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EXHIBIT 10.2
SECOND
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
FFPE, LLC,
A DELAWARE LIMITED LIABILITY COMPANY
Exhibit 25
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TABLE OF CONTENTS
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ARTICLE 1. DEFINITIONS..............................................................1
1.1 "Accounting Period"...........................................................1
1.2 "Act".........................................................................1
1.3 "Adjusted Capital Account"....................................................1
1.4 "Adjustment Period"...........................................................1
1.5 "Agreement"...................................................................1
1.6 "Assignee"....................................................................2
1.7 "Bankruptcy"..................................................................2
1.8 "Book Value"..................................................................2
1.9 "Capital Account".............................................................2
1.10 "Capital Contributions".......................................................3
1.11 "Cause".......................................................................3
1.12 "Code"........................................................................3
1.13 "Depreciation"................................................................4
1.14 "Dissociated Member"..........................................................4
1.15 "Dissolution".................................................................4
1.16 "Dissolution Event"...........................................................4
1.17 "Interest"....................................................................4
1.18 "LLC".........................................................................4
1.19 "Manager".....................................................................4
1.20 "Member Nonrecourse Debt Minimum Gain"........................................4
1.21 "Member Nonrecourse Deductions"...............................................4
1.22 "Members".....................................................................5
1.23 "Minimum Gain"................................................................5
1.24 "Net Income" or "Net Loss"....................................................5
1.25 "Nonrecourse Deductions"......................................................5
1.26 "Person"......................................................................5
1.27 "Property"....................................................................5
1.28 "Substitute Member"...........................................................5
1.29 "Treasury Regulations"........................................................6
1.30 "Units".......................................................................6
1.31 "Unreturned Capital"..........................................................6
ARTICLE 2. FORMATION OF LIMITED LIABILITY COMPANY.......................................6
2.1 Formation.....................................................................6
2.2 Name; Principal Place of Business.............................................6
2.3 Agent for Service of Process..................................................6
Exhibit 25
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2.4 Agreement.....................................................................6
2.5 Business......................................................................6
2.6 Term..........................................................................7
ARTICLE 3. MEMBERSHIP...................................................................7
3.1 Members.......................................................................7
3.2 Units.........................................................................7
3.3 Representations and Warranties................................................7
3.4 Additional Members............................................................8
3.5 Admission of Substitute Members...............................................8
3.6 Resignation or Withdrawal of a Member.........................................8
3.7 Dissociation of a Member......................................................8
3.8 Rights of Dissociating Member.................................................8
3.9 Expulsion of a Member.........................................................9
ARTICLE 4. CAPITAL......................................................................9
4.1 Capital Contributions.........................................................9
4.2 Unit Register.................................................................9
4.3 Additional Capital Contributions.............................................10
4.5 Interest.....................................................................10
ARTICLE 5. ACTION BY MEMBERS...........................................................10
5.1 Meetings of Members..........................................................10
5.2 Annual Meetings..............................................................10
5.3 Special Meetings.............................................................10
5.4 Membership List..............................................................11
5.5 Quorum.......................................................................11
5.6 Voting Rights; Approval of Members at a Meeting..............................12
5.7 Approval of Members without Meeting..........................................12
ARTICLE 6. MANAGEMENT..................................................................13
6.1 Management by Manager........................................................13
6.2 Authority of Manager.........................................................13
6.3 Meetings.....................................................................13
6.4 Action without Meeting.......................................................13
6.5 Compensation of Manager and Members..........................................14
6.6 Powers and Authority of Manager..............................................14
6.7 Duties of Manager............................................................15
6.8 Devotion of Time.............................................................16
6.9 Competing Activities.........................................................16
Exhibit 25
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ARTICLE 7. OFFICERS....................................................................16
7.1 Required Officers............................................................16
7.2 Compensation of Officers.....................................................16
7.3 Duties of Chief Executive Officer............................................17
7.4 Duties of Secretary..........................................................17
ARTICLE 8. DISTRIBUTIONS...............................................................17
8.1 Mandatory Distributions......................................................17
8.2 Distributions in Kind........................................................17
8.3 Restrictions on Distributions................................................18
8.4 No Other Withdrawals.........................................................18
ARTICLE 9. ALLOCATIONS.................................................................18
9.1 Allocation of Income and Loss................................................18
9.2 Special Allocations..........................................................18
9.3 Special Tax Provisions.......................................................19
9.4 Partnership Tax Treatment....................................................20
ARTICLE 10. ACCOUNTING AND RECORDS......................................................20
10.1 Financial and Tax Reporting..................................................20
10.2 Books and Records............................................................20
10.3 Reports......................................................................21
10.4 Tax Returns..................................................................21
10.5 Tax Matters Partner..........................................................21
ARTICLE 11. TRANSFER OF MEMBERSHIP......................................................21
11.1 Transfer.....................................................................21
11.2 Rights of Assignees..........................................................22
ARTICLE 12. INDEMNIFICATION AND LIMITATION OF LIABILITY.................................22
12.1 Indemnification..............................................................22
12.2 Limitation of Liability......................................................23
ARTICLE 13. TERMINATION.................................................................23
13.1 Termination..................................................................23
13.2 Continuation of the LLC......................................................23
13.3 Authority to Wind Up.........................................................24
13.4 Winding Up; Certificate of Cancellation......................................24
13.5 Distribution of Property.....................................................24
Exhibit 25
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ARTICLE 14. SPECIAL TAX PROVISIONS......................................................24
14.1 Substantial Economic Effect..................................................24
14.2 Qualified Income Offset; Prophylactic Offsets; Minimum-Gain
Chargeback...................................................................25
14.3 Compliance with Timing Requirements of Treasury Regulations..................26
14.4 Sharing Arrangement; Interest in LLC Items...................................26
14.5 Taxation of the LLC..........................................................26
ARTICLE 15. MISCELLANEOUS...............................................................27
15.1 Amendment....................................................................27
15.2 Binding Effect...............................................................27
15.3 Counterparts.................................................................27
15.4 Entire Agreement.............................................................27
15.5 Further Assurances...........................................................27
15.6 Governing Law................................................................27
15.7 Notices......................................................................27
15.8 Power of Attorney............................................................28
15.9 Savings Clause...............................................................28
15.10 Severability.................................................................28
15.11 Withholding Taxes............................................................28
Exhibit 25
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SECOND
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
FFPE, LLC
THIS SECOND AMENDED AND RESTATED LIMITED LIABILITY COMPANY
AGREEMENT (this "Agreement"), is entered into as of August 29, 2000 ("Effective
Date"), by FFPE Holding Company, Inc., a Delaware corporation ("Holdings"), and
Sizzler International, Inc., a Delaware corporation ("Sizzler") (each a "Member"
and collectively, the "Members" of FFPE, LLC, a Delaware limited liability
company ("LLC")).
ARTICLE 1.
DEFINITIONS
The following terms shall have the meanings set forth below for
purposes of this Agreement:
1.1 "Accounting Period" means for each Accounting Period the period
beginning on the Monday closest to May 1 and ending on the Sunday closest to
April 30; provided, however, that the first Accounting Period shall commence on
the date of formation of the LLC and shall end on April 30, 2001; and provided,
further, that an Accounting Period shall end and a new Accounting Period shall
commence on any date on which an Additional or Substituted Member is admitted to
the LLC or a Member ceases to be a Member for any reason.
1.2 "Act" means the Limited Liability Company Act, Delaware Corporation
Code, as amended from time to time.
1.3 "Adjusted Capital Account" shall mean the Capital Account of each
Member as of the end of any Accounting Period after taking into account all
adjustments required to be made to the Capital Account for such period other
than the allocation of Net Income or Loss.
1.4 "Adjustment Period" shall mean the ten year period from the Effective
Date of this Agreement.
1.5 "Agreement" means this Amended and Restated Limited Liability Company
Agreement, as amended from time to time.
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1.6 "Assignee" means a transferee of Units who has not been admitted as a
Substitute Member.
1.7 "Bankruptcy" means, with respect to any Person, that: (a) a petition
has been filed by or against such Person as a "debtor" and the adjudication of
such Person as a bankrupt under the provisions of the bankruptcy laws of the
United States of America has commenced; (b) such Person has made an assignment
for the benefit of its creditors generally; or (c) a receiver has been appointed
for substantially all of the property and assets of such Person.
1.8 "Book Value" means, with respect to any asset, the asset's adjusted
basis for federal income tax purposes, except as follows:
(i) The initial Book Value of any asset contributed by a Member to
the LLC shall be the gross fair market value of such asset (not reduced by any
associated liabilities), as agreed to by the contributing Member and the
Manager, provided that the initial Book Values of the assets contributed to the
LLC shall be as set forth in Section 4.1;
(ii) The Book Value of the Property of the LLC shall be adjusted
to equal their respective gross fair market values, as determined by the
Manager, as of the following times: (a) the acquisition of an additional
Interest by any new or existing Member in exchange for more than a de minimis
Capital Contribution; (b) the distribution by the LLC to a Member of more than a
de minimis amount of Property as consideration for an Interest; and (c) the
liquidation of the LLC within the meaning of Treasury Regulations Section
1.704-1(b)(2)(ii)(q); provided, however, that adjustments pursuant to clauses
(a) and (b) above shall be made only if the Manager reasonably determine that
such adjustments are necessary or appropriate to reflect the relative economic
interests of the Members in the LLC; and
(iii) The Book Value of any Property distributed to a Member shall
be adjusted to equal the gross fair market value of such asset on the date of
distribution as determined by the Manager.
The Book Value of any Property which has been established or adjusted to reflect
gross fair market value hereunder shall thereafter be adjusted by the
Depreciation taken into account with respect to such asset for purposes of
computing Net Income or Net Loss.
1.9 "Capital Account" means with respect to each Member a separate
account established and maintained in accordance with the following provisions:
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The Capital Account of each Member shall be increased by:
(i) the amount of money and the fair market value of any property
contributed to the LLC (determined by the Manager as of the date of
contribution) by such Member pursuant to the provisions of this Agreement (net
of any liabilities secured by such property that the LLC is considered to assume
or hold subject to and for purposes of Section 752 of the Code),
(ii) such Member's share of Net Income (or items thereof)
allocated to its Capital Account pursuant to this Agreement, and
(iii) any other amounts required by Treasury Regulation Section
1.704-1(b), provided the Managers determine that such increase is consistent
with the economic arrangement among the Members as expressed in this Agreement.
And shall be decreased by:
(i) The amount of money and the fair market value of any property
distributed by the LLC (determined by the Manager as of the date of
distribution) to such Member pursuant to the provisions of this Agreement (net
of any liabilities secured by such property that such Member is considered to
assume or hold subject to for purposes of Section 752 of the Code),
(ii) such Member's share of Net Losses (or items thereof)
allocated to its Capital Account pursuant to this Agreement, and
(iii) any other amounts required by Treasury Regulation Section
1.704-1(b), provided that the Manager determines that such decrease is
consistent with the economic arrangement among the Members as expressed in this
Agreement.
1.10 "Capital Contributions" of a Member means that amount of cash and/or
the agreed value of other property actually contributed or deemed to be
contributed by such Member to the LLC pursuant to Article 4.
1.11 "Cause" shall mean (i) any act of fraud; (ii) gross negligence or
willful misconduct related to the conduct of the affairs of the LLC; or (iii)
the filing of a petition in bankruptcy by or against any Member or officer of
the LLC which is not dismissed within ninety (90) days of filing, or a general
assignment for the benefit of creditors or take advantage of any insolvency act.
1.12 "Code" means the Internal Revenue Code of 1986, as amended from time
to time.
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1.13 "Depreciation" means, for each Accounting Period, an amount equal to
the depreciation, amortization, or other cost recovery deduction allowable with
respect to an asset for such Period, except that if the gross asset value of an
asset differs from its adjusted basis for federal income tax purposes during
such Accounting Period, Depreciation shall be an amount which bears the same
ratio to Book Value as the federal income tax depreciation, amortization, or
other cost recovery deduction for such Period bears to such beginning adjusted
tax basis; provided, however, that if the adjusted basis for federal income tax
purposes of an asset at the beginning of such Accounting Period is zero,
Depreciation shall be determined with reference to such asset as if the adjusted
basis of the asset for federal income tax purposes were equal to the Book Value
and using any reasonable method of cost recovery selected by the Manager.
1.14 "Dissociated Member" means a Member who has ceased to be a Member as
a result of death, expulsion, Bankruptcy or Dissolution.
1.15 "Dissolution" of a Member which is not a natural person means that
such Member has terminated its existence, whether partnership or corporate,
wound up its affairs and dissolved; provided, however, that a change in the
membership of any Member that is a general partnership shall not constitute a
"Dissolution" hereunder, whether or not the Member is deemed technically
dissolved for partnership law purposes, so long as the business of the Member is
continued.
1.16 "Dissolution Event" means the death, expulsion, Bankruptcy, or
Dissolution of a Member, the occurrence of which terminates the Member's
continued membership in the LLC.
1.17 "Interest" means all right of a Member or an Assignee to share in
distributions and allocations hereunder.
1.18 "LLC" means FFPE, LLC, the limited liability company formed pursuant
to this Agreement.
1.19 "Manager" means the person charged with the management of the
business and affairs of the LLC in accordance with Section 6.1.
1.20 "Member Nonrecourse Debt Minimum Gain" shall have the same meaning
as partner nonrecourse debt minimum gain under Treasury Regulation Section
1.704-2(i)(3).
1.21 "Member Nonrecourse Deductions" shall have the same meaning as
partner nonrecourse deduction set forth in Treasury Regulation Section
1.704-2(i)(2).
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1.22 "Members" means all Members, including Substitute Members and any
Additional Members admitted pursuant to this Agreement but does not include
Assignees.
1.23 "Minimum Gain" has the meaning set forth in Sections 1.704-2(b)(2)
and 1.704-2(d) of the Treasury Regulations.
1.24 "Net Income" or "Net Loss" means for any Accounting Period the
amount, computed as of the last day thereof, of the net income or loss of the
LLC determined in accordance with federal income tax principles (but without
requiring any items to be stated separately pursuant to Code Section 703), with
the following adjustments:
(i) Any income of the LLC that is exempt from federal income tax
shall be included in the computation of Net Income or Net Loss;
(ii) Any expenditures of the LLC described in Code Section
705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant to
Treasury Regulations Section 1.704-1(b)(2)(iv)(l) shall be included in the
computation of Net Income or Net Loss;
(iii) Any adjustment in the Book Value of Property in accordance
with this Agreement shall be taken into account as gain or loss from the
disposition of such asset for purposes of computing Net Income or Net Loss;
(iv) In any situation in which an item of income, gain, loss or
deduction is affected by the adjusted basis of Property, the Book Value of the
Property shall be used in lieu of adjusted basis; and
1.25 "Nonrecourse Deductions" has the meaning set forth in Section
1.704-2(b)(1) of the Treasury Regulations.
1.26 "Person" means a natural person, partnership (whether general or
limited and whether domestic or foreign), LLC, foreign limited liability
company, trust, estate, association, corporation, custodian, nominee or any
other individual or entity in its own or representative capacity.
1.27 "Property" means all real property and other assets owned by the LLC
from time to time.
1.28 "Substitute Member" means an Assignee who has been admitted to all
the rights of a Member pursuant to this Agreement.
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1.29 "Treasury Regulations" means regulations issued pursuant to the
Code, as amended from time to time.
1.30 "Units" means the ownership interests in the LLC.
1.31 "Unreturned Capital" means, with respect to each Member, the excess
of (i) such Member's Capital Contributions over (ii) the aggregate amount
distributed to such Member in excess of the amounts required to be distributed
to such Member pursuant to Section 8.1.
ARTICLE 2.
FORMATION OF LIMITED LIABILITY COMPANY
2.1 Formation. The LLC was formed on a Certificate of Formation (the
"Certificate") conforming to the requirements of the Act in the Office of the
Secretary of State of the State of Delaware. The original limited liability
company agreement of the LLC was the Limited Liability Company Agreement of
FFPE, LLC, dated May 12, 2000 (the "Original Agreement"). The Original Agreement
was amended as of August 25, 2000 by that certain First Amendment to the Limited
Liability Company Agreement of FFPE, LLC, the purpose of which was to reflect
the transfer of Units to new Members. On August 24, 2000, S&C Company, Inc., a
California corporation, was merged with and into the LLC.
2.2 Name; Principal Place of Business. Unless and until amended in
accordance with this Agreement and the Act, the name of the LLC will be "FFPE,
LLC". The principal place of business of the LLC in California shall be 0000
Xxxxxxx Xxxxxxx Xxxx., Xxxxx X, Xxx Xxxxx, Xxxxxxxxxx 00000, or such other place
or places as the Members from time to time determine.
2.3 Agent for Service of Process. Until such time as the Manager has
appointed a different person to act in the State of Delaware as the agent of the
LLC for service of process, the LLC's agent for service of process in the State
of Delaware shall be as set forth in the Articles.
2.4 Agreement. This Agreement shall be the sole Limited Liability Company
Agreement for the LLC.
2.5 Business. The purpose of the LLC is to own, operate and further
develop a chain of casual dining restaurants doing business under the name
Oscar's or such other trade names as agreed upon by the Members, and to engage
in any and all activities
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incidental to or in furtherance of the foregoing purposes, and to engage in any
other activity for which a limited liability company may be organized under the
Act.
2.6 Term. The term of the LLC shall commence upon the filing of the
Certificate and shall continue for the period set forth therein unless its
existence is sooner terminated pursuant to Article 13 of this Agreement.
ARTICLE 3.
MEMBERSHIP
3.1 Members. The names and addresses of the Members of the LLC are set
forth on Exhibit A hereto.
3.2 Units. Ownership of the LLC shall be divided into and represented by
Units of the LLC. The total number of Units which the LLC is authorized to issue
shall initially be One Hundred (100). All of the authorized Units shall be
issued and outstanding, fully paid and nonassessable.
3.3 Representations and Warranties. Each Member hereby represents and
warrants to the LLC and each other Member as follows:
3.3.1 Compliance with Other Agreements. The Member's
execution, delivery and performance of this Agreement does not conflict with any
other agreement or arrangement to which such Member is a party or by which such
Member is bound.
3.3.2 Purchase Entirely for Own Account. The Member is
acquiring its or his interest in the LLC for the Member's own account for
investment purposes only and not with a view to or for the resale, distribution,
subdivision or fractionalization thereof and has no contract, understanding,
undertaking, agreement or arrangement of any kind with any Person to sell,
transfer or pledge to any Person any interest in the LLC, nor does such Member
have any plans to enter into any such agreement.
3.3.3 Investment Experience. By reason of such Member's
business or financial experience, the Member has the capacity to protect his or
their own interests in connection with the transactions contemplated hereunder,
is able to bear the risk of investment in the LLC, and at the present time could
afford a complete loss of such investment.
3.3.4 Disclosure of Information. The Member is aware of the
LLC's business affairs and financial condition and has acquired sufficient
information
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about the LLC to reach an informed and knowledgeable decision to acquire Units
in the LLC.
3.3.5 Securities Laws. Assuming federal and state securities laws apply to the
interests described herein, the Member acknowledges that the Units have not been
registered under the Securities Act of 1933 or any state securities laws,
inasmuch as they are being acquired in a transaction not involving a public
offering, and, under such laws, may not be resold or transferred by the Member
without appropriate registration or the availability of an exemption from such
requirements. In this connection, the Member represents that it is familiar with
SEC Rule 144, as presently in effect, and understands the resale limitations
imposed thereby and by the Securities Act of 1933.
3.4 Additional Members. Subject to paragraph 6.6.4, additional Members
may be admitted upon such terms and conditions as the Manager may determine.
3.5 Admission of Substitute Members. An Assignee of Units of the LLC may
be admitted as a Substitute Member with the approval of the Manager. If so
admitted, the Substitute Member shall have, with respect to the Units so
assigned, all the rights and powers and shall be subject to all the restrictions
and liabilities of the Member who assigned such Units. The admission of a
Substitute Member shall not release any Member who assigned such Units from
liability to the LLC that may have arisen prior to the transfer.
3.6 Resignation or Withdrawal of a Member. Except as specifically
provided below, and subject to the provisions for transfer contained in Article
11, no Member shall have the right to resign or withdraw from membership in the
LLC or withdraw his interest in the capital of the LLC.
3.7 Dissociation of a Member. The death, expulsion, Bankruptcy or
dissolution of a Member: (a) will cause such Member to become a Dissociated
Member; (b) will terminate the continued membership of such Member in the LLC;
and (c) may or may not cause a dissolution of this LLC pursuant to Article 13
hereof.
3.8 Rights of Dissociating Member. In the event any Member becomes a
Dissociated Member:
3.8.1 If the dissociation causes a dissolution and winding
up of the LLC under Article 13, the Dissociated Member or its legal
representative (the "Holder") shall be entitled to participate in the winding up
of the LLC to the same extent as any other Member.
3.8.2 If the dissociation does not cause a dissolution and
winding up of the LLC under Article 13, the Holder shall have only those rights
as an Assignee under this Agreement.
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3.9 Expulsion of a Member. No Member may be expelled other than for
Cause.
ARTICLE 4.
CAPITAL
4.1 Capital Contributions. The initial capital accounts shall be as set
forth in Exhibit "A." The initial capital contribution by Sizzler shall be an
amount equal to the Purchase Price (as such term is defined in the Amended and
Restated LLC Membership Interest Purchase Agreement dated August 21, 2000, to
which Holdings and Sizzler are parties), other than Additional Consideration (as
defined in such Purchase Agreement), plus transaction costs related to the
acquisition of the Purchased Units (as defined in such Purchase Agreement). The
initial capital contribution by Holdings shall be an amount equal to 18/82 of
the initial capital contribution of Sizzler as described in the preceding
sentence. However, upon the payment of any Additional Consideration pursuant to
the Amended and Restated LLC Membership Interest Purchase Agreement dated August
21, 2000 the portion thereof treated as principal for federal income tax
purposes shall upon such payment be treated as a capital contribution by Sizzler
and an amount equal to 18/82 thereof shall be treated as a capital contribution
by Holdings; and Exhibit "A" shall be amended accordingly. In exchange for their
Capital Contributions described above, the Members shall have the rights set
forth herein, including the Units as set forth in Section 4.1. In exchange for
such contributions, the Members shall be issued the number of Units as follows:
Member Units
------ -----
Sizzler 82
Holdings 18
---
Total 100
===
4.2 Unit Register. In order that the LLC may determine the Members
entitled to notice of or to consent, approve or vote on any matter, or the
Members or Assignees entitled to receive payment of any distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other lawful
action, the Manager shall cause the LLC to maintain a register of the ownership
of all Units of the LLC (the "Unit Register"). No transfer of Units shall be
effective unless and until the LLC has been properly notified of such transfer
and any and all conditions or requirements necessary to effect such transfer
have been met, performed or satisfied. The LLC and its Members, Manager and
officers shall
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be entitled to recognize the exclusive right of a person registered on the LLC's
books as the owner of Units to receive distributions, and to vote as such owner
and shall not be bound to recognize any equitable or other claim to or interest
in such Unit or Units on the part of any other person, whether or not it shall
have express or other notice thereof, except as otherwise provided by the laws
of Delaware.
4.3 Additional Capital Contributions. No Member shall be required to make
any additional Capital Contribution to the capital of the LLC. No Member shall
be permitted to make any additional Capital Contribution to the capital of the
LLC without the approval of the Members.
4.4 Unit Certificates. The Units may be evidenced by such written
certificate as may be memorialized by the Manager. Any such Unit Certificates
shall be deemed "investment securities" within the meaning of Articles 8 and 9
of the Uniform Code as adopted in applicable jurisdiction.
4.5 Interest. No Member shall be entitled to payment of any interest with
respect to its Capital Contributions to or its share of the capital of the LLC.
ARTICLE 5.
ACTION BY MEMBERS
5.1 Meetings of Members. All meetings of the Members for the election of
Managers shall be held at such place as may be fixed from time to time by the
Manager and stated in the notice of the meeting. Meetings of Members for any
other purpose may be held at such time and place, within or without the State of
Delaware, as shall be stated in the notice of the meeting or in a duly executed
waiver of notice thereof.
5.2 Annual Meetings.
5.2.1 Annual meetings of Members, commencing with the year
2000, shall be held on such date and at such time as shall be designated from
time to time by the Manager and stated in the notice of the meeting, at which
they shall elect a Manager, and transact such other business as may properly be
brought before the meeting.
5.2.2 Written notice of the annual meeting stating the
place, date and hour of the meeting shall be given to each Member entitled to
vote at such meeting not less than ten (10) nor more than sixty (60) days before
the date of the meeting.
5.3 Special Meetings.
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5.3.1 Special meetings of the Members, for any purpose or
purposes, may be called by the Manager or the Chief Executive Officer or at the
request in writing of Members owning at least seven percent (7%) of the Units
issued and outstanding and entitled to vote. Such request shall state the
purpose or purposes of the proposed meeting.
5.3.2 A special meeting of the Members for the election of
a new Manager or Board of Managers may be called by any Member within 90 days of
the date on which such Member has acquired Units of the LLC.
5.3.3 Written notice of a special meeting stating the
place, date and hour of the meeting and the purpose or purposes for which the
meeting is called, shall be given not less than ten (10) nor more than sixty
(60) days before the date of the meeting, to each Member entitled to vote at
such meeting.
5.3.4 Business transacted at any special meeting of Members
shall be limited to the purposes stated in the notice.
5.4 Membership List. The Person who has charge of the Unit Register of
the LLC shall prepare and make, at least ten days before every meeting of
Members, a complete list of the Members entitled to vote at the meeting,
arranged in alphabetical order, and showing the address of each Member and the
number of Units registered in the name of each Member. Such list shall be open
to the examination of any Member, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten days prior to the meeting,
either at a place within the city where the meeting is to be held, which place
shall be specified in the notice of the meeting, or, if not so specified, at the
place where the meeting is to be held. The list shall also be produced and kept
at the time and place of the meeting during the whole time thereof, and may be
inspected by any Member who is present.
5.5 Quorum. The holders of a majority of the Units issued and outstanding
and entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the Members for the transaction of
business. If, however, such quorum shall not be present or represented at any
meeting of the Members, the Members entitled to vote thereat, present in person
or represented by proxy, shall have power to adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present or represented. At any such adjourned meeting at which a quorum
shall be present or represented, any business may be transacted which might have
been transacted at the meeting as originally notified. If the adjournment is for
more than thirty days, or if after the adjournment a new record date is fixed
for the adjourned meeting, a notice of the adjourned meeting shall be given to
each Member entitled to vote at the adjourned meeting.
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5.6 Voting Rights; Approval of Members at a Meeting.
5.6.1 Except as provided in Section 5.6.3, each Member
shall at every meeting of the Members be entitled to one vote in person or by
proxy for each Unit, but no proxy shall be voted after three years from its
date, unless the proxy expressly provides for a longer period. Neither the
assigning Member nor the Assignee of Units which have been assigned shall have
any right to a vote with respect to any assigned Units. No Dissociated Member or
Member who has assigned all of his Units of the LLC (collectively, "Former
Members") shall have any right to vote on any matter. A Member who has assigned
some, but not all, of his Units of the LLC shall be treated as a Member and
entitled to a vote on all matters to the extent of his retained Units of the
LLC. No Assignee of Units of the LLC shall have the right to consent to, approve
or vote on any matters, unless such Assignee has become a Substitute Member
pursuant to Section 3.5 hereof.
5.6.2 Except to the extent that the express provision of
the statutes, the Certificate, or this Agreement require a different vote (in
which case such express provision shall govern and control) and except as set
forth in Section 5.6.3, when a quorum is present at any meeting, the vote of the
holders of a majority of the Units present in person or by proxy shall decide
any question brought before such meeting.
5.6.3 Notwithstanding Section 5.6.1 or 5.6.2, with respect
to the election of Managers, each Member entitled to one vote with respect to a
Unit under Section 5.6.1 shall be entitled to one vote for such Unit multiplied
by the number of Managers to be elected. All such votes may be cast for a single
Manager or in such other manner as the Member determines to be appropriate in
the circumstance.
5.7 Approval of Members without Meeting. Any action required to be taken
at any annual or special meeting of Members of the LLC, or any action which may
be taken at any annual or special meeting of such Members, may be taken without
a meeting, without prior notice and without a vote, if a consent in writing,
setting forth the action so taken, shall be signed by the holders of outstanding
Units having not less than the minimum number of votes that would be necessary
to authorize or take such action at a meeting at which all Units entitled to
vote thereon were present and voted. Prompt notice of the taking of any action
without a meeting by less than unanimous written consent shall be given to those
Members who have not consented in writing.
ARTICLE 6.
MANAGEMENT
6.1 Management by Manager. The LLC shall be managed and controlled by a
single Manager of the LLC. Initially the Manager shall be Sizzler and any
reference
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herein to "Manager" or "Managers" shall refer only to Sizzler so long as it
serves as the only Manager.
6.2 Authority of Manager.
6.2.1 Except as otherwise limited and set forth in Section
6.6 below, the Manager may exercise all powers of the LLC and shall have all
requisite power and authority to do such lawful acts and things as the Manager
may determine to be necessary or appropriate in the conduct of the business and
affairs of the LLC. Except as otherwise provided herein, it is intended that the
powers and authority of the Manager shall be substantially the same as the
powers and authority of directors of a corporation formed under the laws of the
State of Delaware.
6.2.2 Notwithstanding the above, the Manager may not do or
permit to be done any of the following without the express approval of the
Members:
(i) Any act or thing which this Agreement expressly
requires to be approved, consented to, determined or authorized by all of the
Members; and
(ii) Voluntarily cause the dissolution of the LLC.
6.2.3 Unless the Act or this Agreement expressly requires a
greater vote or consent, all matters requiring the vote, approval, consent,
authorization or determination of the Manager or of all Managers shall require
the vote or consent of a majority of the Managers.
6.3 Meetings. The Manager may hold meetings, both regular and special,
either within or outside the State of Delaware. Regular meetings may be held at
such time and place as shall be specified by the Manager in establishing the
schedule for such regular meetings, or if a schedule is not otherwise fixed, in
a notice given as hereinafter provided. Special meetings may be held at such
time and place as shall be specified in a notice given as hereinafter provided.
6.4 Action without Meeting. Any action required or permitted to be taken
by the Manager may be taken without a meeting, if a majority of all Managers
consent thereto in writing, and the writing or writings are filed with the books
and records of the LLC.
6.5 Compensation of Manager and Members. Unless otherwise expressly
approved by the Members, the Manager shall not be entitled to any compensation
for services or activities undertaken in their capacity as a Manager of the LLC,
provided that the Manager shall be reimbursed for any and all costs and expenses
reasonably incurred in connection with the performance of its duties as Manager.
Notwithstanding the
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foregoing, and at the Manager's option, the Manager shall be entitled to a fee
of two percent (2%) of gross revenues of the Company which shall accrue and not
be paid during the Adjustment Period.
6.6 Powers and Authority of Manager. The Manager shall have all necessary
power and authority to act on behalf of the Company conferred upon managers
under the Act. Notwithstanding the delegation to Manager of the power and
obligation to supervise and conduct the day-to-day operations of the LLC, the
Manager shall not individually or on behalf of the LLC effect, and shall not
cause or permit to occur, any of the following actions unless same have been
approved in writing by all of the Members:
6.6.1 Acts of Contravention. Doing any act in contravention
of this Agreement;
6.6.2 Burdensome Acts. Doing any act which would make it
impossible or unreasonably burdensome to carry on the business of the LLC;
6.6.3 Possess Property. Possessing property of the LLC;
6.6.4 Equity Issuance. Issuing any equity interest with
respect to the LLC that results in an economic dilution of any Units, other than
a dilution that is shared by all Members in accordance with their respective
Units;
6.6.5 Limited Liability Company. Taking or failing to take
any action that could cause the LLC not to be treated as a valid limited
liability company duly organized under the laws of the State of Delaware; and
6.6.6 Amendments. Entering into any amendment,
modification, revision, supplement or rescission with respect to any of the
foregoing to the extent approval of same was previously required pursuant to
this Section 6.6.
6.7 Duties of Manager.
6.7.1 The Manager shall perform its duties in good faith,
in a manner it reasonably believes to be in the best interests of the Company
and its Members, and with such care, including reasonable inquiry, as an
ordinarily prudent person in a like position would use under similar
circumstances.
6.7.2 In performing its duties, the Manager shall be
entitled to rely on information, opinions, reports, or statements, including
financial statements and other financial data, of professional third parties
unless they had knowledge concerning the matter in question that would cause
such reliance to be unwarranted and provided that
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the Manager acts in good faith and after reasonable inquiry when the need
therefor is indicated by the circumstances.
6.7.3 A Manager who so performs the duties of Manager shall
not have any liability by reason of being or having been a Manager of the
Company. Neither the Manager nor any of its affiliates, employees, delegates,
agents, successors or assigns shall be liable to the Company or any Member for
any liabilities incurred by reason of their acts or omissions in connection with
the Company's business or in dealing with other Members or third parties on
behalf of the Company if such acts or omissions are taken in good faith and are
not finally adjudicated by a court of competent jurisdiction to constitute fraud
or gross negligence by the Manager or its affiliates, employees, delegates,
agents, successors or assigns. In any case where the Manager or its affiliates,
employees, delegates, agents successors or assigns are personally liable on
Company obligations, all liabilities incurred first must be satisfied from the
assets of the Company (including any insurance).
6.7.4 With respect to all matters (including disputes with
respect thereto) relating to the Company, its business, and all computations and
determinations required to be made under this Agreement, the Manager may rely
on, and shall have no liabilities to other Members or the Company if it relies
on, the opinion or advice of accountants, lawyers or consultants retained by the
Company or by the Manager on behalf of the Company.
6.7.5 Under no circumstances will any director, officer,
shareholder, member, manager, partner, employee, agent or affiliate of any
Member have any personal responsibility for any liability or obligation of the
Manager (whether on a theory of alter ego, piercing the corporate veil, or
otherwise), and any recourse permitted under this Agreement or otherwise of the
Members, any former Member, and the Company against a Manager will be limited to
the assets of the Manager as they may exist from time to time.
6.8 Devotion of Time. The Manager is not obligated to devote all of its
time or business efforts to the affairs of the Company. The Manager shall devote
whatever time, effort, and skill as it deems appropriate for the operation of
the Company.
6.9 Competing Activities. The Manager and its officers, directors,
shareholders, partners, members, managers, agents, employees and affiliates may
engage or invest in, independently or with others, any business activity of any
type or description, including without limitation: (a) rendering advice or
services to other persons; (b) investing their own capital and revenues or the
capital and revenues of others in any fashion; and (c) those that might be the
same as or similar to the Company's business and that might be in direct or
indirect competition with the Company. Neither the Company nor any Member shall
have any right in or to such other ventures or
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activities or to the income or proceeds derived therefrom. The Manager shall not
be obligated to present any investment opportunity or prospective economic
advantage to the Company, even if the opportunity is of the character that, if
presented to the Company, could be taken by the Company. The Manager shall have
the right to hold any investment opportunity or prospective economic advantage
for its own account or to recommend such opportunity to Persons other than the
Company. The Members acknowledge that the Manager and its affiliates own and/or
manage other businesses, including businesses that may compete with the Company
and for the Manager's time. The Members hereby waive any and all rights and
claims which they may otherwise have against the Manager and its officers,
directors, shareholders, partners, members, managers, agents, employees and
affiliates as a result of any of such activities.
ARTICLE 7.
OFFICERS
7.1 Required Officers. The officers of the LLC shall include a Chief
Executive Officer and a Secretary to be appointed by the Manager. The Manager
may create other offices and elect persons to hold such other offices as they
deem appropriate. Any number of offices may be held by the same person. The
duties of any officers shall be established from time to time by the Manager or
by the Chief Executive Officer acting under authority granted by the Manager.
Each officer shall hold office for such term as shall be determined from time to
time by the Manager and may be removed from office at any time by the Manager.
7.2 Compensation of Officers. The salaries of all officers of the LLC
shall be reasonably fixed by the Manager or by the Chief Executive Officer
acting under authority granted by the Manager, or as otherwise set forth by an
Employment Agreement.
7.3 Duties of Chief Executive Officer. The Chief Executive Officer shall
be the chief executive officer of the LLC and, unless and until the Manager
determines otherwise, shall have general and active management of the day-to-day
business and affairs of the LLC and shall see that all orders and resolutions of
the Manager are carried into effect. The Chief Executive Officer shall execute
bonds, mortgages and other contracts, except where required or permitted by law
to be otherwise signed and executed and except where the signing and execution
thereof shall be prohibited by the Manager or be expressly delegated by the
Manager to some other officer or agent of the LLC. The initial Chief Executive
Officer of the LLC shall be Xxxx Xxxxxxxxx.
7.4 Duties of Secretary. The Secretary shall attend all meetings of the
Members and record all the proceedings of the meetings of the Members in a book
to be kept for that purpose. The Secretary shall give, or cause to be given,
notice of all meetings of the Members and special meetings of the Members, and
shall perform such
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other duties as may be prescribed by the Chief Executive Officer. The initial
Secretary shall be Xxxxxxx X. Xxxxx.
ARTICLE 8.
DISTRIBUTIONS
8.1 Mandatory Distributions. There shall be no distribution of cash to
the Members during the first five years after the Effective Date, without the
unanimous consent of the Members. In the event that Sizzler incurs a tax during
such period as a result of the allocation of income to it from the LLC because
it no longer has a net operating loss, then this tax liability, as computed in
the sentence below, shall be a payable to Sizzler after the end of such five
year period. It is the objective of the Members that all of the cash of the LLC
is to stay in the LLC and be used for the business purposes of the LLC.
Notwithstanding the foregoing, if Holdings receives an allocation of taxable
income during such five year period then the Manager shall distribute to
Holdings an amount equal to the excess, if any, of (i) the amount of net income
of the LLC (net of taxable losses) allocated to Holdings determined on a
cumulative basis for all years (through and including the immediately preceding
tax year) multiplied by 45% over (ii) all amounts previously distributed to
Holdings pursuant to this Section 8.1.
8.2 Distributions in Kind. All distributions shall be made in cash or
cash equivalents, unless the Members shall have approved a distribution of
property in kind. Each Member shall be entitled to receive an interest in any
assets distributed in kind which is proportional to such Member's ownership of
the outstanding Units of the LLC, unless such Member expressly consents to the
receipt of a different interest.
8.3 Restrictions on Distributions. The following restrictions on
Distributions shall apply:
8.3.1 The LLC shall not make any distribution to the
Members unless, immediately after giving effect to the distribution, all
liabilities of the LLC, other than liabilities to Members on account of their
Units in the LLC and liabilities as to which recourse of creditors is limited to
specified property of the LLC, do not exceed the fair market value of the LLC
Property, provided that the fair value of any property that is subject to a
liability as to which recourse of creditors is so limited shall be included in
the LLC assets only to the extent that the fair value of the property exceeds
such liability.
8.3.2 No Member shall be liable to the LLC for the amount
of a distribution received provided that, at the time of the distribution, such
Member did not know that the distribution was in violation of Section 8.4.1. If
a Member receives a distribution in violation of Section 8.4.1 and such Member
knew at the time of the
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distribution that the distribution violated such condition, such Member shall be
liable to the LLC for the amount of the distribution.
8.4 No Other Withdrawals. Except as provided in this Article 8 and in
Section 3.8, no withdrawals or distributions shall be required or permitted.
ARTICLE 9.
ALLOCATIONS
9.1 Allocation of Income and Loss. After giving effect to the special
allocations set forth in Section 9.2 hereof, Net Income or Net Loss, or items of
income, gain, loss or deduction included in the determination of Net Income or
Net Loss, for each Accounting Period shall be allocated to the Members as
follows: Net Income and Net Loss for the Accounting Period shall be allocated to
Members in accordance with their respective Units.
9.2 Special Allocations. Notwithstanding Section 9.1, the following
special allocations shall be made prior to making any allocations under Section
9.1 hereof:
(a) There shall be allocated to Sizzler all of the Net
Income of the LLC until the expiration of both the Put Option Agreement and Call
Option Agreement.
(b) Member Nonrecourse Deductions for any Accounting Period
shall be allocated in the manner required under Treasury Regulation Section
1.704-2(i)(1).
(c) Nonrecourse Deductions (as defined in Treasury
Regulation Section 1.704-2(c), other than Member Nonrecourse Deductions) for any
Accounting Period shall be allocated to the Members in proportion to their
ownership of Units.
(d) In any Accounting Period in which there is a decrease
in Member Nonrecourse Debt Minimum Gain (determined in accordance with Treasury
Regulation Section 1.704-2(i)(3)), there shall be a chargeback of income and
gain for such Accounting Period (and, if necessary, subsequent Accounting
Periods) in accordance with Treasury Regulation Section 1.704-2(i)(4) (and all
related Sections).
(e) In any Accounting Period in which there is a decrease
in Minimum Gain, there shall be a chargeback of income and gain for such
Accounting Period (and, if necessary, subsequent Accounting Periods) in
accordance with Treasury Regulation Section 1.704-2(f) (and all related
Sections).
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9.3 Special Tax Provisions. In addition to the allocations set forth in
Sections 9.1 and 9.2, the following special provisions shall apply to the
allocation of taxable income to the Members:
9.3.1 Section 704(c) Adjustments. In accordance with Code
Section 704(c) and the Treasury Regulations thereunder, items of income, gain,
loss and deduction with respect to an asset, if any, contributed to the capital
of the LLC shall, solely for tax purposes, be allocated between the Members so
as to take account of any variation between the adjusted basis of such property
to the LLC for federal income tax purposes and its market value upon
contribution to the LLC. The amount of the 704(c) adjustment is set forth on
Exhibit "A". Without the prior written consent of Holdings, which may be granted
or denied in its sole and absolute discretion, no method other than the
"traditional" method shall be used by the LLC to make any allocations in
accordance with Section 704(c) or the principles thereof pursuant to Treasury
Regulations under Section 704 or any subsection thereof, and neither the
"curative" nor "remedial" method shall be used therefor.
9.3.2 Section 754 Election. A Section 754 election may be
made for the LLC at the sole discretion of Sizzler. In the event of an
adjustment to the adjusted tax basis of any LLC asset under Code Section 734(b)
or Code Section 743(b) pursuant to a Section 754 election by the LLC, subsequent
allocations of tax items shall reflect such adjustment consistent with the
Treasury Regulations promulgated under Sections 704, 734 and 743 of the Code.
9.3.3 Allocations upon Transfer. If, during an Accounting
Period, a Member ("Transferor Member") transfers all or any portion of its Units
to another Person, items of Net Income and Net Loss, together with corresponding
tax items, that otherwise would have been allocated to the Transferor Member
with regard to such Accounting Period shall be allocated between the Transferor
Member and the Substitute Member in accordance with their respective Units
during the Accounting Period using any method permitted by Section 706 of the
Code and selected by the Manager.
9.4 Partnership Tax Treatment. The Members expect and intend that the LLC
shall be treated as a partnership for all federal income tax purposes, and the
Members agree that they will not: (a) take a position on any federal, state,
local or other tax return or otherwise assert a position, inconsistent with such
expectation and intent; or (b) do any act or thing which could cause the LLC to
be treated as other than a partnership for federal income tax purposes.
ARTICLE 10.
ACCOUNTING AND RECORDS
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10.1 Financial and Tax Reporting. The LLC shall prepare its financial
statements in accordance with generally accepted accounting principles, as from
time to time in effect, and shall prepare its income tax information returns
using such methods of accounting and tax year as the Members deem necessary or
appropriate under the Code and Treasury Regulations.
10.2 Books and Records.
10.2.1 Supervision; Inspection. Proper and complete books
of account and records of the business of the LLC shall be kept under the
supervision of the Manager at the LLC's principal office in California. Such
books and records shall be open to inspection, audit and copying by any Member
or his or their designated representative, upon reasonable notice at any time
during business hours, for any purpose reasonably related to the Member's
interest in the LLC. Any information so obtained or copied shall be kept and
maintained in strict confidence except as required by law.
10.2.2 Reliance on Books and Records. Any Member shall be
fully protected in relying in good faith upon the records and books of account
of the LLC and upon such information, opinions, reports or statements presented
to the LLC by any of its other Members or employees, or by any other Person, as
to matters the Member reasonably believes are within such other Person's
professional or expert competence and who has been selected with reasonable care
by or on behalf of the LLC, including information, opinions, reports or
statements as to the value and amount of the assets, liabilities, profits or
losses of the LLC or any other facts pertinent to the existence and amount of
assets from which distributions to Members might properly be paid.
10.3 Reports. Within thirty (30) days after the close of each Accounting
Period quarter, the Manager shall prepare and deliver to the Members a financial
statement and an income and expense statement setting forth the status and
results of operations of the LLC for such quarter. Within one hundred twenty
(120) days after the end of each Accounting Period, the Manager shall prepare
and deliver to the Members an annual financial statement, audited and reported
on as of the end of such Accounting Year by a firm of independent certified
public accountants of comparable standing selected by the Members, provided that
the Members may waive the requirement of an audit at any time and for any
reason. Within one hundred eighty (180) days after the end of the Accounting
Period, the Manager shall prepare and deliver to the Members such other
information as may be necessary for the Members to prepare their income tax
returns.
10.4 Tax Returns. The Manager shall, within one hundred eighty (180) days
after the end of each Accounting Year, file a federal income tax information
return and deliver to each Member a schedule showing such Member's distributive
share of the LLC's income, deductions and credits, and all other information
necessary for such Members timely to file their federal income tax returns. The
Manager similarly shall file,
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and provide information to the Members regarding, all appropriate state and
local income tax returns.
10.5 Tax Matters Partner. The Members hereby designate the Manager as the
tax matters partner pursuant to Code Section 6231(A)(7).
ARTICLE 11.
TRANSFER OF MEMBERSHIP
11.1 Transfer.
11.1.1 Restrictions. No Member or Assignee may transfer,
sell, encumber, mortgage, assign or otherwise dispose of ("Transfer") all or any
portion of its Units, unless each of the following conditions have been
satisfied: (a) the provisions of Section 11.2 have been complied with; (b) the
transferee has agreed in writing to assume all of the obligations of the
transferor with respect to the Units transferred (including the obligations
imposed hereunder as a condition to any Transfer); and (c) the Manager shall
have concluded (which conclusion may be based upon an opinion of counsel
satisfactory to it) that such Transfer would not result in (i) a violation of
the Securities Act of 1933 as amended, or any other applicable statute of any
jurisdiction, (ii) a termination of the LLC for federal or state income tax
purposes or the LLC being taxed as a corporation for federal income tax
purposes, or (iii) a violation of any law, rule or regulation by the assignor,
the Assignee, the LLC or the Members. Any purported Transfer in contravention of
this Article 11 shall be void and of no effect upon the LLC, any Member, any
creditor of the LLC or any claimant against the LLC.
11.2 Rights of Assignees. The Assignee of any Units shall have no right
to vote on, consent to, approve, or participate in the determination of any
matter, or to otherwise participate in the management of the business and
affairs of the LLC or to become a Member. The Assignee is only entitled to
receive distributions pursuant to Article 8 and to be allocated the Net Income
and Net Losses attributable to the Units transferred to the Assignee.
ARTICLE 12.
INDEMNIFICATION AND LIMITATION OF LIABILITY
12.1 Indemnification.
12.1.1 To the fullest extent permitted by the Act and by
law, the Members, the partners of any Member, if such Member or Member is
organized as a partnership, and the partners, shareholders, controlling persons,
officers, directors and
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employees of any of the foregoing (collectively, "Indemnitees") shall, in
accordance with this Section 12.1, be indemnified, protected, held harmless and
defended by the LLC from and against any and all claims, damages, losses,
liabilities joint and several, expenses, judgments, fines, settlements and other
amounts arising from any and all claims (including reasonable legal expenses),
demands, actions, suits or proceedings (civil, criminal, administrative or
investigative) in which they may be involved, as a party or otherwise, by reason
of their management of, or involvement in, the affairs of the LLC, or rendering
of advice or consultation with respect thereto, or which relate to the LLC, its
properties, business or affairs, if such Indemnitee acted in good faith and in a
manner such Indemnitee reasonably believed to be in, or not opposed to, the best
interests of the LLC, and, with respect to any criminal proceeding, had no
reasonable cause to believe the conduct of such Indemnitee was unlawful. The
termination of a proceeding by judgment, order, settlement, conviction or upon a
plea of nolo contendere, or its equivalent, shall not, of itself, create a
presumption that the Indemnitee did not act in good faith and in a manner which
the Indemnitee reasonably believed to be in, or not opposed to, the best
interests of the LLC or that the Indemnitee had reasonable cause to believe that
the Indemnitee's conduct was unlawful (unless there has been a final
adjudication in the proceeding that the Indemnitee did not act in good faith and
in a manner which the Indemnitee reasonably believed to be in or not opposed to
the best interests of the LLC, or that the Indemnitee did have reasonable cause
to believe that the Indemnitee's conduct was unlawful).
12.1.2 Expenses (including attorneys' fees) incurred in
defending any proceeding under Section 12.1.1 may be paid by the LLC in advance
of the final disposition of such proceeding upon receipt of an agreement by or
on behalf of the Indemnitee to repay such amount, if it shall ultimately be
determined that the Indemnitee is not entitled to be indemnified by the LLC as
authorized hereunder.
12.1.3 The indemnification provided by this Section 12.1
shall not be deemed to be exclusive of any other rights to which any Person may
be entitled under any agreement, or as a matter of law, or otherwise, both as to
action in a Person's official capacity and to action in another capacity.
12.1.4 The Members shall have power to purchase and
maintain insurance on behalf of the LLC, the Members, officers, employees or
agents of the LLC and any other Indemnitees at the expense of the LLC, against
any liability asserted against or incurred by them in any such capacity, whether
or not the LLC would have the power to indemnify such Persons against such
liability under the provisions of this Agreement.
12.2 Limitation of Liability. The debts, obligations and liabilities of
the LLC shall be solely the debts, obligations and liabilities of the LLC; and
no Member shall be obligated personally for any such debt, obligation or
liability of the LLC solely be reason
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of being a Member of the LLC.
ARTICLE 13.
TERMINATION
13.1 Termination. The LLC shall be dissolved, its Property disposed of
and its affairs wound up upon the first to occur of the following:
13.1.1 The expiration of its stated term, if any;
13.1.2 The written consent of all of the Members;
13.1.3 The occurrence of a Dissolution Event and the
failure of Members that remain to consent to continue the LLC pursuant to
Section 13.2 below; or
13.1.4 The entry of a decree of judicial dissolution under
the Act.
13.2 Continuation of the LLC. Notwithstanding the foregoing provisions of
Section 13.1, upon the occurrence of a Dissolution Event, the remaining Members
have the right to avoid dissolution of the LLC and elect to continue the
business of the LLC on the same terms as this Agreement. Such right can be
exercised by the vote of the Members to continue the business of the LLC within
ninety (90) days after the occurrence of a Dissolution Event. Expenses incurred
in the continuance of the LLC shall be deemed expenses of the LLC. If there is
only one remaining Member at or after the occurrence of the Dissolution Event,
such remaining Member shall have the right to continue the LLC hereunder as a
single member LLC.
13.3 Authority to Wind Up. The Manager shall have all necessary power and
authority required to marshal the assets of the LLC, to pay its creditors, to
distribute assets and otherwise wind up the business and affairs of the LLC. In
particular, the Manager shall have the authority to continue to conduct the
business and affairs of the LLC insofar as such continued operation remains
consistent, in the judgment of the Manager, with the orderly winding up of the
LLC.
13.4 Winding Up; Certificate of Cancellation. The winding up of the LLC
shall be completed when all debts, liabilities and obligations of the LLC have
been paid and discharged or reasonably adequate provision therefor has been
made, and all of the remaining property and assets of the LLC have been
distributed to the Members. Upon the completion of winding up of the LLC, a
Certificate of Cancellation shall be filed with the Delaware Secretary of State.
13.5 Distribution of Property. Upon dissolution and winding up of the
LLC, the
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affairs of the LLC shall be wound up and the LLC liquidated by the Manager. The
assets of the LLC shall be applied to pay creditors of the LLC in the order of
priority provided by law. Any remaining balance shall be distributed to the
Members in accordance with their respective Capital Accounts.
ARTICLE 14.
SPECIAL TAX PROVISIONS
14.1 Substantial Economic Effect. The provisions of Article 9 and the
other provisions of this Agreement relating to the maintenance of Capital
Accounts and procedures upon liquidation of the LLC are intended to comply
generally with the provisions of Treasury Regulation Section 1.704-1, and shall
be interpreted and applied in a manner consistent with such Treasury Regulations
and, to the extent the subject matter thereof is otherwise not addressed by this
Agreement, the provisions of Treasury Regulation Section 1.704-1 are hereby
incorporated by reference, unless the Manager shall determine that such
incorporation will result in economic consequences inconsistent with the
economic arrangement among the Members as expressed in this Agreement. In the
event the Manager shall determine that it is prudent to modify the manner in
which the Capital Accounts, or any debits or credits thereto, are computed or
allocated or the manner in which contributions and distributions upon
liquidation (or otherwise) of the LLC (or any Member's interest therein) are
effected in order to comply with such Treasury Regulations and other applicable
tax laws, or to assure that the LLC is treated as a partnership for tax
purposes, or to achieve the economic arrangement of the Members as expressed in
this Agreement, then notwithstanding Section 15.1 hereof, the Manager may make
such modification, provided that it is not likely to have more than an
insignificant detrimental effect on the total amounts distributable pursuant to
any Member. The Manager shall also (i) make any adjustments that are necessary
or appropriate to maintain equality between the Capital Accounts of the Members
and the amount of LLC capital reflected on the LLC's balance sheet, as computed
for book purposes pursuant to this Agreement in accordance with Treasury
Regulations Section 1.704-1(b)(2)(iv)(g), and (ii) make any appropriate
modifications in the event unanticipated events (such as the incurrence of
nonrecourse indebtedness) might otherwise cause the allocations under this
Agreement to not comply with Treasury Regulations Section 1.704-1(b) (and in the
case of the incurrence of nonrecourse indebtedness, Treasury Regulation Section
1.704-2) provided in each case that the Managers determine that such adjustments
or modifications shall not result in economic consequences inconsistent with the
economic arrangement among the Members as expressed in this Agreement.
14.2 Qualified Income Offset; Prophylactic Offsets; Minimum-Gain
Chargeback. Notwithstanding the provisions of Section 9.1.1 and 9.1.2, the
allocations provided therein shall be subject to the following exceptions:
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(a) In the event any Member's Capital Account has an
Unadjusted Excess Negative Balance (as defined in clause (f) of this Section) at
the end of any Accounting Period, such Member will be reallocated items of LLC
Net Income or Loss for such Accounting Period (and, if necessary, future Fiscal
Years) in the amount necessary to eliminate such Unadjusted Excess Negative
Balance as quickly as possible.
(b) In the event any Member unexpectedly receives any
adjustments, allocations or distributions described in Treasury Regulations
Sections 1.704-1(b)(2)(ii)(d)(4) through (d)(6), items of LLC book income and
gain shall be specially allocated to such Member's Capital Account in an amount
and manner sufficient to eliminate, to the extent required by Treasury
Regulations Section 1.704-1(b)(2)(ii)(d), the Excess Negative Balance (as
defined in clause (e) of this Section) in such Member's Capital Account created
by such adjustments, allocations or distributions as quickly as possible. This
paragraph (b) is intended to and shall in all events be interpreted so as to
constitute a "qualified income offset" within the meaning of Treasury
Regulations Section 1.704-1(b)(2)(ii)(d).
(c) A Member's Capital Account shall not be allocated any
item of book deduction or loss to the extent such allocation would cause such
Capital Account to have an Excess Negative Balance (as defined in clause (e) of
this Section).
(d) Any special allocations pursuant to this Section shall
be taken into account as soon as possible in computing subsequent allocations,
so that over the term of the, LLC the net amount of any items so allocated and
the profit, gain, loss, income and expense and all other items allocated to each
Member shall, to the extent possible, be equal to the net amount that would have
been allocated to each such Member if such original allocations pursuant to this
Section had not occurred.
(e) For purposes of this Section, "Excess Negative Balance"
shall mean the excess of the negative balance in a Member's Capital Account
(computed with any adjustments which are required for purposes of Treasury
Regulations Section 1.704-1(b)(2)(ii)(d)) over the amount such Member is
obligated to restore to the LLC (computed under the principles of Treasury
Regulations Section 1.704-1(b)(2)(ii)(c)) inclusive of any addition to such
restoration obligation pursuant to application of the provisions of Treasury
Regulation Sections 1.704-2, or any successor provision thereto).
(f) For purposes of this Section, "Unadjusted Excess
Negative Balance" shall have the same meaning as Excess Negative Balance, except
that the Unadjusted Excess Negative Balance of a Member shall be computed
without effecting the reductions to such Member's Capital Account which are
described in Treasury Regulations Section 1.704-1(b)(2)(ii)(d).
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14.3 Compliance with Timing Requirements of Treasury Regulations.
Notwithstanding any other provision of this Agreement, in the event the LLC is
"liquidated" within the meaning of Treasury Regulations Section
1.704-1(b)(2)(ii)(g), distributions shall be made pursuant to Article 13 to the
Members who have positive Capital Accounts in compliance with Treasury
Regulations Section 1.704-1(b)(2)(ii)(b)(2).
14.4 Sharing Arrangement; Interest in LLC Items. The Members agree that
the allocation and distribution provisions contained in this Agreement represent
the sharing arrangement as between the Members and represent their interests in
such allocated items and, therefore, in the event that any transaction or
relationship between the parties to this Agreement is recharacterized and the
provisions of this Agreement do not specifically address the effect such
recharacterization should have on the allocations provided for herein, such
allocations hereunder shall be made in a manner which maintains the Capital
Account balances of the Members at the same levels they would have been had no
such recharacterization occurred.
14.5 Taxation of the LLC. The LLC shall be taxed as a partnership and no
election to have the LLC taxed as a corporation shall be made without the
approval of all of the Members.
ARTICLE 15.
MISCELLANEOUS
15.1 Amendment. This Agreement may be amended only with the written
consent of each Member except the Manager can amend this Agreement (including,
but not limited to, Section 3.2 hereof) as is necessary to issue new Units and
admit Members, or both.
15.2 Binding Effect. Subject to the restrictions on transfer set forth in
Article 11, this Agreement shall be binding on and inure to the benefit of the
Members and their respective transferees, successors, assigns and legal
representatives.
15.3 Counterparts. This Agreement may be executed in one or more
counterparts with the same force and effect as if each of the signatories had
executed the same instrument.
15.4 Entire Agreement. This Agreement constitutes the entire agreement
among the parties with respect to the subject matter herein.
15.5 Further Assurances. The parties agree to execute and deliver any
further
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instruments or documents and perform any additional acts which are or may become
necessary to effectuate and carry on the LLC created by this Agreement.
15.6 Governing Law. This Agreement shall be governed by and construed
under the laws of the State of Delaware.
15.7 Notices.
15.7.1 Whenever, under the provisions of the Act, the
Articles or this Agreement, notice is required to be given to any Member, such
notice shall be in writing and may be either personally delivered or sent by
U.S. Mail or by a nationally recognized courier service, addressed to such
Member at his address as it appears on the records of the LLC with postage or
delivery cost thereon prepaid, except that notice of LLC meetings shall be in
accordance with the Act.
15.7.2 Whenever any notice is required to be given under
the provisions of the Act, the Articles or this Agreement, a waiver thereof in
writing, signed by the Person or Persons entitled to said notice, whether before
or after the time stated therein, shall be deemed equivalent thereto.
15.8 Power of Attorney. By signing this Agreement, each Member designates
and appoints the Manager as its true and lawful attorney, in its name, place and
stead, to make, execute, sign and file such instruments, documents or
certificates which may from time to time be required by the laws of the United
States of America and the State of California and any political subdivision
thereof or any other state or political subdivision in which the LLC shall do
business to carry out the purposes of this Agreement, except where such action
requires the express approval of the Members hereunder. Such attorney is not
hereby granted any authority on behalf of the undersigned Members to amend this
Agreement, except that as attorney for each of the undersigned Members, the
Manager shall have the authority to amend this Agreement and the LLC's Articles
as may be required to give effect to the transactions below, following any
necessary approvals or consents of the Members:
(a) Extensions of the term of the LLC;
(b) Admissions of additional Members;
(c) Transfer of a Member's Units, or any portion thereof;
(d) Withdrawals or Distributions; and
(e) Contributions of additional capital.
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Each Member shall provide to the other Members copies of all documents executed
pursuant to the power of attorney contained in this Section 15.8.
15.9 Savings Clause. In the event any provision of this Agreement shall
be determined by a court of competent jurisdiction to be contrary to the Act,
such provision shall be deemed amended so as to conform with the Act.
15.10 Severability. Each provision of this Agreement shall be considered
separable, and if any provision which is not essential to the effectuation of
the basic purposes of this Agreement is determined to be invalid and contrary to
any existing or future law, such invalidity shall not impair the operation of or
affect those provisions of this Agreement which are valid.
15.11 Withholding Taxes. In the event that the LLC is obligated to
withhold and pay any taxes with respect to any Member, any tax required to be
withheld may be withheld from any Distribution otherwise payable to such Member,
or, in lieu thereof upon remittance to the appropriate tax authority, shall be
treated as having been distributed to such Member.
IN WITNESS WHEREOF, the parties hereto have executed this
Operating Agreement as of the day and year first above written.
SIZZLER INTERNATIONAL, INC.,
a Delaware corporation
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
FFPE HOLDING COMPANY, INC.,
a Delaware corporation
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
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EXHIBIT A
NAMES OF MEMBERS and
PERCENTAGE INTERESTS and
CAPITAL ACCOUNTS
Initial Amount of
Gross Net Capital IRCss. 704(c) Number Percentage
Contribution Contribution Account Adjustment of Units Interest
------------ ------------ ------- ------------ -------- ----------
Sizzler 82 82%
International, Inc.,
a Delaware
corporation
FFPE Holding 18 18%
Company, Inc., a
Delaware
corporation
Exhibit 25
A-1
