EXHIBIT 10.7
LIMITED LIABILITY COMPANY AGREEMENT
OF
JFC ENTERPRISES, LLC
LIMITED LIABILITY COMPANY AGREEMENT
OF
JFC ENTERPRISES, LLC
THIS LIMITED LIABILITY COMPANY AGREEMENT is made and entered into as of
the 20th day of August, 2004, by and among O'Charley's Inc., a Tennessee
corporation, whose address is ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
("O'Charley's"), and ▇▇▇▇ ▇▇▇▇▇▇, an individual residing at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("JV Partner") (each, together with the
other persons who may become members under the terms of this Agreement, a
"Member" and collectively, the "Members").
W I T N E S S E T H:
WHEREAS, O'Charley's, as a result of the expenditure of time, skill,
effort and money, has developed and owns the rights to develop and operate a
unique system of full service varied menu casual dining restaurants which
feature freshly prepared items such as hand-cut and aged steaks, fresh chicken,
seafood, homemade yeast rolls and fresh-cut salads with special recipe dressing
and which serve alcoholic beverages through a full-service bar all under the
trademark O"Charley's(R) (the "System");
WHEREAS, the distinguishing characteristics of the System include, without
limitation, distinctive exterior and interior design, decor, color schemes,
awnings, neons and furnishings, special recipes and menu items, uniform
standards, specifications and procedures for operations, quality and uniformity
of products and services offered, procedures for inventory management and
financial control, training and assistance, and advertising and promotional
programs, all of which may be changed, improved and further developed by
O'Charley's from time to time;
WHEREAS, O'Charley's identifies the System by means of certain trade
names, service marks, trademarks, emblems and indicia of origin, including, but
not limited to, the ▇▇▇▇ ▇'▇▇▇▇▇▇▇'▇(R) and such other trade names, service
marks and trademarks as are now designated (and may hereafter be designated by
O'Charley's) for use in connection with the System (the "Proprietary Marks");
WHEREAS, O'Charley's continues to develop, use and control the use of such
Proprietary Marks in order to identify for the public the source of services and
products marketed thereunder and under the System, and to represent the System's
high standards of quality, appearance and service;
WHEREAS, the Members hereto desire to enter into this Agreement for the
purpose of (a) forming a limited liability company under and pursuant to the Act
(as defined below), to conduct business as an owner and operator of O'Charley's
restaurants as a limited liability company, and to set forth the mutual rights
and obligations of the Members in this Agreement; (b) owning and operating one
or more O'Charley's restaurants utilizing the System; and (c) obtaining a
franchise from O'Charley's for that purpose; and
WHEREAS, O'Charley's, as franchisor, and the LLC, as franchisee, will
contemporaneously herewith enter into a Development Agreement.
NOW, THEREFORE, in consideration of the mutual promises, covenants, and
undertakings hereinafter contained, and other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the Members hereby
agree as follows:
ARTICLE I.
DEFINITIONS
1.1 DEFINITIONS. As used herein the following terms have the indicated
meanings:
1.1.1 "Act" means the Delaware Limited Liability Company Act, being
Title 6, Sections 18-101 to 18-1109 of the Delaware Code Annotated, as amended
from time to time, and any corresponding provisions of any successor
legislation.
1.1.2 "Affiliate" means any person directly or indirectly
controlling, controlled by, or under common control with such person.
1.1.3 "Agreement" means this Limited Liability Company Agreement,
as amended from time to time.
1.1.4 "Assign" means to make an Assignment.
1.1.5 "Assignment" means any transfer, alienation, sale,
conveyance, assignment, or other disposition of all or any part of an existing
Membership Interest in the LLC, by operation of law or otherwise, including
without limitation any gift, bequest, devise, hypothecation, mortgage, lien,
pledge, encumbrance, or granting of a security interest.
1.1.6 "Available Cash Flow" means all cash, revenues, and funds
received by the LLC, less the sum of the following to the extent paid or set
aside by the LLC (which shall be paid from the cash, revenues and funds received
by the LLC in the following priority): (a) all trade payables and approved
expenses of the LLC; (b) all principal and interest payments due on senior
indebtedness and capitalized leases, including all principal and interest
payments due on indebtedness of the LLC owed to GE Capital; (c) all interest due
under the Revolving Loan Agreement; and (d) such approved capital expenditures
and reserves as the Board deems reasonably necessary for the proper operation of
the LLC's business.
1.1.7 "Board" means the Board of Managers of the LLC established
pursuant to Article VII.
1.1.8 "Board Member" has the meaning given to such term in Section
7.3 hereof.
1.1.9 "Capital Account" in respect of any Member means the account
established for that Member pursuant to Section 5.1 hereof, and as may be
adjusted from time to time in accordance with this Agreement.
1.1.10 "Capital Contribution" shall mean any contribution to the
capital of the LLC in cash or property by a Member whenever made.
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1.1.11 "Certificate of Formation" means the Certificate of Formation
of the LLC filed in the Office of the Secretary of State of the State of
Delaware, as amended from time to time.
1.1.12 "Closing" has the meaning given to such term in Section 11.7
hereof.
1.1.13 "Code" means the Internal Revenue Code of 1986, as amended
from time to time, and any corresponding provisions of any successor
legislation.
1.1.14 "Development Agreement" means that certain Development
Agreement, of even date herewith, between the LLC, the JV Partner and
O'Charley's.
1.1.15 "Dissolution Event" has the meaning given to such term in
Section 12.2 hereof.
1.1.16 "Escrow Agreement" means that certain Escrow Agreement, of
even date herewith, by and among the JV Partner, O'Charley's and the LLC.
1.1.17 "Entity" means any corporation, partnership, trust, limited
liability company, or other entity.
1.1.18 "Financial Rights" means a Member's rights as a member of the
LLC (a) to share in Net Income and Net Loss to the extent provided in this
Agreement, and (b) to share in distributions to the extent provided in this
Agreement.
1.1.19 "Franchise Agreement(s)" means any or all of those certain
Operating Agreements between the LLC, the JV Partner and O'Charley's relating to
restaurants to be developed pursuant to the Development Agreement.
1.1.20 "Governance Rights" means all of a Member's rights as a
member of the LLC other than Financial Rights.
1.1.21 "Gross Sales" has the meaning set forth in the Franchise
Agreement.
1.1.22 "JV Partner" means ▇▇▇▇ ▇▇▇▇▇▇, an individual residing at ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
1.1.23 "LLC" means JFC Enterprises, LLC, a Delaware limited
liability company.
1.1.24 "Loan Program" means the financing program provided by GE
Capital Franchise Finance Corporation under that certain Program Agreement to be
entered into with O'Charley's and the LLC or any successor senior indebtedness.
1.1.25 "Majority in Interest" and "majority in interest of the
remaining Members" each mean Members (other than any Members excluded from the
applicable vote, consent or other action by the terms of this Agreement or the
Act) holding an interest in over 50% of the capital and profits of the LLC.
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1.1.26 "Majority of the Membership Interests" and "majority of the
voting power" each mean over 50% of the Membership Percentages (exclusive of any
Membership Percentages excluded from the applicable vote, consent or other
action by the terms of this Agreement or the Act).
1.1.27 "Members" means the persons who are, from time to time,
admitted as members of the LLC pursuant to the Act and this Agreement and whose
names are set forth on Exhibit A which is attached hereto and made part of this
Agreement, as such Exhibit A may be amended from time to time.
1.1.28 "Membership Interest" means a Member's interest in the LLC,
which when expressed as a percentage of all Membership Interests in the LLC
shall be equal to such Member's Membership Percentage.
1.1.29 "Membership Percentage" means the percentage interest of a
Member as shown on Exhibit A, as amended from time to time as provided in
Section 4.6 hereof or as otherwise required by this Agreement, the Act, or the
Code.
1.1.30 "Net Income" and "Net Loss," for each fiscal year or other
period, means an amount equal to the LLC's taxable income or loss (including but
not limited to any gain or loss to the LLC from any sale or disposition of all
or any portion of the assets of the LLC) for such year or period, determined in
accordance with Section 703(a) of the Code (for this purpose, all items of
income, gain, loss or deduction required to be stated separately pursuant to
Section 703(a)(1) of the Code shall be included in taxable income or loss), with
the following adjustments:
(i) Expenditures described in Section 705(a)(2)(B) of the
Code shall be included as an expense in the determination of Net Income and Net
Loss; and
(ii) Income exempt from taxation shall be included in the
determination of Net Income and Net Loss.
1.1.31 "New Member" means any person other than the JV Partner and
O'Charley's.
1.1.32 "O'Charley's" means O'Charley's Inc., a Tennessee
corporation.
1.1.33 "Restaurant(s) " has the meaning set forth in Section 3.1
hereof.
1.1.34 "Revolving Loan Agreement" means the Revolving Loan Agreement
between the LLC and O'Charley's pursuant to which O'Charley's will make
available to the LLC, subject to the terms of the Revolving Loan Agreement, a
revolving line of credit in the maximum principal amount of $750,000.
1.1.35 "Successor" means a person's executor, administrator,
guardian, conservator, other legal representative, or successor or assign.
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1.1.36 "Tax Amount" means the product of the highest individual
marginal federal income tax rate for the year in question and the LLC's net
taxable income for the year of the determination; provided, however, that the
net taxable income on which the Tax Amount is computed shall be reduced to the
extent of Net Losses previously allocated pursuant to Section 5.2 hereof (but
only where such Net Losses have not previously reduced net taxable income for
purposes of computing the Tax Amount). It is the intent of the Members that the
LLC not be required to distribute a Tax Amount to the extent that the cumulative
Net Losses allocated pursuant to Section 5.2 exceed the cumulative Net Income
allocated pursuant to Section 5.2.
1.1.37 "TMM" means the person designated by the Board to be the Tax
Matters Member.
1.1.38 "Treasury Regulations" means proposed, temporary, and final
regulations promulgated under the Code.
1.1.39 "Year of Termination" means the fiscal year during which the
final distribution of assets is completed.
ARTICLE II.
ORGANIZATION
2.1 FORMATION. On July 12, 2004, the LLC was formed by the filing of the
Certificate of Formation in the Office of the Secretary of State of the State of
Delaware.
2.2 ADOPTION OF AGREEMENT. The Members hereto hereby adopt this
Agreement as the limited liability company agreement of the LLC, as the term
"limited liability company agreement" is used in the Act, to set forth the
rules, regulations, and provisions regarding the governance of the LLC, the
conduct of its business, and the rights and privileges of its Members.
2.3 NAME. The name of the LLC shall be JFC Enterprises, LLC. The LLC may
adopt and conduct its business under such assumed or trade names as may be
determined by the Members from time to time. The LLC shall file any assumed or
fictitious name certificates as may be required to conduct business in any
state.
2.4 PRINCIPAL PLACE OF BUSINESS. The initial registered agent and
registered office of the LLC shall be The Corporation Trust Company, Corporation
Trust Center, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, New Castle County.
The principal executive office of the LLC shall be located at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or such other place as the Members
may from time to time determine.
ARTICLE III.
PURPOSE AND POWERS
3.1 PURPOSE. The exclusive purpose of the LLC shall be to own and
operate those certain casual restaurants know as O'Charley's to be established
by the LLC pursuant to the Development Agreement, (individually, a "Restaurant,"
or collectively, the "Restaurants"), utilizing the System and Proprietary Marks
owned by O'Charley's. Each Restaurant shall be
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operated pursuant to a separate Franchise Agreement to be executed between
O'Charley's, as franchisor, and the LLC, as franchisee. The LLC shall not engage
in any other business or activities. The purpose, authority, and scope of the
LLC shall extend no further than the purpose set forth in this Section 3.1. This
Agreement shall not be deemed or construed to create a relationship between the
Members with respect to any activities whatsoever except for those activities
required for the accomplishment of the LLC's purpose as specified in this
Section 3.1. Each Member acknowledges that neither the LLC nor any Member
(except O'Charley's) shall have the right to establish any O'Charley's
restaurants except such Restaurants as the LLC may establish pursuant to
executed Franchise Agreements. Each Member acknowledges and agrees that
O'Charley's is the sole and exclusive owner of the System and the Proprietary
Marks and neither the LLC nor any Member (except O'Charley's) has any right,
title or interest in or to the System or the Proprietary Marks, except as
specifically provided in executed Franchise Agreements. Nothing contained herein
shall be construed as obligating O'Charley's to approve additional restaurants
on behalf of the LLC (except as specifically contemplated by the Development
Agreement), or to grant additional franchises or to execute additional Franchise
Agreements with the LLC. Except as otherwise provided in the Development
Agreement or any Franchise Agreement, nothing contained herein shall be
construed as limiting O'Charley's right to open, or license others to open,
O'Charley's restaurants at any location, and neither the LLC nor any Member
(except O'Charley's) shall have any interest in such restaurants.
3.2 POWERS. The LLC may exercise all powers that may be legally
exercised by limited liability companies under the Act necessary or convenient
to carry out its business and affairs and to effectuate the purpose described in
Section 3.1 hereof.
ARTICLE IV.
CAPITAL CONTRIBUTIONS AND MEMBERSHIP INTERESTS
4.1 INITIAL CAPITAL CONTRIBUTION. The JV Partner shall be credited with
having made an initial Capital Contribution to the LLC in cash in the amount of
$250,000, which shall be contributed upon the execution hereof.
4.2 INTEREST ON AND RETURN OF CAPITAL ACCOUNTS. No Member shall be
entitled to any interest from his Capital Account or on his Capital Contribution
and, except as otherwise provided herein, no Member shall have the right to
demand or to receive the return of all or any part of his Capital Account or of
his Capital Contributions.
4.3 ADDITIONAL CONTRIBUTIONS.
4.3.1 ESCROW AMOUNT. The JV Partner shall contribute upon the
execution hereof in cash to O'Charley's to hold in escrow pursuant to the terms
of the Escrow Agreement an additional $250,000. Such amount shall be disbursed
from escrow in accordance with the Escrow Agreement as follows:
(i) first, to O'Charley's in the amount of the aggregate
unpaid development fees for all Restaurants
contemplated to be developed pursuant to the
Development Agreement in the event the initial
Restaurant is not open on or prior to November 15,
2004;
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(ii) next, to any operating capital required for the initial
Restaurant under Section 4.3.3 hereof;
(iii) next, to any capital required to construct and open
subsequent Restaurants, if any, under Section 4.3.2
hereof; and
(iv) next, to the repayment of amounts outstanding under the
Revolving Loan Agreement if a second Restaurant is not
opened in accordance with the Development Agreement or
upon the election by O'Charley's to exercise the
O'Charley's Purchase Option pursuant to Section 11.6
hereof.
4.3.2 PRE-OPENING BUDGET. The amounts required under the
Pre-Opening Budget (as defined in Section 10.6 hereof) for each Restaurant shall
be funded as follows:
(i) first, in the case of the initial Restaurant, from the
initial Capital Contribution funded by the JV Partner
and, in the case of any subsequent Restaurant, from the
Escrow Agreement;
(ii) next, up to $2,500,000 under the Loan Program; and
(iii) next, up to $250,000 under the Revolving Loan
Agreement.
4.3.3 OPERATING CAPITAL DEFICIENCIES. In the event of any
deficiency in the amounts required to fund the Operating Budget (as defined in
Section 10.7 hereof) of each Restaurant, such cash flow deficiencies shall be
funded as follows:
(i) first, from amounts available under the Escrow
Agreement; and
(ii) next, from the Revolving Loan Agreement.
4.3.4 ADDITIONAL CAPITAL CONTRIBUTIONS. Except as specifically set
forth herein, no Member shall be required to make any additional Capital
Contribution. Members may make such additional Capital Contributions as may be
approved from time to time by the Board.
4.4 WITHDRAWAL OR REDUCTION OF MEMBERS' CAPITAL CONTRIBUTIONS. No Member
shall have the right to withdraw from the LLC. A Member shall not receive out of
the LLC's property all or any part of such Member's Capital Contributions except
as provided in Sections 5.7 and 12.3 hereof.
4.5 MEMBERSHIP INTERESTS AND AMENDMENTS TO EXHIBIT A. Each Member shall
be credited with the Membership Interest (expressed as a percentage of all
Membership Interests) and Capital Contribution set forth opposite such Member's
name on Exhibit A. The amounts shown on Exhibit A with respect to Capital
Contributions and Membership Interests shall from time to time be appropriately
amended to reflect changes to such amounts as a result of any additional Capital
Contributions by Members, any withdrawals or reductions in Capital
Contributions, admission of any New Members to the LLC, or any Assignments of
Membership Interests. Exhibit A shall also be amended from time to time to
reflect any changes in the addresses of Members.
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4.6 LOANS AND GUARANTEES BY O'CHARLEY'S.
4.6.1 REVOLVING LOAN AGREEMENT. O'Charley's will enter into the
Revolving Loan Agreement with the LLC on the terms and subject to the conditions
set forth in the Revolving Loan Agreement to fund in accordance with Section
4.3.2 the Pre-Opening Budget and in accordance with Section 4.3.3, to fund cash
flow deficiencies under the Operating Budget.
4.6.2 DISCRETIONARY LOANS. In the event the LLC is in need of
additional funds, O'Charley's may, but shall not be obligated to, make loans to
the LLC. Any such loan shall bear interest at a rate, and shall have repayment
terms, as the Board shall approve.
4.6.3 LOAN PROGRAM GUARANTY. O'Charley's shall provide a guaranty
of the Loan Program on such terms and conditions as O'Charley's and GE Capital
Franchise Finance Corporation, or its Successor, shall agree from time to time.
ARTICLE V.
ALLOCATION OF INCOME AND LOSSES; CASH DISTRIBUTIONS
5.1 CAPITAL ACCOUNTS. The LLC will maintain for each Member an account
to be designated as such Member's "Capital Account." Each such Capital Account
shall be credited (a) with the cash contributions of the respective Members, (b)
with the fair market value of contributions of property by the respective
Members (net of liabilities associated with such contributed property and
assumed by the LLC), and (c) with the respective Member's share, determined as
provided herein, of Net Income. Each Member's Capital Account shall be debited
(a) with the respective Member's share, determined as provided herein, of Net
Loss, (b) with the cash distributed to the respective Members, and (c) with the
fair market value of all distributions of property to the respective Members
(net of liabilities associated with such distributed property). The Capital
Accounts shall be maintained in accordance with Section 1.704-1(b)(2)(iv) of the
Treasury Regulations, and the items of income, profit, gain, expenditures,
deductions, and losses that increase or decrease such capital accounts shall be
those items that, pursuant to such Treasury Regulations, affect the balance of
capital accounts.
5.2 ALLOCATION OF NET INCOME AND NET LOSS. Subject to Sections 5.3 and
5.4 hereof, Net Income or Net Loss of the LLC for each fiscal year (except for
the Year of Termination), and all items of income, expense, and deduction
entering into the determination of such Net Income or Net Loss, shall be
allocated to the Members in proportion to their Membership Percentages.
5.3 SPECIAL ALLOCATIONS WITH RESPECT TO CONTRIBUTED OR REVALUED
PROPERTY. If a Member contributes property to the LLC which has a difference
between its tax basis and its fair market value on the date of its contribution,
then all items of income, gain, loss, and deduction with respect to such
contributed property shall be determined and allocated among the Members, and
the Capital Accounts of the Members shall be determined in accordance with
Section 704(c) of the Code, the Treasury Regulations thereunder, and Section
1.704-1(b) of the Treasury Regulations, so as to take into account the variation
between the tax basis and fair market value of such property at the time of its
contribution. Furthermore, in the case of any required or optional revaluation
of LLC property and corresponding adjustment of Capital Accounts, taxable
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income, gain, loss, and deduction with respect to such property shall be
allocated among the Members in a manner that takes into account any variation
between the adjusted tax basis of such property and its book value in the same
manner as variations between tax basis and fair market value are taken into
account under Section 704(c) of the Code in determining income, gain, loss,
5.4 ALLOCATIONS IN CASE OF ASSIGNMENT. Net Income or Net Loss allocable
to any Member whose Membership Interest has been Assigned, in whole or in part,
during any fiscal year shall be allocated among the persons who were the holders
of such interests during such year in proportion to their respective holding
periods, without separate determination of the results of LLC operations during
such periods. Net Income or Net Loss attributable to a sale or other disposition
of all or any portion of the assets of the LLC shall be allocated to those
Members who were Members at the time of the occurrence of the disposition giving
rise to such Net Income or Net Loss.
5.5 ALLOCATIONS FOR YEAR OF TERMINATION. Notwithstanding the provisions
of Section 5.2, Net Income or Net Loss for the Year of Termination (and any year
during which the LLC sells all or substantially all of its assets not in the
ordinary course of business), and each item of income, gain, loss and deduction
related to Net Income or Net Loss, shall be allocated to the Members in such
manner as to produce, as nearly as possible, a Capital Account balance for all
Members immediately prior to the final distribution of assets pursuant to
Section 12.3 such that the Capital Account balances of the Members are in
proportion to their Membership Percentages in the Company. To the extent that
allocations pursuant to this Section 5.5 cannot be made to satisfy the foregoing
sentence, these allocations shall be made to produce a result as close to the
result anticipated by the foregoing sentence as possible.
5.6 DISTRIBUTION OF AVAILABLE CASH FLOW. The LLC may, but is not
obligated to, make current distributions out of Available Cash Flow as the Board
may determine. Distributions shall be made in the following priority:
5.6.1 DISTRIBUTION OF TAX AMOUNT. At least ten days before each
date when a U.S. estimated income tax payment is due, the LLC will distribute
from Available Cash Flow to each Member its share of the Tax Amount estimated by
the LLC to have accrued during the estimated tax period prior to the
distribution date. No later than 65 days after the end of the LLC's fiscal year,
the LLC will distribute from Available Cash Flow to each Member its share of any
previously unpaid Tax Amount for such fiscal year. Distributions pursuant to
this Section 5.6.1 for each fiscal year shall be in proportion to the Members'
Membership Percentages.
5.6.2 PAY AMOUNTS UNDER REVOLVING LOAN AGREEMENT. The LLC will next
pay amounts outstanding under the Revolving Loan Agreement from Available Cash
Flow.
5.6.3 THE BALANCE. The LLC will next distribute the balance, if
any, of Available Cash Flow to the Members in proportion to their respective
Membership Percentages.
5.7 DISTRIBUTIONS UPON TERMINATION. Upon termination of the LLC,
distributions will be made in accordance with Section 12.3.
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5.8 CONSEQUENCES OF DISTRIBUTIONS. Upon the determination to distribute,
remit, or pay funds in any manner expressly provided in this Article V, made in
good faith, no Member or Board Member shall incur any liability on account of
such distribution, even though such distribution may have resulted in the LLC
retaining insufficient funds for the operation of its business, which
insufficiency resulted in loss to the LLC or necessitated the borrowing of funds
by the LLC.
ARTICLE VI.
MEMBERS AND MEETINGS
6.1 MEETINGS. The Members shall meet at least once each fiscal year at
such place, on such date and at such time as may be fixed by the Board for the
purpose of electing Board Members and for the transaction of such other lawful
business as may come before the meeting. Special meetings of the Members may be
called by the President, the Board or any Member holding a Percentage Interest
of at least 25%, upon provision of written notice of demand to the Members or
the Secretary of the Company. No business shall be acted upon at a special
meeting that is not stated in the notice of the meeting. Member meetings may be
held by telephone or any other communications equipment by means of which all
participating Members can simultaneously hear each other during the meeting.
6.2 QUORUM. No action may be taken at a meeting of the Members unless a
quorum consisting of at least Members holding a Majority of the Membership
Interests is present in person or by proxy. Once a Member is represented at any
meeting, such Member is deemed to be present for the remainder of that meeting
and for any adjournment. A meeting may be adjourned, and notice of an adjourned
meeting is not necessary if the date, time and place to which the meeting is
adjourned are announced at the meeting at which the adjournment is taken.
6.3 ACTION BY WRITTEN CONSENT. Any action which may be taken by the
Members under this Agreement may be taken without a meeting if consents in
writing setting forth the action so taken are signed by the Members who own
Membership Percentages having voting power to cast not less than the minimum
number of votes necessary for such action to be taken by the Members. All
Members who do not participate in taking the action by written consent shall be
given written notice thereof by the Secretary of the LLC promptly after such
action has been taken.
6.4 VOTING RIGHTS; REQUIRED VOTE. Each Member shall have voting power
equal to such Member's Membership Percentage. At any meeting of the Members,
each Member present (in person or by proxy) and entitled to vote shall have a
number of votes equal to such Member's Membership Percentage. At any meeting of
the Members at which a quorum is present (in person or by proxy), a majority of
the voting power present (in person or by proxy) at the time the vote is taken
is required to take action on a matter unless a vote of greater proportion is
otherwise required by this Agreement, the Certificate or the Act.
6.5 NOTICE OF MEMBERS' MEETINGS. Written or printed notice stating the
place, date, and time of any meeting and, in the case of any special meeting, a
statement of the purposes of the meeting and the person or persons calling the
meeting, shall be sent by hand delivery or by first class, certified or
registered United States mail. Such notice must be given no fewer than
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ten (10) days nor more than two (2) months before the date of the meeting, and
the notice shall be deemed to be delivered (a) when deposited in the United
States mail, postage prepaid, addressed to each Member at his or her respective
address as it appears on the records of the Company; or (ii) when received, if
sent by hand delivery.
6.6 WAIVERS OF NOTICE. Whenever the giving of any notice to Members is
required by statute or this Agreement, a waiver thereof, in writing and
delivered to the LLC signed by the person or persons entitled to said notice,
whether before or after the event as to which such notice is required, shall be
deemed equivalent to notice. Attendance of a Member at a meeting or execution of
a written consent to any action shall constitute a waiver of notice of such
meeting or action.
6.7 PROXIES. At all meetings of the Members, a Member may vote in person
or by proxy executed in writing by a Member or by a duly authorized
attorney-in-fact. Such proxy shall be filed with the LLC before or at the time
of the meeting. No proxy shall be valid after eleven (11) months from the date
of its execution, unless otherwise provided in the proxy.
6.8 MATTERS REQUIRING APPROVAL OF MEMBERS. Notwithstanding any other
provision hereof, no action shall be taken, sum expended, decision made or
obligation incurred with respect to a matter within the scope of any of the
major decisions enumerated below ("Member Major Decisions"), unless such Member
Major Decision has been approved by a Majority in Interest of the Members. The
Major Decisions are:
(i) amendment of this Agreement;
(ii) the sale, exchange, assignment, mortgage, pledge or other
transfer or encumbrance of LLC property, except in the ordinary course of a
Restaurant's business;
(iii) borrowing money in the name of the LLC or using LLC property
as collateral for debt;
(iv) requiring any additional Capital Contributions to the LLC;
(v) any act that would prevent the LLC from conducting its
business, operating the Restaurants, or would constitute a breach of or default
under a Franchise Agreement or the Development Agreement;
(vi) confession of a judgment on behalf of the LLC;
(vii) submission of a LLC claim or liability to arbitration;
(viii) the lending of money or extension of credit to anyone or the
guarantee of the obligations of another party, except with respect to credit
purchases of goods and services by customers of a Restaurant, in the normal
course of business;
(ix) the sale, assignment, mortgage, pledge or other transfer or
encumbrance of a Member's interest in the LLC or the execution of any agreement
which would purport to give
11
to a third party any interest in the LLC, unless said transfer is accomplished
pursuant to the procedures established in Article XII hereof; and
(x) admission of New Members.
ARTICLE VII.
BOARD OF MANAGERS
7.1 MANAGEMENT BY BOARD OF MANAGERS. The Members hereby unanimously
agree that full responsibility for management of the business and affairs of the
LLC shall be delegated to the Board.
7.2 POWER AND AUTHORITY OF BOARD OF MANAGERS. Except as otherwise
expressly provided in this Agreement, the Board (acting on behalf of the LLC)
shall have the right, power, and authority to manage, operate and control the
business and affairs of the LLC and to do or cause to be done any and all acts,
at the expense of the LLC, deemed by the Board to be necessary or appropriate to
effectuate the purposes of the LLC. Except as otherwise expressly provided in
this Agreement or as may be approved by the Board, no Member shall have any
authority, right or power, by virtue of being a Member, to bind the LLC, or to
manage or control, or to participate in the management or control of, the
business and affairs of the LLC in any manner whatsoever. Without limiting the
generality of the foregoing, the Board shall have the right, power and authority
on behalf of the LLC:
7.2.1 subject to the terms of any Franchise Agreement, to develop,
review and approve policies, operating guidelines, and other key operational
items for the LLC;
7.2.2 to elect officers of the LLC in accordance with Section 8.1;
7.2.3 to arrange for such personnel as may be necessary or
convenient to carry out the business and affairs of the LLC;
7.2.4 to establish such reasonable cash reserves to provide for
anticipated expenses of the LLC as the Board determines to be necessary for
timely payment of such expenses; and
7.2.5 except as relates to a Member Major Decision, to direct the
President or any other duly appointed officer of the LLC to make, execute,
assign, acknowledge, and file on behalf of the LLC any and all documents or
instruments of any kind which the Board may deem necessary or appropriate in
carrying out the business and affairs of the LLC, including, without limitation,
powers of attorney, agreements of indemnification, documents, or instruments of
any kind or character, and amendments thereto.
Except as may be approved by the Board, no Board Member, acting
individually, shall have any authority, right or power, by virtue of being a
Board Member, to bind the Company.
7.3 MATTERS REQUIRING APPROVAL OF THE BOARD. Notwithstanding any other
provision hereof, no action shall be taken, sum expended, decision made or
obligation incurred with respect to a matter within the scope of any of the
major decisions enumerated below ("Board
12
Major Decision"), unless such Board Major Decision has been approved by the
Board in accordance with this Article VII:
(i) approval of a Pre-Opening Budget and any Operating Budget;
(ii) the purchase or lease of any real property or any personal
property involving a purchase price or aggregate lease payments in excess of Ten
Thousand Dollars ($10,000) individually, or Twenty Thousand Dollars ($20,000) in
the aggregate in any fiscal year, unless in each case previously approved as
part of a Pre-Opening Budget or Operating Budget;
(iii) the making, execution or delivery, on behalf of the LLC of any
promissory note, mortgage, deed of trust, security agreement, guarantee,
indemnity bond, surety bond, accommodation paper or endorsement, lease or
purchase agreement, or other instrument purporting to evidence any debt or
obligation, and/or renewal and extension of any of the foregoing;
(iv) entering into any transaction with any Member or any affiliate
of any Member; and
(v) the assignment, transfer, pledge, compromise or release of any
claim of or debt owning to the LLC except upon payment in full to the LLC of
such claim or debt.
7.4 NUMBER; QUALIFICATIONS. The Board shall at all times be composed of
four (4) managers (each, a "Board Member"). Each Board Member shall be a natural
person, but need not be a resident of the State of Delaware or a Member.
7.5 ELECTION. A Majority in Interest of the Members cast in favor of
each candidate for Board Member at the duly-called annual meeting of Members (or
any duly-called and convened special meeting called for such purpose) shall be
required for the election of each Board Member. Each Board Member shall hold
office for a term of one year or until his or her successor is elected and
qualified, or until his or her earlier death, resignation or removal.
Notwithstanding anything herein to the contrary, the Members shall take
all appropriate actions to fix and maintain a Board consisting of four (4)
persons. Each Member hereby agrees to vote all of such Member's Percentage
Interest in favor of the election of ▇▇▇▇▇ ▇▇▇▇▇▇ (representative of
O'Charley's), ▇▇▇ ▇▇▇▇▇▇▇▇ (representative of O'Charley's), ▇▇▇▇ ▇▇▇▇▇▇
(representative of the JV Partner) and ▇▇▇▇ ▇▇▇▇▇▇ (representative of the JV
Partner) as Board Members at any meeting of Members at which Board Members are
to be elected. If any Board Member for any reason is unable or unwilling to
serve as a Board Member, or ceases to serve as a Board Member during his term of
office, the resulting vacancy on the Board shall be filled by a nominee
recommended by the Member for whom such vacating Board Member was a
representative (as indicated above), and each Member hereby agrees to vote all
of such Member's Percentage Interest in favor of the election of such nominee at
any meeting of Members at which Board Members are to be elected. Voting in favor
of the Board Members as set forth herein by the Members shall include, but shall
not be limited to, the voting of their Percentage Interests in the LLC, the
execution of written consents, the filling of vacancies on the Board, the
waiving of notice, the granting of proxies or the attending of meetings for the
purpose of electing and
13
maintaining such persons as Board Members, and the taking of such action as to
prevent the removal of the Board Members.
7.6 INITIAL BOARD OF MANAGERS. The Members do hereby elect the following
persons to serve as the initial Board Members: ▇▇▇▇ ▇▇▇▇▇▇; ▇▇▇▇ ▇▇▇▇▇▇; ▇▇▇▇▇
▇▇▇▇▇▇ and ▇▇▇ ▇▇▇▇▇▇▇▇.
7.7 VACANCIES. In the event of any vacancy in the office of a Board
Member as a result of the death, incapacity, resignation or removal of a Board
Member, such vacancy shall be filled by the Member for whom such vacating Board
Member was a representative (as indicated in Section 7.4). The Board Member
elected to fill any vacancy shall hold office until the next annual meeting of
the Members for the election of Board Members and until such Board Member's
successor is duly elected and qualified.
7.8 REMOVAL OF BOARD MEMBERS. Any Board Member may be removed, with or
without cause, by the Member for whom such Board Member was a representative (as
indicated in Section 7.4).
7.9 MEETINGS OF THE BOARD. Regular meetings of the Board shall be held
at least monthly on such date and at such place and time as may be fixed from
time to time by the Board (unless such meeting shall be waived by all of the
Board Members). Regular meetings of the Board shall be held on not less than ten
(10) days' notice to all Board Members. Special meetings of the Board may be
called by the President and shall be called by the President or Secretary upon
the request of any Board Member, upon two (2) days' notice to all Board Members.
No business shall be acted upon at a special meeting that is not stated in the
notice of the meeting unless approved by the Board. Meetings of the Board may be
held by conference telephone or other communications equipment by means of which
all participating Board Members can simultaneously hear each other during the
meeting.
7.10 QUORUM. No action may be taken at a meeting of the Board unless a
quorum consisting of at least a majority of the Board Members then in office is
present in person or by proxy.
7.11 ACTION BY WRITTEN CONSENT. Any action which may be taken by the
Board under this Agreement may be taken without a meeting if consents in writing
setting forth the action so taken are signed by all of the Board Members.
7.12 VOTING RIGHTS; REQUIRED VOTES. Each Board Member shall be entitled
to cast one vote with respect to any matter coming before the Board. Any action
required or permitted to be taken by the Board must be approved by the
affirmative vote of a majority of the Board Members then in office.
7.13 NOTICE OF BOARD MEETINGS. Written or printed notice stating the
place, date, and time of any meeting and, in the case of any special meeting, a
statement of the purposes of the meeting and the person or persons calling the
meeting, shall be sent by hand delivery or by first class, certified or
registered United States mail. Such notice shall be deemed to be delivered (a)
when deposited in the United States mail, postage prepaid, addressed to each
Board Member at
14
his or her respective address as it appears on the records of the Company; or
(ii) when received, if sent by hand delivery.
7.14 WAIVERS OF NOTICE. Whenever the giving of any notice to Board
Members is required by statute or this Agreement, a waiver thereof, in writing
and delivered to the LLC signed by the Person or Persons entitled to said
notice, whether before or after the event as to which such notice is required,
shall be deemed equivalent to notice. Attendance of a Board Member at a meeting
or execution of a written consent to any action shall constitute a waiver of
notice of such meeting or action, except when a Board Member attends for the
express purpose of objecting at the beginning of the meeting to the transaction
of any business because the meeting is not lawfully called.
7.15 COMPENSATION OF BOARD MEMBERS. Board Members, as such, shall not
receive any compensation for their services; provided that nothing herein
contained shall be construed to preclude any Board Member from serving the LLC
in any other capacity and receiving compensation therefor.
7.16 RESIGNATIONS. Any Board Member may resign at any time by giving
written notice to the Board or to the President or the Secretary of the Company.
Any such resignation shall take effect at the time specified therein, or, if no
time is specified, upon receipt thereof, and unless otherwise specified therein,
acceptance of such resignation shall not be necessary to make it effective.
7.17 FIDUCIARY RELATIONSHIP. No Board Member shall be liable to the LLC
or its Members for monetary damages for breach of fiduciary duty as a Board
Member or otherwise liable, responsible or accountable to the LLC or its Members
for monetary damages or otherwise for any acts performed, or for any failure to
act; provided, however, that this provision shall not eliminate or limit the
liability of a Board Member (i) for any breach of the Board Member's duty of
loyalty to the LLC or its Members, (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, or (iii)
for any transaction from which the Board Member received any improper personal
benefit.
7.18 DELEGATION OF RIGHTS AND AUTHORITY. Except as otherwise expressly
provided in this Agreement, neither the Board nor any Member or Board Member may
delegate to any Person or Persons the rights and powers of the Board or of such
Member or Board Member to manage and control the business and affairs of the
Company.
7.19 NO EXCLUSIVE DUTY. Each Member and Board Member may have other
business interests and may engage in other activities in addition to those
relating to the LLC. Neither the LLC nor any Member or Board Member shall have
any right to share or participate in such other investments or activities of any
other Member or Board Member based on the fact that each are members of the LLC.
No Member or Board Member shall incur any liability to any other Member or the
LLC as a result of engaging in any other business or venture.
15
ARTICLE VIII.
OFFICERS
8.1 NUMBER, ELECTION AND TERM OF OFFICE. The officers of the LLC shall
be a President and a Secretary, and may at the discretion of the Board include
one or more Vice Presidents, a Treasurer, Assistant Secretaries, Assistant
Treasurers and other officers. The initial officers shall be ▇▇▇▇ ▇▇▇▇▇▇, the
LLC's President, and R. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, the LLC's Secretary, who shall hold
their respective offices until the first meeting of the Board held immediately
after the first annual meeting of the Members for the election of Board Members
and until their successors are duly elected and qualified. The officers of the
LLC subsequently shall be elected annually by the Board at its first meeting
held after the annual meeting of the Members for the election of Board Members
and shall hold their respective offices until their successors are duly elected
and qualified or until their earlier death, resignation or removal. Except as
otherwise provided by law, any number of offices may be held by the same person.
8.2 PRESIDENT. Subject to the direction of the Board and the provisions
of this Agreement, the President (i) shall have full responsibility and
authority for management of the day-to-day operations of the LLC and (ii) shall
perform other duties customarily performed by a chief executive officer.
8.3 SECRETARY. The Secretary, at the direction of the Board, shall
prepare and distribute promptly to each Board Member written minutes of all
meetings of the Board. The Secretary shall also be responsible for preparing and
distributing to the Board Members any notices received by the LLC or otherwise
called for by this Agreement to be given by the LLC.
8.4 OTHER OFFICERS. The Board may appoint such other officers and agents
of the LLC as the Board shall deem necessary or appropriate to carry out the
business of the LLC upon such terms and conditions as the Board may determine.
Any such officer shall hold his or her respective office for the term specified
by the Board unless earlier removed by the Board.
8.5 RESIGNATION. Any officer or agent of the LLC may resign at any time
by giving written notice to the Board or to the President or the Secretary of
the LLC. Any such resignation shall take effect at the time specified therein
or, if no time is specified, upon receipt thereof, and unless otherwise
specified therein, acceptance of such resignation shall not be necessary to make
it effective.
8.6 REMOVAL; VACANCIES; TRANSFER OF DUTIES. Any officer or agent of the
LLC may be removed from office, with or without cause, by the Board at a meeting
called for that purpose. Any vacancy in the office of President or Secretary for
any reason shall be filled by a person designated by the Board for the unexpired
term of the vacant office. The Board, in its sole and absolute discretion, may
transfer the power and duties, in whole or in part, of any officer to any other
officer, or persons, notwithstanding the provisions of this Agreement, except as
otherwise provided by the laws of the State of Delaware.
8.7 COMPENSATION. The officers of the LLC shall be entitled to such
salary or other compensation as the Board shall determine. The President shall
initially be paid an annual salary of $100,000.
16
8.8 THIRD PARTY RELIANCE. Third parties dealing with the LLC shall be
entitled to rely conclusively upon the power and authority of the officers of
the LLC as set forth herein.
ARTICLE IX.
INDEMNIFICATION
9.1 AUTHORITY TO INDEMNIFY. The LLC shall indemnify, and upon request
may advance expenses to, any Member, Board Member, officer, employee, or agent
of the LLC, or any person who is serving at the request of the LLC in any such
capacity with another Entity, to the extent, consistent with public policy,
permitted by applicable law.
9.2 INSURANCE. The LLC may purchase and maintain insurance on behalf of
an individual who is or was a Board Member, officer, employee, independent
contractor, or agent of the LLC or who, while a Board Member, officer, employee,
independent contractor, or agent of the LLC, is or was serving at the request of
the LLC as a manager, officer, employee, independent contractor, agent, partner,
or trustee of another foreign or domestic limited liability company,
corporation, partnership, joint venture, trust, employee benefit plan, or other
enterprise, against liability asserted against or incurred by such individual in
that capacity or arising from such individual's status as a Board Member,
officer, employee, independent contractor or agent of the LLC whether or not the
LLC would have the power to indemnify such individual against the same liability
as provided in Section 9.1 hereof.
9.3 NON-EXCLUSIVE RIGHT. The indemnification granted pursuant to or
provided by this Article IX shall not be deemed exclusive of any other rights to
which a person seeking indemnification may be entitled, whether contained in
this Article IX, the Certificate of Formation, in the Act, in a resolution of
the Members, in a resolution of the Board or an agreement providing for such
indemnification. This Section 9.3 does not limit the LLC's power to pay or
reimburse expenses incurred by any person in connection with his or her
appearance as a witness in a proceeding at a time when he or she has not been
named defendant or respondent to the proceeding.
ARTICLE X.
FISCAL MATTERS
10.1 BOOKS AND RECORDS. Full and accurate books and records of the LLC
(including without limitation all information and records required by the Act)
shall be maintained in accordance with accounting principles generally accepted
in the United States at its principal place of business showing all receipts and
expenditures, assets and liabilities, profits and losses, and all other records
necessary for recording the LLC's business and affairs. All Members shall have
the right to inspect and copy the books and records of the LLC, during regular
business hours, at the LLC's principal place of business, upon provision of
notice in writing by any Member to the LLC at least five business days before
the date on which such Member desires to inspect and copy said books and
records.
10.2 FISCAL YEAR. The fiscal year of the LLC shall end on the last Sunday
in December of each year.
17
10.3 ACCOUNTING SERVICES. O'Charley's will provide all accounting for the
LLC, including banking and treasury functions, credit card processing, general
ledger accounting, financial reporting, accounts payable processing, fixed
assets and such other accounting related services as O'Charley's and the LLC
shall mutually agree.
10.4 TAX STATUS. Each of the Members recognizes that it is the intention
of the LLC to be treated as a "partnership" for federal and all relevant state
tax purposes and (ii) the LLC will be treated as a "partnership" for federal and
all relevant state tax purposes and shall make all available elections to be so
treated. All provisions of the LLC's Certificate of Formation and this Agreement
are to be construed so as to preserve that tax status. Within ninety (90) days
after the end of each fiscal year, the LLC will cause to be delivered to each
person who was a Member at any time during such fiscal year a Form K-1 and such
other information, if any, with respect to the LLC as may be necessary for the
preparation of each Member's federal, state or local income tax (or information)
returns, including a statement showing each Member's share of income, gain or
loss, and credits for the fiscal year.
10.5 TAX MATTERS MEMBER. O'Charley's shall be the initial Tax Matters
Member. The TMM shall promptly give notice to all Members of any administrative
or judicial proceeding pending before the Internal Revenue Service involving any
Company item and the progress of all proceedings. The TMM shall have all the
powers provided to a tax matters partner under Sections 6221 through 6233 of the
Code, including the specific power to extend the statute of limitations with
respect to any matter that is attributable to any Company item or affecting any
item pending before the Internal Revenue Service and to select the forum to
litigate any tax issue or liability arising from LLC items. The TMM may resign
the position by giving thirty (30) days written notice to the Board, whereupon
the Board shall promptly vote to designate a new TMM. The Board may, without
cause, remove the TMM, whereupon the Board shall promptly vote to designate a
new TMM. The TMM shall be entitled to reimbursement for any and all reasonable
expenses incurred with respect to any administrative and/or judicial proceedings
affecting the LLC.
10.6 PRE-OPENING BUDGET. Within thirty (30) days from O'Charley's
approval of a location for any Restaurant under the Development Agreement, the
President shall prepare and submit to the Board for its consideration and
approval a budget ("Pre-Opening Budget") setting forth the estimated costs and
expenditures of the LLC for the establishment and operation of such Restaurant
through the first day of opening to the public. The Pre-Opening Budget shall set
forth, without limitation, cost of land, estimated lease costs, costs of
improvements to the Restaurant premises, furniture, fixtures and equipment,
training and payroll, supplies, inventory, and advertising. The Board shall
approve or disapprove of the Pre-Opening Budget in writing within thirty (30)
days after its submission. Subject to the foregoing and provided the President
shall not deviate therefrom in any material amount or item without the consent
of the Board, upon approval of a Pre-Opening Budget, the President shall
implement the Pre-Opening Budget under the direction of the Board and shall be
authorized, without the need for further approval to make the expenditures and
incur the obligations provided for in the Pre-Opening Budget.
10.7 OPERATING BUDGET. Within thirty (30) days prior to the beginning of
each calendar year, the President shall prepare and submit to the Board for its
consideration and approval a budget ("Operating Budget"), setting forth the
estimated costs and expenditures of the
18
LLC for the next calendar year. The Board shall approve or disapprove an
Operating Budget in writing within thirty (30) days of its submission. Subject
to the foregoing and provided the President shall not deviate therefrom in any
material amount or item without the consent of the Board, upon approval of an
Operating Budget, the President shall implement the Operating Budget and shall
be authorized, without the need for further approval to make the expenditures
and incur the obligations provided for in the Operating Budget.
ARTICLE XI.
ASSIGNMENT AND TRANSFER OF MEMBERSHIP INTERESTS
11.1 TRANSFER OF MEMBERSHIP INTERESTS. Except as otherwise provided in
this Article XI, a Member may not Assign all or any part of such Member's
Membership Interest in the LLC (including any Financial Rights, Governance
Rights, or other rights pertaining to a Membership Interest) to any person
without the prior written consent of Members holding a majority of the
Membership Interests. O'Charley's shall have the right to Assign all or any part
of its Membership Interest in the LLC (including any Financial Rights,
Governance Rights or other rights pertaining to its Membership Interest) to any
of its Affiliates.
11.2 RESTRICTIONS ON ASSIGNMENT NOT UNREASONABLE. Each of the Members
hereby agrees and acknowledges that the restrictions on Assignment contained in
this Article XI are not unreasonable in view of the nature of the parties and
their relationships to one another and the nature of the business of the LLC.
11.3 ADMISSION OF NEW MEMBERS. An Assignment effected in accordance with
this Article XI shall become effective and the assignee shall become a New
Member and entitled to the rights of a Member under this Agreement upon (a)
executing a copy of this Agreement and agreeing to be bound hereby and (b)
delivering such executed copy to the LLC in accordance with Section 13.1 hereof.
Upon receipt of such executed copy, the LLC will cause Exhibit A to be amended
appropriately and will deliver to all Members, including the New Member, in
accordance with Section 13.1 hereof, a copy of amended Exhibit A.
11.4 RIGHTS AND OBLIGATIONS OF FORMER MEMBERS. A Member who Assigns all
of his, her, or its Membership Interest shall cease to be a Member; provided,
however, that such former Member or any Successor shall remain liable to the LLC
(a) for any obligations of such Member for wrongful distributions under Section
18-607 of the Act, and (b) pursuant to any contribution agreements with the LLC
existing at the time of the Assignment of all such Membership Interest.
11.5 JV PARTNER PURCHASE OPTION. In the event that the LLC (i) has opened
three Restaurants in accordance with the Development Agreement; (ii) is not in
default of the terms of any of the Franchise Agreements or this Agreement; and
(iii) has received a commitment for financing the remaining Restaurants under
the Development Agreement on terms reasonably satisfactory to O'Charley's, the
JV Partner shall thereupon have the right, but not the obligation, for a period
beginning on the date that is six months following the opening of the third
Restaurant under the Development Agreement and ending on the date that is
eighteen (18) months after the opening of the third Restaurant under the
Development Agreement, to purchase all, but not less than all, of O'Charley's'
Membership Interest in the LLC by giving written notice (the "JV Election
Notice") to the LLC and O'Charley's. As a condition to the JV Partner's
19
exercise of such option, the JV Partner (or the LLC) will be required at the
Closing to: (a) pay O'Charley's the amount set forth in the table below for each
of the three (3) Restaurants based on the trailing twelve (12) months' Gross
Sales for each Restaurant at the time of the exercise of the option, it being
understood that for any Restaurant that has been open less than twelve (12)
months, the Gross Sales shall be determined by annualizing the average monthly
Gross Sales for each full month of any such Restaurant's operation; (b) pay
O'Charley's the applicable development fees for the exclusive right to develop
the remaining Restaurants under the terms of the Development Agreement; (c)
continue to pay the royalty and other fees under the Franchise Agreements for
the existing and future Restaurants; (d) pay all amounts outstanding under the
Revolving Loan Agreement; (e) obtain a release of O'Charley's' guaranty of any
debt or other obligations of the LLC, including the Loan Program; and (f)
provide satisfactory evidence to O'Charley's of the commitment for financing
referred to in subsection (iii) above.
ANNUALIZED RESTAURANT GROSS SALES PAYMENT PER RESTAURANT
--------------------------------- ----------------------
Less than $2.7 million $175,000
$2.7 million > $2.8 million $150,000
$2.8 million > $2.9 million $125,000
$2.9 million > $3.0 million $100,000
Greater $3.0 million $ 50,000
11.6 O'CHARLEY'S PURCHASE OPTION. In the event that (i) the JV Partner
does not exercise its option to purchase O'Charley's' Membership Interest in the
LLC pursuant to Section 11.5 hereof prior to the expiration of such option; (ii)
the JV Partner is not entitled to exercise its option to purchase O'Charley's'
Membership Interest pursuant to Section 11.5 hereof; or (iii) O'Charley's has
terminated the Development Agreement or any of the Franchise Agreements in
accordance with their terms, O'Charley's shall thereupon have the right for a
period of 180 days thereafter, but not the obligation, to purchase all, but not
less than all, of the JV Partner's Membership Interest in the LLC by giving
written notice (the "O'Charley's Notice") to the LLC and the JV Partner. As a
condition to O'Charley's exercise of such option, O'Charley's will be required
at the Closing to: (a) pay the JV Partner the amount set forth in the table
below for each of the then-existing Restaurants based on the trailing twelve
(12) months' Gross Sales for each Restaurant at the time of the exercise of such
option, it being understood that for any Restaurant that has been open less than
twelve (12) months, the Gross Sales shall be determined by annualizing the
average monthly Gross Sales for each full month of any such Restaurant's
operation; and (b) obtain a release of the JV Partner's guaranty of any debt or
other obligations of the LLC.
ANNUALIZED RESTAURANT GROSS SALES PAYMENT PER RESTAURANT
--------------------------------- ----------------------
Less than $2.7 million $ 50,000
$2.7 million > $2.8 million $ 75,000
$2.8 million > $2.9 million $125,000
$2.9 million > $3.0 million $150,000
Greater $3.0 million $200,000
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11.7 CLOSING. The sale or purchase of any Member's Membership Interest,
or portion thereof, pursuant to this Article XI and payment therefor (the
"Closing") shall take place at the principal offices of the LLC on such date as
the parties to the transaction may, acting reasonably, agree upon. At the
Closing, in addition to any obligations of the selling Member set forth in
Section 11.5, the selling Member shall deliver to the purchasing Member the
following executed documentation, in form reasonably acceptable to the
purchasing Member:
(i) an assignment of its Membership Interest;
(ii) the resignation of each of its designees who are acting as
members of the Board or officers of the LLC;
(iii) a representation and warranty by the selling Member that its
Membership Interest is free and clear of all options, liens,
charges and encumbrances whatsoever, which representation and
warranty will survive Closing and will continue forever;
(iv) a general release of all claims against the LLC and the
purchasing Member relating to LLC matters; and
(v) such other documentation as the purchasing Member may
reasonably require in order to vest in the purchasing Member
or its designee full right, title and interest in and to the
Membership Interest of the selling Member.
At the Closing, the purchasing Member will deliver to the selling Member
(i) the purchase price in immediately available funds and (ii) an indemnity
indemnifying the selling Member against any claims arising from the conduct of
the business of the LLC from and after the time of Closing.
ARTICLE XII.
DISSOLUTION, WINDING UP, AND TERMINATION OF THE LLC'S EXISTENCE
12.1 TERM. The duration of the LLC shall be perpetual and shall continue
until terminated in accordance with the provisions of this Agreement or the Act.
12.2 EVENTS CAUSING DISSOLUTION AND WINDING UP. The LLC shall be
dissolved and its affairs wound up upon the occurrence of any of the following
events (individually, a "Dissolution Event"):
(i) at any time with the prior approval of a Majority of Interest
of the Members; or
(ii) as may be otherwise required by law.
Upon the occurrence of a Dissolution Event, the LLC shall be terminated when the
winding up of the LLC's affairs has been completed following dissolution.
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12.3 WINDING UP AFFAIRS ON DISSOLUTION. Upon dissolution of the LLC, the
officers, Board Members or other persons required or permitted by law to carry
out the winding up of the affairs of the LLC shall promptly notify all Members
of such dissolution; shall wind up the affairs of the LLC; shall prepare and
file all instruments or documents required by law to be filed to reflect the
dissolution of the LLC; and, after collecting the debts and obligations owed to
the LLC and after paying or providing for the payment of all liabilities and
obligations of the LLC, shall distribute any remaining assets to the Members in
accordance with the positive balances in their respective Capital Accounts. In
the event of a distribution of assets in kind (in whole or in part), the fair
market value of the assets shall be determined and each Member's Capital Account
shall be adjusted as if such asset were sold for its fair market value. Each
Member shall receive an undivided interest in the assets of the Company equal in
value to the portion of the proceeds to which the Member would have been
entitled if the assets had been sold or otherwise converted to cash at the
assets' fair market values and the distribution had been solely in the form of a
cash distribution. Division of the property may be made on a non-pro rata basis
upon the consent of all of the Members, so that certain Members own certain
assets while other Members own other assets.
12.4 WAIVER OF RIGHT TO PARTITION AND DECREE OF DISSOLUTION. As a
material inducement to each Member to execute this Agreement, each Member
covenants and represents to each other Member that, during the period beginning
on the date of this Agreement, no Member, nor such Member's heirs,
representatives, successors, transferees, or assigns, will attempt to make any
partition whatever of the assets of the LLC or any interest therein whether now
owned or hereafter acquired, and each Member waives all rights of partition
provided by statute or principles of law or equity, including partition in kind
or partition by sale. The Members agree that irreparable damage would be done to
the goodwill and reputation of the LLC if any Member should bring an action in a
court to dissolve the LLC. The Members agree that there are fair and just
provisions for payment and liquidation of the interest of any Member in the LLC,
and fair and just provisions to prevent a Member from selling or otherwise
alienating his or her interest in the LLC. Accordingly, each Member hereby
waives and renounces his, her or its right to such a court decree of dissolution
or to seek the appointment by court of a liquidator or receiver for the LLC.
ARTICLE XIII.
GENERAL PROVISIONS
13.1 NOTICES. All notices and other communications required or permitted
to be given in respect of this Agreement shall be in writing, and sent by
facsimile, courier service, hand delivery or certified or registered mail
(return receipt requested and first-class postage prepaid). Written notice by
the LLC to the Members is effective when mailed, if mailed and correctly
addressed to the Member's address as reflected in the LLC's records. Written
notice to the LLC may be addressed to the LLC's registered agent at its
registered office or to the LLC's Secretary at the LLC's principal executive
office. Written notice to the LLC is effective at the earliest of the following:
(a) when received; (b) five days after its deposit in the United States mail, if
correctly addressed and first class postage affixed thereon; or (c) on the date
shown in the return receipt, if sent by registered or certified mail, return
receipt requested, and the receipt is signed by or on behalf of the addressee.
22
13.2 INTEGRATION. This Agreement embodies the entire agreement and
understanding among the Members relating to the formation and operation of the
LLC and supersedes all prior agreements and understandings, if any, among and
between the Members relating to the subject matter hereof.
13.3 APPLICABLE LAW. This Agreement and the rights of the Members shall
be governed by and construed and enforced in accordance with the laws of the
State of Delaware and specifically the Act. All actions or proceedings relating
to this Agreement (whether to enforce a right or obligation or obtain a remedy
or otherwise) will be brought solely in the state or federal courts located in
or for Davidson County, Tennessee. Each party hereby unconditionally and
irrevocably consents to the jurisdiction of such courts and waives its rights to
bring any action or proceeding against the other party except in such courts.
Process in any action or proceeding referred to in the preceding sentence may be
served on any party anywhere in the world. Each of the parties irrevocably
waives any right to a jury trial with respect to any matter arising out of or in
connection with this Agreement. If any party seeks to enforce its right under
this Agreement by joining another party to a judicial proceeding before a jury
in which such third party is a party, the parties will request the court to try
the claims between the parties to this Agreement without submitting the matter
to the jury.
13.4 SEVERABILITY. In case any one or more of the provisions contained in
this Agreement or any application thereof shall be invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein and any other application thereof shall
not in any way be affected or impaired thereby.
13.5 BINDING EFFECT. Except as herein otherwise provided to the contrary,
this Agreement shall be binding upon, and inure to the benefit of, the Members
and their respective heirs, executors, administrators, successors, transferees
and assigns.
13.6 TERMINOLOGY. All personal pronouns used in this Agreement, whether
used in the masculine, feminine, or neuter gender, shall include all other
genders; and the singular shall include the plural, and vice versa. Titles and
Articles are for convenience only and neither limit nor amplify the provisions
of this Agreement itself.
13.7 AMENDMENT. This Agreement may be amended, modified, or supplemented
in writing (a) with the consent of the Members holding a Majority of the
Membership Interests and (b) with respect to Exhibit A hereto, under the
circumstances set forth in Section 4.5. No other written or oral agreement,
understanding, instrument or writing other than this agreement or any amendment
hereto shall constitute part of the limited liability company agreement of the
LLC. Notwithstanding anything herein to the contrary, no amendment or
modification that disproportionately affects the interests of any Member in the
capital, Net Profits or Net Losses of, or distributions or allocations with
respect to, the LLC shall be effective as to any Member unless the same has been
set forth in a document duly executed by such Member.
13.8 EXECUTION OF ADDITIONAL INSTRUMENTS. Each Member hereby agrees to
execute such other and further statements of interest and holdings,
designations, powers of attorney, and other instruments necessary to comply with
any laws, rules, or regulations.
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13.9 WAIVERS. The failure of any party to seek redress for violation of
or to insist upon the strict performance of any covenant or condition of this
Agreement shall not prevent a subsequent act, which would have originally
constituted a violation, from having the effect of an original violation.
13.10 RIGHTS AND REMEDIES CUMULATIVE. The rights and remedies provided by
this Agreement are cumulative and the use of any one right or remedy by any
party shall not preclude or waive the right to use any or all other remedies.
Said rights and remedies are given in addition to any other rights the Members
may have by law, statute, ordinance, or otherwise.
13.11 HEIRS, SUCCESSORS, AND ASSIGNS. Each and all of the covenants,
terms, provisions and agreements herein contained shall be binding upon and
inure to the benefit of the Members hereto and, to the extent permitted by this
Agreement, their respective heirs, legal representatives, successors, and
assigns.
13.12 CREDITORS. None of the provisions of this Agreement shall be for the
benefit of or enforceable by any creditors of the LLC.
13.13 COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be deemed an original but all of which shall constitute one and
the same instrument.
[Signature page to follow.]
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IN WITNESS WHEREOF, the undersigned hereby agrees, acknowledges and
certifies that the foregoing Agreement constitutes the limited liability company
agreement of JFC Enterprises, LLC adopted by the Members of the LLC as of the
20th day of August, 2004.
/s/ ▇▇▇▇ ▇▇▇▇▇▇
------------------------------------
▇▇▇▇ ▇▇▇▇▇▇
O'CHARLEY'S INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chairman and CEO
25
EXHIBIT A
MEMBERS NAME AND ADDRESS CAPITAL CONTRIBUTION MEMBERSHIP PERCENTAGES
------------------------ -------------------- ----------------------
▇▇▇▇ ▇▇▇▇▇▇ $250,000 50%
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
O'Charley's Inc. $ 0 50%
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
TOTAL $250,000 100%