EXHIBIT 10.22
BC RESTAURANTS, LLC
MEMBER CONTROL AGREEMENT
THIS MEMBER CONTROL AGREEMENT is made effective as of January 3, 2003, by and
among BC Restaurants, LLC, a California limited liability company (the
"Company"), and the undersigned parties listed on the last page hereof, each of
whom is a Member of the Company:
RECITALS
WHEREAS, the undersigned constitute all of the current Members of the Company;
and
WHEREAS, each of the undersigned parties wishes to enter into this Member
Control Agreement (this "Agreement);
NOW, THEREFORE, for valid consideration, the parties agree as follows:
ARTICLE 1. GENERAL PROVISIONS
1.1 DEFINITIONS.
The terms defined in this Article 1 (except as may be otherwise expressly
provided in this Agreement or unless the context otherwise requires) shall, for
all purposes of this Agreement, have the following respective meanings:
(a) "Act" means the Act contained in the Xxxxxxx-Xxxxxx Limited
Liability Company Act of California, as amended and any successor
thereto.
(b) "Agreement" means this Member Control Agreement as hereafter
amended from time to time, including any schedules to the
Agreement.
(c) "Board" or "Board of Managers" means the board of governors of the
Company.
(d) "Capital Account" means the account of a Member which is maintained
in accordance with the provisions of 2.8 hereof.
(e) "Code" means the Internal Revenue Code of 1986, as amended and any
successor thereto. Any reference herein to specific sections of the
Code shall be deemed to include a reference to any corresponding
provisions of future law.
(f) "Distribution" means the direct or indirect distribution of money
or property other than Membership Interests of the Company to or
for the benefit of a Member made in respect of a Membership
Interest from time to time pursuant to the provisions of the
Articles of Organization of the Company, the Operating Agreement of
the Company or this Agreement.
(g) "Estimated Member Tax Liability" means 50% of the taxable income
and gains of the Company for a given fiscal year of the Company, or
such other percentage as the Board determines, in its sole
discretion, is required in order to satisfy the approximate income
tax liability to the Members resulting from the allocation of Net
Income to the Members.
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(h) "Financial Rights" means a Member's right to share in Net Income,
Net Losses and Distributions with respect to a Membership Interest
in accordance with this Agreement.
(i) "Net Cash from a Sale" means the gross amount received by the
Company from the sale of the Elephant & Castle(R) Restaurant owned
and operated by the Company, less the expenses of such sale or
refinancing, and shall be distributed to the Members (from time to
time) in such amounts as determined by the Board of Managers to
those persons recognized on the books of the Company as Members on
the day of such distribution.
(j) "Governance Rights" means all of a Member's rights as a Member in
the Company other than Financial Rights and the right to assign
Financial Rights.
(k) "Manager" means a natural person serving on the Board of Managers.
(l) "Chief Manager" means a person or entity elected, appointed, or
otherwise designated as a manager or officer of the Company by the
Board of Managers to manage the business affairs of the Company
pursuant to the terms of the Operating Agreement and this
Agreement.
(m) "Member" means a person reflected in the required records of the
Company as the owner of some Governance Rights of a Membership
Interest of the Company.
(n) "Membership Interest" means a Member's interest in the Company
consisting of the Member's Financial Rights and Governance Rights
with respect to the Company, which may be expressed as a percentage
or in units of the Company.
(o) "Net Cash From Operations" means all revenues of the Company
received during any period (month, calendar quarter or fiscal year)
decreased by (i) cash expenditures for operating, administrative
and other business expenses of the Company and (b) cash reserves
for accounts payable, accrued expenses and working capital required
by the Company at the end of any period.
(p) "Net Income" and "Net Losses" mean the profits and losses of the
Company, as the case may be, as determined for federal income tax
purposes as of the close of each of the fiscal years of the
Company.
(q) "Nonvoting Interest" as to any Member means the percentage interest
of such Member in the Nonvoting Membership Interests of the
Company. The initial Nonvoting Interest of the Members are set
forth on Schedule A for each Member.
(r) "Percentage Interest" as to any Member means the Member's ownership
of the Company expressed as a percentage or computed pro rata in
accordance with the total of all Voting and Nonvoting Membership
Interests. The initial Percentage Interest of each Member is set
forth on Schedule A.
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(s) "Voting Interest" as to any Member means the percentage interest of
such Member in the Voting Membership Interests of the Company. The
initial Voting Interest of each Member is set forth on Schedule A.
1.2 BUSINESS PURPOSE.
For as long as E&C San Francisco, LLC owns a membership interest in BC
Restaurants, LLC, a California Limited Liability Company, the business purposes
of E&C San Francisco, LLC will be limited to (a) owning a membership interest in
BC restaurants, LLC and (b) operating and managing the Elephant & Castle(R)
Restaurant owned by BC Restaurants, LLC pursuant to the Management Agreement
entered into with BC Restaurants, LLC, which is incorporated herein by
reference. E&C San Francisco, LLC will not (i) incur any debt other than to
Elephant & Castle (Chicago) Incorporated, its parent company and sole member,
(ii) engage in or agree to a consolidation, liquidation, merger or asset sale,
(iii) file or consent to any bankruptcy or insolvency petition and/or (iv)
guarantee any loans or debts of any other entity. E&C San Francisco, LLC will
(A) maintain separate books and records, (B) conducts its business under its
name and no other, (C) maintain separate financial statements, (D) pay its
obligations from its own funds, (E) at no time pledge its assets to any lender,
financial institution or other entity, (F) hold itself out as a separate entity,
and (G) maintain adequate capital in light of its business operations.
1.3 ARTICLES OF ORGANIZATION AND OPERATING AGREEMENT.
Except as specifically provided herein to the contrary, the terms in this
Agreement shall have the same meanings as set forth in the Articles of
Organization and the Operating Agreement of the Company. Except as specifically
set forth in this Agreement to the contrary, the provision of the Articles of
Organization and Operating Agreement of the Company shall remain in full force
and effect; provided that in the event of a conflict between the provisions of
this Member Control Agreement and the provisions of the Articles of Organization
or Operating Agreement, the provisions of this Member Control Agreement shall
govern.
ARTICLE 2. MEMBERSHIP INTERESTS
2.1 INITIAL MEMBERS AND MEMBERSHIP INTERESTS.
The relative interests of each Member in the Company shall be maintained for
Financial Rights and Governance Rights. The names of the initial Members, their
respective contributions to the Company and the Membership Interest received are
set forth on Schedule A, which is attached hereto an incorporated herein by
reference.
2.2 AUTHORITY FOR ADDITIONAL MEMBERSHIP INTEREST.
Additional contributions and Membership Interests may be granted by the Board if
approved by the unanimous vote of both the Board and the Members. At the
discretion of the Board, the Membership Interests granted may be Voting
Membership Interests or Non-Voting Membership Interests.
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2.3 MEMBERS TO USE BEST EFFORTS; COMPENSATION.
Each Member shall devote his or her best efforts and sufficient time to the
promotion of the business and services of the Company. E & C agrees that it will
manage the Restaurant in accordance with the terms of the Management Agreement
with the Company without any compensation for its services, and Battery & Clay
Associates, LLC agrees to serve as the Chief Manager of the Company without any
compensation for its services.
2.4 RESTRICTIONS ON VOTING.
A Member shall not be entitled to vote, and his or her vote shall not be counted
in determining the voting power of the Company, under the following
circumstances:
(a) If the subject of the vote is whether that Member should be
declared disabled; or
(b) If the subject of the vote is whether to reject an obligation
incurred by that Member as being improperly incurred on behalf of
the Company.
2.5 POWERS RESERVED TO THE MEMBERS.
This Agreement delegates all powers to the Board of Managers and the Chief
Manager except the following powers which are specifically reserved to the
Members of the Company:
(a) Expulsion of any Member;
(b) Choice of the Company name;
(c) Location of the Company office(s);
(d) Approval of any merger, acquisition, consolidation, and the sale of
over 20% of the Company's assets;
(e) Dissolution or termination of the Company;
(f) Amendment of this Agreement;
(g) Amendment of the Articles of Organization;
(h) Purchase, sale, lease, expenditure, borrowing or other transaction
with a value of more than $100,000; and
(i) Election of the Board of Managers.
All of the actions referred to in (a)-(i) above, must be made with at least 70%
of the Voting Membership Interests of the Company.
2.6 NO LIABILITY OF A MEMBER FOR COMPANY OBLIGATION.
No Member shall be liable for an obligation of the Company except upon the
written guaranty of the Member therefore. Any obligation properly incurred by a
Member on behalf of the Company, whether in contract, tort or otherwise, shall
be deemed to be an obligation of the
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Company. Any determination as to whether or not the obligation is covered by the
Company insurance policies shall not be a determinative on the question of
whether the obligation was properly incurred. Such determination shall be made
independently by the Company and shall be based on all relevant factors
including habit, custom and practice. An obligation shall be deemed to have been
properly incurred unless it is incurred with actual fraudulent, dishonest,
criminal or malicious purpose or intent. Any Member against whom any such
Company obligation is asserted shall immediately notify the Chief Manager. The
Chief Manager shall bring such matters to the attention of the Board of Managers
who shall consider the asserted claim and vote on its disposition. In the event
that a Member is sued on a Company obligation, the Company shall undertake the
defense of such suit and shall pay any judgment rendered or settlement reached.
Any Member who is nevertheless compelled to make payment on any Company
obligation shall have the right to demand and immediately receive from the
Company the amount so paid. To the extent that the assets of the Company are
insufficient to make such payment and such liability is based upon a pro rata
distribution of Company assets or income to a Member, or the liability of any
Member is based upon a piercing of the entity of the Company, then as between
the Members only and not for the benefit of any other party, such Member shall
be entitled to a pro rata contribution from each other Member of the Company. In
the event, however, that the liability was incurred with actual fraudulent,
dishonest, criminal or malicious purpose or intent, that Member shall be
required to bear the entire liability and the Company or any of the several
Members who may be compelled to pay all or any part of the liability shall be
entitled to recover that payment from the Member who caused the liability to be
incurred.
2.7 VOTING.
Members shall be entitled to vote on all matters in proportion to their Voting
Interests which are set forth in Schedule A. The holders of the Membership
Interests shall not have the right of cumulative voting and shall have the
pre-emptive rights provided under the Act.
2.8 CAPITAL ACCOUNTS.
A Capital Account shall be established for each Member and shall be maintained
in accordance with Treasury Regulation Section 1.704-1(b). Any Member who shall
receive any Membership Interest in the Company or whose Membership Interest
shall be increased by means of the transfer to such Member of any Financial
Rights in the Company from another Member shall have a Capital Account that has
been appropriately adjusted to reflect such transfer. Except as provided herein,
no interest shall be paid by the Company on capital contributions or on balances
in Members' Capital Accounts.
ARTICLE 3. ALLOCATIONS AND DISTRIBUTIONS
3.1 ALLOCATION OF NET INCOME AND NET LOSS.
Except as otherwise provided in this Agreement, the Net Income and Net Loss of
the Company for each fiscal year, including each item of income, gain, loss,
deduction or credit, shall be allocated to the Members in accordance with their
Percentage Interests as reflected in the required records of the Company
(Schedule A). In the case of a valid assignment of a Membership Interest, the
allocation of such taxable items to such Membership Interest shall be
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allocated between the assignor and the assignee to reflect their varying
interests in the Company during the fiscal year.
3.2 DISTRIBUTIONS OF NET CASH FROM OPERATION AND NET CASH FROM A SALE.
(a) Distributions of Net Cash from Operations. Commencing with the
calendar year beginning January 1, 2003 and in each calendar year
thereafter, the Board will determine the amount of the Net Cash
from Operations and the Chief Manager will distribute the Net Cash
from Operations to the Members on or before the 25th day after the
end of each calendar year. The distributions of Net Cash from
Operations will be distributed to the Members as follows:
(i) First, distributable Net Cash from Operations between $1 and
$175,000 will be paid (1) 85% to the Chief Manager and (2)
15% to the Members (other than the Chief Manager);
(ii) Then, distributable Net Cash from Operations between
$175,001 and $375,000 will be paid (1) 50% to the Chief
Manager and (2) 50% to the Members (other than the Chief
Manager); and
(iii) Thereafter, distributable Net Cash from Operations over
$375,000 shall be paid (1) 66 2/3% to the Chief Manager and
(2) 33 1/3% to the Members (other than the Chief Manager).
(b) At the discretion of the Chief Manager, the determination of the
amount of Net Cash from Operations and distributions of Net Cash
from Operations set forth in paragraph (a) above may be made on a
quarterly basis, PROVIDED, HOWEVER, that the annual benchmarks for
distributable Net Cash from Operations set forth in paragraph (a)
above shall be adjusted to quarterly benchmarks by multiplying such
annual benchmarks by 25%.
(c) Distribution of Net Cash from a Sale. Distributions to Members of
Net Cash from a Sale of the Restaurant received by the Company will
be distributed as follows:
(i) The first Net Cash from a Sale shall be distributed pro-rata
to all Members, as a return of their outstanding Capital
Contribution.
(ii) After return of the Capital Contribution to each Member,
then each Member will receive a sum equal to 8% per annum
simple interest as a return on its outstanding Capital
Contribution for the period such Capital Contribution was
outstanding This amount shall be reduced by any
distributions of Net Cash from Operations received by any
Member under Article 3.2(a).
(iii) All remaining Net Cash from a Sale shall be distributed (1)
33-1/3% to the Members (other than the Chief Manager), and
(2) 66-2/3% to the Chief Manager.
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3.3 LIQUIDATING DISTRIBUTIONS.
If the Company is dissolved and its business is being liquidated in accordance
with the Act, the Company shall cease to carry on its business, except to the
extent necessary for the winding up of the business of the Company. The Company
shall thereafter be wound up and terminated as provided by the Act. All tangible
and intangible property of the Company, including money, remaining after the
discharge of the debts, obligations, and liabilities of the Company shall be
distributed to the Members as follows:
(a) To the Members in proportion to, and to the extent of, the positive
balances in their Capital Accounts (excluding adjustments to any
Capital Account solely for tax purposes); and
(b) The remainder, if any, to the Members in accordance with their
Percentage Interests (as set forth on Schedule A).
Notwithstanding the foregoing, the tangible property constituting the Elephant &
Castle Package will be returned to Elephant & Castle International, Inc. or its
assignee, prior to the time any liquidating distribution is made to the Members.
3.4 DISTRIBUTIONS TO PAY TAXES.
The Board may, with a unanimous vote, annually authorize the distribution of
cash to the Members based on their Percentage Interests in an amount of the
Estimated Member Tax Liability to the extent such a distribution is legally
permitted. Such Distribution, if made, shall be made on or before April 1 of
each year for the Estimated Member Tax Liability due with respect to the
immediately preceding year.
ARTICLE 4. CHIEF MANAGER
4.1 CHIEF MANAGER.
Except as otherwise provided in the Agreement, the management of the Company and
all decisions concerning the business affairs of the Company shall be made by
the Chief Manager. The initial Chief Manager will be Battery & Clay Associates,
LLC.
4.2 AUTHORITY TO BIND THE COMPANY.
Only the Chief Manager and the authorized agents of the Company will have the
authority to bind the Company.
4.3 ACTIONS OF THE CHIEF MANAGER.
No Person dealing with the Company shall have any obligation to inquire into the
power or authority of the Chief Manager for any actions taken on behalf of the
Company. The Chief Manager will have the right to legally obligate the Company
to any agreement including general contracts, leases, mortgages or deeds.
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4.4 COMPENSATION OF CHIEF MANAGER.
The Chief Manager will not be entitled to compensation for performing any
services for or on behalf of the Company. The Chief Manager shall not be
required to devote full time to the management of the Company business, but only
so much time as shall be necessary or appropriate for the proper management of
the business of the Company.
4.5 CHIEF MANAGER'S STANDARD OF CARE.
The Chief Manager shall discharge the Chief Manager's duties to the Company and
other Members in good faith and with that degree of care that an ordinarily
prudent person in a similar position would use under similar circumstances. In
discharging its duties, a Chief Manager shall be fully protected in relying in
good faith upon the records required to be maintained by the Company and upon
such information, opinions, reports or statements by any person as to matters
the Chief Manager 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 Company, including information, opinions, reports or
statements as to the value and amount of the assets, liabilities, profits or
losses of the Company, or any other facts pertinent to the existence and amount
of assets from which Distributions to Members might properly be paid. The
Company shall indemnify and hold the Chief Manager harmless against any loss,
damage or expense (including attorneys' fees) incurred by the Chief Manager as a
result of any act performed or omitted on behalf of the Company or in
furtherance of the Company's interests without, however, relieving the Chief
Manager of liability for failure to perform its duties in accordance with the
standards under this Agreement, the Operating Agreement and the Act. The
satisfaction of any indemnification and any holding harmless shall be from and
limited to Company property and the other Members shall not have any personal
liability for any acts of the Chief Manager.
4.6 RESIGNATION; REMOVAL OF CHIEF MANAGER.
The Chief Manager shall not have a right to resign and may not be removed by the
Members other than by a vote of 100% of the Voting Membership Interests of all
of the Members.
ARTICLE 5. TAX MATTERS
5.1 TAX CHARACTERIZATION AND RETURNS.
The Members acknowledge that the Company will be treated as a "partnership" for
tax purposes. Within 90 days after the end of each fiscal year, the Chief
Manager will cause to be delivered to each person who was a Member at any time
during such fiscal year a Form K-1 and such other information, if any, with
respect to the Company as may be necessary for the preparation of such Member's
federal or state income tax returns, including a statement showing each Member's
share of income or loss, gain and credits for such fiscal year.
5.2 ACCOUNTING DECISIONS.
All decisions as to accounting matters shall be made by the Board in its sole
discretion. The Company, at the sole discretion of the Board, also may make or
revoke such elections as may be allowed pursuant to the Code, including the
election referred to in Section 754 of the Code to adjust the basis of Company
property.
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5.3 TAX MATTERS MEMBER.
The Board hereby appoints the Chief Manager to act on behalf of the Company as
the "tax matters partner" within the meaning of Section 6231(a)(7) of the Code.
The Chief Manager will, for the purposes of this Agreement, act as the initial
tax matters partner until the Board determines otherwise.
5.4 COMPLIANCE WITH INTERNAL REVENUE CODE.
(a) LIMITATION ON LOSS ALLOCATION. Notwithstanding anything herein to
the contrary, no allocation of loss may be made to any Member if
such loss causes such Member to have a negative balance in his or
her capital account after such capital account is (i) credited by
any amounts which such Member is obligated to restore or is deemed
to be obligated to restore pursuant to Treasury Regulations Section
1.704, and (ii) debited by the items described in said Regulations.
The foregoing limitation is intended to comply with the provisions
of Treasury Regulations Section 1.704-1(b)(2)(ii) and shall be
interpreted consistently therewith. Members with deficit capital
account balances resulting in whole or in part from allocations of
losses or deductions attributable to non-recourse indebtedness
shall be allocated income or gain in an amount not less than the
"minimum gain", and at a time no later than the time at which the
"minimum gain" is reduced below the sum of such deficit capital
account balances, or as soon thereafter as possible. In the event
there is a net decrease in the minimum gain of the Company (as
defined in Treasury Regulations Section 1.704-2) during any fiscal
year of the Company, all Members with a deficit capital account
balance at the end of such year (adjusted as required by said
Regulations) shall be allocated items of income and gain for such
year in the amount and in the proportions necessary to eliminate
such deficits as quickly as possible. In the event a Member
unexpectedly receives an adjustment, allocation or distribution as
described in Treasury Regulations Section 1.704-1(b)(2)(ii)(d), and
such unexpected adjustment, allocation or distribution puts such
Member's capital account into a deficit balance (or increases such
deficit balance), then such Member shall be allocated items of
income and gain in an amount and manner sufficient to eliminate
such deficit balance (or such increase) as quickly as possible;
said adjustment to result in a "qualified income offset" as defined
in Treasury Regulations Section 1.704-1(b)(2)(ii)(d). Any Company
deductions that would be non-recourse deductions as defined in
Treasury Regulations Section 1.704-2 if they were not attributable
to a loan made or guaranteed by a Member shall be allocated to the
Member or Members who shared the risk of loss with respect to which
the loan deductions are attributable in accordance with Treasury
Regulations Section 1.704-2. The allocations set forth in this
Paragraph are intended to comply with certain requirements of
Treasury Regulations Sections 1.704-1(b) and 1.704-2.
Notwithstanding any other provision of this Agreement, the
allocations of income, gain, loss, deduction or credit among the
Members shall be allocated so that, to the extent possible, the net
amount of such allocations to each Member shall be equal to the net
amount which would have been allocated to such Member if the
allocations required by Treasury Regulation had not occurred.
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(b) ALLOCATIONS ON ACCOUNT OF BASIS. The income, gain, loss and/or
deductions with respect to any property contributed to the Company
shall, solely for tax purposes, be allocated among the Members so
as to take into account any variation between the adjusted basis of
such property to the Company for federal income tax purposes and
its book value in the same manner as such variations are required
to be treated under Section 704(c) of the Internal Revenue Code.
(c) NO OBLIGATION TO RESTORE DEFICITS. In the event that any Member has
a negative capital account balance after dissolution and winding up
of the Company, such Member shall not be obligated to contribute
capital in the amount of such deficit except to the extent
specifically set forth in this Agreement to the contrary.
(d) REEVALUATION OF INTERESTS. Upon the admission of each new Member,
which may only occur upon the vote of 100% of the Voting Membership
Interests, the value of the Company shall be subject to
re-valuation at the discretion of the Board of Managers. If the
Board of Managers determines that a re-valuation is appropriate, or
if no determination is made by the Board, then the capital accounts
of each existing Member shall be adjusted upon the contribution of
capital by the new Member. Except in the event additional
Membership Units are specifically issued to such Member upon such
contribution to capital, any adjustment to the Capital Account of
any Member shall not, except by a vote of 100% of the Voting
Memberships, change the Percentage Interest of such Member or the
rights of such Member to allocations or Net Income or Net Loss and
Distributions, and all Financial Rights and Governance Rights shall
be determined based upon the Membership Units owned by such Members
as reflected in the required records of the Company.
ARTICLE 6. TRANSFER OF MEMBERSHIP INTERESTS
6.1 TRANSFER OF MEMBERSHIP INTERESTS.
No Member may transfer or assign his or her Membership Interests except as
provided in this Article 6.
6.2 RELATED COMPANY TRANSFERS.
Any Member may transfer or assign his or her Membership Interests to a related
party, PROVIDED HOWEVER, that E&C San Francisco, LLC [or any related party
holding Membership Interests originally owned by E&C San Francisco, LLC] may
transfer or assign such Membership Interests only to a related party that is
bankruptcy remote.
6.3 BANKRUPTCY OF E&C SAN FRANCISCO, LLC.
(a) If, at any time it is a Member, E&C San Francisco, LLC (hereinafter
referred to as "E&C") files for bankruptcy under any federal or
state law and the bankruptcy filing (i) does not prohibit or
preclude E&C from substantially performing the services required
under the Management Agreement between E&C and the Company (the
"Management Agreement"), and (ii) the License Agreement
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between Elephant & Castle International Inc. (the "License
Agreement") remains in full and effect and the Company continues to
have the right to operate its restaurant business under the
Elephant & Castle(R)brand name, then this Member Control Agreement
shall remain in full force and effect.
(b) If, at any time it is a Member, E&C files for bankruptcy under any
federal or state law and the bankruptcy filing (i) prohibits or
precludes E& C from substantially performing the services required
under the Management Agreement and (ii) the License Agreement
remains in full force and effect and the Company continues to have
the right to operate its restaurant business under the Elephant &
Castle(R)brand name, then Battery & Clay Associates, LLC
(hereinafter referred to as "Battery & Clay") will have the right
to purchase, and E&C will be required to sell to Battery & Clay,
17 1/3% of the Membership Interests owned by E&C in the Company, in
consideration of which (A) Battery & Clay will be responsible for
and will undertake all of the management, operational and other
obligations of E&C under the Management Agreement, (B) the
Management Agreement will terminate in all respects, and (C) E&C
will be released from all liability and obligations under the
Management Agreement.
(c) If, at any time it is a Member, E&C files for bankruptcy under any
federal or state law and the bankruptcy filing (i) prohibits or
precludes E& C from substantially performing the services required
under the Management Agreement and (ii) the License Agreement is
terminated for any reason, then Battery & Clay will have the right
to purchase, and E&C will be required to sell to Battery & Clay all
of the Membership Interests owned by E&C in the Company, in full
consideration of which (A) Battery & Clay will be responsible for
and will undertake all of the management, operational and other
obligations of E&C under the Management Agreement, (B) the
Management Agreement will terminate in all respects, (C) E&C will
be released from all liabilities and obligations under the
Management Agreement, (D) the Company will no longer have the right
to use the Elephant & Castle(R)name as the name of the operating
restaurant or in any other capacity, (E) the License Agreement will
terminate in all respects, and (F) Elephant & Castle International,
Inc. will be released from all liability and obligations under the
License Agreement.
6.4 SPECIAL BUY-OUT RIGHTS.
If the Company does not generate an average Net Profit of at least $300,000 per
year during the first two years of operations, then:
(a) Battery & Clay will have the right to purchase all of the
Membership Interests owned by E&C in the Company and E&C will be
obligated to sell its Membership Interests in the Company to
Battery & Clay as provided in Article 6.5, and/or
(b) E&C will have the right to require Battery & Clay to purchase all
of its Membership Interests in the Company as provided for in
Article 6.5.
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6.5 TERMS OF SPECIAL BUY-OUT RIGHTS.
(a) Either Battery & Clay or E&C will have the right to exercise its
rights under Article 6.4 by giving the other party written notice
of its election within 60 days after the end of the second year of
operations.
(b) If Battery & Clay exercises its rights under Article 6.4(a), then
E&C will be required to sell all of its Membership Interests to
Battery & Clay and Battery & Clay will pay E&C the sum of $193,600
for such Membership Interests, which will be payable 10 days after
the date the written notice under Article 6.5(a) is received by E &
C.
(c) If E&C exercises its rights under Article 6.4(b), then Battery &
Clay will be required to purchase all of the Membership Interests
owned by E&C, and Battery & Clay will pay E&C the sum of $500 for
its Membership Interests.
(d) If either Battery & Clay or E&C exercises its respective rights
under Article 6.4 and Article 6.5, then (i) the Management
Agreement will terminate in all respects, (ii) E&C will be released
from all liabilities and obligations under the Management
Agreement, (iii) the Company will no longer have the right to use
the Elephant & Castle(R)name as the name of the operating
restaurant or in any other capacity, (iv) the License Agreement
will terminate in all respects, (v) Elephant & Castle
International, Inc. will be released from all liabilities and
obligations under the License Agreement, and (vi) the Company will
return the "English Package" to E&C as required by the terms of the
Management Agreement.
ARTICLE 7. DISSOLUTION; SUCCESSOR ENTITY; TERMINATION
7.1 EVENTS NOT CAUSING DISSOLUTION.
The Company shall not be dissolved by the admission of a substitute Member or by
the withdrawal, death, insolvency, bankruptcy, retirement or other disability of
a Member.
7.2 EVENTS CAUSING DISSOLUTION.
The Company shall be dissolved only upon the occurrence of any of the following
events:
(a) Upon a vote of seventy percent (70%) of the Voting Membership
Interests, and
(b) The final decree of a court of competent jurisdiction that such
dissolution is required under applicable law.
7.3 CONTINUATION OF BUSINESS.
In the event of dissolution of the Company, the Company shall be temporarily
continued beyond the effective date of dissolution for the purpose of winding up
Company affairs and liquidating its assets.
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7.4 LIQUIDATION AND WINDING UP.
If dissolution of the Company should be caused by reason of any of the events
listed in this Article, then the Company shall be liquidated and the Managers
(or other person or persons designated by a decree of court or unanimously
elected by the remaining Members) shall wind up the affairs of the Company.
ARTICLE 8. MISCELLANEOUS
8.1 AMENDMENT OF AGREEMENT.
No change, modification or amendment of this Agreement shall be valid or binding
unless such change, modification or amendment shall be in writing and signed by
all of the Members as of such date.
8.2 SEVERABILITY.
If any provision of this Agreement is held to be illegal, invalid, or
unenforceable under the present or future laws effective during the term of this
Agreement, such provision will be fully severable; this Agreement will be
construed and enforced as if such illegal, invalid, or unenforceable provision
had never comprised a part of this Agreement; and the remaining provisions of
this Agreement will remain in full force and effect, and will not be affected by
the illegal, invalid, or unenforceable provision or by its severance from this
Agreement. Furthermore, in lieu of such illegal, invalid, or unenforceable
provision, there will be added automatically as a part of this Agreement a
provision as similar in terms to such illegal, invalid, or unenforceable
provision as may be possible and be legal, valid, and enforceable.
8.3 MULTIPLE COUNTERPARTS.
This Agreement may be executed in several counterparts, each of which will be
deemed an original but all of which will constitute one and the same instrument.
However, in making proof hereof, it will be necessary to produce only one copy
hereof signed by the party to be charged.
8.4 ADDITIONAL DOCUMENTS AND ACTS.
Each Member agrees to execute and deliver such additional documents and
instruments and to perform such additional acts as may be necessary or
appropriate to effectuate, carry out and perform all of the terms, provisions,
and conditions of this Agreement and the transactions contemplated hereby.
8.5 NO THIRD PARTY BENEFICIARY.
This Agreement is made solely and specifically among and for the benefit of the
parties hereto, and their respective successors and assigns, and no other person
will have any rights, interest, or claims hereunder or be entitled to any
benefits under or on account of this Agreement as a third party beneficiary or
otherwise.
8.6 NOTICES.
Any notice to be given or to be served upon the Company or any party hereto in
connection with this Agreement must be in writing and will be deemed to have
been given and received when
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delivered to the address specified by the party to receive the notice. Such
notices will be given to a Member at the address specified in the Company's
required records. Any Member or the Company may, at any time by giving five
days' prior written notice to the other Members and the Company, designate any
other address in substitution of the foregoing address to which such notice will
be given.
8.7 NEW PARTIES.
The Company shall not record the transfer of any Membership Interest, nor accept
contributions for any new or additional Membership Interest to or from any
person not a party hereto unless said person shall execute an agreement to be
bound by this Agreement and an Acknowledgment of the terms hereof, in
substantially the form of Schedule D attached hereto. Upon execution of any such
form, and compliance with the additional terms hereof, said new Member shall be
deemed for all purposes to be a party hereto, shall be included as a Member as
defined herein, and shall enjoy all the rights and be subject to all the
obligations created hereby with respect to Members.
8.8 OUTSIDE ACTIVITIES.
Nothing in this Agreement shall be deemed to prohibit any Members from engaging
in or owning any interest in any other business venture, except as such business
is in direct competition with the interests of the Company
8.9 ARBITRATION.
Any controversy or claim arising out of or relating to any provision of this
Agreement or the breach thereof shall be settled by binding arbitration in San
Francisco, California in accordance with the rules then in effect of the
National Arbitration Forum (xxx.xxx-xxxxx.xxx), and judgment upon any award
rendered may be entered in any court having jurisdiction thereof. The Federal
Arbitration Act shall apply to this Agreement.
8.10 GOVERNING LAW.
This Agreement and the rights of the parties hereunder will be governed by,
interpreted, and enforced in accordance with the laws of the State of
California.
8.11 BINDING EFFECT.
This Agreement will be binding upon and inure to the benefit of the Members, and
their respective distributees, successors and permitted assigns.
8.12 SURVIVAL OF TERMS.
The terms, conditions, representations, warranties and other provisions of this
Agreement shall survive any purchase hereunder and be binding upon the Seller
and Purchasers as if stated in a separate agreement evidencing such purchase.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement effective as of
the date first above written.
BC RESTAURANTS, LLC
BY BATTERY & CLAY ASSOCIATES, LLC
ITS CHIEF MANAGER
-----------------------------------
Xxx X. Xxxxxxxx, Vice President
THE MEMBERS:
BATTERY & CLAY ASSOCIATES, LLC
-----------------------------------
Xxx X. Xxxxxxxx, Vice President
E&C SAN FRANCISCO, LLC
-----------------------------------
Xxxxxxx X. Xxxxxx, Chief Manager
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SCHEDULE A
BC RESTAURANTS, LLC
MEMBERSHIP INTERESTS
VOTING NON-
NAME OF VALUE OF MEMBERSHIP VOTING VOTING
MEMBER CONTRIBUTION UNITS INTEREST INTEREST
--------------------------------------------------------------------
Battery & Clay $ 667 66-2/3% 66-2/3% N/A
Associates, LLC
--------------------------------------------------------------------
E&C San
Francisco, LLC $ 333 33-1/3 33-1/3% N/A
--------------------------------------------------------------------
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SCHEDULE
ACKNOWLEDGEMENT AND CONSENT TO
BC RESTAURANTS, LLC
MEMBER CONTROL AGREEMENT
This Schedule is attached to and made a part of that certain Member Control
Agreement by and among BC Restaurants, LLC a
California limited liability
company (the "Company") and its Members, originally executed effective on
January 3, 2003, as from time to time amended.
Each of the undersigned, wishing to become a Member of the Company, hereby
acknowledges that its duly authorized officer, chief manager, has read and
understands the terms and conditions of the Member Control Agreement, agrees to
be bound by all of such terms and conditions as a Member of the Company and
understands that any contribution for a Membership Interest in the Company is
being accepted in reliance upon this acknowledgment and agreement to be bound by
the terms and conditions of the Member Control Agreement.
IN WITNESS WHEREOF, the undersigned have executed this Schedule effective as of
January 3, 2003.
BC RESTAURANTS, LLC
BY BATTERY & CLAY ASSOCIATES, LLC
-----------------------------------
Xxx X. Xxxxxxxx, Vice President
THE MEMBERS:
BATTERY & CLAY ASSOCIATES, LLC
-----------------------------------
Xxx X. Xxxxxxxx, Vice President
E&C SAN FRANCISCO, LLC
-----------------------------------
Xxxxxxx X. Xxxxxx, Chief Manager
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