SUBSCRIPTION AGREEMENT
Exhibit 1
This Subscription Agreement (this “Agreement”) is made and entered into as of March 6,
2007 between EATURNA LLC, a Delaware limited liability company (the “Company”), and the
person set forth on the Purchaser Signature Page hereto (the “Purchaser”).
RECITALS
The Purchaser, by signing this Agreement, has agreed to subscribe for the number of Preferred
B Units as is set forth on the Purchaser Signature Page to this Agreement, and if such subscription
for such Preferred B Units is accepted by the Company in accordance with this Agreement, has agreed
to purchase that number of Preferred B Units on the terms and subject to the conditions set forth
in this Agreement.
SECTION 1. Agreement to Subscribe; Payment; Terms of Subscription.
1.1 Subscription. The Purchaser hereby irrevocably subscribes for 6,085 Preferred B
Units at a price of Nine Hundred Dollars ($900) per Unit for an aggregate purchase price of
$5,476,500. The aggregate purchase price for the Preferred B Units for which the Purchaser is
subscribing is referred to herein as the “Purchase Price.” The Purchase Price shall be
paid by the Purchaser in the following forms of consideration: (a) 923,873 shares of common stock,
par value $.00004 per share (the “Common Stock”), of Grill Concepts, Inc., a Delaware corporation
(the “Grill”), plus (b) a cash payment (the “Cash Payment”) equal to the amount by which the
Purchase Price exceeds the Equity Value (as defined below), plus (c) all rights of the Purchaser to
receive Warrants to purchase additional shares of Common Stock including, without limitation,
pursuant to that certain Amendment, dated as of June 20, 2006, to the Development Agreement, dated
as of July 27, 2001, between the Grill and the Purchaser (the “Warrant Rights” and together with
the Common Stock, collectively, the “Securities”), plus (d) subject to the provisions of Section
6.4, all rights and benefits associated with the Securities (collectively, the “Ancillary Rights”)
under the following agreements (collectively, the “Ancillary Agreements”): (i) the Subscription
Agreement, dated as of May 16, 2001, between the Purchaser and the Grill, (ii) the Development
Agreement, dated as of July 27, 2001, between the Purchaser and the Grill, as amended by the First
Amendment to Development Agreement, dated as of June 20, 2006 (the “Development Agreement”), (iii)
the Investor Rights Agreement, dated as of July 27, 2001, between the Purchaser and the Grill, and
(iv) the Stockholders Agreement, dated as of July 27, 2001, between the Purchaser, the Grill and
certain stockholders of the Grill. The “Equity Value” means the sum of (x) (i) the average of the
closing prices of a share of Grill Common Stock (the “Grill Per Share Price”) for the 30 trading
days ending on the last trading day before the date of Closing (as defined below), multiplied by
(ii) 923,873, plus (y) $300,000.
1.2 Payment; Closing. The Purchaser understands that, if the Purchaser’s subscription
for such Preferred B Units is accepted by the Company in accordance with this Agreement, the
Purchase Price will be paid by the Purchaser to the Company at the Closing. The cash portion of
the Purchase Price shall be paid at the Closing by wire transfer of immediately available funds to
a bank account designated by the Company. The remaining portion of the Purchase Price shall be
paid at the Closing by delivery of the original certificates, instruments
and other documentation evidencing the Securities and Ancillary Rights along with duly
executed stock assignments and other assignments and instruments of transfer in form and substance
reasonably acceptable to the Company. The closing of the purchase and sale of the Preferred B
Units hereunder (the “Closing”) shall be held at the offices of Maron & Sandler, 0000
Xxxxxx Xxxxxx, Xxxxx 000, Xxxxx Xxxxxx, Xxxxxxxxxx 00000 on the date hereof (the date of the
Closing being hereinafter referred to as the “Closing Date”).
1.3 LLC Agreement. The Purchaser acknowledges and agrees that the Preferred B Units
are subject to the terms and conditions of the Company’s Second Amended And Restated Limited
Liability Agreement (as amended and modified from time to time, the “LLC Agreement”).
Concurrently with the execution and delivery of this Agreement, the Purchaser shall execute and
deliver to the Company signature pages to the LLC Agreement which shall become effective and
binding as of the Closing.
SECTION 2. Representations and Warranties of the Company.
Except as set forth in the Company Disclosure Schedule attached hereto, the Company represents
and warrants to the Purchaser as of the Closing as follows:
2.1 Formation and Authority. The Company is a limited liability company duly
organized, validly existing, and in good standing in the State of Delaware and has the limited
liability company power and authority to own and operate its properties and to carry on its
business as presently conducted. The Company is duly qualified or authorized to do business as a
foreign limited liability company and is in good standing under the Laws of each jurisdiction in
which it owns or leases real property and each other jurisdiction in which the conduct of its
business or the ownership of its properties requires such qualification or authorization except
where the failure to be so qualified or authorized would not have a material adverse effect on the
Company.
2.2 Authorization. All limited liability company action on the part of the Company
necessary for the authorization, execution, delivery, and performance of the Company’s obligations
under this Agreement, the LLC Agreement, and for the issuance of the Preferred B Units hereunder
has been taken, and the LLC Agreement and this Agreement constitute legal, valid, and binding
obligations of the Company, enforceable against the Company in accordance with their terms, subject
to laws of general application relating to bankruptcy, insolvency, and the relief of debtors and
rules of law governing specific performance, injunctive relief, or other equitable remedies.
2.3 Capitalization. There are (a) 62,081 Common Units of the Company issued and
outstanding, (b) no Preferred A Units of the Company issued and outstanding, and (c) 18,251.8886
Preferred B Units (inclusive of the 6,085 Preferred B Units to be issued to the Purchaser
hereunder). The 6,085 Preferred B Units when issued to the Purchaser in accordance with the terms
hereof will constitute at the time of issuance not less than one-third of the total number of
outstanding Preferred B Units. All of the issued and outstanding Units were duly authorized for
issuance and are validly issued, fully paid and non-assessable.
2
Other than pursuant to the Employee Unit Option Plan (as defined in the Company’s LLC
Agreement), there is no existing option, warrant, call, right, commitment or other agreement of any
character to which the Company is a party requiring, and there are no securities of the Company
outstanding which upon conversion or exchange would require, the issuance, sale or transfer of any
additional Units or other equity securities of the Company or other securities convertible into,
exchangeable for or evidencing the right to subscribe for or purchase Units or other equity
securities of the Company. Except as set forth in the LLC Agreement, the Company is not a party to
any voting trust or other voting agreement with respect to any of the Units or to any agreement
relating to the issuance, sale, redemption, transfer or other disposition of Units of the Company.
2.4. No Conflicts. Neither the execution and delivery by the Company of this
Agreement, the consummation of the transactions contemplated hereby, nor compliance by the Company
with any of the provisions hereof (i) conflict with, or result in the breach of, any provision of
the LLC Agreement; (ii) to the knowledge of the Company, conflict with, violate, result in the
breach of or termination of, or constitute a default under any contract to which the Company is a
party or by which it or any of its properties or assets are bound; (iii) to the knowledge of the
Company, violate any Law of any Governmental Body by which the Company is bound; or (iv) result in
the creation of any Lien upon the properties or assets of the Company, except, in the case of
clauses (ii) and (iii), any such items that would not have a material adverse effect on the
Company.
To the knowledge of the Company, no consent, waiver, approval, Order, Permit or authorization
of, or declaration or filing with, or notification to, any Person or Governmental Body is required
on the part of the Company in connection with the execution and delivery of this Agreement, or the
compliance by the Company with any of the provisions hereof, except for such consents, waivers,
approvals, Orders, Permits, authorizations, declarations, filings or notifications as may be
required under applicable U.S. federal, foreign and state securities (or related) Laws or where the
failure to obtain or make would not have a material adverse effect on the Company.
2.5. Real Property. The Company does not, and since its formation has not, owned any
real property.
2.6. Intellectual Property. The Company does not own any material Intellectual
Property, except for rights in the name “Eaturna” and recipes for its products. The Company has
not received written notice or, to the knowledge of the Company, oral notice, of any threatened
claim that the Company’s use of the name “Eaturna” or recipes infringes on or violates any
Intellectual Property right of any Person. The Company is not the subject of any pending or, to
the knowledge of the Company, threatened legal proceeding which involves, either directly or
indirectly, a claim of unauthorized use of the recipes used in its business, or challenging the
ownership and use of such recipes. The Company possesses or has a right to use all material
Intellectual Property necessary for the conduct of its business as now conducted.
2.7. Litigation. There is no Legal Proceeding pending or, to the knowledge of the
Company, overtly threatened against the Company, or to which the Company is a party, before any
court, or before any governmental department, commission, board, agency, or
3
instrumentality, nor to the knowledge of the Company, is there any reasonable basis for any
such Legal Proceeding which would, if determined adverse to the Company, result in a judgment
greater than $100,000. The Company is not subject to any judgment, order or decree of any
Governmental Body and the Company is not engaged in any legal action to recover monies due it or
for damages sustained by it.
2.8. Compliance with Laws. To the knowledge of the Company (i) the Company has all
Permits required from Governmental Bodies in order for it to conduct its business as currently
conducted, and (ii) the Company is not in violation of or default under any such Permit, except
where the failure to have any such Permit or any such violation or default would not have a
material adverse effect on the Company.. To the knowledge of the Company, all products distributed
and sold by the Company have been manufactured in compliance in all material respects with all
applicable Laws. The Company has not (i) voluntarily recalled, or received any recall notice or
request from any Governmental Body (including the Federal Trade Commission and the Food and Drug
Administration) in respect of any products or materials sold by or on behalf of the Company or (ii)
received any written notice or other communication from any Governmental Body or any other Person
regarding any actual, alleged, possible or potential violation of any Law or liability under any
Law. To the knowledge of the Company, the Company is in compliance with all Laws applicable to the
Company or to the conduct of the business or operations of the Company or the use of its properties
(including any leased properties) and assets, except where the failure to comply would not have a
material adverse effect on the Company.
2.9. Related Party Transactions. None of the Members of the Company nor any of their
respective Affiliates has (i) borrowed any moneys from or has outstanding any indebtedness or other
similar obligations to the Company, or (ii) lent or advanced any moneys to or has receivables owed
by the Company (collectively, the “Affiliate Loans”).
2.10. Valid Issuance of Securities. The Preferred B Units when issued in accordance
with the terms hereof will be duly and validly issued, fully paid, and nonassessable, and free and
clear of all Liens, other than restrictions on transfer set forth herein and in the LLC Agreement.
2.11 Delivery of LLC Agreement. The Company has delivered to the Purchaser a true and
complete copy of the LLC Agreement.
2.12 Securities Law Matters.
(a) The Company is an “accredited investor” for purposes of Rule 501 under the Securities Act
of 1933, as amended, and has a similar status under applicable state securities laws.
(b) The Company acknowledges that the Securities are being purchased for the Company’s own
account, and not for the account of any other person, and not with a view to, or for sale in
connection with, any distribution or resale to others in violation of the Securities Act of 1933,
as amended.
4
(c) The Company acknowledges that (i) the Securities have not been registered under the Act
nor qualified under any applicable state securities or blue sky laws herein, and (ii) there can be
no assurance that the Company will be able to sell or dispose of the Securities. The Company
acknowledges that the Warrant Rights may never be issued by the Grill and that the Purchaser is
under no obligation to continue any relationship whatsoever with the Grill. The Company further
acknowledges that the Purchaser may act in its sole and absolute discretion in connection with its
business relationship with the Grill, including ceasing all contacts with the Grill.
(d) The Company acknowledges that the Purchaser is under no obligation to register the
Securities on behalf of the Company or to assist the Company in complying with any exemption from
registration.
(e) The Company has such knowledge and experience in financial and business matters that the
Company is capable of evaluating the merits and risks of investment in the Grill and of making an
informed investment decision. The Company has the capacity to protect the Company’s concerns in
connection with the acquisition of the Securities, and the Company is able to bear the economic
risk, including the complete loss, of an investment in the Securities.
(f) The Company acknowledges that the Securities cannot be transferred or assigned except as
permitted under applicable securities laws.
SECTION 3. Representations and Warranties Of The Purchaser.
The Purchaser represents and warrants as of the Closing as follows:
3.1 The Purchaser has the legal capacity and authority to execute, deliver, and perform its
obligations under this Agreement and the LLC Agreement. This Agreement and the LLC Agreement have
been duly authorized, executed, and delivered by the Purchaser. This Agreement and the LLC
Agreement are legal, valid, and binding obligations of the Purchaser, enforceable against the
Purchaser in accordance with their terms, subject to laws of general application relating to
bankruptcy, insolvency, and the relief of debtors and rules of law governing specific performance,
injunctive relief, or other equitable remedies.
3.2 The Purchaser is an “accredited investor” for purposes of Rule 501 under the Securities
Act of 1933, as amended, and has a similar status under applicable state securities laws that
permit the Purchaser to be an offeree and purchaser in an offering exempt from registration and
qualification under such laws.
3.3 The Purchaser acknowledges that the Preferred B Units are being purchased for the
Purchaser’s own account, and not for the account of any other person, and not with a view to, or
for sale in connection with, any distribution or resale to others within the meaning of the
Securities Act of 1933, as amended. No other person has a direct or indirect beneficial interest
in such Preferred B Units.
3.4 The Purchaser acknowledges that (i) the Preferred B Units have not been registered under
the Act nor qualified under any applicable state securities or blue sky laws in
5
reliance, in part, on the representations and warranties made by the Purchaser herein, (ii) no
federal or state agency has made any finding or determination as to the fairness of the offering,
nor any recommendation or endorsement of the Preferred B Units, and (iii) there is no public market
for the Preferred B Units or any of the Company’s securities and there is no certainty that such a
market will ever develop. There can be no assurance that the Purchaser will be able to sell or
dispose of the Preferred B Units.
3.5 The Purchaser acknowledges that, except as provided in the LLC Agreement, the Company is
under no obligation to register the Preferred B Units on behalf of the Purchaser or to assist the
Purchaser in complying with any exemption from registration.
3.6 The Company has made available to the Purchaser all documents and information that the
Purchaser has requested relating to an investment in the Company. The Purchaser recognizes that
investing in the Company involves substantial risks, and the Purchaser has taken full cognizance of
and understands all of the risk factors related to the purchase of the Preferred B Units. Some,
but not all, of those risk factors are: (i) the Company experiences competition from other
companies; (ii) the uncertainty of the economy and the unknown pricing sensitivity of the rapidly
changing market may adversely affect the Company; (iii) the need for additional funding
requirements to develop the business into a position of sustainable positive cash flow; (iv)
unproven success of the Company in ongoing development of food formulations, brand and food
systems; (v) the Company’s brand name is not yet well known; (vi) the Company has been operating at
a loss and has negative cash flow; (vii) the Company’s management team, has worked together for
only a short period, and some of them are part-time consultants; and (viii) there can be no
assurance that further investment funds will be obtained. The Purchaser has carefully considered
and has, to the extent the Purchaser believes necessary, discussed with the Purchaser’s
professional legal, tax, and financial advisors the suitability of an investment in the Company and
the Purchaser has determined that the Preferred B Units are a suitable investment for the
Purchaser. The Purchaser has not relied on the Company for any tax or legal advice in connection
with the Purchaser’s purchase of the Preferred B Units. In evaluating the suitability of an
investment in the Company, the Purchaser has not relied upon any representations (other than the
representations and warranties of the Company explicitly set forth in Section 2 hereof) or other
information (whether oral or written) from the Company or any of its agents. Without limiting the
generality of the foregoing, the Purchaser acknowledges that any private placement or confidential
information memorandum (and any supplement thereto) relating to the Company that has been delivered
to the Purchaser prior to the date hereof is outdated and the Purchaser is not relying on any
information contained therein in making a decision to invest in the Preferred B Units.
3.7 The Purchaser has such knowledge and experience in financial and business matters that the
Purchaser is capable of evaluating the merits and risks of investment in the Company and of making
an informed investment decision. The Purchaser has the capacity to protect the Purchaser’s
concerns in connection with the purchase of the Preferred B Units, and the Purchaser is able to
bear the economic risk, including the complete loss, of an investment in the Preferred B Units.
6
3.8 The Purchaser acknowledges that, subject to the provisions of the LLC Agreement, the Board
of Directors of the Company (the “Board”) has full authority to act on behalf of and to
bind the LLC in all respects, including, without limitation, the authority to negotiate, complete,
execute, and deliver any and all agreements, deeds, instruments, receipts, certificates, and other
documents on behalf of the LLC, and to take all such other actions on behalf of the LLC as the
Board may consider necessary or advisable in connection with the management of the LLC. The
Purchaser further understands that certain persons and/or entities affiliated with members of the
Board may directly or indirectly hold securities of the Company, and as a result of such securities
ownership, the Board and certain of its affiliates will have the ability to influence and/or
control the Company.
3.9 The Purchaser acknowledges that the Preferred B Units cannot be transferred or assigned
except as permitted in the LLC Agreement and under applicable securities laws.
3.10 The Purchaser owns, legally and beneficially, all of the Securities and the Ancillary
Rights free and clear of any Liens. At the Closing, the Company will acquire good and valid title
to all of the Securities and the Ancillary Rights, free and clear of any Lien.
3.11 Neither the Purchaser nor, to its knowledge, the Grill is in default (nor does any
circumstance exist which, with notice or the lapse of time or both, would result in such a default)
under any of the agreements relating to the Ancillary Rights and all of such agreements are in full
force and effect, are legal, valid, and binding obligations, enforceable in accordance with their
terms, subject to laws of general application relating to bankruptcy, insolvency, and the relief of
debtors and rules of law governing specific performance, injunctive relief, or other equitable
remedies.
3.12 There are no approvals or consents (governmental or otherwise) required in connection
with the execution and delivery of this Agreement by the Purchaser or the consummation of the
transactions contemplated hereby.
3.13 The Purchaser has not taken any action that would give rise to a claim for any broker’s
or finder’s fee, commission or similar payment in connection with the transactions contemplated by
this Agreement.
SECTION 4. Purchaser Closing Deliverable. At the Closing, the Purchaser shall deliver
to the Company:
(a) A duly executed addendum to the LLC Agreement pursuant to which the Purchaser shall become
a member of the Company.
(b) The Purchase Price as set forth in Section 1.2.
SECTION 5. Company Closing Deliverables. At the Closing, the Company shall deliver to
the Purchaser, a duly executed addendum to the LLC Agreement pursuant to which the Purchaser shall
become a member of the Company.
7
SECTION 6. Covenants. The following covenants shall become effective as of the
Closing:
6.1 Board Seat. So long as the Purchaser continues to hold at least the Minimum
Number of Units, the Company shall take all actions reasonably necessary to assure that one (1)
designee of the Purchaser is elected as a member of the Board of Directors of the Company. The
foregoing right shall terminate effective as of immediately prior to the consummation of an
underwritten public offering of equity securities by the Company or any successor entity (a “Public
Offering”). For purposes of this Agreement, the “Minimum Number of Units” shall mean the
equivalent of 15,500 Common Units assuming the conversion of any Preferred Units in accordance with
the terms of such Preferred Units (as adjusted for any split, combination or recapitalization of
Units).
6.2 Delaware General Corporation Law Section 203 Protection. It is the intention of
the parties that the Company not become the owner of 15% or more of the outstanding voting stock of
the Grill as a result of the Company’s acquisition of the Securities and the Ancillary Rights
unless the transaction has been approved in advance by the Board of Directors of the Grill under
Section 203 of the Delaware General Corporation Law (“203 Board Approval”). Upon request of the
Company, the Purchaser shall use its commercially reasonable efforts (at the expense of the
Company) to assist the Company in obtaining 203 Board Approval. If the Company becomes the owner
of 15% or more of the outstanding voting stock of the Grill without 203 Board Approval, the
Purchaser shall, at the request of the Company, immediately repurchase from the Company for cash
such number of Securities, or accept a reassignment from the Company of certain or all of the
Ancillary Rights, in each case as would be necessary to cause the Company to own less than 15% of
the outstanding voting stock of the Grill. The per share purchase price for such Securities shall
be equal to the Grill Per Share Price (as adjusted for any stock split, combination, consolidation,
reorganization, recapitalization or other transaction affecting the Securities after the date
hereof). For purposes of this Section 6.3, the terms “owner,” “own” and “voting stock” shall have
the respective meanings set forth in Section 203 of the Delaware General Corporation Law.
6.3. Development Warrant. Pursuant to Section 4 of the Development Agreement, the
Grill is required to issue to the Purchaser a warrant to purchase shares of Common Stock of the
Grill “promptly after the date as of which the aggregate number of GCI Concept Facilities covered
by Management Agreements and/or License Agreements entered into on or after the date hereof reaches
five.” Upon issuance of such warrant (the “Grill Warrant”) to the Purchaser, the Purchaser shall
transfer all right, title and interest to the Grill Warrant to the Company, free and clear of any
Liens.
6.4. Ancillary Rights. Anything in this Agreement to the contrary notwithstanding,
this Agreement shall not constitute an agreement to assign any Ancillary Rights if an attempted
assignment thereof, without the consent of the Grill, would constitute a default under or violate
any Ancillary Agreement or adversely affect the Ancillary Rights. Upon request of the Company, the
Purchaser shall use its commercially reasonable efforts (at the expense of the Company) to assist
the Company in obtaining any such required consent of the Grill. To the extent any such required
consent is not obtained, or if an attempted assignment of Ancillary Rights would be ineffective or
would adversely affect such rights so that the Company would not
8
receive all such rights, the Purchaser will cooperate with the Company to provide to the
Company the benefits of such Ancillary Rights, including, without limitation, enforcement thereof
for the benefit of the Company.
6.5. Right of First Refusal. If the Company receives an offer from a Listed Competitor
for the purchase of all or substantially all of the Company’s assets and the Company desires to
accept such offer, the Company shall give written notice to the Purchaser (“ROFR Notice”). The
ROFR Notice shall describe the assets proposed to be sold (the “Subject Assets”) and the purchase
price and other material terms of sale. If the Purchaser desires to purchase the Subject Assets
for the price and on the terms specified in the ROFR Notice, the Purchaser shall give the Company
written notice (“Acceptance Notice”) within fifteen (15) days after the giving of the ROFR Notice.
If the Purchaser fails to timely give an Acceptance Notice, the Purchaser shall be deemed to have
consented to the proposed sale and the Company may sell the Subject Assets to the Listed
Competitor, at a price and on terms no less favorable to the Company than those set forth in the
ROFR Notice, at any time within nine (9) months after the expiration of the time period for the
giving of the Acceptance Notice. If the Purchaser timely gives the Company an Acceptance Notice,
then, on such business day as the Purchaser shall specify in the Acceptance Notice, which day shall
be not less than twenty (20) days nor more than forty five (45) days after the giving of the
Acceptance Notice, the Purchaser shall purchase the Subject Assets at the price and on the terms
set forth in the ROFR Notice. The closing of the sale shall be held at the chief executive office
of the Company or at such other place as the parties may mutually agree upon. The foregoing rights
are personal to the Purchaser and may not be directly or indirectly transferred or assigned. The
provisions of this Section 6.5 shall terminate effective upon the earlier of: (a) immediately prior
to the consummation of a Public Offering, or (b) when the Purchaser no longer holds the Minimum
Number of Units.
6.6. Grill Stock Liquidity Event. In the event that a Grill Stock Liquidity Event (as
defined in Exhibit B) occurs on or prior to the first anniversary of the date hereof (the
“Expiration Date”), the Company shall issue to the Purchaser additional Company Preferred B Units
in accordance with the provisions set forth on Exhibit B attached hereto; provided, however, that
if a transaction that would constitute a Grill Liquidity Event is announced prior to the Expiration
Date, the Expiration Date shall be extended until the consummation of such announced transaction or
the termination thereof.
6.7. Publicity. Neither the Company nor the Purchaser nor any of their representatives
shall issue any press release or public announcement concerning this Agreement or the transactions
contemplated hereby without obtaining the prior written approval of the other party hereto, which
approval will not be unreasonably withheld or delayed, unless, in the sole judgment of the
Purchaser or the Company, disclosure is required by applicable Law or by the applicable rules of
any stock exchange on which the Purchaser or the Company or the Grill lists securities, provided
that, to the extent required by applicable Law, the party intending to make such release shall use
its commercially reasonable efforts consistent with such applicable Law to consult with the other
party with respect to the text thereof. It is understood and acknowledged that the Company and the
Purchaser are required to make certain filings with the Securities and Exchange Commission with
respect to the transfer of ownership of the Securities and this Agreement.
9
SECTION 7. Indemnification.
(a) Subject to the other provisions of this Section 7 and Section 9.1, the Company hereby
agrees to indemnify and hold the Purchaser and its directors, officers, employees, Affiliates,
agents, successors and assigns harmless from and against any and all Losses resulting from the
failure of any representation or warranty of the Company set forth in Section 2 to be true and
correct as of the Closing.
(b) Subject to the other provisions of this Section 7 and Section 9.1, the Purchaser hereby
agrees to indemnify and hold the Company and its directors, officers, employees, Affiliates,
agents, successors and assigns harmless from and against any and all Losses resulting from the
failure of any representation or warranty of the Purchaser set forth in Section 3 to be true and
correct as of the Closing.
(c) Notwithstanding anything to the contrary in this Agreement:
(i) Neither the Company nor the Purchaser shall have any liability to the other party under
Section 7 hereof unless the aggregate amount of Losses finally determined to arise thereunder
exceeds $125,000 and, in such event, only for the amount which exceeds $125,000;
(ii) Neither the Company nor the Purchaser shall be required to pay to the other party any
Losses pursuant to Section 7 hereof in excess of the amount of the Cash Payment;
(iii) Indemnification by the indemnifying party pursuant to this Section 7 shall be limited to
the amount of any Losses that remain after deducting therefrom (i) any Tax Benefit (as hereinafter
defined) to the indemnified party or any of its Affiliates and (ii) any insurance proceeds or any
indemnity, contribution or other similar payment recoverable to the indemnified party or any of its
Affiliates from any third party with respect thereto. As used herein, the term “Tax
Benefit” shall mean the foreign, federal, state and local income Tax savings that have
resulted, from any Tax deduction or Tax credit that (i) the indemnified party has claimed in
accordance with applicable law (without regard to the entitlement of such indemnified party to any
indemnification payment pursuant to the terms of this Section 7) on a foreign, federal, state or
local income Tax return filed, by the time the indemnification payment is calculated, for any Tax
year of any indemnified party and (ii) is directly attributable to such claim. For purposes of
calculating any Tax Benefit, it shall be assumed that the indemnified party is subject to the
maximum marginal foreign, federal state and local Tax rates for a corporation doing business in the
principal jurisdiction where the indemnified Person does business.
(iv) The indemnified party shall give the indemnifying party written notice of any
indemnification claim hereunder promptly upon becoming aware of any facts or circumstances giving
rise to such claim; provided, however, that the failure to promptly give such notice shall not
release, waive or otherwise affect the indemnifying party’s obligations with
10
respect to such claim except to the extent that the indemnifying party can demonstrate actual
loss or prejudice as a result of such failure.
(d) The provisions of this Section 7 and Section 9.1 set forth the sole and exclusive remedy
for any breach of any representation or warranty in this Agreement.
SECTION 8. Certain Definitions.
For purposes of this Agreement, the following terms shall have the meanings specified in this
Section 8:
“Affiliate” shall mean, with respect to any Person, any other Person controlling,
controlled by or under common control with such Person.
“Governmental Body” shall mean any government or governmental or regulatory body
thereof, or political subdivision thereof, whether federal, state, local or foreign, or any agency,
instrumentality or authority thereof, or any court or arbitrator (public or private).
“Intellectual Property” shall mean all (a) patents, utility models, and patent
applications, including reissues, continuations, continuations-in-part, divisions, revisions,
extensions and reexaminations; (b) trademarks, trade dress, trade names or corporate names, brand
marks or brand names, service marks, and domain names, and all applications, registrations and
renewals thereof; (c) copyrights, and all applications, registrations and renewals thereof; (d)
mask works, and all applications, registrations and renewals thereof; and (e) trade secrets or
similar rights in proprietary confidential information (including ideas, technology, research and
development, formulas, compositions, manufacturing processes and techniques, technical data,
designs, drawings and specifications).
“Law” shall mean any federal, state, local or foreign law (including common law),
statute, code, ordinance, rule, regulation or other requirement.
“Legal Proceeding” shall mean any judicial, administrative or arbitral actions, suits,
proceedings (public or private), claims or governmental proceedings.
“Lien” shall mean any lien, pledge, mortgage, deed of trust, security interest, claim,
lease, charge, option, right of first refusal, easement, servitude, transfer restriction under any
shareholder or similar agreement or encumbrance of any kind.
“Listed Competitor” shall mean any of the companies listed on Exhibit A attached
hereto.
“Losses” shall mean, collectively, with respect to any Person, any and all losses,
liabilities, obligations, damages, costs and expenses; provided, however, that Losses shall not
include any indirect or consequential damage or loss or loss of profit.
“Order” shall mean any order, injunction, judgment, decree, ruling, writ, assessment
or arbitration award.
11
“Permits” shall mean any approvals, declarations, authorizations, registrations,
filings, consents, licenses, permits or certificates.
“Person” shall mean any individual, corporation, partnership, firm, joint venture,
association, joint-stock company, trust, unincorporated organization, Governmental Body or other
entity.
“Taxes” shall mean (i) all federal, state, local or foreign taxes, charges, fees,
imposts, levies or other assessments, including, without limitation, all net income, gross
receipts, capital, sales, use, ad valorem, value added, transfer, franchise, profits, inventory,
capital stock, license, withholding, payroll, employment, social security, unemployment, excise,
severance, stamp, occupation, property and estimated taxes, customs duties, fees, assessments and
charges of any kind whatsoever, (ii) all interest, penalties, fines, additions to tax or additional
amounts imposed by any taxing authority in connection with any item described in clause (i) and
(iii) any liability in respect of any items described in clauses (i) and/or (ii) as a transferee or
as an indemnitor, guarantor, surety or in a similar capacity under any contract, arrangement,
agreement, understanding or commitment (whether written or oral).
SECTION 9. Miscellaneous.
9.1 Survival of Representations and Warranties. The parties hereto hereby agree that
the representations and warranties contained in this Agreement shall survive the execution and
delivery of this Agreement, and the Closing hereunder; provided, however, that (a)
any claims or actions with respect thereto (other than claims or actions for indemnification with
respect to the representations and warranties contained in Section 2.3 (Capitalization)) shall
terminate unless on or prior to December 31, 2007 written notice of such claims or actions is given
to the Company or the Purchaser, as applicable, and (b) any claims or actions for indemnification
with respect to the representations and warranties contained in Section 2.3 (Capitalization)) shall
terminate unless on or prior to December 31, 2008 written notice of such claims or actions is given
to the Company. In the event the Company or the Purchaser disputes in writing any indemnification
claim, such claim shall be deemed to be released and forever waived if the party asserting such
claim fails to file a lawsuit on such claim in accordance with Section 9.3 within forty five (45)
days after the date that such claim is disputed writing.
9.2. Entire Agreement; Successors and Assigns. This Agreement and the LLC Agreement
constitute the full and entire understanding and agreement between the parties with regard to the
subject matter hereof and supersede all prior oral or written (and all contemporaneous oral)
agreements or understandings with respect to the subject matter hereof. No representations or
warranties regarding the Company, its business or the Preferred B Units have been made to the
Purchaser except as otherwise explicitly set forth in Section 2 of this Agreement. This Agreement
is personal to the Purchaser and the Purchaser may not assign any of its rights hereunder or
delegate any of its obligations hereunder without the prior written consent of the Company which
may be withheld in its sole and absolute discretion, provided that the Purchaser may assign its
rights to any wholly owned subsidiary of the Purchaser without the consent of the Company. Subject
to the foregoing, the terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective executors, administrators, heirs, successors, and permitted assigns of
the parties.
12
9.3 Governing Law; Jurisdiction. This Agreement shall be governed by and construed in
accordance with the laws of the State of California without regard to its conflicts of law
principles. Each party hereto irrevocably and unconditionally (i) agrees that any suit, action or
other legal proceeding arising out of this Agreement shall be brought in any state or Federal court
in Los Angeles, California; (ii) consents to the jurisdiction of any such court in any such suit,
action or proceeding; and (iii) waives any objection which such party may have to the laying of
venue of any such suit, action or proceeding in any such court.
9.4 Counterparts; Facsimile Signatures. This Agreement may be executed in
several counterparts, each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument. Copies of signed signature pages delivered by facsimile or
other electronic means shall have the same effect as delivery of originals.
9.5 Enforcement. The parties expressly agree that the provisions of this
Agreement may be specifically enforced against each of the parties hereto in any court of competent
jurisdiction.
9.6 Headings. The headings of the Sections of this Agreement are for convenience and
shall not by themselves determine the interpretation of this Agreement.
9.7 Notices. All notices and other communications provided for or permitted hereunder
shall be in writing and shall be made by hand-delivery, first-class mail (registered or certified,
return receipt requested), telecopier, or overnight air courier guaranteeing next day delivery to
the following addresses or numbers or to such other addresses or numbers as shall be provided in a
notice given in accordance with this Section:
(a) if to the Purchaser, at the address set forth on the Purchaser signature page to this
Agreement;
(b) if to the Company, c/o Maron & Sandler, 0000 Xxxxxx Xxxxxx, Xxxxx 000, Xxxxx Xxxxxx,
Xxxxxxxxxx 00000, Attention: Xxxxxxx X. Xxxxx, Esq., Facsimile No.: (000) 000-0000.
All such notices and communications shall be deemed to have been duly given: at the time
delivered by hand, if personally delivered; five business days after being deposited in the mail,
postage prepaid, if mailed; when receipt acknowledged, if telecopied; and the next business day
after timely delivery to the courier, if sent by overnight air courier guaranteeing next day
delivery.
9.8 Amendments and Waivers. This Agreement may be amended, modified, or supplemented,
and waivers or consents to departures from the provisions may be given, provided that the same are
in writing and signed by the Purchaser and the Company.
9.9 Severability. Every provision of this Agreement is intended to be severable from
every other provision of this Agreement. If any provision of this Agreement is held to be void or
unenforceable, in whole or in part, such provision shall be deemed to be reformed to the
13
minimum extent necessary so that such provision as reformed may and shall be legally
enforceable. If any provision of this Agreement is held to be void or unenforceable, in whole or
in part, and cannot be reformed and made enforceable as provided in the immediately preceding
sentence, the remaining provisions will remain in full force and effect.
9.10. Construction. The Parties have participated jointly in the negotiation and
drafting of this Agreement. In the event an ambiguity or question of intent or interpretation
arises, this Agreement shall be construed as if drafted jointly by the Parties and no presumption
or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any
of the provisions of this Agreement. Any reference to any Law shall be deemed also to refer to all
rules and regulations promulgated thereunder, unless the context requires otherwise. The word
“including” shall mean including without limitation. The Parties intend that each
representation, warranty, and covenant contained herein shall have independent significance. If
any Party has breached any representation, warranty, or covenant contained herein in any respect,
the fact that there exists another representation, warranty, or covenant relating to the same
subject matter (regardless of the relative levels of specificity) which the Party has not breached
shall not detract from or mitigate the fact that the Party is in breach of the first
representation, warranty, or covenant.
9.11 Taxpayer Identification Number and Backup Withholding. The Purchaser verifies
under penalties of perjury, that the Social Security Number/Taxpayer Identification Number shown
for the Purchaser on the Purchaser signature page to this Agreement is true, correct, and complete
and that the Purchaser is not subject to backup withholding because either (a) the Purchaser is
exempt from backup withholding, (b) the Purchaser has not been notified that it is subject to
backup withholding as a result of a failure to report all interest or dividends, or (c) because the
Internal Revenue Service has notified the Purchaser that it is no longer subject to backup
withholding.
* * *
If this Agreement is satisfactory, please so indicate by signing and delivering the Purchaser
signature page attached hereto. EXECUTION OF THE PURCHASER SIGNATURE PAGE CONSTITUTES THE
EXECUTION BY THE PURCHASER OF THE SUBSCRIPTION AGREEMENT.
14
SUBSCRIPTION AGREEMENT
PURCHASER SIGNATURE PAGE
PURCHASER SIGNATURE PAGE
| SUBSCRIBER: | ||||
| Starwood Hotels & Resorts Worldwide, Inc. | ||||
By |
||||
| Xxxxxx Xxxxxx, | ||||
| EVP and Chief Financial Officer | ||||
| Address: | ||||
| Starwood Hotels & Resorts Worldwide, Inc. | ||||
| 0000 Xxxxxxxxxxx Xxxxxx | ||||
| Xxxxx Xxxxxx, XX 00000 | ||||
| Attn: Xxxxxx Xxxxxx, | ||||
| EVP and Chief Financial Officer | ||||
Telephone: |
||||
| Taxpayer I.D. Number: 00-0000000 | ||||
| Number of Preferred B Units Subscribed For: 6,085 | ||||
| $5,476,500 Total Purchase Price (based on $900 per Unit) | ||||
ACCEPTANCE
IN WITNESS WHEREOF, the Company has accepted the foregoing Subscription Agreement.
| EATURNA LLC, | ||||||
| a Delaware limited liability company | ||||||
| By: | ||||||
| Secretary | ||||||
