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EXHIBIT 1
BREWING VENTURES LLC
MEMBER CONTROL AGREEMENT
THIS MEMBER CONTROL AGREEMENT is made as of the 26th day of June, 1997,
by and among Steven J. Wagenheim, William E. Burdick, Mitchel I. Wachman,
Timothy Cary, Eric LeClair and Arthur Nermoe (collectively, the "Members" and
individually, a "Member").
RECITALS
WHEREAS, the undersigned Members constitute all of the current Members of
Brewing Ventures LLC, a Minnesota limited liability company (the "Company"); and
WHEREAS, Minnesota Statutes Section 322B.37 authorizes members of a
limited liability company to enter into a "member control agreement" as defined
therein; and
WHEREAS, Messrs. Wagenheim and Burdick have spent considerable efforts
and time in preparing and developing the business plan, leasing opportunity,
restaurant concept, proprietary and other intellectual property and information,
all in connection with a restaurant and microbrewery to be located 830 West St.
Germaine Street, Saint Cloud, Minnesota (collectively, the "Restaurant
Project"); and
WHEREAS, Messrs. Wachman, Cary, LeClair and Nermoe have agreed to
participate in the further development and execution of the Restaurant Project;
and
WHEREAS, each Member recognizes that upon the execution of this Agreement
and the valid organization of the Company, it is anticipated that the Restaurant
Project will be contributed to Brewing Ventures Inc., a Minnesota corporation
("Brewing Ventures"), in exchange for all of the outstanding capital stock of
such corporation; and
WHEREAS, each of the undersigned Members wishes to enter into this
Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual promises
contained in this Agreement, the Members agree as follows:
SECTION 1
DEFINITIONS
1.1 DEFINITIONS. In addition to the abbreviations and terms otherwise
defined in this Agreement, the following capitalized terms used herein shall
have the meanings set forth below:
"ACT" means the Minnesota Limited Liability Company Act contained in
Minnesota Statutes Chapter 322B.
"AGREEMENT" means this Member Control Agreement and all amendments
hereto.
"BOARD" OR "BOARD OF GOVERNORS" means the Board of Governors of the
Company.
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"CAPITAL ACCOUNT" means the account of a Member which is established and
maintained in accordance with the provisions of Section 5.1 hereof.
"CAPITAL CONTRIBUTION" means the total amount of cash and/or the fair
market value, accorded by the Board of Governors, to property or services
contributed or agreed to be contributed by a Member with respect to his
Membership Interest.
"CODE" means the Internal Revenue Code of 1986, as amended, and any
successor thereto.
"FINANCIAL RIGHTS" means those rights associated with a Membership
Interest to share in Net Income and Net Losses and distributions with respect to
Membership Interests.
"GOVERNANCE RIGHTS" means all rights associated with a Membership
Interest in the Company other than Financial Rights, including, without
limitation, rights to vote, receive notices and attend meetings of Members.
"MANAGER" means a person elected, appointed or otherwise designated as a
Manager of the Company by the Board of Governors, and any other person
considered elected as a Manager pursuant to the Act.
"MEMBER" means a person reflected in the Required Records of the Company
as the owner of one or more Membership Interests of the Company who has signed
this Agreement.
"MEMBERSHIP INTEREST" means one of the ownership interests created by the
Company's Articles of Organization into which the Members' ownership interests
in the Company are divided, each such Membership Interest consisting of
Governance Rights and Financial Rights.
"NET INCOME AND NET LOSS" mean the aggregate income or loss of the
Company, respectively, determined as of the close of the Company's fiscal year,
including each item of income, gain, loss, credit or deduction required to be
separately stated for each Member pursuant to Code Section 702(a).
"PERCENTAGE INTEREST" means each Member's proportionate contribution to
the capital of the Company, as set forth on Schedule 1.
"REGULATIONS" mean the Treasury Regulations (final and temporary)
promulgated under the Code, as such Regulations may be amended from time to time
(including corresponding provisions of succeeding Regulations).
"REQUIRED RECORDS" mean those records required to be maintained by the
Company pursuant to the Company's Operating Agreement and Minnesota Statutes
Section 322B.373.
"TRANSFER" means the mortgage, pledge, hypothecation, transfer, sale,
exchange, assignment or any other disposition of any part or all of a Member's
Interest, whether voluntarily or involuntarily, by operation of law or
otherwise.
SECTION 2
CONTRIBUTIONS AND MEMBERSHIP INTERESTS
2.1 MEMBERS. The names, addresses, Capital Contributions and
Percentage Interests of the Members are set forth on Schedule 1 attached hereto
and incorporated herein by reference ("Schedule 1"). The Required Records shall
be modified to reflect any changes in the ownership of Membership Interests.
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2.2 TERMS OF MEMBERSHIP INTERESTS; PERCENTAGE INTERESTS. Except as
provided in this Agreement, the Membership Interests shall be equal in all
respects, and the Members' respective Governance Rights and Financial Rights
will be in proportion to their Percentage Interests set forth on Schedule 1, as
amended from time to time.
2.3 NO WITHDRAWAL OR RETURN OF CAPITAL CONTRIBUTIONS. Except as
provided in this Agreement, a Member shall not be entitled to withdraw or demand
the return of any part or all of his Capital Contribution or to receive any
distribution from the Company.
2.4 NO INTEREST ON CAPITAL CONTRIBUTIONS. No interest will be paid to
any Member on any part of such Member's Capital Contribution.
SECTION 3
GOVERNANCE
3.1 BOARD OF GOVERNORS. The Board of Governors shall consist of up to
three (3) Governors, as determined at each annual meeting of Members; provided,
however, that each Member hereby consents to the election to the Board of
Governors of an initial third Governor by the remaining Governors. The initial
Board of Governors shall consist of Steven J. Wagenheim and William E. Burdick.
3.2 GENERAL POWERS. The business and affairs of the Company shall be
managed by or under the direction of the Board of Governors. Subject to any
requirement in the Act that Member approval be obtained, the Board of Governors
may exercise all such powers and do all such things as may be exercised or done
by the Company.
3.3 MEETINGS. Meetings of the Board of Governors shall be held at
least annually at the principal office of the Company. Other meetings of the
Board may be called by the Board of Governors, in which case the person or
persons calling such meeting may fix the date, time and place thereof, either
within or without the State of Minnesota, and shall give at least 5 days'
advance notice of the meeting. The Board of Governors may waive notice of any
meeting.
3.4 ACTION OF THE BOARD. A majority of the total number of votes on
the Board shall be required for a Board action.
3.5 APPOINTMENT OF MANAGERS. The Board of Governors shall appoint one
or more Members to the position of Chief Manager and Treasurer. The Board of
Governors may also appoint such other Managers and assistant Managers as it
deems necessary or advisable. The Board of Governors shall fix the powers and
duties of all Managers. Any Manager may be removed by the Board at any time.
3.6 DUTIES OF CHIEF MANAGER. Unless provided otherwise by a
resolution adopted by the Board of Governors or this Agreement, the Chief
Manager (1) shall have general active management responsibility for the business
of the Company, (2) shall preside at meetings of the Board of Governors, (3)
shall see that all orders and resolutions of the Board of Governors are carried
into effect, (4) shall have authority to sign and deliver in the name of the
Company any deeds, mortgages, bonds, contracts or other instruments pertaining
to the business of the Company, except in cases in which the authority to sign
and deliver is required by law to be exercised by another person, (5) may
maintain records of and certify proceedings of the Board of Governors and
Members, and (6) shall perform such other duties as may from time to time be
prescribed by the Board of Governors.
3.7 DUTIES OF TREASURER. Unless provided otherwise by a resolution
adopted by the Board of Governors or this Agreement, the Treasurer (1) shall
keep accurate financial records for the Company, (2) shall
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deposit all monies, drafts and checks in the name of and to the credit of the
Company in such banks and depositories as the Board of Governors shall designate
from time to time, (3) shall endorse for deposit all notes, checks and drafts
received by the Company as ordered by the Board of Governors, making proper
vouchers therefor, (4) shall disburse Company funds and issue checks and drafts
in the name of the Company as ordered by the Board of Governors, (5) shall
render to the Chief Manager and the Board of Governors, whenever requested, an
account of all such Manager's transactions as Treasurer and of the financial
condition of the Company, and (6) shall perform such other duties as may be
prescribed by the Board of Governors or the Chief Manager from time to time.
SECTION 4
CONTRIBUTIONS AND MEMBERSHIP INTERESTS
4.1 MANNER OF COMPUTING PERCENTAGE INTERESTS. In exchange for the
property or services that have been and will be provided by the Members to the
Company with respect to the development of the Restaurant Project, the Members
hereby agree they have received the respective Percentage Interests set forth on
Schedule 1.
(a) VESTING OF MEMBERSHIP INTERESTS. The respective Membership
Interests of Messrs. Wagenheim and Burdick shall become immediately
vested with and in such individuals upon their execution of this
Agreement. Subject to the provisions of Section 4.1(b) below, the
Membership Interests of Messrs. Wachman, Cary, LeClair and Nermoe shall
be respectively vested with and in each persons as follows: (i) Mr.
Wachman shall become vested with and in his Membership Interests on the
second anniversary of the date on which he executes this Agreement, and
(ii) Messrs. Cary, LeClair and Nermoe shall become vested with and in
their respective Membership Interests on the third anniversary of the
date on which each person executes this Agreement; provided, however,
that in any case, Messrs. Wachman, Cary, LeClair and Nermoe must, on such
dates, be Members of the Company and provided further that such
individuals must have been Members of the Company for the intervening
years between the date on which they sign this Agreement and such
anniversary date.
(b) INITIAL PUBLIC OFFERING. Each Member of the Company shall
become fully and immediately vested with and in any of the Membership
Interests discussed in Section 4.1(a) in the event that (i) Brewing
Ventures Inc. sells its equity or debt securities to the public in an
initial public offering pursuant to the provisions of the Securities Act
of 1933, as amended, and the rules and regulations of the Securities and
Exchange Commission promulgated thereunder (the "Public Offering"), and
(ii) such Member is a Member of the Company on the effective date of the
Public Offering.
(c) REMOVAL OF A MEMBER. Each Member other than Steven J.
Wagenheim, William E. Burdick or a Member whose initial Capital Account
exceeded $10,000, hereby consents to the ability of the Board, in its
sole discretion, to remove a Member in the event that the Board, in its
sole discretion, determines that such Member is no longer actively
involved with and making contributions toward the Restaurant Project.
Such removal may be with or without cause. In the event of the removal
of a Member pursuant to this Section 4.1(c), each Member hereby agrees to
surrender all Membership Interests then vested in and owned by such
Member to the Company for $100.00, with said amount being due and payable
on the day on which such Member is removed from the Company.
(d) DISSOLUTION AVOIDANCE. Upon the removal of a Member in
accordance with Section 4.1(c) above, the remaining Members shall have
the right to avoid the Company's dissolution in accordance with Section 8
of this Agreement. In the event the other Members shall continue the
Company's business in accordance with Section 8, and upon the payment by
the Company of the $100.00 set forth in Section 4.1(c), the Company shall
continue its business. In the event the remaining Members
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do not agree to avoid the Company's dissolution, the Company shall be
liquidated in accordance with Section 6.2 and the provisions of
applicable law.
(e) ADDITIONAL MEMBERS. Each Member hereby understands that,
in its sole discretion, the Board of Governors may approve the admission
of additional Members to the Company. Each Member hereby agrees with and
consents to the addition of such additional Members, and understands that
the addition of other Members, and the proportion of additional
Membership Interests, will dilute each Member's Membership Interest in
the Company.
(f) VOTING OF MEMBERSHIP INTERESTS. Upon transfer of the
Restaurant Project to Brewing Ventures, each Member hereby agrees to vote
all Membership Interests owned by him in favor of the election to the
Board of Directors of Brewing Ventures of Steven J. Wagenheim and William
E. Burdick.
4.2 TRANSFER OF MEMBERSHIP INTERESTS. A Member may only Transfer a
portion or all of his Membership Interests in accordance with Section 7.
Schedule 1 shall be adjusted to reflect any such Transfers.
4.3 LOANS FROM MEMBERS TO COMPANY. Subject to any other restrictions
contained herein, the Company may borrow money from one or more Members at such
interest rate or rates and upon such other terms as are agreed upon by the
Company and the lending Member; provided, however, that the interest rate on any
such loans shall not exceed the rate that would apply to Company borrowing on
similar terms from recognized banks or financial institutions.
4.4 NONRECOURSE LOANS. A creditor who makes a nonrecourse loan to the
Company shall not have or acquire, at any time as a result of making the loan,
any direct or indirect interest in the profits, capital or property of the
Company other than as a secured creditor.
4.5 MEMBERS' OTHER COMPENSATION. No Member shall receive any salary
or drawing with respect to his Capital Contributions or his Capital Account or
for services rendered on behalf of the Company, except as otherwise provided in
this Agreement or by separate resolution or agreement approved by the Board.
4.6 NON-COMPETITION. As long as a Member owns a Membership Interest
in the Company or owns 5% or more of the outstanding common stock of Brewing
Ventures Inc., such Member hereby agrees that he will not, directly or
indirectly, as a partner, shareholder, employee or consultant, engage in any
activity which is competitive with the business of Brewing Ventures Inc. Such
business is defined for purposes of this section to be a casual dining
restaurant with an on-site microbrewery, except that Sherlock's Home, an entity
owned and operated by William E. Burdick, is hereby excluded from application of
this section.
SECTION 5
CAPITAL ACCOUNTS AND ALLOCATIONS
5.1 CAPITAL ACCOUNTS. A separate Capital Account shall be maintained
by the Company for each Member. The Capital Account for each Member shall be
increased by such Member's Additional Capital Contributions, if any. Each
Member's Capital Account shall also be increased or decreased, as the case may
be, to account for allocations of Net Income and Net Loss to such Member.
5.2 ALLOCATIONS OF NET LOSSES. Except as otherwise provided in this
Agreement, Net Losses shall be allocated to the Members in proportion to their
Percentage Interests.
5.3 ALLOCATIONS OF NET INCOME. Except as otherwise provided in this
Agreement, Net Income shall be allocated to the Members in proportion to their
Percentage Interests.
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5.4 ALLOCATION ADJUSTMENTS AND LIMITATIONS. The provisions of this
Section 5 relating to the maintenance of Capital Accounts are intended to comply
with Regulations Section 1.704-1(b), and shall be interpreted and applied in a
manner consistent with such Regulations. In the event the Board of Governors
shall determine that it is prudent to modify the manner in which the Capital
Accounts, or any increases or decreases thereto, are computed in order to comply
with such Regulations, the Board may make such modification; provided that any
such modification is not likely to have a material effect on the amounts
distributable to any Member upon the dissolution of the Company. The following
special allocations, limitations and contingent reallocations are further
intended to address and coordinate the Members' economic intentions with the
various IRS rulings and the Regulations issued under Code Section 704(b) and
shall be so construed when applied.
(a) MINIMUM GAIN CHARGEBACK. In the event there is a net
decrease in "Partnership Minimum Gain" (as determined in accordance with
Section 1.704-2(b)(2) and Section 1.704-2(d) of the Regulations) during
any Company fiscal year, each Member shall be specially allocated items
of income and gain for such year, and, if necessary, subsequent fiscal
years, in an amount equal to such Member's share of the net decrease in
Partnership Minimum Gain, determined in accordance with Regulation
Section 1.704-2(g). This Subsection is intended to comply with the
"Minimum Gain Chargeback" requirement of Regulation Section 1.704-2(f)
and shall be interpreted consistently therewith.
(b) QUALIFIED INCOME OFFSET. In the event a deficit balance in
a Member's Capital Account is caused or increased because a Member
unexpectedly receives an adjustment, allocation or distribution, as
described in Regulation Sections 1.704-1(b)(2)(ii)(d)(4), (5) or (6),
then such Member will be allocated items of income and gain, to the
extent required by Regulation Section 1.704-1(b)(2)(ii)(d), so as to
eliminate such deficit balance as quickly as possible. This Subsection
is intended, and shall be so construed, to provide a "Qualified
Income Offset" as defined in Section 1.704-1(b)(2)(ii)(d) of the
Regulations.
5.5 TAX ALLOCATIONS. To the extent required by Code Section 704(c)
and the Regulations promulgated thereunder, items of income, gain, loss or
deduction with respect to contributed properties shall, if any, solely for tax
purposes, be allocated among the Members in such manner as takes into account
any variations between the basis of such properties to the Company upon
contribution and the fair market values of such properties at the time of
contribution.
5.6 REVALUATIONS OF COMPANY PROPERTY. As of the date on which any
Additional Capital Contributions are made by any Member, the Capital Account
balances of the Members may be restated to reflect the market values of the
Company's property as of such date and the manner in which Net Income and Net
Loss would have been allocated had the Company disposed of its property on such
date, all in accordance with Regulations Sections 1.704-1(b)(2)(iv)(f) and (r),
as in effect on the date hereof. Subsequent adjustments to Capital Accounts
shall be made so as to comply with the requirements of Regulations
Sections 1.704-1(b)(2)(iv) and 1.704-1(b)(4)(i), as in effect on the date
hereof. Subsequent allocations of Net Income and Net Losses with respect to
Company's property shall take into consideration any variation between such
property's revaluation and its adjusted basis for federal income tax purposes in
the same manner as under Code Section 704(c) and the Regulations thereunder.
Any elections or other decisions relating to such allocations shall be made by
the Board of Governors in a manner that reasonably reflects the purpose and
intention of this Agreement.
5.7 ALLOCATION BETWEEN ASSIGNOR AND ASSIGNEE. In the case of the
assignment of Membership Interests during any fiscal year, (i) the transferee
shall succeed to the Capital Account of the transferor to the extent it relates
to the Membership Interest transferred, and (ii) Net Income or Net Losses
allocable to such transferred Membership Interest with respect to such fiscal
year shall be allocated between the assignor and the assignee in proportion to
the number of days during such fiscal year that each was the owner of such
Membership Interest; provided, however, that the Board, in its sole discretion,
may close the Company's books on an interim basis for purposes of allocating Net
Income and Net Losses between the assignor and assignee.
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SECTION 6
DISTRIBUTIONS
6.1 NONLIQUIDATING DISTRIBUTIONS. The amount and timing of
distributions of cash or property from the Company's operations, other than in
liquidation, shall be made solely at the discretion of the Board of Governors.
6.2 DISTRIBUTIONS UPON COMPANY'S LIQUIDATION. The net proceeds
resulting from the liquidation of the Company shall be applied and distributed
in the following order of priority:
(a) COMPANY DEBTS AND LIABILITIES. To the extent available,
proceeds shall be applied to the payment of debts and liabilities of the
Company, including all expenses of the Company incident to its
liquidation and all loans and other obligations owed to Members.
(b) RESERVES. To the extent available, proceeds shall be
applied to the setting up of any reserves which the Board deems
reasonably necessary for contingent, unmatured or unforeseen liabilities
or obligations of the Company for such period as deemed advisable for the
purpose of disbursing such reserves in payment of such liabilities or
obligations and, at the expiration of such period, the balance of such
reserves, if any, shall be distributed as hereinafter provided.
(c) BALANCE. The balance of any proceeds shall be distributed
among the Members in accordance with the positive balances in their
Capital Accounts after taking into account all Capital Account
adjustments for the Company fiscal year during which liquidation occurs.
SECTION 7
TRANSFER OF MEMBER INTERESTS
7.1 TRANSFER RESTRICTIONS. No Member shall Transfer any portion of
his Membership Interest except as provided in this Section 7. Any other
attempted Transfer of any or all rights associated with a Membership Interest
shall be void and of no legal effect, including any assignment of the Financial
Rights associated with a Member's Membership Interest, and the Company shall not
be obligated for any purpose whatsoever to recognize such Transfer or
assignment, except as otherwise required by operation of law, and in such event,
the Company shall have the right to purchase such Membership Interest as if the
transferor of such Membership Interest was a "Former Member" as provided in
Section 7.3 hereof.
7.2 PERMITTED TRANSFEREES. Any Member may Transfer all or any portion
of his Membership Interest to another Member without the consent of the other
Members and without offering such Membership Interest to the Company and the
remaining Members.
7.3 DEATH, VOLUNTARY WITHDRAWAL OR BANKRUPTCY OF A MEMBER. Upon the
death, voluntary withdrawal or bankruptcy of a Member (a "Former Member"), the
remaining Members shall have the right to avoid the Company's dissolution in
accordance with Section 8 of this Agreement. In the event the remaining Members
shall continue the Company's business in accordance with Section 8, the Company
shall, for a period of 90 days following the date the Company's dissolution was
avoided pursuant to Section 8, have the option to purchase the Former Member's
Membership Interest and if such option is exercised the Former Member shall sell
the Former Member's Membership Interest in accordance with Section 9. In the
event the other Members do not avoid the Company's dissolution, the Company
shall be liquidated in accordance with Section 6.2 and the provisions of
applicable law. In no event, however, shall the provisions of this Section 7.3
apply to the removal, by the Board of Governors, of a Member of the Company
pursuant to the provisions of Section 4.1(c) of this Agreement.
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7.4 OTHER TRANSFERS. Except as otherwise set forth in this Section 7,
a Member may not Transfer any part of his Membership Interest unless items (a)
through (d) below are first satisfied:
(a) All of the Members consent to the assignment of such
Membership Interest in writing, which consent may be withheld for any
reason;
(b) The transferee accepts and agrees to be bound by the terms
and provisions of this Agreement;
(c) Such other documents or instruments as the Board of
Governors may require are executed by the transferee to evidence such
acceptance and agreement; and
(d) The transferee pays or reimburses the Company for all
reasonable legal fees, filing and publication costs incurred by the
Company in connection with the Transfer of such Membership Interest.
7.5 ACQUIT COMPANY. Until such time as a written assignment has been
received by and recorded on the books of the Company, any payment by the Company
to an assigning Member shall acquit the Company of liability to the extent of
such payments from any other person who may have an interest in such payment by
reason of an assignment by the Member.
SECTION 8
DISSOLUTION AVOIDANCE CONSENT
8.1 DISSOLUTION AVOIDANCE CONSENT. Upon the occurrence of an event
that terminates the continued membership of a Member (including the events
enumerated in Minnesota Statutes Section 322B.80, subdivision 1, clause (5)),
the existence and business of the Company may be continued without dissolution
if a majority-in-interest of the remaining Members consent within 90 days after
the termination of the continued membership; provided that there are at least
two remaining Members or a new Member is admitted within 90 days after the
termination of the event causing dissolution.
8.2 STATUS OF FORMER MEMBER IF DISSOLUTION IS AVOIDED. If dissolution
is avoided under Section 8.1, then the Former Member shall lose all Governance
Rights and shall be considered merely an assignee of such Member's Financial
Rights.
SECTION 9
VALUATION AND PAYMENTS FOR MEMBERSHIP INTERESTS
9.1 VALUATION DATE. If the option set forth in Section 7.3 is
exercised, the Closing, valuation and terms of payment for the Membership
Interest of a Former Member shall be determined as of the date of death,
voluntary withdrawal or bankruptcy, as the case may be (the "Valuation Date").
9.2 VALUATION OF FORMER MEMBER'S MEMBERSHIP INTEREST. If the Company
and the Former Member (or his personal representative in the case of death) are
unable to agree on the value of the Former Member's Membership Interest within
90 days following the Valuation Date, the value of a Former Member's Membership
Interest shall be determined by an independent appraiser. If the Company and
the Former Member fail to agree on an appraiser within 120 days following the
Valuation Date, either party may, upon notice to the other party, apply to a
judge of the District Court of Hennepin County, Minnesota, for the selection of
the appraiser. The appraiser shall have free access to the books and records of
the Company and shall, within 30 days after his or her appointment, file a
report with the Company and the Former Member setting forth the value of the
Former Member's Membership Interest. The appraiser shall: (i) not consider the
proceeds of policies of life
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insurance on the life of a Former Member which are payable to the Company, if
any; (ii) consider the effect of the loss of the Former Member's services to the
Company on the value of the Membership Interest; and (iii) not apply any
discounts for lack of control or marketability. The appraiser's determination
shall be binding upon the Company and the Former Member, and the cost of such
appraisal shall be borne by the party who demanded the appraisal.
9.3 PAYMENT FOR TERMINATED INTEREST. The purchase price for a Former
Member's Membership Interest to be purchased by the Company pursuant to Section
9.2 above shall be paid in equal monthly installments of principal and interest
over a seven-year period with the first installment due on the date of Closing
and each subsequent installment due on the same day of each month thereafter;
provided, however, that if the Membership Interest of a Former Member is valued
at less than $25,000, then such monthly installments shall be paid over a
five-year period. The interest rate shall be the lower of the long-term
applicable federal funds interest rate in effect for the month in which the
Closing occurs or the maximum lawful rate of interest that may be charged under
the laws of the State of Minnesota.
9.4 COMPANY'S PROMISSORY NOTE. Any balance owed by the Company for
the purchase of a Former Member's Membership Interest shall be evidenced by a
promissory note. Said promissory note shall give the Company the option of
prepayment at any time without penalty, shall provide for the acceleration of
all remaining installments upon default by the Company, and shall provide for a
grace period of 30 days in which to make any installment payment.
9.5 CLOSING. The "Closing" for the purchase of a Former Member's
Membership Interest shall take place at the Company's principal office and shall
occur 30 days after the value of the Former Member's Membership Interest is
established pursuant to Section 9.2. The Closing can occur earlier and at
another location if mutually agreed upon by the Company and the Former Member.
SECTION 10
TAX MATTERS
10.1 TAX CLASSIFICATION OF COMPANY. The Members acknowledge that the
Company will be classified as a "partnership" for tax purposes.
10.2 ANNUAL TAX INFORMATION. Within 90 days after the end of each
fiscal year, the Chief Manager or Treasurer 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 (or information)
returns, including a statement showing each Member's share of income, gain or
loss and credits for such fiscal year for federal or state income tax purposes.
10.3 ANNUAL ACCOUNTING REPORT. Within 120 days after the close of each
fiscal year, the Chief Manager or Treasurer shall furnish to the Members an
annual report containing a statement of income and expense and a statement of
financial condition as of the year then ended.
10.4 ACCOUNTING AND TAX DECISIONS. All decisions as to accounting and
tax matters shall be made by the Board of Governors in its sole discretion. The
Company, at the sole discretion of the Board, 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.
10.5 TAX MATTERS PARTNER. Unless another Manager is otherwise
designated by the Board of Governors, the Chief Manager shall act on behalf of
the Company as the "Tax Matters Partner" under the Code and in any similar
capacity under state or local law.
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SECTION 11
MISCELLANEOUS
11.1 GOVERNING LAW. This Agreement and the rights of the parties
hereunder shall be governed by, interpreted, and enforced in accordance with the
internal laws, and not the laws pertaining to choice or conflict of laws, of the
State of Minnesota.
11.2 RELATIONSHIP WITH OTHER AGREEMENTS. The Articles of Organization
of the Company are incorporated herein by reference and hereby made a part of
this Agreement. This Agreement, in conjunction with such Articles of
Organization, constitutes the entire Agreement of the Members with respect to
the Company, and supersedes all prior written and prior and contemporaneous oral
agreements, understandings and negotiations with respect to the Company. In the
event of any conflict between the Company's Articles of Organization and this
Agreement, the provisions of this Agreement shall govern to the extent not
contrary to law.
11.3 BINDING EFFECT. Except as otherwise provided in this Agreement,
every covenant, term and provision of this Agreement shall be binding upon and
inure to the benefit of the Members and their respective heirs, legatees, legal
representatives, successors, transferees and assigns.
11.4 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 claim hereunder or be entitled to any benefits under or on account
of this Agreement, whether as a third party beneficiary or otherwise.
11.5 WAIVERS. No waiver of this Agreement, or any part hereof, shall
be binding unless made in writing and signed by the party claimed to have made
such waiver. No waiver of any breach or condition of this Agreement shall be
deemed to be a waiver of any other conditions or subsequent breach whether of
like or different nature.
11.6 NOTICES. All notices, requests, demands, or other communications
by the terms hereof required or permitted to be given by one Member to the
Company or another Member shall, unless otherwise specifically provided for
herein, be given in writing and be personally served or sent by registered mail,
postage prepaid, addressed to the Company or such other Member or delivered to
the Company or such other Member at the Company's principal executive office or
to another Member at its last address furnished to the Company for such purpose.
Any notice, request, demand or other communication so personally delivered shall
be deemed to have been received on the day of delivery.
11.7 ADDITIONAL ACTS AND INSTRUMENTS. Each Member agrees to perform
all further acts and execute, acknowledge and deliver all further documents
which may be reasonably necessary, appropriate or desirable to carry out the
provisions of this Agreement.
11.8 SEVERABILITY. In the event of any conflict between a provision of
this Agreement and any provision of the Act not subject to variation in this
Agreement, the provisions of the Act shall govern. If any provision of this
Agreement is or becomes or is deemed invalid, illegal, or unenforceable in any
jurisdiction, (i) such provision will be deemed amended to conform to applicable
laws of such jurisdiction so as to be valid and enforceable or, if it cannot be
so amended without materially altering the intention of the Members, it will be
stricken, (ii) the validity, legality, and enforceability of such provision will
not in any way be affected or impaired thereby in any other jurisdiction, and
(iii) the remainder of this Agreement will remain in full force and effect.
11.9 COUNTERPARTS. This Agreement and any amendments hereto may be
executed in multiple counterparts, each of which shall be deemed an original
agreement and all of which shall constitute one and the
Page 19 of 31 Pages
<PAGE>
same agreement. However, in making proof hereof it will be necessary to produce
only one copy hereof signed by the party to be charged.
11.10 PREPARATION OF AGREEMENT. Briggs and Morgan, Professional
Association, has drafted this Agreement at the request of the Members and the
Company. The parties recognize that their interests under this Agreement may
now or hereafter be adverse to, or in conflict with, the interests of each
other. The Members and the Company have consented to such representation by
Briggs and Morgan, Professional Association, and agree that at no time will such
representation be construed, claimed or deemed to be a conflict of interest or
violation of any professional obligations to any party. The Members and the
Company acknowledge that Briggs and Morgan, Professional Association, has
encouraged them to seek separate counsel because of potential conflicts of
interest which exist, or which may arise in the future.
11.11 OTHER BUSINESS VENTURES. Any Member may engage in or possess an
interest in other business ventures of every nature and description,
independently or with others, whether such ventures are competitive with the
Company or otherwise; and neither the Company nor the Members shall have any
right by virtue of this Agreement in or to such independent ventures or to the
income or profits derived therefrom and no Member shall have the obligation to
bring any business opportunity to the Company or to any other Member.
Page 20 of 31 Pages
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written, or with respect to Members acquiring Membership
Interests after the date of this Agreement, on the date opposite such Member's
signature.
/s/ Steven J. Wagenheim
------------------------------------
Steven J. Wagenheim
/s/ William E. Burdick
------------------------------------
William E. Burdick
/s/ Mitchel I. Wachman
------------------------------------
Mitchel I. Wachman
/s/ Timothy Cary
------------------------------------
Timothy Cary
/s/ Eric LeClair
------------------------------------
Eric LeClair
/s/ Arthur Nermoe
------------------------------------
Arthur Nermoe
Page 21 of 31 Pages
<PAGE>
JUNE 26, 1997 SCHEDULE 1
<TABLE>
<CAPTION>
INITIAL
PERCENTAGE MEMBERSHIP CAPITAL
NAME OF MEMBER INTEREST UNITS CONTRIBUTION
<S> <C> <C> <C>
Steven J. Wagenheim 33.33 33.33 $250(1)
------------------------
------------------------
William E. Burdick 33.33 33.33 $250(1)
------------------------
------------------------
Mitchel I. Wachman 16.00 16.00 $120
------------------------
------------------------
Timothy Cary 6.67 6.67 $50
------------------------
------------------------
Eric LeClair 6.67 6.67 $50
------------------------
------------------------
Arthur Nermoe 4.00 4.00 $30
------------------------
------------------------ ------- -------
Totals 100.00% 100
------- ---
------- ---
</TABLE>
----------------------
(1) In addition, Messrs. Wagenheim and Burdick have also contributed the
Restaurant Project.
Page 22 of 31 Pages
