee shall have
no right to vote or participate in the management of the business, property and
affairs of the Company or to exercise any rights of a Member. Such transferee
shall only be entitled to become an Distributional Interest Owner and thereafter
shall only receive the share of the Company's taxable income, taxable loss and
Distributions of the Company's assets to which the transferor of such
Distributional Interest would otherwise be entitled. Notwithstanding the
immediately preceding sentences, if, in the determination of the Manager, a
transfer in violation of this Article 7 would cause the
25
termination of the Company under Section 708(b) of the Code, in the sole
discretion of the Manager, the transfer shall be null and void and the purported
transferee shall not become either a Member or an Distributional Interest Owner.
7.8 Right to Purchase Non-Distributional Interest. Upon and
contemporaneously with any transfer, assignment, conveyance or sale (whether
arising out of an attempted charge upon that Member's Distributional Interest by
judicial process, a foreclosure by creditor of the Member or otherwise) of all
or any portion of a Member's Distributional Interest which does not at the same
time transfer the balance of the rights associated with the Membership Interest
transferred by the Member (including, without limitation, the rights of the
Member to vote or participate in the management of the business, property and
affairs of the Company), the Company shall purchase from the Member, and the
Member shall sell to Company for a purchase price of One Dollar ($1) for each
Percentage Interest transferred, all remaining rights and interests retained by
the Member that immediately before the transfer, assignment, conveyance or sale
were associated with the transferred Distributional Interest. Such purchase and
sale shall not, however, result in the release of the Member from any liability
to the Company as a Member. Each Member acknowledges and agrees that the right
of the Company to purchase such remaining rights and interests from a Member who
transfers a Membership Interest in violation of this Article 7 is not
unreasonable under the circumstances existing as of the date hereof.
7.9 Right of FirstRefusal. Each time a Member proposes to transfer, assign,
convey, sell, encumber or in any way alienate all or any part of its, his or her
Membership Interest (or as required by operation of law or other involuntary
transfer to do so), except for transfers permitted by Section 7.4, such Member
shall first offer such Membership Interest to the Company and the non-
transferring Members in accordance with the following provisions:
7.9(a) Such Member shall deliver a written notice to the Company and the
other Members stating (i) such Member's bona fide intention to transfer such
Membership Interest, (ii) the name and address of the proposed transferee, (iii)
the Membership Interest to be transferred, and (iv) the purchase price and terms
of payment for which the Member proposes to transfer such Membership Interest.
7.9(b) Within thirty (30) days after receipt of the notice described in
Section 7.9(a), each non-transferring Member shall notify the Manager in writing
of its, his or her desire to purchase a portion of the Membership Interest being
so transferred. The failure of any Member to submit a notice within the
applicable period shall constitute am election on the part of that Member not to
purchase any of the Membership Interest which may be so transferred. Each Member
so electing to purchase shall be entitled to purchase a portion of such
Membership Interest in the same proportion that such Member's Percentage
Interest bears to the aggregate of the Percentage Interests of all of the
Members electing to so purchase the Membership Interest being transferred (the
"Pro Rata Share"). In the event any Member elects to purchase less than all of
its, his or her Pro Rata Share, then the other Members can elect to purchase
more than their Pro Rata Share. If such Members fail to purchase the entire
Membership Interest being transferred, the Company may purchase any remaining
share of such Membership Interest.
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7.9(c) Within ninety (90) days after receipt of the notice described in
Section 7.9(a) the Company and the Members electing to purchase such Membership
Interest shall have the first right to purchase or obtain such Membership
Interest upon the price and terms of payment designated in such notice. If such
notice provides for the payment of non-cash consideration, the Company and such
purchasing Members each may elect to pay the consideration in cash equal to the
good faith estimate of the present fair market value of the non-cash
consideration offered.
7.9(d) If the Company and/or the other Members elect not to purchase all of
the Membership Interest designated in such notice, then the transferring Member
may transfer the Membership Interest described in the notice to the proposed
transferee, providing such transfer (i) is completed within thirty (30) days
after the expiration of the Company's and the other Members' right to purchase
such Membership Interest, (ii) is made at the price and terms designated in such
notice, and (iii) the requirements of Sections 7.1 and 7.2 relating to consent
of the Members, securities and tax requirements hereof are met. If such
Membership Interest is not so transferred, the transferring Member must give
notice in accordance with this Section prior to any other or subsequent transfer
of such Membership Interest.
ARTICLE 8.
CONSEQUENCES OF DEATH, DISSOLUTION,
RETIREMENT OR BANKRUPTCY
8.1 Dissociation Event. Upon the occurrence of any Dissociation Event, the
Company shall not dissolve. In the event of a Dissociation Event with respect to
the Manager or the termination of the Management Agreement due to the fault of
Manager, the Manager hereby agrees that, upon the election of the Majority
Interests of the Non-Manager-Members, it shall sell its entire Membership
Interest in the Company back to the Company for the sum of One Dollar ($1), it
being the agreement of the Members that any voluntary withdrawal, retirement,
resignation of the Manager or removal of the Manager for Good Cause as set forth
in the Management Agreement and Section 5.2(c), which shall be an expulsion, or
the bankruptcy or dissolution of the Manager or the termination of the
Management Agreement due to the fault of Manager, so that the Manager no longer
performs its obligations hereunder and under the Management Agreement, is an
event which would cause such harm to the Company that such purchase is a fair
payment to the Manager for its Membership Interest and not a penalty or
forfeiture. In the event that the Manager is dissociated, or the Manager's
Membership Interest is sold back to the Company as provided for in the previous
sentence, the remaining members ("Remaining Members") voting by a Majority
Interest shall elect a new Manager.
8.2 Withdrawal. A Member shall not have the right to withdraw from the
Company except as provided in Section 4.3. If a Member withdraws as provided in
Section 4.3, it, he or she will be treated as a Former Member. In the event of
the occurrence of a Dissociation Event to a Member who is not a Manager, the
Member or his successor-in-interest shall become a Former Member and shall only
have an Distributional Interest and not a Membership Interest as described in
Sections 7.5 and 7.6 unless the Members consent to the admission of a successor-
in-interest pursuant to Article 7.
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8.3 Buyout Right.
8.3(a) In the event that GCI is then the Manager and it is acquired in a
transaction resulting in a Change of Control of GCI, GCI has the option
exercisable for the ninety (90) day period commencing on the date of such Change
of Control to purchase the Membership Interest of the Members other than the
Manager for the sum of Three Million Two Hundred Fifty Thousand Dollars
($3,250,000) (the "Basic Purchase Price"), plus any accrued but unpaid Preferred
Return (the "Preferred Return Purchase Price") (the Preferred Return Purchase
Price plus the Basic Purchase Price are the "Membership Interest Purchase
Price"), provided that GCI also concurrently acquires from the holders of any
remaining MAG Loan such remaining MAG Loan for its then-face value plus all
accrued but unpaid interest thereon (the 'Note Purchase Price'). The Membership
Interest Purchase Price shall be paid to such Members in the ratio of their
Percentage Interests. The Note Purchase Price shall be paid to the holders of
the MAG Loan proportionately to their interest. The Basic Purchase Price will be
reduced proportionately by the proportion that GCI Warrants previously exercised
by the Members other than the Manager bear to the number of GCI Warrants issued
to such Members. The Members will be required to relinquish any GCI Warrants not
exercised prior to notice to them by GCI of the exercise of the within option.
The proportionate reduction of the Basic Purchase Price shall relate solely to
the Basic Purchase Price and shall not affect the Preferred Return Purchase
Price or the Note Purchase Price. Change of Control shall mean a transaction,
or a series of related transactions, pursuant to which more than fifty percent
(50%) of the stock of GCI, or substantially all of the assets of GCI, is
acquired by a third party who is not at the date of this Agreement the
beneficial owner of more than five percent (5%) of the stock of GCI.
8.3(b) In the event GCI determines to exercise the option, GCI shall send a
written notice to each of the Members and each of the holders of the MAG Loan
specifying a closing date of not more than sixty (60) days from the exercise of
the option and setting forth the computation of the Membership Interest Purchase
Price and the Note Purchase Price. At the closing, GCI shall pay the Membership
Interest Purchase Price and the Note Purchase Price in cash, and the Members and
holders of the MAG Loan shall perform all such acts and execute all such
documents and assurances as reasonably may be required by Manager, to convey to
Manager the Membership Interests in the Company, or the interest in the MAG
Loan, free and clear of all liens, claims or encumbrances.
ARTICLE 9
ACCOUNTING, RECORDS, REPORTING BY MEMBERS
9.1 Books and Records. The books and records of the Company shall be kept,
and the financial position and the results of its operations recorded, in
accordance with Generally Accepted Accounting Principles. The books and records
of the Company shall reflect all the Company transactions and shall be
appropriate and adequate for the Company's business. The Company shall maintain
at its principal office all of the following:
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9.1 (a) A current list of the full name and last known business or
residence address of each Member and Economic Interest Owner set forth in
alphabetical order, together with the Capital Contributions, Capital Account and
Percentage Interest of each Member and Distributional Interest Owner;
9.1 (b) A current list of the full name and business or residence address
of each Manager;
9.1 (c) A copy of the Articles and any and all amendments thereto together
with executed copies of any powers of attorney pursuant to which the Articles or
any amendments thereto have been executed;
9.1 (d) Copies of the Company's federal, state, and local income tax or
information returns and reports, if any, for the six most recent taxable years;
9.1 (e) A copy of this Agreement and any and all amendments thereto
together with executed copies of any powers of attorney pursuant to which this
Agreement or any amendments thereto have been executed;
9.1 (f) Copies of the financial statements of the Company, if any, for the
six most recent Fiscal Years; and
9.1 (g) The Company's books and records as they relate to the internal
affairs of the Company for at least the current and past four Fiscal Years.
9.2 Delivery to Members and Inspection.
9.2(a) (i) Upon the request of any Member or Distributional Interest Owner
for purposes reasonably related to the interest of that Person as a Member or
Distributional Interest Owner, the Manager shall promptly deliver to the
requesting Member or Distributional Interest Owner, at the expense of the
Company, a copy of the information required to be maintained by Sections 9.1
(a), (b) and (d).
(ii) The Manager shall deliver to the Members at least quarterly
copies of the financial statements of the Company for the most recent quarter
and the year to date, containing at least a balance sheet, profit and loss
statement, and Manager's narrative explanation.
9.2(b) Each Member, Manager and Distributional Interest Owner has the
right, upon reasonable request for purposes reasonably related to the interest
of the Person as Member, Manager or Distributional Interest Owner, to:
(i) inspect and copy during normal business hours any of the Company
records described in Sections 9.1(a) through (g); and
(ii) obtain from the Manager, promptly after their becoming available,
a copy of the Company's federal, state, and local income tax or information
returns for each Fiscal Year.
29
9.2(c) Any request, inspection or copying by a Member or Distributional
Interest Owner under this Section 9.2 may be made by that Person or that
Person's agent or attorney.
9.3 Annual Statements.
9.3(a) The Manager shall cause to be prepared at least annually, at Company
expense, information necessary for the preparation of the Members' federal and
state income tax returns. The Manager shall send or cause to be sent to each
Member or Distributional Interest Owner as soon as practicable after the end of
each fiscal year such information as is necessary to complete federal and state
income tax or information returns, and, a copy of the Company's federal, state,
and local income tax or information returns for that year.
9.3(b) The Manager shall cause to be filed at least annually with the
Illinois Secretary of State the report required under Section 50-1 of the Act.
9.4 Financial and Other Information. The Manager shall provide such
financial and other information relating to the Company or any other Person in
which the Company owns, directly or indirectly, an equity interest, as a Member
may reasonably request. The Manager shall distribute to the Members, promptly
after the preparation or receipt thereof by the Manager, any financial or other
information relating to any Person in which the Company owns, directly or
indirectly, an equity interest, including any filings by such Person under the
Securities Exchange Act of 1934, as amended, that is received by the Company
with respect to any equity interest of the Company in such Person.
9.5 Filings. The Manager, at Company expense, shall cause the income tax
returns for the Company to be prepared and timely filed with the appropriate
authorities. The Manager, at Company expense, shall also cause to be prepared
and timely filed, with appropriate federal and state regulatory and
administrative bodies, amendments to, or restatements of, the Articles and all
reports required to be filed by the Company with those entities under the Act or
other then current applicable laws, rules, and regulations. If a Manager
required by the Act to execute or file any document fails, after demand, to do
so within a reasonable period of time or refuses to do so, any other Manager or
Member may prepare, execute and file that document with the Illinois Secretary
of State.
9.6 Bank Accounts. The Manager shall maintain the funds of the Company in
one or more separate bank accounts in the name of the Company, and shall not
permit the funds of the Company to be commingled in any fashion with the funds
of any other Person.
9.7 Accounting Decisions and Reliance on Others. All decisions as to
accounting matters, except as otherwise specifically set forth herein, shall be
made by the Manager. The Manager may rely upon the advice of his accountants as
to whether such decisions are in accordance with accounting methods followed for
federal income tax purposes. The Company's accountant shall be selected by the
Manager.
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9.8 Tax Matters for the Company Handled by Manager. Manager shall from
time to time cause the Company to make such tax elections as it deems to be in
the best interests of the Company and the Members. Manager shall be designated
as "Tax Matters Partner" (as defined in Code Section 6231), to represent the
Company (at the Company's expense) in connection with all examinations of the
Company's affairs by tax authorities, including resulting judicial and
administrative proceedings, and to expend the Company funds for professional
services and costs associated therewith. In its capacity as "Tax Matters
Partner," Manager shall oversee the Company tax affairs in the overall best
interests of the Company.
9.9 Tax Status and Returns. Any provision hereof to the contrary
notwithstanding, solely for United States federal income tax purposes, each of
the Members hereby confirms that the Company will be subject to all provisions
of Subchapter K of Chapter I of Subtitle A of the Code; provided, however, the
filing of U.S. Partnership Returns of Income shall not be construed to extend
the purposes of the Company or expand the obligations or liabilities of the
Members.
9.10 Tax Withholding.
9.10(a) The Manager is authorized and directed to cause the Company to
withhold from or pay on behalf of any Member the amount of federal, state, local
or foreign taxes that the Manager, after consultation with such Member,
reasonably believes the Company is required to withhold or pay with respect to
any amount distributable or allocable to such Member pursuant to this Agreement,
including, without limitation, any taxes required to be paid by the Company
pursuant to Code Sections 1441, 1442, 1445 or 1446 and any taxes imposed by any
state or other taxing jurisdiction on the Company as an entity. Without limiting
the foregoing, the Manager shall cause the Company to withhold (and remit to the
appropriate governmental authority), from amounts otherwise distributable to a
Member, any taxes that such Member notifies the Manager in writing should be
withheld, which notice shall be given by any Member who becomes aware of any
withholding obligation to which it is subject and shall specifically set forth,
inter alia, the rate at which tax should be withheld and the name and address to
which any amounts withheld should be remitted.
9.10(b) If the Company is required to withhold and pay over to taxing
authorities amounts on behalf of a Member exceeding available amounts then
remaining to be distributed to such Member, such payment by the Company shall
constitute a loan to such Member that is repayable by the Member on demand,
together with interest at the applicable federal rate determined from time to
time under Code Section 7872(f)(2) or the maximum rate permitted under
applicable law, whichever is less, calculated upon the outstanding principal
balance of such loan as of the first day of each month. Any such loan shall be
repaid to the Company, in whole or in part, as determined by the Manager in its
sole discretion, either (i) out of any distributions from the Company which the
Member is (or becomes) entitled to receive, or (ii) by the Member in cash upon
demand by the Member (said Member bearing all of the Company's costs of
collection, including reasonable attorneys' fees, if payment is not remitted
promptly by the Member after such a demand for payment).
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9.10(c) Each Member agrees to cooperate fully with all efforts of the
Company to comply with its tax withholding and information reporting obligations
and agrees to provide the Company with such information as the Manager may
reasonably request from time to time in connection with such obligations.
9.11 Construction Budget: Advance of MAG Loan. The Manager shall prepare a
Construction Budget for the opening of the restaurant and deliver such
Construction Budget to the Members at least concurrently with the delivery of
the detailed preliminary plans and specifications, if any, required under the
Lease. The Super majority Interest must approve such Construction Budget
concurrently with the approval of the Landlord, if required, of the Tenant's
plans under the Lease. The Initial Capital Contributions from the Non-Manager-
Members and the MAG Loan shall be contributed and advanced, respectively, on
February 1, 1999, but may not be utilized prior to the approval by the
Supermajority Interest of the Construction Budget and approval by the Landlord,
if required under the Lease. In the event that Landlord does not approve of the
Company's plans and specifications or the Supermajority Interest does not
approve of the Construction Budget, the contributions and loans shall be
returned to MAG. The Preferred Return, and interest upon the MAG Loan, shall
commence on February 1, 1999. The MAG Loan shall be placed into a special
construction account in the name of Company. Such account shall be subject to
the control of MAG, which shall designate the signatories thereon. The MAG Loan
shall be released from time to time upon the submission by Manager to MAG of
evidence of progress of the completion of construction in accordance with the
provisions of the Construction Budget. If, at any time, it appears that the
construction will exceed the Construction Budget, Manager shall place the amount
of such anticipated excess in an escrow account to assure completion. The
establishment of such account is a condition precedent to the continued release
of the MAG Loan.
9.12 Annual Budget. The Manager shall present an annual operating budget
and annual capital expense budget in December of each year for the following
year. The capital expense budget shall be subject to the approval of Members
holding a Majority Interest of the Non-Manager-Members, which approval shall not
be unreasonably withheld or delayed.
ARTICLE 10.
DISSOLUTION AND WINDING UP
10.1 Dissolution. The Company shall be dissolved, its assets shall be
disposed of and its affairs wound up on the first to occur of the following:
10.1(a) Upon the happening of any event of dissolution specified in the
Articles;
10.1(b) Upon the entry of a decree of judicial dissolution pursuant to the
Act;
10.1(c) Upon the vote of the Members holding the Percentage Interests set
forth in Section 4.7; or
10.1(d) The sale of all or substantially all of the assets of the
Company.
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10.2 Winding Up. Upon the occurrence of any event specified in Section
10.1, the Company shall continue solely for the purpose of winding up its
affairs in an orderly manner, liquidating its assets, and satisfying the claims
of its creditors. The Manager, if he has not wrongfully dissolved the Company,
or if he has, then the Members, shall be responsible for overseeing the winding
up and liquidation of Company, shall take full account of the liabilities and
assets of the Company, shall either cause its assets to be sold or distributed,
and if sold (as promptly as is consistent with obtaining the fair market value
thereof) shall cause the proceeds therefrom, to the extent sufficient therefor,
to be applied and distributed as provided in Section 10.5. The Persons winding
up the affairs of the Company shall give written notice of the commencement of
winding up by mail to all known creditors and claimants whose addresses appear
on the records of the Company.
10.3 Distributions in Kind. Any non-cash asset distributed to one or more
Members shall first be valued at its fair market value to determine the taxable
income or taxable loss that would have resulted if such asset were sold for such
value, such taxable income or taxable loss shall then be allocated pursuant to
Article 6, and the Members' Capital Accounts shall be adjusted to reflect such
allocations. The amount distributed and charged to the Capital Account of each
Member receiving an interest in such distributed asset shall be the fair
market value of such interest (net of any liability secured by such asset that
such Member assumes or takes subject to). The fair market value of such asset
shall be determined by the Manager orby the Members or if any Member objects by
an independent appraiser (any such appraiser must be recognized as an expert in
valuing the type of asset involved) selected by the Manager or liquidating
trustee and approved by the Members.
10.4 Order of payment and Distribution Upon Dissolution. Upon a
dissolution of the Company, the Members shall take or cause to be taken a full
account of the Company's assets and liabilities as of the date of such
dissolution and shall proceed with reasonable promptness to liquidate the
Company's assets and to terminate its business. The cash proceeds from the
liquidation, as and when available therefor, shall be applied in the following
order of priority:
10.4(a) to the payment of all taxes, debts and other obligations and
liabilities of the Company (including the MAG Loan) and the necessary expenses
of liquidation; provided, however, that all debts, obligations and other
liabilities of the Company as to which personal liability exists with respect to
any Member shall be satisfied, or a reserve shall be established therefor, prior
to the satisfaction of any debt, obligation or other liability of the Company as
to which no such personal liability exists; and provided. further, that where a
contingent debt, obligation or liability exists, a reserve, in such amount as
the Manager deems reasonable and appropriate, shall be established to satisfy
such contingent debt, obligation or liability, which reserve shall be
distributed as provided in this subsection (a) only upon the termination of such
contingency;
10.4(b) to the Members to the extent of any unpaid Preferred Return;
10.4(c) to the Members to the extent of any balance of the Non-Manager-
Members Adjusted Capital Contributions;
33
10.4(d) to the Manager to the extent of any balance of the Manager's
Adjusted Additional Capital Contributions; and
10.4(e) the balance, if any, shall be distributed to the Members in
accordance with Section 6.12(b)(v).
10.5 Limitations on Payments Made in Dissolution. Except as otherwise
specifically provided in this Agreement or in other written agreements among
the Members, each Member shall only be entitled to look solely at the assets of
Company for the return of its, his or her positive Capital Account balance and
shall have no recourse for its, his or her Capital Contribution and/or share of
taxable income (upon dissolution or otherwise) against the Manager or any
other Member except as provided in Article 11.
10.6 Articles of Dissolution. The Manager, if it has not wrongfully
dissolved the Company, or the Members, if it has, shall execute Articles of
Dissolution in such form as shall be prescribed by the Illinois Secretary of
State and file the Articles as required by the Act upon the completion of the
winding up of the affairs of the Company.
10.7 No Action for Dissolution. Except as expressly permitted in this
Agreement, a Member shall not take any voluntary action that directly causes a
Dissolution Event. The Members acknowledge that irreparable damage would be done
to the goodwill and reputation of the Company if any Member should bring an
action in court to dissolve the Company under circumstances where dissolution is
not required by Section 10.1. This Agreement has been drawn carefully to provide
fair treatment of all parties and equitable payment in liquidation of the
Distributional Interests. Accordingly, except where the Manager has failed to
liquidate the Company as required by this Article 10, each Member hereby waives
and renounces his or her right to initiate legal action to seek the appointment
of a receiver or trustee to liquidate the Company or to seek a decree of
judicial dissolution of the Company on the ground that (a) it is not reasonably
practicable to carry on the business of the Company in conformity with the
Article or this Agreement, or (b) dissolution is reasonably necessary for the
protection of the rights or interests of the complaining Member. Damages for
breach of this Section 10.8 shall be in monetary damages only (and not specific
performance) and the damages may be offset against distributions by the Company
to which such Member would otherwise be entitled.
ARTICLE 11.
INDEMNIFICATION AND INSURANCE
11.1 Indemnification of Agents. The Company shall indemnify any Person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding by reason of the fact that he or she is
or was a Member, Manager, officer, employee or other agent of the Company or
that, being or having been such a Member, Manager, officer, employee or agent,
he or she is or was serving at the request of the Company as a manager,
director, officer, employee or other agent of another limited liability company,
corporation, partnership, joint venture, trust or other enterprise (all such
persons being referred to hereinafter as an "agent"), to the fullest extent
permitted by applicable law in effect on the date hereof and to such greater
extent as applicable law may hereafter from time to time permit.
34
11.2 Insurance. The Company shall have the power to purchase and maintain
insurance on behalf of any Person who is or was an agent of the Company against
any liability asserted against such Person and incurred by such Person in any
such capacity, or arising out of such Person's status as an agent, whether or
not the Company would have the power to indemnify such Person against such
liability under the provisions of Section 11.1 or under applicable law.
11.3 Type of Insurance. Manager shall at all times during the term of this
Agreement, procure and maintain insurance as required by the Lease.
11.4 Policies and Endorsements.
11.4(a) The reasonable cost of all such insurance policies shall be an
expense chargeable to the Company. If any such policy of insurance covers
properties other than, or afford protection in connection with activities
occurring other than in connection with, the Premises, only an allocable
portion, reasonably determined by Manager, of the cost of such insurance shall
be an expense chargeable to the Premises.
11.4(b) All insurance provided for under Section 11 of this Agreement shall
be effected by policies issued by insurance companies of good national
reputation and adequate financial responsibility, licensed to do business in the
State.
11.4(c) Where permitted, all policies of insurance required under Section
11 shall be carried in the name of Company and shall name Manager as additional
named insured.
ARTICLE 12.
MISCELLANEOUS
12.1 Counsel to the Company. Counsel to the Company may also be counsel to
any Manager or any Affiliate of a Manager. The Manager may execute, on behalf of
the Company and the Members, any consent to the representation of the Company
that counsel may request pursuant to the California Rules of Professional
Conduct or similar rules in any other jurisdiction. By his execution hereof,
each Member specifically acknowledges that ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Fields Claman &
Machtinger LLP has represented ▇▇▇▇▇ ▇▇▇▇▇ on an ongoing and continuous basis;
that ▇▇▇▇▇ has had extensive business dealings with the partners of MAG in which
he has been represented by ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Fields Claman & Machtinger LLP;
that ▇▇▇▇▇ is a substantial investor in and a substantial creditor of Manager;
and that Herzog, Fisher, ▇▇▇▇▇▇▇ & ▇▇▇▇▇, A Law Corporation, has represented
Manager on an ongoing and continuous basis and has represented certain
Affiliates of ▇▇▇▇▇, i.e., ▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇ along with entities owned
by them. Since there are actual and potential conflicts of interest among the
Members due to their differing classes and differing economic and management
interests in the Company, each Member should have separate representation to
avoid the possibility that ▇▇▇▇▇▇▇▇▇ Glusker Fields Clamam & Machtinger LLP may
be influenced in its representation of the Company by its representation of
▇▇▇▇▇ and his Affliates and MAG, and that Herzog, Fisher, ▇▇▇▇▇▇▇ & ▇▇▇▇▇, A Law
Corporation, may be influenced in its representation of the Company by its
representation of the Manager or of Affiliates of ▇▇▇▇▇. It is possible that if
each Member had separate counsel, such counsel might structure the formation of
the Company and the
35
transaction in a fashion different than the structure contemplated by the
Company. By his execution hereof, each Member confirms that either he has
consulted with separate counsel or has determined not to obtain such separate
representation and agrees to waive any conflict which is created by the
representation by ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Fields Claman & Machtinger LLP of both ▇▇▇▇▇
and his Affiliates, MAG and the Company and the representation of ▇▇▇▇▇▇, ▇▇▇▇▇▇
& ▇▇▇▇▇▇▇, A Law Corporation, of both Manager and its Affiliates and the
Company. Each Member specifically acknowledges that among the Affiliates of
▇▇▇▇▇ for whom ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Fields Claman & Machtinger LLP have performed
services are ▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇, along with entities owned by them; and
that ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇ and/or such entities have ongoing business
relationships with Manager and have acted for Manager in connection with its
negotiations with MAG. Each Member further specifically acknowledges that
▇▇▇▇▇▇▇▇▇ Glusker Fields Claman & Machtinger LLP has been engaged by GCI to
perform services for it relating to employee relations and other labor matters.
MAG specifically acknowledges that there may be a conflict between ▇▇▇▇▇ and his
Affiliates, as an investor in and creditor of Manager, and MAG; and that
▇▇▇▇▇▇▇▇▇ Glusker Fields Claman & Machtinger LLP may be influenced in its
representation of MAG by its representation of ▇▇▇▇▇ and his Affiliates, and as
persons with an ongoing business relations with GCI. MAG expressly waives such
conflict or potential conflict. Each party waives generally each and all of the
conflicts and potential conflicts which are outlined in this Section 12.1.
Without limiting the foregoing, the Members agree that no attorney shall be
precluded from representing a Member (including Manager) in connection with any
case, claim, controversy or dispute because of having represented the Company
and/or another Member (including Manager).
12.2 Complete Agreement. This Agreement and the Articles, together with
the other documents referred to herein, constitute the complete and exclusive
statement of agreement among the Members and Manager with respect to the subject
matter herein and therein and replace and supersede all prior written and oral
agreements or statements by and among the Members and Manager or any of them. No
representation, statement, condition or warranty not contained in this Agreement
or the Articles will be binding on the Members or Manager or have any force or
effect whatsoever. To the extent that and provision of the Articles conflict
with any provision of this Agreement, the Articles shall control.
12.3 Binding Effect. Subject to the provisions of this Agreement relating
to transferability, this Agreement will be binding upon and inure to the benefit
of the Members, and their respective successors and assigns.
12.4 Parties in Interest. Except as expressly provided in the Act, nothing
in this Agreement shall confer any rights or remedies under or by reason of this
Agreement on any Persons other than the Members and Manager and their respective
successors and assigns nor shall anything in this Agreement relieve or discharge
the obligation or liability of any third person to any party to this Agreement,
nor shall any provision give any third person any right of subrogation or action
over or against any party to this Agreement.
36
12.5 Pronouns: Statutory References. All pronouns and all variations
thereof shall be deemed to refer to the masculine, feminine, or neuter, singular
or plural, as the context in which they are used may require. Any reference to
the Code, the Regulations, the Act, Corporations Code or other statutes or laws
will include all amendments, modifications, or replacements of the specific
sections and provisions concerned.
12.6 Headings. All headings herein are inserted only for convenience and
ease of reference and are not to be considered in the construction or
interpretation of any provision of this Agreement.
12.7 Interpretation. In the event any claim is made by any Member relating
to any conflict, omission or ambiguity in this Agreement, no presumption
or burden of proof or persuasion shall be implied by virtue of the fact that
this Agreement was prepared by or at the request of a particular Member or his
or her counsel.
12.8 References to this Agreement. Numbered or lettered articles, sections
and subsections herein contained refer to articles, sections and subsections of
this Agreement unless otherwise expressly stated.
12.9 Power of Attorney. To the extent not inconsistent with the terms of
this Agreement, each Member hereby irrevocably constitutes and appoints the
Manager his true and lawful attorney-in-fact, with full power and authority, in
his name, place and ▇▇▇▇▇, to make, execute, consent to, swear to, seal,
acknowledge, record and file:
12.9(a) any certificates and other instruments which may be required to be
filed by the Company or the Member under the laws of the State of Illinois or
any jurisdiction in which the Company is conducting, or proposes to conduct,
business;
12.9(b) any and all amendments or modifications of the instruments
described in subsection (a);
12.9(c) all certificates and other instruments which may be required to
effect the dissolution and termination of the Company pursuant to the provisions
of this Agreement;
12.9(d) subject to the provisions of Section 4.7 hereof, any deed,
promissory note, deed to secure debt, ▇▇▇▇ of sale and other instruments
necessary or appropriate in connection with the sale, leasing, development,
operation or financing of the Company's property or any part thereof; and
12.9(e) all such other instruments and agreements as such attorney-in-fact
may deem necessary or desirable in order to carry out the provisions of this
Agreement in accordance with its terms.
Each member hereby acknowledges and agrees that the power of attorney
hereby given is a power coupled with an interest and is irrevocable.
37
12.10 Disputed Matters: Arbitration.
12.10(a) Any dispute or difference between the parties 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 and resolved
by arbitration as herein provided. Any party may request the American
Arbitration Association (the "AAA") to designate one arbitrator, who shall be a
retired California Superior Court or Court of Appeals judge.
12.10(b) The arbitrator shall consider the dispute at issue at Los Angeles,
California at a mutually agreed upon time within sixty (60) days (or such longer
period as may be acceptable to the parties) of the designation of the
arbitrator. The arbitration proceeding shall be held in accordance with the
rules for commercial arbitration of the AAA in effect on the date of the initial
request by a party that gave rise to the dispute to be arbitrated (as such rules
are modified by the terms of this Agreement or may be further modified by mutual
agreement of the parties) and shall include an opportunity for the parties to
conduct discovery in accordance with California Code of Civil Procedure Section
1283.05, as amended, in advance of the proceeding. Notwithstanding the
foregoing, the parties hereto agree that they will attempt, and they intend that
they and the arbitrator should use their best efforts in that attempt, to
conclude the arbitration proceeding and have a final decision from the
arbitrator within 120 days from the date of selection of the arbitrator;
provided, however, that the arbitrator shall be entitled to extend such 120-day
period for one or more additional 120-day periods. The arbitrator shall
immediately deliver a written award with respect to the dispute to each of the
parties, who shall promptly act in accordance therewith. Each party to such
arbitration agrees that any award of the arbitrator shall be final, conclusive
and binding and that they will not contest any action by any other party thereto
in accordance with an award of the arbitrator. It is specifically understood and
agreed that any party may enforce any award rendered pursuant to the arbitration
provisions of this Section 12.10 by bringing suit in any court of competent
jurisdiction.
12.10(c) Neither this agreement to arbitrate nor any demand for arbitration
hereunder shall waive any party's right to obtain any provisional remedy,
including, without limiting the generality of the foregoing, injunctive relief,
from any court of competent jurisdiction, as may be necessary in such party's
sole and subjective judgment, with respect to matters otherwise subject to
arbitration pursuant to the terms of this Agreement. However, if any party seeks
or obtains such provisional remedy, an arbitration hereunder shall also be
commenced, and, if necessary, the merits of the controversy or claim and/or the
determination of an appropriate permanent remedy shall be sealed by arbitration
in accordance with this Agreement.
12.10(d) To the extent judicial proceedings are permitted or required
hereunder, any appropriate state or federal district court located in Los
Angeles County, California, shall have sole and exclusive jurisdiction over any
case or controversy arising hereunder and shall be the proper forum in which to
adjudicate such case or controversy.
12.10(e) All fees, costs and expenses (including reasonable attorneys' fees
and expenses) incurred by the party that prevails in any such arbitration
commenced pursuant to this Section 12.10 or any judicial action or proceeding
seeking to enforce the agreement to arbitrate disputes as set forth in this
Section 12.10, or seeking provisional remedies as authorized by this Section
38
12.10, or seeking to enforce any order or award of any arbitration commenced
pursuant to this Section 12.10 may be assessed against the party or parties that
do not prevail in such arbitration in such manner as the arbitrator or the court
in such judicial action, as the case may be, may determine to be appropriate
under the circumstances. All costs and expenses attributable to the arbitrator
shall be allocated among the parties to the arbitration in such manner as the
arbitrator shall determine to be appropriate under the circumstances.
12.11 Exhibits. All Exhibits attached to this Agreement are incorporated
and shall be treated as if set forth herein.
12.12 Severability. If any provision of this Agreement or the application
of such provision to any person or circumstance shall be held invalid, the
remainder of this Agreement or the application of such provision to persons or
circumstances other than those to which it is held invalid shall not be affected
thereby.
12.13 Additional Documents and Acts. Each Member agrees to execute and
deliver such additional documents and instruments and to perform such additional
acts as may be necessary or appropriate to effectuate, carry out and perform all
of the terms, provisions, and conditions of this Agreement and the transactions
contemplated hereby. In particular, each Member agrees that to the extent
required by any licensing authorities or any other public authority, such Member
shall cooperate and make available all reasonably necessary information and
execute all necessary documents to enable the Company to qualify for and obtain
all required licenses.
12.14 Notices. All notices, requests, demands, claims and other
communications hereunder shall be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given (1) if
personally delivered, when so delivered, (2) if mailed, two Business Days after
having been sent by registered or certified mail, return receipt requested,
postage prepaid and addressed to the intended recipient as set forth below, (3)
if given by telecopier, once such notice or other communication is transmitted
to the telecopier number specified below and the appropriate answer back or
telephonic confirmation is received, or (4) if sent through an overnight
delivery service in circumstances to which such service guarantees next day
delivery, the day following being so sent:
If to GCI: Grill Concepts, Inc.
▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇, President
Telecopier No.: 310/820-6530
with a copy to: ▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
Telecopier No.: 310/278-5430
39
If to Company: Chicago - The Grill on the Alley
c/o Grill Concepts, Inc.
▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇, President
Telecopier No.: 310/820-6530
with a copy to: Herzog, Fisher, ▇▇▇▇▇▇▇ & ▇▇▇▇▇, A Law Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
Telecopier No.: 310/278-5430
If to MAG: The Michigan Avenue Group
c/o ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier No.:
with a copy to: The Michigan Avenue Group
c/o ▇▇▇▇▇-▇▇▇▇▇▇▇▇ LLC
▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Telecopier No.: 310/477-2522
with a copy to: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Fields Claman & Machtinger LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
Telecopier No.: 310/553-0687
Any party may give any notice, request, demand, claim or other communication
hereunder using any other means (including ordinary mail or electronic mail),
but no such notice, request, demand, claim or other communication shall be
deemed to have been duly given unless and until it actually is received by the
individual for whom it is intended. Any party may change the address to which
notices, requests, demands, claims and other communications hereunder are to be
delivered by giving the other parties notice in the manner herein set forth.
12.15 Amendments. All amendments to this Agreement will be in writing and
approved as set forth in Section 4.7.
12.16 Reliance on Authority of Person Signing Agreement. If a Member is
not a natural person, neither the Company nor any Member will (a) be required to
determine the authority of the individual signing this Agreement to make any
commitment or undertaking on behalf of such entity or to determine any fact or
circumstance bearing upon the existence of the authority of
40
such individual or (b) be responsible for the application or distribution of
proceeds paid or credited to individuals signing this Agreement on behalf of
such entity.
12.17 No Interest in Company Property: Waiver of Action for Partition. No
Member or Distributional Interest Owner has any interest in specific property
of the Company. Without limiting the foregoing, each Member and Distributional
Interest Owner irrevocably waives during the term of the Company any right that
he or she may have to maintain any action for partition with respect to the
property of the Company.
12.18 Multiple Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.
12.19 Time is of the Essence. All dates and times in this Agreement are of
the essence.
12.20 Remedies Cumulative. The remedies under this Agreement are
cumulative and shall not exclude any other remedies to which any person may be
lawfully entitled.
12.21 Governing Law. The local, internal laws of Illinois govern the
validity of this Agreement, the construction of its terms and the interpretation
of the rights and duties of the Members.
IN WITNESS WHEREOF, all of the Members of Chicago - The Grill on the Alley
LLC, an Illinois limited liability company, have executed this Agreement,
effective as of the date written above.
"GCI"
GRILL CONCEPTS, INC., a Delaware corporation
By: /s/
▇▇▇▇▇▇, President
By: /s/
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Secretary
"MAG"
THE MICHIGAN AVENUE GROUP, a general partnership
By:/s/
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, General Partner
41
