AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 15, 1996
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------
HOPS GRILL & BAR, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
FLORIDA 5812 APPLIED FOR
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
INCORPORATION OR
ORGANIZATION)
3030 NORTH ROCKY POINT DRIVE WEST, SUITE 650, TAMPA, FLORIDA 33607
(813) 282-9350
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------
DAVID L. MASON, CHIEF EXECUTIVE OFFICER
HOPS GRILL & BAR, INC.
3030 NORTH ROCKY POINT DRIVE WEST, SUITE 650
TAMPA, FLORIDA 33607
(813) 282-9350
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF AGENT FOR SERVICE)
------------
COPIES OF ALL COMMUNICATIONS, INCLUDING COPIES OF ALL COMMUNICATIONS SENT
TO AGENT FOR SERVICE, SHOULD BE SENT TO:
R. Alan Higbee, Esq. Gary M. Epstein, Esq.
David M. Doney, Esq. Andrew Hulsh, Esq.
Fowler, White, Gillen, Boggs, Greenberg, Traurig, Hoffman,
Villareal and Banker, P.A. Lipoff, Rosen & Quentel, P.A.
501 East Kennedy Boulevard, Suite 1700 1221 Brickell Avenue
Tampa, Florida 33602 Miami, Florida 33131
Telephone: (813) 228-7411 Telephone: (305) 579-0500
Facsimile: (813) 228-9401 Facsimile: (305) 579-0717
------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this registration statement becomes effective.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box:[X]
------------
CALCULATION OF REGISTRATION FEE
================================================================================
PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AGGREGATE REGISTRATION FEE
SECURITIES TO BE REGISTERED OFFERING PRICE(1)
- --------------------------------------------------------------------------------
Common Stock, par value $0.01 per share...... $19,800,000 $6,000
================================================================================
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE>
HOPS GRILL & BAR, INC.
CROSS REFERENCE BETWEEN ITEMS IN PART I
OF FORM S-1 AND THE PROSPECTUS
FORM S-1 ITEM AND CAPTION PROSPECTUS CAPTION
------------------------- ------------------
1. Forepart of Registration Statement and
Outside Front Cover Page of
Prospectus.......................... Outside Front Cover Page of
Prospectus
2. Inside Front and Outside Back Cover
Pages of Prospectus................. Inside Front and Outside
Back Cover Pages of
Prospectus
3. Summary Information, Risk Factors and
Ratio of Earnings to Fixed
Charges............................. Prospectus Summary; Risk
Factors
4. Use of Proceeds....................... Use of Proceeds
5. Determination of Offering Price....... Outside Front Cover Page of
Prospectus; Underwriting
6. Dilution.............................. Dilution; Risk Factors
7. Selling Security Holders.............. *
8. Plan of Distribution.................. Outside Front Cover Page of
Prospectus; Underwriting
9. Description of Securities to be
Registered ......................... Outside Front Cover Page of
Summary; Dividend Policy;
Description of Securities
10. Interests of Named Experts and Counsel. *
11. Information with Respect to the
Registrant ......................... Outside Front Cover Page of
Prospectus; Prospectus
Summary; The Company;
Reorganization and Prior S
Corporation Status; Risk
Factors; Use of Proceeds;
Dilution; Capitalization;
Dividend Policy; Selected
Combined Financial Data;
Management's Discussion and
Analysis of Financial
Condition and Results of
Operations; Business;
Management; Certain
Transactions; Principal
Shareholders; Description of
Securities; Independent
Auditors Report and Combined
Financial Statements
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities *
- --------
* Omitted because answer is negative or not applicable
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission but has not yet become effective. These
securities may not be sold nor may offers to buy be accepted prior to the time
the registration statement becomes effective. This prospectus shall not
constitute an offer to sell or the solicitation of an offer to buy nor shall
there be any sale of these securities in any State in which such offer,
solicitation or sale would be unlawful prior to registration or qualification
under the securities laws of such State.
SUBJECT TO COMPLETION, DATED OCTOBER 15, 1996
PROSPECTUS
SHARES
HOPS GRILL & BAR, INC.
COMMON STOCK
[GRAPHIC OMITTED] ----------
THE SHARES OF COMMON STOCK OFFERED HEREBY ARE BEING ISSUED AND
SOLD BY HOPS GRILL & BAR, INC. (THE "COMPANY"). THE COMPANY HAS MADE AN
APPLICATION TO INCLUDE THE COMMON STOCK FOR QUOTATION ON THE NASDAQ NATIONAL
MARKET UNDER THE TRADING SYMBOL "HOPS." PRIOR TO THIS OFFERING, THERE HAS BEEN
NO PUBLIC MARKET FOR THE COMMON STOCK. IT IS CURRENTLY ESTIMATED THAT THE
INITIAL PUBLIC OFFERING PRICE PER SHARE WILL BE BETWEEN $ AND $ SEE
"UNDERWRITING" FOR FACTORS TO BE CONSIDERED IN DETERMINING THE INITIAL PUBLIC
OFFERING PRICE.
----------
SEE "RISK FACTORS" ON PAGES 5 THROUGH 10 OF THIS PROSPECTUS FOR A DISCUSSION OF
CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
================================================================================
Underwriting
Price To Discounts and Proceeds to
Public Commissions(1) Company(2)
- --------------------------------------------------------------------------------
Per Share............. $ $ $
- --------------------------------------------------------------------------------
Total(3).............. $ $ $
================================================================================
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933. See
"Underwriting."
(2) Before deducting expenses estimated at $400,000, which are payable by the
Company.
(3) The Company has granted to the Underwriters a 30-day option to purchase
up to additional shares of Common Stock to cover over-allotments, if
any. If the option is exercised in full, the total Price to Public,
Underwriting Discounts and Commissions and Proceeds to Company will be $ ,
$ and $ respectively. See "Underwriting."
----------
THE SHARES OF COMMON STOCK ARE OFFERED BY THE SEVERAL UNDERWRITERS,
SUBJECT TO PRIOR SALE, WHEN, AS AND IF DELIVERED TO AND ACCEPTED BY THEM, AND
SUBJECT TO CERTAIN OTHER CONDITIONS INCLUDING THE RIGHT OF THE UNDERWRITERS TO
WITHDRAW, CANCEL, MODIFY OR REJECT ANY ORDER IN WHOLE OR IN PART. IT IS EXPECTED
THAT DELIVERY OF THE SHARES WILL BE MADE ON OR ABOUT , 1996, AT
THE OFFICES OF RAYMOND JAMES & ASSOCIATES, INC., ST. PETERSBURG, FLORIDA.
RAYMOND JAMES & ASSOCIATES, INC.
The date of this Prospectus is , 1996
<PAGE>
[INSIDE FRONT COVER]
[The text and photographs described below appear on
a background consisting of a brick wall.]
[The text "Wait'll You See What's [A photograph of a frozen mug of
Brewing On The Grill.(\trademark\)" beer, a plate with a steak and a
and the registered service mark baked potato, and a plate of salad
"Hops Grill & Bar Microbrewery appears here.]
(registered \trademark\)"
and Design appears here.]
The Company intends to furnish its shareholders with annual reports
containing audited financial statements certified by an independent accounting
firm and to make available to its shareholders quarterly reports for the first
three quarters of each year containing unaudited financial information.
----------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
<PAGE>
[INSIDE FRONT FOLD-OUT]
[A photograph of the interior of the [A photograph of the exterior of
HOPS GRILL & BAR restaurant in Boynton a HOPS GRILL & BAR restaurant
Beach, Florida appears here.] located in Tampa, Florida appears
here.]
[A photograph of three beers in frozen mugs, hops, and
barley surrounded by a colorful ribbon, together with
the text "Tap Into The Taste of Hops." appears here.]
[A photograph of the exterior of the [A photograph of the on-premises
HOPS GRILL & BAR restaurant in Denver, microbrewery equipment at a HOPS
Colorado appears here.] GRILL & BAR restaurant located in
Tampa, Florida appears here.]
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO, INCLUDED
ELSEWHERE IN THIS PROSPECTUS. ALL INFORMATION CONCERNING THE COMPANY HAS BEEN
ADJUSTED TO REFLECT AND ASSUMES THE CONSUMMATION OF THE REORGANIZATION DESCRIBED
UNDER "REORGANIZATION AND PRIOR S CORPORATION STATUS." AFTER GIVING EFFECT TO
THE REORGANIZATION, THE CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY WILL BE
THE PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS PRESENTED HEREIN. THE PRO FORMA
CONSOLIDATED FINANCIAL STATEMENTS HAVE BEEN DERIVED FROM THE AUDITED HISTORICAL
FINANCIAL STATEMENTS OF HOPS GRILL & BAR, INC. AND THE AUDITED HISTORICAL
FINANCIAL STATEMENTS OF THE PREDECESSOR CORPORATIONS INCLUDED ELSEWHERE IN THIS
PROSPECTUS. UNLESS OTHERWISE INDICATED (i) ALL FINANCIAL DATA IN THIS PROSPECTUS
IS BASED UPON THE PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS AND (ii) THE
INFORMATION IN THIS PROSPECTUS GIVES NO EFFECT TO THE EXERCISE OF THE
UNDERWRITERS' OVER-ALLOTMENT OPTION.
THE COMPANY
The Company's HOPS GRILL & BAR restaurant system of 18 full-service,
casual dining restaurants constitutes the nation's largest chain of restaurants
that feature an on-premises microbrewery and operate under one name. Each
restaurant features a diverse menu of popular foods, freshly prepared in a
display kitchen with a strict commitment to quality. The Company seeks to
heighten its customers' sense of value by offering generous portions at moderate
prices. As a complement to its menu, each HOPS GRILL & BAR restaurant offers
handcrafted lager-style beers and ales that are brewed in-house and selected for
their mass appeal and drinkability. To enhance the dining experience of its
customers, each restaurant provides attentive, friendly service in a casual,
upbeat atmosphere. The Company believes that its emphasis on consistent,
high-quality food and outstanding service, together with its signature
microbrewed beers, enable the Company to differentiate itself from its
competitors and provide its customers with an exceptional dining experience.
HOPS GRILL & BAR restaurants feature an American-style menu that includes
top choice steaks and prime rib, smoked baby back ribs, fresh fish, chicken and
pasta dishes, deluxe burgers and sandwiches, hand-tossed salads with homemade
dressings, appetizers, soups, and desserts. Menu items are prepared from scratch
daily in a display kitchen. The Company's restaurants serve both lunch and
dinner, with prices ranging from $5.45 to $6.45 for appetizers, $3.95 to $6.95
for salads, $5.95 to $7.95 for burgers and sandwiches, and $8.45 to $16.95 for
dinner entrees. The menu also offers separate selections for children.
Management believes that the cost of a typical meal at the Company's
restaurants, including beverages, currently ranges from $6.00 to $9.00 per
person for lunch and $13.00 to $15.00 per person for dinner. Average annual
sales for the 12 HOPS GRILL & BAR restaurants that were open for the entire
12-month period ended June 30, 1996, were approximately $2.5 million.
The Company utilizes its own original recipes to brew its distinctive
lager-style beers and ales - Clearwater Light(\trademark\), Lightning Bold
Gold(\trademark\), Hammerhead Red(\trademark\), and A-1 Ale. An observation
microbrewery at each restaurant allows customers to view the entire brewing
process. The freshly brewed beers are served in a frozen glass mug and, except
for one nonalcoholic beer, are the only beers served at HOPS GRILL & BAR
restaurants. Full liquor and bar service is also available at each restaurant.
Sales of alcoholic beverages accounted for 17.8% of the Company's total sales
(with beer constituting 58.0% of sales of alcoholic beverages) during the
12-month period ended June 30, 1996.
The Company opened the first HOPS GRILL & BAR restaurant in Clearwater,
Florida in 1989, and all but two HOPS GRILL & BAR restaurants are located in
Florida. Fourteen HOPS GRILL & BAR restaurants are owned and operated by the
Company, and four HOPS GRILL & BAR restaurants are owned by development joint
ventures which are controlled by the Company. The Company opened five HOPS GRILL
& BAR restaurants in 1996 and plans to open nine and 12 HOPS GRILL & BAR
restaurants in 1997 and 1998, respectively.
A key element of the Company's restaurant development strategy is its
operating partner program. Under this program, each operating partner acquires a
ten percent equity interest in the restaurants developed within a specified
geographic area. Each of the Company's operating partners is an experienced
restaurant operator who can provide local market knowledge and management. Six
of the current Company-owned restaurants and all of the current development
joint venture restaurants have an operating partner. The Company believes the
operating partner program provides incentive to its operating partners to
actively manage and develop restaurants and will enhance its ability to open new
restaurants.
2
<PAGE>
THE OFFERING
Common Stock Offered by the Company.... shares
Common Stock to be Outstanding after
the Offering (1)....................... shares
Use of Proceeds........................ To repay existing indebtedness.
See "Use of Proceeds."
Proposed Nasdaq National Market Symbol. HOPS
Risk Factors........................... Investors should carefully consider
the factors discussed under "Risk
Factors."
<TABLE>
<CAPTION>
SUMMARY FINANCIAL AND RESTAURANT DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
SIX MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------------------------------------- ----------------------
1991(2) 1992 1993 1994 1995 1995(2) 1996
--------- --------- --------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF EARNINGS DATA:
Sales .................................$ 3,699 $ 6,733 $ 12,120 $ 20,189 $ 28,314 $ 13,336 $ 20,331
Restaurant operating expenses:
Cost of sales ...................... 1,228 2,114 3,822 6,600 9,070 4,183 6,610
Labor and other related expenses ... 1,143 2,033 3,404 5,792 8,147 3,804 5,692
Other restaurant operating
expenses ......................... 862 1,612 2,762 4,569 6,811 2,953 3,987
Depreciation and amortization ...... 145 173 286 800 1,242 514 893
-------- -------- -------- -------- -------- -------- --------
Total restaurant operating
expenses ...................... 3,378 5,932 10,274 17,761 25,270 11,454 17,182
Income from restaurant operations ..... 321 801 1,846 2,428 3,044 1,882 3,149
General and administrative expenses ... 168 337 634 1,544 2,036 1,053 774
-------- -------- -------- -------- -------- -------- --------
Operating income ...................... 153 464 1,212 884 1,008 829 2,375
Interest expense, net ................. (101) (99) (158) (506) (939) (428) (606)
Net income before taxes ............... 30 392 1,072 301 1 437 1,506
Net income ............................$ 19 $ 243 $ 665 $ 187 $ 1 $ 271 $ 934
======== ======== ========= ========= ========= ========= =========
Net income per share ..................$ 0.01 $ 0.11 $ 0.30 $ 0.08 $ 0.00 $ 0.12 $ 0.41
======== ======== ========= ========= ========= ========= =========
$ $
Supplemental net income per share(3) .. ========= =========
RESTAURANT DATA:
Restaurants open at end of period:
Company-owned restaurants .......... 2 4 6 7 10 9 13
Development joint venture
restaurants ...................... -- -- -- 2 3 3 3
-------- -------- -------- -------- -------- -------- --------
Total .......................... 2 4 6 9 13 12 16
======== ======== ======== ======== ======== ======== ========
System-wide sales:
Company-owned restaurants ..........$ 3,699 $ 6,733 $ 12,120 $ 17,160 $ 22,600 $ 10,734 $ 17,119
Development joint venture
restaurants ...................... -- -- -- 3,029 5,714 2,602 3,212
-------- -------- -------- -------- -------- -------- --------
Total ..........................$ 3,699 $ 6,733 $ 12,120 $ 20,189 $ 28,314 $ 13,336 $ 20,331
======== ======== ======== ======== ======== ======== ========
</TABLE>
JUNE 30,1996
-------------------------
PRO FORMA
PRO FORMA AS ADJUSTED(4)
--------- --------------
BALANCE SHEET DATA:
Working capital (deficit)........................ $(4,396) $
Total assets..................................... 25,918
Long-term debt, excluding current portion........ 14,197
Shareholders' equity............................. 2,866
- -----------------
(1) Does not include 375,000 shares reserved for issuance under the Company's
1996 Stock Incentive Plan, including 240,000 shares issuable upon the
exercise of outstanding options. See "Management-Stock Incentive Plan."
(2) Derived from the unaudited historical financial statements of the
Predecessor Corporations.
(3) Immediately prior to the Reorganization and in contemplation of the terms of
the New Facility (as defined herein), the Predecessor Corporations will
distribute to their shareholders funds which were previously restricted
under the Predecessor Corporations' prior lending arrangement. A portion of
such distribution is in excess of earnings, and therefore supplemental net
income per share assumes the issuance of additional shares, which
would generate proceeds equivalent to the amount by which such distribution
is in excess of earnings. See "Reorganization and Prior S Corporation
Status" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations - Liquidity and Capital Resources."
(4) Adjusted to reflect the sale of shares of Common Stock offered by the
Company hereby (at an assumed initial public offering price of $ per share)
and the application of the estimated net proceeds therefrom. See "Use of
Proceeds."
3
<PAGE>
THE COMPANY
Hops Grill & Bar, Inc. was incorporated in the State of Florida on October
1, 1996. Unless the context requires otherwise, references in this Prospectus to
the Company refer to Hops Grill & Bar, Inc. and its subsidiaries and, with
respect to operations prior to the Reorganization, the Predecessor Corporations.
See "Reorganization and Prior S Corporation Status" and "Certain Transactions."
The address of the Company's principal executive office is 3030 North Rocky
Point Drive West, Suite 650, Tampa, Florida 33607. The Company's telephone
number is (813) 282-9350.
REORGANIZATION AND PRIOR S CORPORATION STATUS
Hops Grill & Bar, Inc. was incorporated on October 1, 1996 to act as a
holding company for 24 corporations (the "Predecessor Corporations") which owned
or operated various aspects of the HOPS GRILL & BAR restaurant system. Pursuant
to the terms of a Share Exchange Agreement dated October 7, 1996 (the "Exchange
Agreement"), the Company and each of the shareholders of the Predecessor
Corporations agreed that immediately prior to the closing of this offering (the
"Exchange Date"), the Company will exchange its Common Stock for all of the
outstanding common stock of each of the Predecessor Corporations (such
transactions are referred to herein collectively as the "Reorganization") and
all of the Predecessor Corporations will become direct wholly owned subsidiaries
of the Company. Under the terms of the Exchange Agreement, each of the
shareholders of the Predecessor Corporations will receive, in consideration for
the exchange of the outstanding capital stock of the Predecessor Corporations,
shares of the Company's Common Stock, such that immediately following the
Reorganization but prior to the completion of this offering, the shareholders of
the Predecessor Corporations will own all of the Common Stock of the Company.
Since their inception, each of the Predecessor Corporations has been
treated as an S corporation for federal and state income tax purposes. As a
result, the earnings of the Predecessor Corporations have been taxed, for
federal and state income tax purposes, directly to the shareholders of the
Predecessor Corporations. Upon the completion of the Reorganization, the Company
will become responsible for the payment of federal and state income taxes on its
earnings.
The Predecessor Corporations paid cash dividends to their shareholders in
the aggregate amounts of $365,000, $844,000, $1,424,000, and $1,467,000
representing funds available for distribution, including funds necessary to pay
federal and state income tax obligations, during the years ended December 31,
1993, 1994 and 1995, and during the six months ended June 30, 1996,
respectively. Immediately prior to the Reorganization and in contemplation of
the terms of the New Facility, the Predecessor Corporations will distribute to
their shareholders funds which were previously restricted under the Predecessor
Corporations' prior lending arrangement (approximately $1.2 million as of June
30, 1996). Such restricted funds would have been prevously distributed by the
Predecessor Corporations in accordance with their past practice, but for the
restrictions contained in the prior lending arrangement.
4
<PAGE>
RISK FACTORS
PROSPECTIVE PURCHASERS SHOULD CAREFULLY CONSIDER THE FOLLOWING INFORMATION
IN ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS IN EVALUATING
AN INVESTMENT IN THE SHARES OF COMMON STOCK OFFERED HEREBY.
LIMITED OPERATING HISTORY
The first HOPS GRILL & BAR restaurant opened in 1989. Of the 18 current
HOPS GRILL & BAR restaurants, only 12 have been open for more than a full year.
Accordingly, the Company has a limited operating history upon which investors
may evaluate its performance. Although the Company is currently profitable,
there can be no assurance that the Company will continue to operate profitably.
SMALL RESTAURANT BASE
The operating results achieved to date by the Company's relatively small
restaurant base may not be indicative of the future operating results of a
larger number of restaurants. Because of the Company's small restaurant base, an
unsuccessful new restaurant or poor results at one or a small number of
restaurants could have a greater adverse effect on the Company's results of
operations than would be the case in a larger restaurant chain.
GEOGRAPHIC CONCENTRATION
All but two of the 18 existing HOPS GRILL & BAR restaurants are located in
the state of Florida. During 1996, the Company opened one restaurant in Bowling
Green, Kentucky and one restaurant in Denver, Colorado. The Company expects that
six of the next eight HOPS GRILL & BAR restaurants will be located in Florida
and two will be located outside Florida. Accordingly, the Company is susceptible
to fluctuations in its business caused by adverse economic, weather, or other
conditions in Florida. As a result of the Company's present geographic
concentration, adverse publicity relating to a HOPS GRILL & BAR restaurant in
Florida could have a more pronounced adverse effect on the Company's overall
sales than might be the case if the Company's restaurants were more broadly
dispersed. As a part of its growth strategy, the Company will open restaurants
in the same market in order to achieve media and other efficiencies. The opening
of restaurants in relatively close proximity to one another may have the effect
of reducing sales in existing restaurants. Additionally, the Company has only
limited experience in operating restaurants that are geographically dispersed,
and there can be no assurance that the Company will be able to operate
restaurants located outside of Florida profitably. See "Business-Restaurant
Locations."
GROWTH STRATEGY
The Company has experienced steady growth in the past five years and
intends to accelerate the opening of new restaurants following this offering.
The Company opened five HOPS GRILL & BAR restaurants in 1996 and plans to open
nine and 12 HOPS GRILL & BAR restaurants in 1997 and 1998, respectively. The
Company's ability to expand will depend upon a number of factors, including
identification of suitable locations, negotiation of favorable lease or site
acquisition terms, the availability, training and retention of skilled
management and restaurant personnel, securing required governmental approvals,
licenses, and permits, adequately supervising construction and managing
development costs, securing adequate financing and other factors, some of which
are beyond the control of the Company. In addition, the Company's ability to
develop restaurants in certain states may be adversely affected by local laws
regulating brewers or restaurants with on-premise breweries. See "-Government
Regulation." There can be no assurance that the Company will be able to develop
all of its planned new restaurants or that, if developed, such new restaurants
will operate profitably. See "Business-Expansion Strategy."
5
<PAGE>
LEVERAGE
The Company has financed its expansion and operations to date principally
through debt financing and operating cash flows. All of the proceeds of this
offering will be utilized to repay a substantial portion of the Company's
existing indebtedness and, upon completion of this offering, the Company will
enter into a new $20.0 million credit facility (the "New Facility") with its
existing lender. The Company will draw approximately $ million from the New
Facility to repay its remaining existing indebtedness. The Company intends to
utilize substantially all of the remaining funds available under the New
Facility to finance its new restaurant development during 1997. Payments of
principal and interest will have to be made with respect to such borrowings
regardless of the Company's operating results. The credit agreement relating to
the New Facility will contain customary representations, warranties and
covenants, as well as prohibitions against the incurrence of other indebtedness
without the consent of the lender, except for normal trade credit and
liabilities and minor equipment leases, and a prohibition of the payment of
dividends. The Company's obligations under the New Facility will be secured by a
pledge of all of the outstanding capital stock of the Company's subsidiaries and
will be guaranteed by David L. Mason, Chairman of the Board, Chief Executive
Office and President of the Company, and Thomas A. Schelldorf, Chief Operating
Officer and Executive Vice President of the Company. See "Management's
Discussionand Analysis of Financial Condition and Results of
Operations-Liquidity and Capital Resources."
NEED FOR ADDITIONAL FINANCING
The development of new restaurants requires funds for the purchase of real
estate, construction, tenant improvements, furniture, fixtures, equipment,
training of employees, permits, and other expenditures. See "Business-Unit
Economics." The Company expects that funds available under the New Facility and
cash flow from operations will be sufficient to achieve the Company's expansion
objectives through 1997. Thereafter, the Company will require additional
financing, possibly through the issuance of additional equity or debt
securities, or additional borrowings, to achieve its expansion objectives,
including the Company's planned restaurant development in 1998, as well as to
pay amounts due under the New Facility, which matures in 1998. There can be no
assurance that such financing will be available or will be available on
satisfactory terms. If additional financing is not obtained by the Company when
needed, the Company's expansion plan may be severely limited. Future equity
financings could result in dilution to shareholders. See "Use of Proceeds" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources."
DEPENDENCE ON SENIOR MANAGEMENT
The success of the Company's business will continue to be highly dependent
upon the services of Messrs. Mason and Shelldorf. The loss of the services of
either Mr. Mason or Mr. Schelldorf could have a material adverse effect upon the
Company's business and development. The Company is currently the beneficiary of
life insurance policies in the amount of $2.0 million on the life of each of
Messrs. Mason and Schelldorf, respectively. As the Company expands its
operations, the success of its business will increasingly depend on the
Company's ability to attract and retain skilled management personnel. The loss
of the services of any of the executive officers or other key employees or the
Company's inability to attract or maintain the necessary personnel could have a
material adverse effect on the Company's business, prospects, financial
condition or results of operations. See "Management" and "Business-Restaurant
Operations."
6
<PAGE>
CHANGES IN FOOD COSTS
The Company's profitability depends in large measure on its ability to
anticipate and react to changes in food costs. Various factors beyond the
Company's control, including adverse weather conditions, natural disasters, and
local, regional, or national matters related to food purity and safety may
increase food costs. While management for the most part has been able to
anticipate and react to changing food costs to date, there can be no assurance
that it will be able to do so in the future. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
JOINT VENTURE INTERESTS
The Company is currently a party to three development joint ventures for
the development of HOPS GRILL & BAR restaurants. Accordingly, the Company is
subject to risks relating to its relationship with its partners and development
joint ventures. Any significant deterioration of such relationships could
jeopardize the ultimate success of the operation of the existing HOPS GRILL &
BAR restaurants developed by the ventures, as well as the development of
additional restaurants by such ventures. Although the Company presently believes
that it has good relations with its development joint venture partners, there
can be no assurance that such relations will continue, that such parties will
not seek to terminate their relationship with the Company or alter the terms of
such ventures. See "Business-Ownership Structures."
GOVERNMENT REGULATION
ALCOHOLIC BEVERAGE REGULATION. Sales of alcoholic beverages accounted for
17.8% of the Company's total sales (with beer constituting 58.0% of sales of
alcoholic beverages) during the 12-month period ended June 30, 1996. The
Company is required to operate in compliance with federal licensing requirements
imposed by the Bureau of Alcohol, Tobacco and Firearms of the United States
Department of Treasury, as well as the licensing requirements of states and
municipalities in which its restaurants are located. Failure to comply with
federal, state, or local regulations could cause the Company's licenses to be
revoked or suspended for cause at any time. Any difficulties, delays, or
failures in obtaining such required licenses, permits, or approvals could delay
or prevent the opening of a restaurant in a particular area. In addition,
changes in legislation, regulations, or administrative interpretation of liquor
laws after the opening of restaurants in a jurisdiction may prevent or hinder
the Company's expansion or operations in that jurisdiction. Management believes
the Company is operating in substantial compliance with applicable laws and
regulations governing its operations. Certain states issue liquor licenses under
a quota or other system that limits their availability and may cause the cost of
obtaining a liquor license to be very high. Additionally, the Company may be
subject in certain states (including Florida) to "dram-shop" statutes, which
generally provide a person who is injured by an intoxicated person the right to
recover damages from an establishment that wrongfully served alcoholic beverages
to the intoxicated person.
BREWPUB REGULATION. Historically, the alcoholic beverage laws of most
states prohibited the manufacture and retail sale of beer to consumers by a
single person or entity or related persons or entities. At present, 48 states
allow for the limited manufacture and retail sale of microbrewed beer by
restaurants and bars classified as "brewpubs" under state law. As the result of
the on-premises microbrewery in each HOPS GRILL & BAR restaurant, the Company's
restaurants are required to comply with such state "brewpub" laws in order to
obtain necessary state licenses and permits. Laws in Mississippi and Montana
prohibit the operation of brewpubs. Additionally, many states impose
restrictions on the operations of brewpubs, such as a prohibition on the
bottling of beer, a prohibition on the sale of beer for consumption outside of
the restaurant premises, and a limitation on the volume of beer that may be
brewed at any location, as well as certain geographic limitations. In addition,
certain states limit the number of brewpubs that may be owned by any person or
entity or a related group of entities. The Company's ability to own and operate
HOPS GRILL & BAR restaurants in any state is and will continue to be dependent
upon its ability to operate within the regulatory scheme of such state.
Restrictions currently imposed by two of the states (Kansas and Michigan) that
allow for
7
<PAGE>
the operation of brewpubs may make it impractical for the Company to operate
HOPS GRILL & BAR restaurants in such states under the Company's present system
of operation. Additionally, there can be no assurance that states that currently
permit the operation of brewpubs will not change their laws or regulations in a
manner that would prohibit brewpub operation or otherwise adversely affect the
operations of the Company.
OTHER REGULATION. The restaurant industry is subject to numerous federal,
state, and local government regulations, including those relating to the
preparation and sale of food and to building and zoning requirements. Delays or
failures in obtaining the required construction and operating licenses, permits
or approvals could delay or prevent the opening of new restaurants. The Company
is subject to regulation by air and water pollution control divisions of the
environmental protection agencies of the United States and by the various states
and municipalities in which its restaurants are or will be located. The Company
is also subject to laws governing its relationship with employees, including
minimum wage requirements, overtime, working and safety conditions, and
citizenship requirements. Restaurant operating costs are affected by increases
in the minimum wage, unemployment tax rates, sales taxes, and similar matters,
such as any government mandated health insurance, over which the Company has no
control. In August 1996 the President of the United States signed into law a
bill increasing the minimum hourly wage effective October 1, 1996. However, the
law contains provisions that, among other things, maintains the cash wage for
tipped employees at the current rate. Management believes the Company is in
substantial compliance with applicable laws and regulations governing its
operations. See "Business-Government Regulation."
CERTAIN FACTORS AFFECTING THE RESTAURANT BUSINESS
The ownership and operation of restaurants may be affected by adverse
changes in national, regional, or local economic or market conditions; increased
costs of labor (including those which may result from any increases in
applicable minimum wage requirements); increased costs of food products;
management problems; increases in the number and density of competitors; limited
alternative uses for properties and equipment; changing consumer tastes, habits,
and spending priorities; the cost and availability of insurance coverage;
uninsured losses; changing demographics; changes in government regulation;
changing traffic patterns; weather conditions; local, regional, or national
health and safety matters; and other factors. The Company may be the subject of
litigation based on discrimination, personal injury, or other claims, including
claims which may be based upon legislation that imposes liability on restaurants
or their employees for injuries or damages caused by the negligent service of
alcoholic beverages to an intoxicated person or to a minor. A multi-unit
restaurant operator such as the Company can be adversely affected by publicity
resulting from food quality, illness, injury, or other health concerns or
operating issues resulting from one restaurant or a limited number of
restaurants operated under the same name. None of these factors can be predicted
with any degree of certainty, and any one or more of these factors could have a
material adverse effect on the Company.
COMPETITION
Competition in the restaurant industry is intense with respect to price,
service, location and type and quality of food and beverage served. Many of the
Company's competitors are well established and have substantially greater
resources than the Company. HOPS GRILL & BAR restaurants compete with other
mid-priced, full service, casual dining restaurants primarily on the basis of
food and beverage quality, atmosphere, service, location and value. Other
companies operate with restaurant concepts that target the same casual dining
customers as the Company, and the Company is aware of other restaurants that
operate with concepts similar to the Company's. There can be no assurance that
the Company will continue to compete effectively against present and future
competitors or that competitive pressures will not have an adverse effect on the
Company's business, prospects, financial condition or results of operations. See
"Business-Competition."
8
<PAGE>
TAXES; SMALL BREWERS EXCISE TAX CREDIT
The United States federal government currently imposes an excise tax of
$18 per barrel of beer brewed for domestic consumption in the United States.
However, each brewer with production under 2,000,000 barrels per year is granted
a small brewer's excise tax credit in the amount of $11 per barrel on its first
60,000 barrels brewed annually. In 1995, the Company took advantage of
approximately a $60,000 credit pursuant to this exemption, but no assurance can
be given that the federal government will not reduce or eliminate the credit.
Individual states and municipalities also impose excise or other taxes or
special charges on alcoholic beverages in varying amounts, which amounts are
subject to change. For example, the state of Florida imposes an excise tax on
all restaurant liquor sales. It is possible that in the future the rate of
excise taxation could be increased by either state or federal governments, or
both. Future increases in excise taxes on alcoholic beverages, if enacted, could
adversely affect the Company.
DEPENDENCE UPON SINGLE SUPPLIER
To date the Company has purchased all of the microbrewery equipment for
its restaurants from a single supplier. Although the Company believes that its
relationship with this supplier is good and that alternate sources of
microbrewery equipment are available, any delay in obtaining or lack of
availability of microbrewery equipment from the Company's current supplier for
any reason could have a material adverse effect upon the Company's ability to
develop and open new restaurants in accordance with its development schedule.
See "Business-Expansion Strategy."
CONTROL BY PRINCIPAL SHAREHOLDERS; FACTORS INHIBITING TAKEOVER
Upon the completion of this offering, David L. Mason and Thomas A.
Schelldorf will beneficially own, in the aggregate, approximately % of the
outstanding Common Stock ( % if the Underwriters' over-allotment is
exercised in full). As a result, Messrs. Mason and Schelldorf will be able to
elect all of the Company's directors and determine the outcome of substantially
all other matters requiring shareholder approval. The voting power of Messrs.
Mason and Schelldorf, together with a staggered Board of Directors and the
anti-takeover effects of certain provisions contained in both the Florida
Business Corporation Act and in the Company's Articles of Incorporation and
Bylaws (including, without limitation, the ability of the Board of Directors of
the Company to issue shares of Preferred Stock and to fix the rights and
preferences thereof), may have the effect of delaying, deferring or preventing
an unsolicited change in the control of the Company, which may adversely affect
the market price of the Common Stock or the ability of shareholders to
participate in a transaction in which they might otherwise receive a premium for
their shares. See "Management" and "Description of Securities-Certain Statutory
and Other Provisions."
DILUTION
The purchasers of the Common Stock offered hereby will experience
immediate and significant dilution of approximately $ per share. This is
the amount by which the purchase price of the Common Stock offered hereby will
exceed the net tangible book value of the Common Stock immediately following
this offering. See "Dilution."
ABSENCE OF PUBLIC MARKET AND DETERMINATION OF OFFERING PRICE
Prior to this offering, there has been no public market for the Company's
Common Stock and there can be no assurance that an active public market for the
Common Stock will develop or, if developed, that it will be sustained after this
offering. The public offering price has been determined through negotiations
between the Company and the Representative of the Underwriters and may not
9
<PAGE>
be indicative of prices that will prevail in the open market. See "Underwriting"
for a discussion of the factors considered in determining the initial public
offering price.
PRICE VOLATILITY
The market price of the Common Stock could be subject to significant
fluctuations in response to variations in quarterly operating results, news
announcements, matters affecting the restaurant industry in general, and other
factors. In addition, the securities markets have experienced significant price
and volume fluctuations in recent years that have often been unrelated or
disproportionate to the operating performance of particular companies. These
broad fluctuations may adversely affect the market price of the Common Stock.
SEASONALITY AND FLUCTUATIONS IN QUARTERLY RESULTS
The Company's sales and earnings fluctuate seasonally. In addition,
quarterly results have been, and in the future are likely to be, substantially
affected by the timing of new restaurant openings. Because of the seasonality of
the Company's business and the impact of new restaurant openings, results for
any quarter are not necessarily indicative of the results that may be achieved
for a full fiscal year and cannot be used to indicate financial performance for
the entire year. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations-Seasonality and Quarterly Results."
SHARES ELIGIBLE FOR FUTURE SALE
Upon the completion of this offering, the Company will have shares of
Common Stock outstanding ( shares if the Underwriters' over-allotment
option is exercised in full). Of these shares, the shares of Common Stock sold
in this offering ( shares if the Underwriters' over-allotment option is
exercised in full) will be freely tradeable by persons other than affiliates of
the Company, without restriction under the Securities Act of 1933, as amended
(the "Securities Act"). The remaining 2,250,000 shares of Common Stock will be
"restricted securities" within the meaning of Rule 144 under the Securities Act,
and may not be sold in the absence of registration under the Securities Act
unless an exemption from registration is available, including the exemptions
contained in Rule 144. Commencing two years after the date of the
Reorganization, these 2,250,000 shares of Common Stock will become eligible for
sale in the open market, subject to volume and other limitations imposed by Rule
144. Sales of all or a portion of such shares could have a material adverse
effect upon the price of the Common Stock. See "Shares Eligible for Future
Sale."
FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISK
This Prospectus contains forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), including statements regarding, among
other items, (i) the Company's expansion strategy and (ii) anticipated trends in
the restaurant industry. These forward-looking statements are based largely on
the Company's expectations and are subject to a number of risks and
uncertainties, certain of which are beyond the Company's control. Actual results
could differ materially from these forward-looking statements as a result of the
factors described in "Risk Factors," including, among others, general economic
conditions, governmental regulation, and competitive factors. In light of these
risks and uncertainties, there can be no assurance that the results anticipated
by the forward-looking information contained in this Prospectus will in fact
transpire.
10
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the shares of
Common Stock offered hereby (at an assumed initial public offering price of
$ per share) are estimated to be approximately $ million ($ million
if the Underwriters' over-allotment is exercised in full) after deduction of
estimated offering expenses payable by the Company and underwriting discounts
and commissions. The Company plans to use all of these proceeds to repay a
substantial portion of the Company's existing bank indebtedness. The
indebtedness to be repaid out of these proceeds bears interest at rates ranging
from approximately 8.75% to 9.50% per annum and matures at various dates ranging
from December 1996 to May 2011. This indebtedness consists primarily of
construction loans and other debt owed to the Company's primary bank lender
incurred in connection with the opening of new restaurants.
The Company has received a commitment from its primary bank lender to
provide the Company with a $20.0 million line of credit facility, effective upon
the completion of this offering. The New Facility will bear interest at the
prime rate (as determined by reference to the prime rates published in the WALL
STREET JOURNAL) or, at the Company's option, at LIBOR plus 2.5%, and will mature
two years from the closing of the loan. Approximately $ million of the New
Facility will be utilized to repay the balance of the existing indebtedness with
the Company's primary bank lender, and the balance of approximately $
million will be available to develop new restaurants and for working capital and
other general corporate purposes. The Company intends to utilize the New
Facility primarily to finance the development of new restaurants. See "Risk
Factors-Leverage," "Risk Factors-Growth Strategy," and "Management's Discussion
and Analysis of Financial Condition and Results of Operations-Liquidity and
Capital Resources."
The Company plans to open nine and 12 HOPS GRILL & BAR restaurants in 1997
and 1998, respectively. Although the funds available under the New Facility, the
Company's cash flow from operations, and contributions from development joint
venture partners are expected to be sufficient to fund the Company's restaurant
development through 1997, the Company will need additional financing in order to
carry out its expansion plans in 1998 and thereafter, as well as to pay amounts
due under the New Facility, which matures in 1998. Such additional financing,
when required, may involve the sale of additional debt or equity securities by
the Company, additional bank financing, leases on some of its new restaurants,
additional mortgage loans secured by restaurants, or the development of
restaurants under development joint venture or other contractual relationships.
See "Risk Factors-Growth Strategy," "Risk Factors-Need for Additional
Financing," and "Management's Discussion and Analysis of Financial Condition and
Results of Operations-Liquidity and Capital Resources."
11
<PAGE>
DILUTION
At June 30, 1996, the net tangible book value of the Company's Common
Stock was $2,586,000 or $1.15 per share. Net tangible book value per share
represents the amount of total assets less total liabilities and intangible
assets, divided by the number of shares of Common Stock assumed to be
outstanding at such date. Net tangible book value dilution per share represents
the difference between the amount per share paid by purchasers of shares of
Common Stock in this offering and the net tangible book value per share of
Common Stock immediately after completion of this offering. After giving effect
to the sale of shares of Common Stock by the Company in this offering at
an assumed initial public offering price of $ per share and the application of
the estimated net proceeds therefrom, the adjusted net tangible book value of
the Company as of June 30, 1996, would have been $ , or $ per share. This
represents an immediate increase in net tangible book value of $ per share for
existing shareholders and an immediate dilution in net tangible book value of
$ per share to purchasers of Common Stock in the offering, as illustrated in
the following table:
Assumed initial public offering price per share $
Net tangible book value per share
before offering .......................... $1.15
Increase per share attributable to new
investors ................................
-----
Net tangible book value per share
after offering ...........................
------
Dilution per share to new investors........... $
======
The following table sets forth as of June 30, 1996 (assuming the sale of
shares of Common Stock offered by the Company hereby at an assumed
initial public offering price of $ per share), the number of outstanding shares
of Common Stock purchased from the Company by existing shareholders, the total
consideration paid, and the average price per share. Corresponding information
is set forth with respect to the shares to be sold in this offering.
<TABLE>
<CAPTION>
SHARES PURCHASED CONSIDERATION AVERAGE
------------------- --------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing shareholders(1) 2,250,000 % $ 4,215,000(2) $ % $ 1.87
New investors........... % % $
--------- ------- ----------- ------ -----
Total................ 100.0% $ 100.0%
========= ======= =========== ======
- ---------------------
<FN>
(1) Does not include 375,000 shares reserved for issuance under the Company's
1996 Stock Incentive Plan, including 240,000 shares issuable upon the
exercise of outstanding options. See "Management-Stock Incentive Plan."
(2) Does not reflect a planned distribution to the shareholders of the
Predecessor Corporations immediately prior to the Reorganization. See
"Reorganization and Prior S Corporation Status."
</FN>
</TABLE>
12
<PAGE>
CAPITALIZATION
The following table sets forth the current portion of long-term debt and
capitalization of the Company as of June 30, 1996, and as adjusted to give
effect to the sale by the Company of the shares offered hereby (at an
assumed initial public offering price of $ per share) after deduction of
estimated offering expenses and underwriting discounts and commissions and the
application of the net proceeds therefrom. See "Use of Proceeds." This table
should be read in conjunction with the financial statements and related notes
included elsewhere in this Prospectus.
JUNE 30, 1996
-----------------------
PRO FORMA
PRO FORMA AS ADJUSTED
--------- -----------
(IN THOUSANDS)
Current portion of long-term debt .................. $ 2,344 $
======== ========
Long-term debt, excluding current portion .......... $ 14,197 $
-------- --------
Shareholders' equity:
Preferred stock, $0.01 par value;
1,000,000 shares authorized; no
shares issued or outstanding
actual or as adjusted ......................... --
Common stock, $0.01 par value; 25,000,000
shares authorized; 2,250,000 shares issued
and outstanding; shares issued
and outstanding as adjusted ................... 23
Additional paid-in capital ...................... 3,043
Retained earnings (deficit) ..................... (200)
-------- --------
Total shareholders' equity .................. 2,866
-------- --------
Total capitalization ............................... $ 17,063 $
======== ========
13
<PAGE>
DIVIDEND POLICY
Following this offering, the Company intends to retain any earnings for
use in the operation and expansion of its business and therefore does not
anticipate declaring any cash dividends in the foreseeable future, other than
the distributions described below. The payment of dividends, if any, in the
future will be at the discretion of the Board of Directors of the Company and
will depend upon, among other things, future earnings, capital requirements,
restrictions in and any future financing agreements, the general financial
condition of the Company and general business conditions. The New Facility will
prohibit the payment of cash dividends without the prior consent of the lender.
The Predecessor Corporations paid cash dividends to their shareholders in
the aggregate amounts of $365,000, $844,000, $1,424,000, and $1,467,000
representing funds available for distribution, including funds necessary to pay
federal and state income tax obligations during the years ended December 31,
1993, 1994 and 1995, and during the six months ended June 30, 1996,
respectively. Immediately prior to the Reorganization and in contemplation of
the terms of the New Facility, the Predecessor Corporations will distribute to
their shareholders funds which were previously restricted under the Predecessor
Corporations' prior lending arrangement (approximately $1.2 million as of June
30, 1996). Such restricted funds would have been previously distributed by the
Predecessor Corporations in accordance with their past practice, but for the
restrictions contained in the prior arrangeemnt. See "Reorganization and Prior S
Corporation Status," "Certain Transactions-Reorganization,"and "Certain
Transactions-Earnings Distributions."
14
<PAGE>
SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table sets forth certain selected financial data on a pro
forma basis for, and as of the end of, each of the years in the five-year period
ended December 31, 1995, and each of the six-month periods ended June 30, 1995,
and 1996. Unless otherwise indicated, the selected financial data have been
derived from the pro forma consolidated financial statements of Hops Grill &
Bar, Inc. which have been derived from the audited historical financial
statements of Hops Grill & Bar, Inc. and the audited historical financial
statements of the Predecessor Corporations included elsewhere in this
Prospectus. The pro forma consolidated financial statements as of June 30, 1995
have been derived from the unaudited financial statements of the Predecessor
Corporations and reflect, in the opinion of management, all adjustments
necessary for a fair presentation thereof. The results of operations for the six
months ended June 30, 1996, are not necessarily indicative of the results of
operations to be expected for the entire year. This table should be read in
conjunction with the financial statements and related notes included elsewhere
in this Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------------------------------------ -------------------
1991(1) 1992(2) 1993 1994 1995 1995(1) 1996
-------- -------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF EARNINGS DATA:
Sales ........................... $ 3,699 $ 6,733 $ 12,120 $ 20,189 $ 28,314 $ 13,336 $ 20,331
Restaurant operating expenses:
Cost of sales ................ 1,228 2,114 3,822 6,600 9,070 4,183 6,610
Labor and other related
expenses ................... 1,143 2,033 3,404 5,792 8,147 3,804 5,692
Other restaurant operating
expenses ................... 862 1,612 2,762 4,569 6,811 2,953 3,987
Depreciation and amortization 145 173 286 800 1,242 514 893
-------- -------- -------- -------- -------- ------- -------
Total restaurant operating
expenses ................ 3,378 5,932 10,274 17,761 25,270 11,454 17,182
Income from restaurant operations 321 801 1,846 2,428 3,044 1,882 3,149
General and administrative
expenses ...................... 168 337 634 1,544 2,036 1,053 774
-------- -------- -------- -------- -------- ------- -------
Operating income ................ 153 464 1,212 884 1,008 829 2,375
Interest expense, net ........... (101) (99) (158) (506) (939) (428) (606)
Other income (loss) ............. (22) 27 18 (71) (25) 80 (124)
-------- -------- -------- -------- -------- ------- -------
Net income before taxes and
elimination of minority
partners' interest ........... 30 392 1,072 307 44 481 1,645
Elimination of minority
partners' interest ........... -- -- -- 6 43 44 139
-------- -------- -------- -------- -------- ------- -------
Net income before taxes ......... 30 392 1,072 301 1 437 1,506
-------- -------- -------- -------- -------- ------- -------
Net income ...................... $ 19 $ 243 $ 665 $ 187 $ 1 $ 271 $ 934
========= ========= ========= ========= ========= ======== ========
Net income per
share ........................ $ 0.01 $ 0.11 $ 0.30 $ 0.08 $ 0.00 $ 0.12 $ 0.41
========= ========= ========= ========= ========= ======== ========
BALANCE SHEET DATA (AT END
OF PERIOD):
Working capital (deficit) ....... $ (166) $ 32 $ 130 $ (634) $ (1,344) $ (1,081) $ (4,396)
Total assets .................... 1,454 3,420 7,286 13,241 21,746 18,216 25,918
Long-term debt, excluding
current portion ............... 968 2,149 4,524 7,969 11,737 10,024 14,197
Shareholders' equity ............ (32) 245 973 2,516 4,110 2,068 2,866
- -------------
<FN>
(1) Derived from the unaudited historical financial statements of the
Predecessor Corporations.
(2) Balance sheet data derived from the unaudited historical financial
statements of the Predecessor Corporations.
</FN>
</TABLE>
15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The financial data for each for the years ended December 31, 1993, 1994,
and 1995 and for the six months ended June 30, 1996, have been derived from the
pro forma consolidated financial statements of Hops Grill & Bar, Inc., which
have been derived from the audited historical financial statements of Hops Grill
& Bar, Inc. and the audited historical financial statements of the Predecessor
Corporations included elsewhere in this Prospectus. The financial data for the
six months ended June 30, 1995, has been derived from the unaudited historical
financial statements of Hops Grill & Bar, Inc. and the historical financial
statements of the Predecessor Corporation.
The following discussion of the results of operations and financial
condition should be read in conjunction with the financial statements and notes
appearing elsewhere in this Prospectus. See "Risk Factors-Forward-Looking
Statements and Associated Risk."
As of June 30, 1996, the Company had an ownership interest in 16 HOPS
GRILL & BAR restaurants. The Company's ownership interest in each of the
restaurants is in one of two categories for financial accounting purposes. See
"Business-Ownership Structures."
COMPANY-OWNED RESTAURANTS. As of June 30, 1996, the Company owned 13
HOPS GRILL & BAR restaurants. Eight of these restaurants are wholly owned
by the Company, and the Company owns approximately 90% and an operating
partner owns approximately ten percent of the other five restaurants. The
results of operations of the restaurants in which an operating partner
owns an interest are consolidated in the operating results of the Company,
and the portion attributable to the operating partner is eliminated as
minority partners' interest.
DEVELOPMENT JOINT VENTURE RESTAURANTS. As of June 30, 1996, three
HOPS GRILL & BAR restaurants operating in one market were owned by a
development joint venture controlled by the Company. The Company owns
approximately 46%, its development joint venture partner owns
approximately 44%, and an operating partner owns approximately 10% of
these restaurants. The results of operations of these restaurants are
consolidated in the operating results of the Company, and the portion
attributable to the development joint venture partner and operating
partner is eliminated as minority partners' interest.
Subsequent to June 30, 1996, the Company opened one additional
Company-owned restaurant and one additional development joint venture restaurant
through a new development joint venture in which the Company owns a 51%
interest. Operating partners own approximately ten percent of each of these
restaurants. Of the nine restaurants to be opened in 1997, the Company currently
anticipates that three will be opened by the Company and six will be opened
through development joint ventures. It is anticipated that operating partners
will own approximately 10% of these nine restaurants.
The Company has financed its expansion and operations to date principally
through debt financing and operating cash flows. The Company plans to use all of
the proceeds of this offering and to draw approximately $ million under the
New Facility to repay the Company's existing bank indebtedness. Additionally,
the Company intends to utilize substantially all of the remaining funds
available under the New Facility to finance its new restaurant development
during 1997. As a result, the Company expects to have significant indebtedness
and incur substantial interest expense in the future. See "Risk
Factors-Leverage" and "Use of Proceeds."
During 1995, the Company incurred certain costs which it believed were
necessary to enhance and accelerate the growth of the Company and its concept.
As the HOPS GRILL & BAR restaurant system expanded during 1994, the Company
developed and began to utilize the operating partner program as a key element in
its expansion strategy. In 1995, the Company incurred approximately $250,000 in
general and administrative expenses associated with the recruitment of operating
partners
16
<PAGE>
and the start-up of the operating partner program. The Company does not
anticipate incurring such additional expenses in the future. The Company also
decided in the fourth quarter of 1995 to further expose its concept to the
public via its first television advertising campaign, which was conducted in all
but one of the Company's then-current markets. The campaign cost the Company
approximately $400,000 (including approximately $100,000 in production costs),
which is included in other restaurant operating expenses. The campaign increased
the advertising expenses as a percentage of sales to 3.0% in 1995 compared to
2.2% in 1994. The Company believes that it will receive efficiencies in
advertising expenditures as new restaurants open and markets develop, and the
Company anticipates utilizing television advertising in the furture in markets
that are media-efficient for the Company. In 1995, the Company also incurred
additional costs due to the hiring of additional corporate personnel and
restaurant supervisory personnel to support its expansion program. The Company
believes it will be able to leverage these general and administrative expenses
as it expands its restaurant base.
Preopening costs include labor costs, costs of hiring and training
personnel, and certain other costs related to opening new restaurants, and are
capitalized and amortized over a 12-month period, beginning in the month the
restaurant opens.
Immediately prior to the Reorganization and in contemplation of the New
Facility, the Predecessor Corporations will distribute to their shareholders
funds which were previously restricted under the Predecessor Corporations' prior
lending arragement (approximately $1.2 million as of June 30, 1996). Such
restricted funds would have been previously distributed by the Predecessor
Corporations in accordance with their past practice, but for the restrictions
contained in the prior lending arrangement. As a result of the termination of
the Predecessor Corporations' S corporation status upon the closing of this
offering, the Company's operating results will reflect the recognition of a
deferred tax liability of approximately $200,000 which will be included as
income tax expense in the fourth quarter of 1996. In addition, the Company's New
Facility requires a $250,000 facility fee, which will be expensed in the fourth
quarter of 1996.
Since their inception, each of the Predecessor Corporations has been
treated as an S corporation for federal and state income tax purposes. As a
result, the earnings of the Predecessor Corporations have been taxed, for
federal and state income tax purposes, directly to the shareholders of the
Predecessor Corporations. Accordingly, the following discussion of the Company's
results of operations does not include a discussion of income tax expense. Upon
the completion of the Reorganization, the Company will become responsible for
the payment of federal and state income taxes on its earnings.
17
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, (i) the
percentages which items in the Company's Statement of Earnings bear to total
sales, as indicated, and (ii) selected restaurant data. All dollar amounts in
the following table are expressed in thousands.
<TABLE>
<CAPTION>
SIX MONTHS
YEARS ENDED DECEMBER 31, ENDED JUNE 30,
--------------------------- ----------------
1993 1994 1995 1995 1996
------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
STATEMENT OF EARNINGS DATA:
Sales............................... 100.0% 100.0% 100.0% 100.0% 100.0%
------- ------- ------- ------- ------
Restaurant operating expenses:
Cost of sales..................... 31.5 32.7 32.0 31.4 32.5
Labor and other related expenses.. 28.1 28.7 28.8 28.5 28.0
Other restaurant operating expenses 22.8 22.6 24.0 22.1 19.6
Depreciation and amortization..... 2.4 3.9 4.4 3.9 4.4
------- ------- ------- ------- ------
Total restaurant operating
expenses 84.8 87.9 89.2 85.9 84.5
------- ------- ------- ------- ------
Income from restaurant operations... 15.2 12.1 10.8 14.1 15.5
General and administrative expenses. 5.2 7.7 7.2 7.9 3.8
------- ------- ------- ------- ------
Operating income.................... 10.0 4.4 3.6 6.2 11.7
Interest expense, net............... (1.3) (2.5) (3.3) (3.2) (3.0)
Other income (loss)................. 0.1 (0.4) (0.1) 0.6 (0.6)
------- ------- ------- ------- ------
Net income before taxes and
elimination of minority partners'
interest.... 8.8 1.5 0.2 3.6 8.1
Elimination of minority partners'
interest - - 0.2 0.3 0.7
------- ------- ------- ------- ------
Net income before taxes............. 8.8% 1.5% 0.0% 3.3% 7.4%
======= ======= ======= ======= ======
RESTAURANT DATA:
Restaurants open at end of period:
Company-owned restaurants......... 6 7 10 9 13
Development joint venture
restaurants - 2 3 3 3
------- ------- ------- ------- ------
Total......................... 6 9 13 12 16
======= ======= ======= ======= ======
System-wide sales:
Company-owned restaurants......... $12,120 $17,160 $22,600 $10,734 $17,119
Development joint venture
restaurants - 3,029 5,714 2,602 3,212
------- ------- ------- ------- ------
Total......................... $12,120 $20,189 $28,314 $13,336 $20,331
======= ======= ======= ======= =======
</TABLE>
SIX MONTHS ENDED JUNE 30, 1996 COMPARED WITH SIX MONTHS ENDED JUNE 30, 1995
SALES. Sales increased $7.0 million or 52.5% to $20.3 million for the six
months ended June 30, 1996, from $13.3 million for the same period in 1995.
Approximately $4.8 million of this increase was attributable to the three new
restaurants opened during the first six months of 1996, while approximately $1.3
million of the increase was attributable to a full six months of operations for
the four restaurants opened during 1995. The increase was also a result of a
$0.9 million increase in sales by the nine restaurants opened for the first six
months of both 1996 and 1995. This increase is primarily attributable to an
increase in customer counts as well as an increase in the average check amount.
In June 1995, the Company reformatted its menu to focus on higher dollar entrees
at dinner as well as adding the Brewmaster Steak to its menu permanently. Both
the reformatting of the menu and the addition of the Brewmaster Steak had the
effect of increasing average check amounts.
COST OF SALES. Cost of sales, which consists of food and beverage costs,
increased $2.4 million or 58.0% to $6.6 million for the six months ended June
30, 1996, from $4.2 million for the same period in 1995 and increased as a
percentage of sales to 32.5% for the six months ended June 30, 1996, from 31.4%
for the same period in 1995. The increase in the cost of sales as a percentage
of sales was primarily due to increased meat sales as a result of the
reformatting of the menu and higher food costs associated with new restaurant
openings during the six months ended June 30, 1996.
LABOR AND OTHER RELATED EXPENSES. Labor and other related expenses, which
include restaurant wages, payroll taxes, and group health insurance, increased
$1.9 million or 49.6% to $5.7 million for the six months ended June 30, 1996,
from $3.8 million for the same period in 1995. Labor
18
<PAGE>
and other related expenses increased due to new restaurant openings but
decreased as a percentage of sales to 28.0% for the six months ended June 30,
1996, from 28.5% for the same period in 1995. The decrease as a percentage of
sales is primarily attributable to an increased focus on restaurant employee
retention which decreased training costs as well greater efficiencies created by
an increase in average sales per restaurant. The Company does not expect the
legislated increase in the minimum wage, effective October 1, 1996, to have a
material effect on its operating results.
OTHER RESTAURANT OPERATING EXPENSES. Other restaurant operating expenses,
which include operating supplies, repairs and maintenance, utilities,
advertising expenses, and occupancy costs, increased $1.0 million or 35.0% to
$4.0 million for the six months ended June 30, 1996, from $3.0 million for the
same period in 1995. As a percentage of sales, such expenses decreased to 19.6%
from 22.1% primarily due to greater efficiencies created by an increase in
average sales per restaurant as well as an increased focus on cost controls.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased
$0.4 million or 73.7% to $0.9 million for the six months ended June 30, 1996,
from $0.5 million for the same period in 1995 principally reflecting the
amortization of capitalized preopening costs and depreciation expenses related
to new restaurant openings.
INCOME FROM RESTAURANT OPERATIONS. As a result of the increase in sales,
the changes in the relationship between sales and expenses discussed above, and
the opening of new restaurants, income from restaurant operations increased $1.2
million or 67.3% to $3.1 million for the six months ended June 30, 1996, from
$1.9 million for the same period in 1995. As a percentage of sales, income from
restaurant operations increased to 15.5% for the six months ended June 30, 1996,
from 14.1% for the same period in 1995.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
decreased $0.3 million or 26.5% to $0.8 million for the six months ended June
30, 1996, compared to $1.1 million for the same period in 1995 and decreased as
a percentage of sales to 3.8% for the six months ended June 30, 1996, compared
to 7.9% for the same period in 1995. During the first half of 1995, the Company
hired additional restaurant supervisory personnel and corporate personnel to
support additional restaurants. The Company also incurred higher expenses in the
first half of 1995 as the result of start-up costs associated with the
commencement of its operating partner program. Although general and
administrative expenses decreased substantially both in amount and as a
percentage of sales during the six months ended June 30, 1996, the Company
believes that the these expenses, both in amount and as a percentage of sales,
will increase after the offering due to the addition of corporate personnel to
support growth and from an increase in salaries for existing management. See
"Business-Executive Compensation."
INTEREST EXPENSE, NET. Interest expense, net, which consists of interest
expense net of interest income, increased $0.2 million to $0.6 million during
the six months ended June 30, 1996, from $0.4 million during the same period in
1995 reflecting borrowings for the development of new restaurants offset in part
by a decrease in the cost of borrowings.
OTHER INCOME (LOSS). Other income (loss) includes any gains or losses
associated with investment in marketable securities and any gains or losses
associated with the disposal of fixed assets. Other income (loss) decreased
$204,000 to a loss of $124,000 during the six months ended June 30, 1996, from
income of $80,000 for the same period in 1995. This decrease was primarily due
to a loss in marketable securities of $32,000 during the six months ended June
30, 1996, compared to a gain of $80,000 for the same period in 1995, as well as
a loss on the disposal of fixed assets of $92,000 during the first half of 1996
in connection with an upgrade of the Company's point of sale system. The Company
intends to divest itself of all marketable securities prior to the completion of
this offering and does not to plan to invest in marketable securities in the
future.
NET INCOME BEFORE TAXES. As a result of the foregoing factors, net income
before taxes increased $1.1 million or 244.6% to $1.5 million during the six
months ended June 30, 1996, from $0.4
19
<PAGE>
million for the same period in 1995. As a percentage of sales, net income before
taxes increased to 7.4% for the six months ended June 30, 1996, from 3.3% for
the same period in 1995.
YEAR ENDED DECEMBER 31, 1995 COMPARED WITH YEAR ENDED DECEMBER 31, 1994
SALES. Sales increased $8.1 million or 40.2% to $28.3 million in 1995 from
$20.2 million in 1994. Approximately $6.4 million of this increase was
attributable to the four new restaurants opened in 1995 while approximately $1.9
million of the increase was attributable to a full year of operations for the
three restaurants opened during 1994. The increases were partially offset by a
$0.2 million aggregate decrease in sales at the six restaurants that were open
for both periods.
COST OF SALES. Cost of sales increased $2.5 million or 37.4% to $9.1
million in 1995 from $6.6 million in 1994, but decreased as a percentage of
sales to 32.0% in 1995 from 32.7% in 1994. The overall increase in cost of sales
was due to new restaurant openings in 1995 while the decrease in cost of sales
as a percentage of sales was due to a 0.2% decrease in food costs primarily
attributable to improved food costs in restaurants open prior to 1995 and by a
0.5% decrease in liquor costs mostly related to a beer promotion in 1994 which
reduced margins.
LABOR AND OTHER RELATED EXPENSES. Labor and other related expenses
increased $2.3 million or 40.7% to $8.1 million in 1995 from $5.8 million in
1994. This increase is primarily attributable to new restaurant openings. Labor
and other related expenses as a percentage of sales remained essentially
unchanged.
OTHER RESTAURANT OPERATING EXPENSES. Other restaurant operating expenses
increased $2.2 million or 49.1% to $6.8 million in 1995 from $4.6 million in
1994. Such expenses as a percentage of sales increased to 24.0% from 22.6%
primarily due to increased occupancy costs associated with entering new markets
and increased advertising expenses associated with the Company's first
television advertising campaign in the fourth quarter of 1995.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased
$0.4 million or 55.3% to $1.2 million in 1995 from $0.8 million in 1994,
principally reflecting the amortization of capitalized preopening costs and
depreciation expenses related to new restaurant openings in 1995.
INCOME FROM RESTAURANT OPERATIONS. As a result of the increase in sales,
the changes in the relationship between sales and expenses discussed above, and
the opening of new restaurants, income from restaurant operations increased $0.6
million or 25.4% to $3.0 million in 1995 from $2.4 million in 1994. As a
percentage of sales, income from restaurant operations decreased to 10.8% in
1995 from 12.1% for 1994.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased $0.5 million or 31.9% to $2.0 million in 1995 from $1.5 million in
1994 but decreased as a percentage of sales to 7.2% in 1995 from 7.7% in 1994.
The overall increase in general and administrative expenses was the result of an
increase in restaurant supervisory personnel and corporate personnel to support
additional restaurants and certain costs incurred by the Company in the
initiation of its operating partner program, and the decrease in general and
administrative expenses as a percentage of sales was due to higher sales without
a proportionate increase in such expenses.
INTEREST EXPENSE, NET. Interest expense, net, increased $0.4 million to
$0.9 million from $0.5 million reflecting borrowings for the development of new
restaurants as well as an increase in the cost of borrowings.
OTHER INCOME (LOSS). Other income (loss) includes any gains or losses
associated with investment in marketable securities and any gains or losses
associated with the disposal of fixed assets. The Company incurred a loss of
$25,000 in 1995 compared to a loss of $71,000 in 1994. This decrease in the
amount of loss was primarily due to a gain in marketable securities of $36,000
in 1995
20
<PAGE>
compared to a loss of $71,000 in 1994, offset in part by a loss on the disposal
of fixed assets of $61,000 in connection with an upgrade of the Company's
computer system.
NET INCOME BEFORE TAXES. As a result of the foregoing factors, net income
before taxes decreased $0.3 million or 99.9% to $1,000 during 1995, from $0.3
million for 1994. As a percentage of sales, net income before taxes decreased to
less than one percent for 1995 from 1.5% for 1994.
YEAR ENDED DECEMBER 31, 1994 COMPARED WITH YEAR ENDED DECEMBER 31, 1993
SALES. Sales increased $8.1 million or 66.6% to $20.2 million in 1994 from
$12.1 million in 1993. Approximately $4.5 million of this increase was
attributable to the three new restaurants opened in 1994 while approximately
$4.0 million of the increase was attributable to a full year of operations for
the two restaurants opened in 1993. The increases were partially offset by a
$0.4 million aggregate decrease in sales at the four restaurants that were open
for both periods.
COST OF SALES. Cost of sales increased $2.8 million or 72.7% to $6.6
million in 1994 from $3.8 million in 1993 and increased as a percentage of sales
to 32.7% in 1994 from 31.5% in 1993. The overall increase in cost of sales was
due to new restaurant openings. The increase as a percentage of sales was
primarily attributable to an increase in the food sales mix to 81.4% of total
sales in 1994 compared to 79.3% in 1993.
LABOR AND OTHER RELATED EXPENSES. Labor and other related expenses
increased $2.4 million or 70.2% to $5.8 million in 1994 from $3.4 million in
1993. Labor and other related expenses increased as a percentage of sales to
28.7% in 1994 from 28.1% in 1993. The increase is primarily attributable to
higher labor costs as a percentage of sales for the three new restaurants opened
in 1994 and to the opening of the two new restaurants in the fourth quarter of
1993.
OTHER RESTAURANT OPERATING EXPENSES. Other restaurant operating expenses
increased $1.8 million or 65.4% to $4.6 million in 1994 from $2.8 million in
1993. This increase is due to the opening of the three new restaurants in 1994.
Such expenses as a percentage of sales decreased to 22.6% in 1994 from 22.8% in
1993.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased
$0.5 million or 179.7% to $0.8 million in 1994 from $0.3 million in 1993,
principally reflecting the amortization of capitalized preopening costs and
depreciation expenses related to new restaurant openings in 1994.
INCOME FROM RESTAURANT OPERATIONS. As a result of the increase in sales,
the changes in the relationship between sales and expenses discussed above, and
the opening of new restaurants, income from restaurant operations increased $0.6
million or 31.5% to $2.4 million in 1994 from $1.8 million in 1993. As a
percentage of sales, income from restaurant operations decreased to 12.1% for
1994 from 15.2% for 1993.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased $0.9 million or 143.5% to $1.5 million in 1994 from $0.6 million in
1993 and increased as a percentage of sales to 7.7% in 1994 from 5.2% in 1993.
The increase is primarily the result of the Company's development of its
corporate infrastructure. During 1994, the Company moved its administrative
support personnel from its restaurants to 4,000 square feet of new office space
located in Tampa, Florida. Along with the expenses associated with the move to a
corporate office and the related rent expense, the Company also incurred costs
associated with recruiting, moving, and hiring of administrative personnel as
well as costs associated with supplies and materials.
INTEREST EXPENSE, NET. Interest expense, net, which consists of interest
expense net of interest income, increased $0.3 million to $0.5 million from $0.2
million reflecting borrowings for the development of new restaurants offset by a
decrease in the cost of borrowings.
21
<PAGE>
OTHER INCOME (LOSS). Other income (loss) decreased $89,000 to a loss of
$71,000 in 1994 from a gain of $18,000 in 1993. This decrease was primarily due
to a loss in marketable securities.
NET INCOME BEFORE TAXES. As a result of the foregoing factors, net income
before taxes decreased $0.8 million or 71.9% to $0.3 million during 1994, from
$1.0 million for 1993. As a percentage of sales, net income before taxes
decreased to 1.5% for 1994 from 8.8% for 1993.
LIQUIDITY AND CAPITAL RESOURCES
The Company requires capital primarily for the development and
construction of new restaurants. Total capital expenditures were approximately
$3.2 million, $6.8 million, $8.4 million, and $5.1 million for the years ended
December 31, 1993, 1994, and 1995, and for the six months ended June 30, 1996,
respectively. As of June 30, 1996, the Company leased ten restaurant properties
and owned six restaurant properties. To date, the Company has financed its
capital requirements through cash flow from operations, bank borrowings, and
capital contributions from shareholders and minority partners. The following
table presents a summary of the Company's sources of capital for the last three
fiscal years and for the six months ended June 30, 1996. All dollar amounts in
the following table are expressed in thousands.
SIX
YEARS ENDED MONTHS
DECEMBER 31, ENDED
--------------------------- JUNE 30,
1993 1994 1995 1996
------- ------- ------- -------
Cash provided by operations .......... $ 1,711 $ 1,320 $ 1,369 $ 2,522
Borrowings, net of repayments ........ 2,575 4,207 3,863 4,112
Contributions from shareholders ...... 21 2,086 3,017 105
Contributions from minority partners . -- 48 1,961 285
------- ------- ------- -------
$ 4,307 $ 7,661 $10,210 $ 7,024
======= ======= ======= =======
The borrowings have been under term loans ranging from one to 15 years at
0.50% to 1.25% above the lender's prime rate. See Note 3 of Notes to Combined
Financial Statements.
The Company plans to open nine new restaurants in 1997. Of the nine new
restaurants in 1997, the Company expects to purchase four restaurant properties
for an average of approximately $750,000 per property and to lease the remaining
five restaurant properties. The Company estimates that its portion of capital
expenditures (including land costs but excluding development joint venture
partner contributions) for the development of new restaurants in 1997 will be
approximately $15.6 million. See "Business-Unit Economics." The Company also
intends to make capital expenditures on an ongoing basis to maintain and, where
appropriate, upgrade its existing restaurants.
The Company has received a commitment from its primary bank lender to
provide the Company with a $20.0 million line of credit facility, effective upon
the completion of this offering. The New Facility will bear interest at the
prime rate (as determined by reference to the prime rates published in the WALL
STREET JOURNAL) or, at the Company's option, at LIBOR plus 2.5%, and will mature
two years from the closing of the loan. Approximately $ million of the New
Facility will be utilized to repay the balance of the existing indebtedness with
the Company's primary bank lender, and the balance of $ million will be
available to develop new restaurants and for working capital and other general
corporate purposes. The Company expects that the credit agreement relating to
the New Facility will contain customary representations, warranties and
covenants, as well as prohibitions against any other indebtedness without the
consent of the lender, except for normal trade credit and liabilities and minor
equipment leases, and a prohibition of the payment of dividends. The Company's
obligations under the New Facility will be secured by a pledge of all of the
outstanding capital stock of the Company's direct, wholly owned subsidiaries and
will be guaranteed by Messrs. Mason and Schelldorf. The Company intends to
utilize the New Facility primarily to finance the development of new
restaurants.
22
<PAGE>
The Company plans to repay $ million of existing debt with proceeds
from the offering and utilize the New Facility to repay the remaining $ million
of existing debt. The Company believes that the remaining availability of its
New Facility along with cash flow from operations will be sufficient to fund the
Company's restaurant development through 1997. In order to carry out its
expansion plans beyond 1997, as well as to pay amounts due under the New
Facility, which matures in 1998, the Company will need additional sources of
capital. Such additional financing may be through bank financing or the sale of
debt or equity securities. There can be no assurance that such funds will be
available on favorable terms, if at all. The issuance of additional equity
securities could result in dilution to purchasers in the offering.
As is common in the restaurant industry, the Company has generally
operated with negative working capital. The Company does not have significant
receivables or inventory and receives trade credit on its purchases of food and
supplies.
SEASONALITY AND QUARTERLY RESULTS
The Company's sales and earnings fluctuate seasonally. Quarterly results
have been and in the future are likely to be affected by the timing of new
restaurant openings. Because of the seasonality of the Company's business and
the impact of new restaurant openings, results for any quarter are not
necessarily indicative of the results that may be achieved for a full fiscal
year and cannot be used to indicate financial performance for the entire year.
The following table sets forth summary statement of earnings data for the
six quarters ended June 30, 1996, and has been derived from the unaudited
histroical financial statements of Hops Grill & Bar, Inc. and the unaudited
historical financial statements of the Predecessor Corporations. All dollar
amounts in the following table are expressed in thousands, except per share
data.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------------------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30,
1995 1995 1995 1995 1996 1996
--------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF EARNINGS DATA:
Sales ................................ $6,265 $7,071 $ 6,926 $ 8,052 $ 9,643 $ 10,688
Restaurant operating expenses:
Cost of sales ..................... 1,917 2,267 2,269 2,617 3,122 3,488
Labor and other related expenses .. 1,744 2,060 2,004 2,339 2,661 3,031
Other restaurant operating expenses 1,381 1,572 1,594 2,264 1,867 2,120
Depreciation and amortization ..... 230 284 338 390 396 497
------ ------ ------- ------- ------- --------
Total restaurant operating
expenses .................... 5,272 6,183 6,205 7,610 8,046 9,136
------ ------ ------- ------- ------- --------
Income from restaurant operations .... 993 888 721 442 1,597 1,552
General and administrative expenses .. 563 489 510 474 386 388
------ ------ ------- ------- ------- --------
Operating income (loss) .............. 430 399 211 (32) 1,211 1,164
Interest expense, net ................ 185 244 242 268 270 336
Other income (loss) .................. 35 45 (10) (95) (11) (113)
------ ------ ------- ------- ------- --------
Net income (loss) before taxes
and elimination of minority
partners' interest ................ 280 200 (41) (395) 930 715
Elimination of minority partners'
interest .......................... 26 17 (8) 8 65 74
------ ------ ------- ------- ------- --------
Net income before taxes .............. 254 183 (33) (403) 865 641
====== ====== ======= ======= ======= ========
Net income(1) ........................ $ 157 $ 113 $ (20) $ (249) $ 536 $ 398
====== ====== ======= ======= ======= ========
Net income per
share .............................. $ 0.07 $ 0.05 $ (0.01) $ (0.11) $ 0.24 $ 0.18
====== ====== ======= ======= ======= ========
RESTAURANT DATA:
Average sales per restaurants open
for full period..................... $ 639 $ 609 $ 577 $ 598 $ 686 $ 683
- ---------------
<FN>
(1) Reflects the effect on statement of earnings data, assuming the Company had
been treated as a C corporation rather than as an S corporation for federal
and state income tax purposes, and assuming that combined federal and state
income tax rates aggregate 38.0%. See "Reorganization and Prior S
Corporation Status" and Note 1 of Notes to Combined Financial Statements.
</FN>
</TABLE>
23
<PAGE>
Historically, the Company has generated higher average sales per
restaurant during the first and second quarters of the calendar year. This is
primarily a result of the geographic concentration of the Company's restaurants
in Florida, which experiences a substantially higher level of tourism during
these periods. The Company believes the $90,000 or 7.3% increase in average
sales per restaurant for the first two quarters of 1996 versus the first two
quarters of 1995 is primarily the result of the reformatting of its menu in June
1995 and carryover benefits from its advertising campaign in the fourth quarter
of 1995.
Higher average sales per restaurant generally equate to higher income from
restaurant operations as operating efficiencies are realized. Income from
restaurant operations was lower in the fourth quarter of 1995, in absolute
dollars and as a percentage of sales, due to an increase in other operating
expenses related to the Company's first television campaign and the write-off of
certain amounts at year-end.
General and administrative expenses decreased to 6.9% of sales in the
second quarter of 1995 compared to 9.0% of sales in the first quarter of 1995
primarily due to certain expenses incurred in the start-up of the operating
partner program. General and administrative expenses decreased, in absolute
dollars and as a percentage of sales, in each of the first two quarters of 1996
versus each quarter of 1995 due to increased management focus on the amount of
such expenses.
IMPACT OF INFLATION
Management does not believe inflation has had a significant effect during
the past several years on the Company's operations. Management believes the
Company has historically been able to pass on increased costs through menu price
increases, but there can be no assurance that it will be able to do so in the
future. The Company does not expect the legislated increase in the minimum wage,
effective October 1, 1996, to have a material effect on its operating results.
24
<PAGE>
BUSINESS
GENERAL
The Company's HOPS GRILL & BAR restaurant system of 18 full-service,
casual dining restaurants constitutes the nation's largest chain of restaurants
that feature an on-premises microbrewery and operate under one name. Each
restaurant features a diverse menu of popular foods, freshly prepared in a
display kitchen with a strict commitment to quality. The Company seeks to
heighten its customers' sense of value by offering generous portions at moderate
prices. As a complement to its menu, each HOPS GRILL & BAR restaurant offers
handcrafted lager-style beers and ales that are brewed in-house and selected for
their mass appeal and drinkability. To enhance the dining experience of its
customers, each restaurant provides attentive, friendly service in a casual,
upbeat atmosphere. The Company believes that its emphasis on consistent,
high-quality food and outstanding service, together with its signature
microbrewed beers, enable the Company to differentiate itself from its
competitors and provide its customers with an exceptional dining experience.
BUSINESS STRATEGY
The Company seeks to differentiate its restaurants and establish a
foundation for growth by emphasizing the following strategic elements:
PREMIUM-QUALITY FOOD; STRATEGICALLY DESIGNED MENU. At each HOPS GRILL &
BAR restaurant, the Company seeks to provide its customers with generous
portions of premium-quality foods, freshly prepared daily in a display kitchen.
The menu has been designed with a select number of items to permit the greatest
attention to quality while offering sufficient breadth to appeal to a wide
variety of customer tastes. The Company seeks to heighten its customers' sense
of value by offering its generous portions at moderate prices.
HANDCRAFTED MICROBREWED BEERS. HOPS GRILL & BAR restaurants feature
lager-style beers and ales, freshly brewed to exacting specifications in each
restaurant's on-premises observation microbrewery. Each beer is handcrafted from
an original recipe formulated by the Company's team of experienced brewmasters
and has been carefully selected for its mass appeal and drinkability and to
complement the restaurants' food selections.
EXCEPTIONAL CUSTOMER SERVICE. At each HOPS GRILL & BAR restaurant, the
Company seeks to provide its customers with an exceptional dining experience and
a level of service that exceeds their expectations. Service at each table is
provided by a well-trained staff utilizing a friendly, attentive and efficient
approach that emphasizes teamwork, situational awareness, communication, and
overall customer satisfaction.
MOTIVATED MANAGEMENT AND EMPLOYEES. The Company is committed to
attracting, developing and motivating its employees through the extensive use of
custom-designed recruiting and training programs, competitive compensation and
benefit programs, and opportunities for advancement. A key element of this
strategy is the use of operating partners, who are experienced restaurant
operators and who acquire a ten percent equity interest in the restaurants
within their operating territory. The Company believes that equity ownership
motivates the operating partners to actively manage existing restaurants and to
develop new restaurants.
DISTINCTIVE ATMOSPHERE AND DECOR. Each HOPS GRILL & BAR restaurant has a
casual, upbeat atmosphere and decor characterized by a display kitchen, an
observation microbrewery and the extensive use of custom-designed and
- -manufactured fixtures, seating areas and signage.
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CONCEPT
The HOPS GRILL & BAR concept is designed to appeal to a broad customer
base by incorporating the following:
MENU AND PRICING. HOPS GRILL & BAR restaurants feature an American-style
menu that includes top choice steaks and prime rib, smoked baby back ribs, fresh
fish, chicken and pasta dishes, deluxe burgers and sandwiches, hand-tossed
salads with homemade dressings, appetizers, soups, and desserts. Menu items are
prepared from scratch daily in a display kitchen. The Company's restaurants
serve both lunch and dinner, with prices ranging from $5.45 to $6.45 for
appetizers, $3.95 to $6.95 for salads, $5.95 to $7.95 for burgers and
sandwiches, and $8.45 to $16.95 for dinner entrees. The menu also offers
separate selections for children. Management believes that the cost of a typical
meal at the Company's restaurants, including beverages, currently ranges from
$6.00 to $9.00 per person for lunch and $13.00 to $15.00 per person for dinner.
All menu items are offered in both the dining and the bar areas, and the
restaurants offer a selection of quality wines and a full liquor bar. Sales of
alcoholic beverages accounted for 17.8% of the Company's total sales (with beer
constituting 58.0% of sales of alcoholic beverages) during the 12-month period
ended June 30, 1996.
HANDCRAFTED BEER. Consumer interest in higher quality, more flavorful beer
has resulted in significant growth in the microbrewed and specialty beer markets
during the last several years. To address this growing consumer interest, HOPS
GRILL & BAR restaurants feature handcrafted beer brewed on-premises by each
restaurant's brewmaster. The Company utilizes its original recipes to brew its
distinctive lager-style beers and ales - Clearwater Light(\trademark\),
Lightning Bold Gold(\trademark\), Hammerhead Red(\trademark\), and A-1 Ale.
These freshly brewed beers are served in a frozen glass mug and, except for one
nonalcoholic beer, are the only beers served at HOPS GRILL & BAR restaurants.
The restaurants' handcrafted beers are intended to complement the food
offerings.
DESIGN AND LAYOUT. HOPS GRILL & BAR restaurants range in size from
approximately 5,000 to 7,300 square feet and are designed to create a dramatic
visual impact on their customers. Each HOPS GRILL & BAR restaurant features warm
lighting, high ceilings and wood-finished interiors complemented by an array of
stainless steel and copper brewing tanks and equipment. The dining and bar areas
are spacious, and the kitchens are contemporary and open. The attractive
on-premises brewing equipment is an integral aspect of the design and enhances
the ambiance of the restaurant. The observation microbreweries in the
restaurants are efficiently designed to occupy from 450 to 750 square feet. The
restaurants' dining and bar areas seat from 160 to 240 customers. In select
locations, the restaurants also provide outdoor patio service which allows for
increased seating capacity and an open-air dining experience for customers.
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RESTAURANT LOCATIONS
The following table sets forth certain information regarding the Company's
18 existing restaurant locations.
APPROXIMATE
SQUARE OWNED
LOCATION OPENING DATE FEET OR LEASED
- -------- ------------ ---- ---------
Clearwater, Florida........ November 1989 5,600 Leased
Tampa, Florida............. April 1991 6,800 Leased
Palm Harbor, Florida....... May 1992 5,600 Leased
Tampa, Florida............. November 1992 5,600 Owned
Bradenton, Florida......... October 1993 5,400 Leased
Lakeland, Florida.......... December 1993 6,000 Leased
Jacksonville, Florida(1)... March 1994 6,000 Leased
Tampa, Florida............. June 1994 7,100 Owned
Orange Park, Florida(1).... September 1994 6,000 Leased
Port Richey, Florida....... February 1995 5,000 Owned
Orlando, Florida........... April 1995 5,000 Owned
Ocala, Florida(1).......... May 1995 5,900 Leased
Coral Springs, Florida..... October 1995 5,900 Leased
Boynton Beach, Florida..... February 1996 5,900 Leased
St. Petersburg, Florida.... March 1996 5,000 Owned
Bowling Green, Kentucky.... May 1996 7,300 Owned
Denver, Colorado(1)........ July 1996 5,400 Leased
Altamonte Springs, Florida. August 1996 6,500 Leased
- -------------------
(1) Operated by a development joint venture that is controlled by the Company.
See "-Ownership Structures."
UNIT ECONOMICS
Average annual sales for the 12 HOPS GRILL & BAR restaurants that were
open for the entire 12-month period ended June 30, 1996, were approximately $2.5
million. During the 12 months ended June 30, 1996, the cost of developing and
opening each HOPS GRILL & BAR opened during the period averaged approximately
$1.4 million, including building, site improvement costs, restaurant fixtures
and equipment, and approximately $170,000 in microbrewery equipment. Land costs
for the two restaurants opened by the Company during this period were
approximately $800,000 per restaurant. Preopening costs, which include labor
costs, costs of hiring and training personnel, and certain other costs related
to opening new restaurants, were an average of approximately $150,000 per
restaurant during this period. In certain instances, the Company has received
landlord contributions in the form of tenant finish allowances, reducing the
cash required to open a new restaurant.
The Company estimates that the cost of developing and opening each
additional restaurant in 1997 will average approximately $1.45 million,
including building, site improvement costs, restaurant fixtures and equipment,
and approximately $150,000 in microbrewery equipment. The Company expects that
the cost of land for four of the nine restaurants expected to be opened in 1997
will average approximately $750,000 per restaurant. Preopening costs during 199
are expected to average approximately $140,000 per restaurant.
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SITE SELECTION
Site selection is critical to the success of individual restaurants, and
the Company devotes significant time and resources in analyzing each prospective
site. Once a particular market has been identified and agreed upon by senior
management, real estate brokers and agents are engaged to assist senior
management and the Company's local operating partner in locating specific sites.
Factors such as local market demographics, including population density, age
range, median household income and median home prices are considered. In
addition to analyzing demographic information for each prospective site,
management considers factors such as visibility, traffic patterns,
accessibility, proximity of shopping areas, office parks and tourist
attractions, and the availability of parking. The Company also reviews potential
competition and attempts to analyze the profitability of other national chain
restaurants operating in the area.
The Company has developed a series of prototype designs and specifications
that allows for the development of HOPS GRILL & BAR restaurants as free-standing
buildings or as an end-cap of a strip shopping center. Fifteen of the Company's
restaurants are located in free-standing buildings, and three are a part of a
strip shopping center. Additionally, six of the free-standing HOPS GRILL & BAR
restaurants involved the remodeling of an existing building and nine were newly
constructed by the Company. In select locations, the restaurants also provide
outdoor patio service which allows for increased seating capacity and an
open-air dining experience for customers. The Company uses an experienced
in-house development staff to supervise the construction process for new
restaurants, including contracting with vendors for all leasehold improvements,
restaurant furniture and restaurant and microbrewery equipment. The Company
believes that its ability to utilize a variety of existing restaurant and other
retail space, as well as its ability to construct new restaurants from the
ground up, enables the Company to obtain desirable locations that would prove
impractical if the Company were constrained by rigid design requirements.
EXPANSION STRATEGY
The Company opened five HOPS GRILL & BAR restaurants in 1996 and plans to
open nine and 12 HOPS GRILL & BAR restaurants in 1997 and 1998, respectively.
The Company has entered into agreements to purchase the real estate for
restaurants in Charlotte, North Carolina, Plantation, Florida, and Orlando,
Florida and has entered into leases for restaurants in Colorado Springs,
Colorado, Miami, Florida, Pompano Beach, Florida, and Pembroke Pines, Florida.
Generally, each lease to be entered into or property to be purchased by the
Company will be conditioned upon the ability of the Company to obtain the
permits and licenses necessary to operate the restaurant identified for such
site.
A key element of the Company's expansion strategy is its operating partner
program. Under this program, the Company enters into an agreement for restaurant
development within a prescribed area with an experienced restaurant operator who
can provide local market knowledge and management. Each operating partner
acquires a ten percent equity interest in the restaurants within the operating
partner's territory. The equity interest provides incentive to the operating
partner to actively supervise the development and operations of his restaurants.
The Company believes that its operating partner programs enhance its ability to
expand into new markets. Currently 10 HOPS GRILL & BAR restaurants operate under
five operating partner arrangements, and the Company expects that all of the
restaurants it intends to develop in 1997 will be operated under operating
partner arrangements.
Another important element of the Company's expansion strategy has been its
development joint ventures. The Company is currently a party to three
development joint ventures for the development of HOPS GRILL & BAR restaurants
in southeast Florida, Colorado, and northeast Florida. The Company believes that
its development joint ventures have allowed the Company to more quickly expand
its concept into new territories. While no further development will occur within
the northeast Florida development joint venture, the two remaining development
joint ventures may develop up to an additional 15 restaurants. It is currently
anticipated that six of the nine HOPS GRILL & BAR
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restaurants to be opened in 1997 will be developed through the Company's
existing development joint ventures. See "-Ownership Structures-Joint Venture
Restaurants."
RESTAURANT OPERATIONS
MANAGEMENT AND EMPLOYEES. The Company's overall restaurant operations are
directed by Thomas A. Schelldorf, the Company's Executive Vice President and
Chief Operating Officer, and Timothy V. Curci, the Company's Vice
President-Operations. Oversight of the Company's eight Tampa Bay area
restaurants is undertaken directly by Company management with responsibility for
the remaining 10 restaurants organized geographically with five operating
partners. Operating partners currently have responsibility for between one and
three restaurants. As restaurant development continues, the Company expects each
operating partner to have responsibility for three to six restaurants.
The typical HOPS GRILL & BAR's restaurant management staff has one general
manager and two or three assistant managers, as well as a kitchen manager, an
assistant kitchen manager and a brewmaster. Brewmasters generally supervise the
microbrewery operations of one or two HOPS GRILL & BAR restaurants. The Company
seeks to attract and retain high quality, experienced restaurant management
personnel by providing them with responsibility and financial incentives as well
as the potential for advancement within the Company's restaurant system.
Selected, proven, HOPS GRILL & BAR general managers are offered five-year
employment agreements and, in addition to their base salaries, are compensated
under a bonus arrangement which is based upon the performance of their
restaurants.
The Company believes that its restaurant employees have been a significant
factor in its ability to provide customers with an exceptional dining
experience. The Company believes that it must provide its employees a fun, fair
work environment with an opportunity for advancement and demonstrate a genuine
concern for the development of each employee. Through periodic manager meetings,
focus groups, and confidential employee surveys, the Company involves each
employee in the evaluation and improvement of restaurant operations.
QUALITY CONTROL. The Company strives to maintain quality and consistency
at each of its restaurants by assisting its personnel in achieving high levels
of execution in service, food and beverage preparation, brewing quality
assurance and facility maintenance. The Company also utilizes a team of
experienced personnel to regularly monitor the performance of each restaurant.
The Company adheres to strict specifications with respect to its food
ingredients. In addition, samples of the Company's beer are collected from each
location on a weekly basis and analyzed by the Company's chief brewmaster for
quality and consistency. To further ensure the quality and consistency of its
handcrafted beers, the Company purchases all of its microbrewery equipment from
a single vendor.
TRAINING AND RECRUITING. The Company devotes significant time and
resources to management training. The Company utilizes a comprehensive,
custom-designed management training program that covers topics such as general
restaurant management, kitchen operations, food management, food service
techniques, bar and microbrewery operations, customer service, and
restaurant-level accounting and financial management. In general, the Company
strives to foster an environment in which its restaurant management personnel
emphasize performance in the Company's three key results areas: customer
service, employee management, and financial performance.
The Company also devotes substantial resources to the recruiting, hiring
and training of the Company's restaurant employees. In order to identify
high-quality, retainable employees, the Company utilizes custom-designed
selection programs for both front-of-the-house and back-of-the-house employees.
The Company's restaurant personnel receive intensive on-the-job training during
which the Company's service philosophy is emphasized. The Company has
established a team of full-time training professionals to manage the training of
kitchen and service personnel for new restaurants. All restaurant employees are
trained and encouraged to participate in the achievement of restaurant-level
financial objectives.
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ADVERTISING AND MARKETING. The Company strives to provide its customers
with dining experiences that encourage repeat business and historically has
relied primarily on word of mouth to attract new customers. HOPS GRILL & BAR
restaurants also support charitable and civic organizations and utilize a
limited amount of targeted outdoor billboard, television, and radio advertising.
The Company recently purchased ten custom-designed special event trailers (five
from which the Company's handcrafted beers can be served and five from which
food can be served) to promote its restaurants at various community events. The
Company expects to utilize greater amounts of radio and television advertising
as its markets become more media-efficient. To supplement its marketing efforts,
the Company sells HOPS GRILL & BAR merchandise such as T-shirts, glassware, caps
and other items bearing the restaurant's name and logo as well as the names of
certain of the restaurants' more popular handcrafted beers.
PURCHASING. The Company currently purchases a substantial portion of its
food items from Henry Lee Co., a large distributor based in Miami, Florida. The
Company believes that alternative supply sources are readily available. Certain
of the Company's food items, such as produce, seafood, and dairy products, as
well as certain beverage items, are purchased from local vendors or
distributors.
RESTAURANT REPORTING. During the last 12 months, the Company purchased new
computer hardware and software, including a management information system and
point-of sale terminals for each restaurant. This integrated system allows for
the daily tracking of restaurant operating results and provides restaurant
managers with monthly operating statements for their restaurants. Management
believes that these systems, together with the Company's expanded management
team of professionals, has enhanced its budgeting, forecasting, and accounting
capabilities.
BREWING OPERATIONS
The microbreweries at the HOPS GRILL & BAR restaurants are designed with
the capacity to produce between 700 and 2,200 barrels per year. Each
microbrewery is custom designed to be integrated into the restaurant layout in
the most efficient and aesthetically pleasing manner and emphasizes ease of
control, use and flexibility.
Each HOPS GRILL & BAR restaurant employs a brewmaster and in some
restaurants one or more apprentice brewers. All of the Company's brewers strive
to ensure that every batch of beer brewed is of the highest quality and
consistency. Beers from each restaurant are tested weekly to ensure quality and
uniformity. Beer is produced using only natural malted barley, hops, yeast and
water. Malted barley, the main ingredient of beer, is produced when barley is
moistened, allowed to germinate and then dried. The malted barley is then milled
and mixed with warm water where grain starches are converted to fermentable
sugars and then strained, producing a clear amber liquid called wort. Wort is
boiled in brew kettles, and hops are added to add bitterness and flavor to the
brew. The mixture is then decanted, cooled, and placed in a tank where yeast is
added and the wort is allowed to ferment to become beer. When the fermentation
process produces the desired result, the beer is then cooled and held in the
fermentation tank for the required amount of time where the flavor is developed.
The beer is then filtered clear and transferred to pressurized tanks in a cold
room in each restaurant where it is kept chilled and transferred directly to
beer taps. The brewing process from the conversion of raw materials to the
serving of beer is typically completed in 14 days, depending on the type of beer
being brewed.
HOPS GRILL & BAR restaurants serve four signature beers which are
formulated to complement the restaurants' menu of premium-quality foods:
-Clearwater Light (\trademark\) - A reduced carbohydrate, low
calorie lager-style beer, pale in
color, light in body and smooth in
character.
-Lightning Bold Gold (\trademark\) - A classic golden American
lager-style beer, slightly dry
with a flowery hop aroma. Finished
with imported Saaz hops.
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-Hammerhead Red (\trademark\) - A rich, full-bodied amber ale.
Handcrafted using a combination of
caramel and chocolate malts to
balance the hops bitterness with a
hint of malt sweetness.
-A-1 Ale - A rich, full-bodied, dark, creamy
ale with a smooth finish. This
combination of flavors is attained
with a blend of caramel, chocolate
and dark malts to provide
sweetness which balances the hops
bitterness.
The Company's handcrafted beers are also sold by the keg for off-premises
consumption in Kentucky and Colorado, where such sales are legally permitted.
MICROBREWED AND SPECIALTY BEER MARKET
Consumer interest in higher quality, more flavorful beer has resulted in
significant growth in the microbrewed and specialty beer markets during the last
several years. According to the NEW BREWER, a leading beer industry publication,
U.S. specialty beer sales (in barrels) have increased by approximately 40% or
more for each of the past three years and have grown at a compound annual rate
of approximately 40% since 1986. Despite these high levels of growth, sales of
microbrewed and domestic specialty beer only represented approximately 2% of the
total beer production in the United States in 1995. According to the Institute
for Brewing Studies, the number of microbreweries has grown from 30 in 1986 to
approximately 276 in 1995, while the number of brewpubs has increased to
approximately 502 in the United States in 1995, an increase from only 16
brewpubs in 1986.
OPERATING PARTNER PROGRAM
A key element of the Company's restaurant development strategy is its
operating partner program. Under this program, the Company recruits and hires
experienced restaurant operators (referred to as "operating partners") to manage
three to six HOPS GRILL & BAR restaurants in a specific territory. Under the
Company's operating partner program, each operating partner is given the
opportunity to acquire approximately a ten percent interest in the restaurants
under his supervision for a specified price, upon entering into a five-year
employment agreement with the Company. Under the terms of the employment
agreements, each operating partner receives monthly distributions of adjusted
net profits from his restaurants as advances against future distributions which
he might otherwise be entitled to receive as an equity owner. The Company is
required to repurchase the interests of the operating partner upon the
termination or expiration of the operating partner's employment agreement. The
price at which an operating partner's interest can be repurchased is equal to
the price actually paid by the operating partner if such partner's employment is
terminated prior to the end of the five-year term of the employment agreement or
at the fair market value of his interest (calculated pursuant to a
pre-determined formula) after five years of employment. Fair market value is
defined in the employment agreements as an amount equal to four times the annual
cash flow (as determined pursuant to the agreement) of the restaurants for the
most recent 12-month period or the amount otherwise determined in good faith by
the Board of Directors of the Company. Each operating partner employment
agreement also contains confidentiality and non-competition covenants by the
operating partner.
OWNERSHIP STRUCTURES
The Company's ownership interests in HOPS GRILL & BAR restaurants are
divided into two categories: (i) Company-owned restaurants and (ii) development
joint venture restaurants.
COMPANY-OWNED RESTAURANTS. Fourteen HOPS GRILL & BAR restaurants are
owned and operated by the Company. Six of these Company-owned restaurants are
managed by operating
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partners. Of the eight Company-owned restaurants that do not have operating
partners, five have general managers who have five-year employment agreements
with the Company. Under these agreements, in addition to their base salaries,
such general managers also receive bonus compensation based upon the performance
of their respective restaurants.
DEVELOPMENT JOINT VENTURE RESTAURANTS. The Company is currently a party to
three development joint ventures for the development of HOPS GRILL & BAR
restaurants. Two of the development joint ventures are structured as limited
partnerships in which the Company holds a 51% equity interest and serves as the
sole general partner. The other development joint venture is a series of three
general partnerships in which the Company owns approximately 46% and controls
approximately 56% of the equity. In each development joint venture, an operating
partner holds an approximate ten percent equity interest, and the remainder of
the venture is owned by the Company's development joint venture partner.
The first of these ventures (the "Colorado Partnership") was formed in
January 1996, to develop up to three HOPS GRILL & BAR restaurants in the state
of Colorado. The Colorado Partnership has developed one restaurant in Denver,
Colorado and has secured a lease for a second restaurant in Colorado Springs,
Colorado. The Company expects to open the Colorado Springs restaurant in the
second quarter of 1997. The Company is evaluating locations for the third
restaurant to be developed under the Colorado Partnership. However, it has not
yet determined a location or opening date for that restaurant.
The second of these ventures (the "South Florida Partnership") was formed
in October 1996, to develop up to 13 HOPS GRILL & BAR restaurants in the
southeast Florida counties of Dade, Broward, Palm Beach and Martin. To date, the
South Florida Partnership has developed no restaurants. However, the venture has
secured leases for three HOPS GRILL & BAR restaurants in Pompano Beach, Florida,
Miami, Florida, and Pembroke Pines, Florida. Additionally, the South Florida
Partnership has purchased the real estate for a restaurant in Plantation,
Florida. The South Florida Partnership was formed to continue the development of
the southeast Florida market area that was begun by a prior development joint
venture between the Company and the other partners of the South Florida
Partnership. The Company acquired the interest of its development joint venture
partners in the prior development joint venture as a part of the Reorganization.
See "Reorganization and Prior S Corporation Status." The prior development joint
venture had developed a HOPS GRILL & BAR restaurant in each of Coral Springs and
Boynton Beach. The Company, in conjunction with its development joint venture
partners, is evaluating locations for the remaining HOPS GRILL & BAR restaurants
to be developed under the South Florida Partnership. However, it has not yet
determined locations or opening dates for such restaurants.
Each of the limited partnership development joint ventures provides the
Company with a right of first refusal to purchase the interest of the Company's
development joint venture partner and provides the Company with the option to
purchase the interest of the Company's development joint venture partner on
specified terms in the event that the Company's development joint venture
partner breaches the terms of the development joint venture. One of these
development joint ventures also obligates the Company to purchase the interest
of its development joint venture partner upon the death or permanent disability
of the principal of the development joint venture partner. Each of the
development joint ventures provides the Company with the option to purchase the
development joint venture partner's 39% interest in certain circumstances. In
the event that the Company elects to purchase the development joint venture
partner's interest, the Company may pay the purchase price with cash and a note
or, at the Company's election, in common stock of the Company, in which case the
Company will grant to the development joint venture partner certain registration
rights with respect to the resale of the shares of common stock issued to the
development joint venture partner. In addition, one of the development joint
ventures provides that if the Company decides to transfer for value to an
unaffiliated party more than 50% of the Company's interest in the limited
partnership joint venture, the Company will permit the development joint venture
partner to sell, and the Company may require the development joint venture
partner to sell, on the same terms and conditions obtained by the Company, a
proportionate share of the development joint venture partner's interest in the
development joint venture.
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The third of these ventures (the "Northeast Florida Venture") was begun in
February 1993 to develop HOPS GRILL & BAR restaurants in the northeast Florida
counties of Alachua, Clay, Duval, and Marion. To date, the Northeast Florida
Venture has developed a HOPS GRILL & BAR restaurants in each of Jacksonville,
Orange Park, and Ocala, Florida. No further development under the Northeast
Florida Venture will occur by its terms. The Northeast Florida Venture consists
of three general partnerships of common ownership, each of which owns and
operates one HOPS GRILL & BAR restaurant. The partnership agreements for each of
these general partnerships provides the Company with a right of first refusal to
purchase the interest of the Company's development joint venture partner and
provide the Company with the option to purchase the interest of the Company's
development joint venture partner on specified terms in the event that the
Company's development joint venture partner breaches the terms of the
development joint venture. The general partnership development joint ventures
also obligate the Company to purchase the interest of its development joint
venture partner upon the death or permanent disability of the principal of the
development joint venture partner. Control of the day-to-day operations of the
general partnership development joint ventures is vested in a two person board
of managers composed of one Company representative and one representative of the
Company's 44.1% development joint venture partner. In the event that the board
of managers of the respective general partnerships is unable to agree upon any
matter, the partnership agreements provide that the matter will be decided by
the party which controls a majority of the equity of the partnership. The
Company controls a majority of the equity of each of the general partnerships.
RESTAURANT OPERATING AGREEMENTS. The Company has entered into restaurant
operating agreements with respect to each HOPS GRILL & BAR restaurant developed
by the development joint ventures. These operating agreements require the
development joint venture to operate its HOPS GRILL & BAR restaurant in strict
conformity with the Company's unique system and method of restaurant operation
(as modified from time to time). The agreements require the Company to provide
training for the restaurant general manager, kitchen manager, brewmaster, and
certain other management personnel and to provide certain other services in
connection with the opening and operation of the restaurants. The agreements
require each restaurant to pay the Company a monthly operating fee of up to 6%
of such restaurant's monthly gross sales. Each development joint venture is also
required to pay the Company (or a marketing agent or affiliate designated by the
Company) a monthly promotional fee equal to 1% of such partnership's monthly
gross sales (which may be increased to up to 3% in the Company's sole
discretion) and to spend 2% of monthly gross sales for local promotional
activities, provided that the Company cannot require the restaurants to make
payments, in the aggregate, of more than 5% of monthly gross sales for
advertising and promotional expenses. Each of the operating agreements also
requires the restaurants to maintain certain levels of insurance.
DEVELOPMENT OPTION AGREEMENTS. The Company has entered into three separate
development option agreements (one of which has, by its terms, expired) pursuant
to which the development joint ventures were formed for the purpose of
developing HOPS GRILL & BAR restaurants. Pursuant to these agreements, each of
the respective developers was permitted to participate in the development and
ownership of the initial restaurant developed in the specified development
territory and has the option, subject to certain limitations, to participate in
the development and ownership of additional restaurants in the territory during
a specified period of time. Pursuant to their development option agreements,
each of the developers agreed to pay the Company a development fee of $10,000 to
$30,000 for each restaurant developed. The Company has the right to terminate
each of the development option agreements in certain circumstances. Each of the
developers also agreed to make capital contributions with respect to each
restaurant developed by the Company and such developer. In addition, if a
developer fails to participate in the development and ownership of any
additional restaurant in which the developer is entitled to participate, he
thereafter forfeits his right to participate further in the development of
additional restaurants in the territory, and the Company thereafter may proceed
to develop additional restaurants in the territory on its own or with third
parties. Each of the development option agreements impose certain
confidentiality and noncompetition restrictions on the developer.
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COMPETITION
The restaurant industry is intensely competitive with respect to service,
quality, price, and atmosphere, among other factors. The Company's restaurants
compete with a large number of other restaurants and brewpubs, including
national and regional restaurant chains and franchised restaurant systems, many
of which have greater financial resources, more experience, and longer operating
histories than the Company, as well as locally owned independent restaurants.
The restaurant industry generally is affected by changes in consumer tastes,
national, regional or local economic conditions, demographic trends, traffic
patterns, and the type, number, and location of competing restaurants. The
Company believes its ability to compete effectively will continue to depend upon
its ability to offer high-quality menu items with superior service in a
distinctive dining environment.
The Company's casual dining business also competes with various types of
food businesses, as well as other businesses, for restaurant locations. The
Company believes that site selection is one of the most crucial decisions
required in connection with the development of restaurants. As a result of the
presence of competing restaurants in the Company's areas of operation,
management devotes great attention to obtaining what it believes will be premium
locations for new restaurants, although no assurances can be given that the
Company will be successful in this regard.
GOVERNMENT REGULATION
GENERAL. The Company's restaurants are subject to regulation by federal
agencies and to licensing and regulation by state and local health, sanitation,
safety, fire and other departments relating to the development and operation of
restaurants. These regulations include matters relating to environmental,
building and zoning requirements, the preparation and sale of food and alcoholic
beverages, designation of non-smoking and smoking areas and accessibility of
restaurants to disabled customers. Various federal and state labor laws govern
the Company's relationship with its employees, including minimum wage
requirements, overtime, working conditions, and immigration requirements.
Significant additional government-imposed increases in minimum wages, paid
leaves of absence and mandated health benefits, or increased tax reporting and
tax payment requirements for employees who receive gratuities, could have an
adverse effect on the Company. In August 1996 the President of the United States
signed into law a bill increasing the minimum hourly wage effective October 1,
1996. However, the law contains provisions that, among other things, maintains
the cash wage for tipped employees at the current rate. Delays or failures in
obtaining the required construction and operating licenses, permits or approvals
could delay or prevent the opening of new restaurants. Management believes the
Company is in substantial compliance with applicable laws and regulations
governing its operations.
ALCOHOLIC BEVERAGE REGULATION. Each of the Company's restaurants is
subject to licensing and regulation by a number of governmental authorities. The
Company operates its HOPS GRILL & BAR restaurants in compliance with federal
licensing requirements imposed by the Bureau of Alcohol, Tobacco and Firearms of
the United States Department of the Treasury, as well as the licensing
requirements of states where its restaurants are located. Alcoholic beverage
control regulations require each of the Company's restaurants to apply to a
state authority and, in certain locations, county or municipal authorities for a
license and permit to brew and/or sell alcoholic beverages on premises.
Typically, licenses must be renewed annually and may be revoked or suspended for
cause at any time. Alcoholic beverage control regulations relate to numerous
aspects of the daily operations of the Company's restaurants, including minimum
age of patrons and employees, hours of operation, advertising, wholesale
purchasing, inventory control and brewing, handling, storage and dispensing of
alcoholic beverages. The Company has obtained all regulatory permits and
licenses necessary to operate its restaurants and the breweries at the HOPS
GRILL & BAR restaurants. Failure on the part of the Company to comply with
federal, state or local regulations could cause the Company's licenses to be
revoked and force it to cease the brewing and/or sale of alcoholic beverages at
its restaurants. In addition, changes in legislation, regulations or
administrative interpretation of liquor laws after the opening of restaurants in
a jurisdiction may prevent or hinder the Company's expansion or operations
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in that jurisdiction. The failure to receive or retain, or a delay in obtaining,
a liquor or brewpub license in a particular location could adversely affect the
Company's ability to obtain such a license elsewhere.
The Company is subject to "dram-shop" laws in the state of Florida and
will be subject to such statutes in certain other states. These laws generally
provide a person injured by an intoxicated person the right to recover damages
from an establishment which wrongfully served alcoholic beverages to such
person. The Company carries liquor liability coverage as part of its existing
comprehensive general liability insurance which it believes is consistent with
coverage carried by other entities in the restaurant industry. However, a
judgment against the Company under a dram- shop statute in excess of the
Company's liability coverage could have a material adverse effect on the
Company.
BREWPUB REGULATION. Historically, the alcoholic beverage laws of most
states prohibited the manufacture and retail sale of beer to consumers by a
single person or entity or related persons or entities. At present, 48 states
allow for the limited manufacture and retail sale of microbrewed beer by
restaurants and bars classified as "brewpubs" under state law. As the result of
the on-premises microbrewery in each HOPS GRILL & BAR restaurant, the Company's
restaurants are required to comply with such state "brewpub" laws in order to
obtain necessary state licenses and permits. Laws in Mississippi and Montana
prohibit the operation of brewpubs. Additionally, many states impose
restrictions on the operations of brewpubs, such as a prohibition on the
bottling of beer, a prohibition on the sale of beer for consumption outside of
the restaurant premises, and a limitation on the volume of beer that may be
brewed at any location, as well as certain geographic limitations. In addition,
certain states limit the number of brewpubs that may be owned by any person or
entity or a related group of entities. The Company's ability to own and operate
HOPS GRILL & BAR restaurants in any state is and will continue to be dependent
upon its ability to operate within the regulatory scheme of such state.
Restrictions currently imposed by two of the states (Kansas and Michigan) that
allow for the operation of brewpubs may make it impractical for the Company to
operate HOPS GRILL & BAR restaurants in such states under the Company's present
system of operation. Additionally, there can be no assurance that states that
currently permit the operation of brewpubs will not change their laws or
regulations in a manner that would prohibit brewpub operation or otherwise
adversely affect the operations of the Company.
Certain states, including Florida, have restrictions on the number of
barrels of beer that can be brewed annually by a brewpub. These various state
liquor laws are continually changing, and the Company may be hindered or
prohibited from opening HOPS GRILL & BAR restaurants in certain markets.
FEDERAL EXCISE TAX. The United States federal government currently imposes
an excise tax of $18 per barrel on each barrel of beer produced for domestic
consumption in the United States. However, each brewer with production under
2,000,000 barrels per year is granted a small brewer's excise tax credit in the
amount of $11 per barrel on its first 60,000 barrels produced annually. In 1995,
the Company took advantage of approximately a $60,000 credit pursuant to this
exemption. The Company is not aware of any plans by the federal government to
reduce or eliminate the small brewer's credit. Individual states also impose
excise taxes on alcoholic beverages in varying amounts, which also are subject
to change. It is possible that excise taxes will be increased by both the
federal government and a number of the states. Increased excise taxes on
alcoholic beverages have been considered by the U.S. Congress as an additional
source of tax revenue in connection with various proposals and could be included
in future legislation. Certain states have special taxes on the sale or
production of alcoholic beverages. Increases in taxes on malt beverages, if
enacted, could adversely affect the Company.
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TRADEMARKS AND SERVICE MARKS
The Company is the owner of the federal service mark registrations for the
marks "Hops Grill & Bar Microbrewery(\registered trademark\)" and Design and
Hops!(\registered trademark\)." Pursuant to the settlement of a dispute
involving the rights to the word mark "Hops!(\registered trademark\)" and the
federal registration thereof, in February 1995 as partial consideration for the
transfer of the federal registration to the Company, the Company licensed
certain limited rights to use the word mark "Hops!(\registered trademark\)" to
the former owner of the federal registration of that mark for use on an
exclusive, royalty-free basis, solely in the state of Arizona and in San Diego
and Imperial counties in southern California. This license requires the licensee
to utilize the word mark solely in connection with its existing restaurant
concept and in a manner so as to distinguish itself from the Company and its
HOPS GRILL & BAR restaurants. This license shall continue for so long as the
licensee continues to operate restaurants in the licensed territory under the
licensed mark and will effectively prevent the Company from opening restaurants
in that territory utilizing the "Hops! (\registered trademark\)" mark.
The Company also has federal trademark and service mark applications
pending for a number of additional marks, including "Hammerhead Red
(\trademark\)," "Clearwater Light(\trademark\)," "Lightning Bold Gold," and "Hop
E. Hare(\trademark\)." In seeking registration for "Hammerhead Red(\trademark\)"
the Company experienced opposition from a brewpub chain in Oregon that is also
seeking to register the trademark "Hammerhead" for ale. This dispute has been
fully settled with the Company having exclusive rights to the trademark
"Hammerhead Red(\trademark\)" in the states of Tennessee, Kentucky, Florida,
Georgia, Alabama, Mississippi, North Carolina, and South Carolina, including the
other right to obtain a federal trademark registration for those states, and the
other brewpub chain having exclusive rights in the remainder of the United
States.
The Company regards its marks as having substantial value and as being an
important factor in the marketing of its HOPS GRILL & BAR restaurants. While the
Company is aware of certain persons who may claim certain limited local rights
(in areas where the Company does not yet have restaurants) in marks utilized by
the Company in its restaurants, the Company is not aware of any infringing uses
or claims to such marks that could have a material adverse effect upon the
Company's current business or its ability to expand its HOPS GRILL & BAR
restaurants. The Company's policy is to pursue registration of its marks
whenever practical and to oppose vigorously any infringement of its marks.
EMPLOYEES
At August 31, 1996, the Company employed 1,443 persons, 26 of whom served
in administrative capacities, 149 of whom served as restaurant management
personnel, and the remainder of whom were hourly personnel. No employee is
covered by a collective bargaining agreement, and the Company has never
experienced an organized work stoppage, strike or labor dispute. The Company
considers relations with its employees to be satisfactory.
PROPERTIES
Twelve of the Company's 18 restaurants are located on leased sites. The
Company either owns or leases the furnishings, fixtures and restaurant and
microbrewery equipment in each of its restaurants. Restaurant leases have
expiration dates ranging from June 2004 to September 2029 (including existing
renewal options). The Company does not anticipate any difficulties in renewing
its existing leases as they expire; however, there can be no assurance that the
Company will be able to renew such leases. See Note 4 of Notes to Consolidated
Combined Financial Statements for information regarding aggregate minimum
rentals paid by the Company for recent periods and information regarding the
Company's obligation to pay minimum rentals in future years. See "-Restaurant
Locations."
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The Company leases approximately 10,000 square feet of office space for
its executive offices in Tampa, Florida. The Company believes that this space is
adequate for its current and foreseeable needs.
LITIGATION
The Company is not currently a party to, and no property of the Company is
the subject of, any material pending legal proceeding. The Company is involved
in routine litigation from time to time.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The Company's Board of Directors is divided into three classes with the
members of each class serving three-year terms expiring at the third annual
meeting of shareholders after their election or until their respective
successors are duly elected and qualified. The following table sets forth
certain information with respect to the current directors and executive officers
of the Company.
TERM AS
DIRECTOR
NAME AGE POSITION EXPIRES
---- --- -------- -------
David L. Mason 46 Chairman of the Board, President, 1999
and Chief Executive Officer
Thomas A. Schelldorf 41 Director, Executive Vice President, 1998
and Chief Operating Officer
Terence M. Terenzi 30 Director, Vice President-Finance, 1997
Chief Financial Officer, Secretary and
Treasurer
Timothy V. Curci 30 Vice President-Operations
DAVID L. MASON is one of the co-creators of the HOPS GRILL & BAR
restaurant concept and has served as the Company's Chairman of the Board,
President and Chief Executive Officer since its inception in 1988. In 1978, Mr.
Mason co-founded Midsouth Management Group, Inc., a Kentucky-based fast food and
casual dining restaurant company. Mr. Mason served as Chief Operating Officer of
Midsouth Management Group, Inc. from 1978 to 1988 and was responsible for
administration, operations, marketing, and construction and real estate
development activities. Midsouth Management Group Inc.'s operations included 18
franchised Wendy's Old Fashioned Hamburgers restaurants located in three states
and three Rafferty's Restaurant & Bar casual dining restaurants located in
Kentucky and Tennessee. Mr. Mason was a co-creator of the Rafferty's Restaurant
& Bar concept. From 1972 to 1975, Mr. Mason served in various restaurant
management capacities for the Steak & Ale chain of restaurants.
THOMAS A. SCHELLDORF is one of the co-creators of the HOPS GRILL & BAR
restaurant concept and has served as the Company's Executive Vice President and
Chief Operating Officer since its inception in 1988. From 1981 to 1988, Mr.
Schelldorf served as President of the Rafferty's Restaurant & Bar division of
Midsouth Management Group, Inc., where he was primarily responsible for the
construction, management and operation of three Rafferty's Restaurant & Bar
restaurants, a concept that Mr. Schelldorf co-created in 1981. From 1977 to
1981, he served as a general manager and supervisor for Houston's Restaurant
Company. From 1972 to 1977, Mr. Schelldorf held various positions, including
kitchen management and general management, in the Steak & Ale chain of
restaurants.
TERENCE M. TERENZI has been the Company's Vice President-Finance and Chief
Financial Officer, Secretary and Treasurer since March 1995. From June 1988 to
March 1995, Mr. Terenzi was employed by KPMG Peat Marwick LLP, an international
public accounting firm, most recently as an audit manager. Mr. Terenzi is a
Certified Public Accountant.
TIMOTHY V. CURCI has been employed by the Company since its inception in
1988 and has served as the Company's Vice President-Operations since November
1991. Mr. Curci is a graduate of the Culinary Institute of America.
Each of the Company's executive officers serve at the pleasure of the
Board of Directors. There are no family relationships among any of the Company's
executive officers and directors.
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Current Board members who are also executive officers of the Company do
not receive compensation for their service on the Board. While the Company has
not yet adopted a formal plan for the compensation of independent directors, it
is anticipated that future independent directors will receive reasonable
compensation and a reimbursement of the expenses associated with their service
as a director of the Company.
OUTSIDE DIRECTORS AND RELATED MATTERS
The Board of Directors expects to add two additional outside directors
within 90 days after the consummation of this offering. At that time the Board
of Directors also intends to establish an Audit Committee, a majority of the
members of which shall be outside directors.
KEY EMPLOYEES
The Company has identified William G. Holmes, John R. Oldham, John E.
Schwarzen, and Howard E. Taylor as key employees.
WILLIAM G. HOLMES, age 43, joined the Company in November 1994 as the
Company's Director of Construction. From 1984 until joining the Company, Mr.
Holmes co-owned and operated Award Construction of Tampa, Inc., a privately held
commercial and residential construction management company. From 1977 to 1984,
he served as a Vice President for Creative Properties, Inc., a Tampa-based
residential construction management company. Mr. Holmes has more than 20 years
experience in the construction management business.
JOHN R. OLDHAM, age 44, has been the Company's Director of Advertising and
Marketing since June 1996. His responsibilities include the coordination of the
Company's marketing, advertising, promotional, public relations, creative
design, and special events activities. From 1994 until joining the Company, Mr.
Oldham was a senior account executive for a regional ABC television network
affiliate in Bowling Green, Kentucky. From 1991 to 1994, he served as Director
of Advertising and Marketing for Wendy's of Bowling Green, Inc., which owned 18
franchised Wendy's Old Fashioned Hamburgers restaurants located in three states.
From 1982 to 1991, Mr. Oldham served in a similar capacity for Midsouth
Management Group, Inc.
JOHN E. SCHWARZEN, age 61, joined the Company in September 1994 as the
Company's Director of Brewing Operations. Prior to his employment with the
Company, Mr. Schwarzen held various brewery operations and management positions
during a 35-year career at Anheuser-Busch, Incorporated, where he most recently
served as a Brewing Superintendent. Mr. Schwarzen's experience includes all
aspects of brewing operations, including brewing equipment design and
installation, production management and scheduling, brewing safety and
sanitation, recipe formulation, quality control, training, and personnel
management and supervision.
HOWARD E. TAYLOR, age 49, joined the Company in September 1996 as the
Company's Director of Training. His responsibilities include the coordination
and supervision of the Company's kitchen and restaurant personnel training
activities. From 1990 until joining the Company, he was employed in various
training positions by Metromedia Steakhouses, Inc., a Dallas-based operator of
Bonanza restaurants, most recently as Vice President of Training. From 1986 to
1990, Mr. Taylor served as a Director of Training for the Dalt's Grill division
of TGI Friday's Inc. in Dallas. Mr. Taylor has more than 20 years experience in
the restaurant industry.
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid or accrued by the
Company for services rendered during the year ended December 31, 1995, to David
L. Mason, the Company's President and Chief Executive Officer, and to Thomas A.
Schelldorf, the Company's Executive Vice President and
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Chief Operating Officer (the "Named Executive Officers"). During the year ended
December 31, 1995, there were no executive officers whose combined annual salary
and bonus exceeded $100,000, and the Company did not grant any stock options,
restricted stock awards or stock appreciation rights or make any long-term
incentive plan payouts. See"-Stock Incentive Plan."
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
----------------------
NAME AND PRINCIPAL POSITIONS SALARY($) BONUS($)
- ---------------------------- --------- --------
David L. Mason, President and Chief
Executive Officer.................. $80,000 --
Thomas A. Schelldorf, Executive Vice
President and Chief Operating Officer 80,000 --
Effective January 1, 1997, Messrs. Mason and Schelldorf will each begin to
receive a salary of $175,000 per year and such bonuses, if any, as may be
determined by the Board of Directors.
EMPLOYMENT AGREEMENTS
The Company is a party to employment agreements with Terence M. Terenzi
and Timothy V. Curci. The employment agreements are each for a term of five
years and become effective upon consummation of this offering. Mr. Terenzi's
employment agreement provides for him to serve as the Company's Vice
President-Finance and Chief Financial Officer, and Mr. Curci's employment
agreement provides for him to serve as the Company's Vice President-Operations.
The employment agreements provide for Messrs. Terenzi and Curci to receive
salaries of $130,000 per year. In addition, the employment agreements provide
that Messrs. Terenzi and Curci will each be eligible to receive discretionary
bonuses in amounts determined by the Board of Directors based upon the factors
deemed relevant by the Board of Directors, including the performance of the
Company. The employment agreements also impose certain confidentiality and
noncompetitive restrictions on Messrs. Terenzi and Curci.
STOCK INCENTIVE PLAN
In October 1996, the Company adopted its 1996 Stock Incentive Plan (the
"1996 Plan") authorizing the grant of options to purchase shares of Common Stock
("Performance Options"), the grant of stock appreciation rights ("SARs") and the
sale or grant of restricted stock ("Performance Shares") to key employees of the
Company and its subsidiaries. There are 375,000 shares of Common Stock reserved
for issuance under the 1996 Plan. The 1996 Plan provides for the grant of both
incentive stock options intended to qualify as such under Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), and nonqualified stock
options. The Company's Board of Directors, or a committee thereof, administers
and interprets the 1996 Plan and is authorized to grant Performance Options and
SARs and to grant or sell Performance Shares thereunder to all eligible
employees of the Company, including executive officers and directors (whether or
not employees) of the Company and its subsidiaries. Performance Options intended
to be treated as incentive stock options may only be granted, however, to
employees. Performance Options can be granted under the 1996 Plan on such terms
and at such prices as determined by the board, or a committee thereof, except
that the per share exercise price of Performance Options granted under the 1996
Plan will not be less than 50% of the fair market value of the Common Stock on
the date of grant, and, in the case of a Performance Option intended to be
treated as an incentive stock option granted to any 10% shareholder, the per
share exercise price will not be less than 110% of such fair market value as
defined in the 1996 Plan. Performance Options granted under the 1996 Plan that
would otherwise qualify as incentive stock options will not be treated as
incentive stock options to the extent that the
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aggregate fair market of the shares to which the options relate, which are
exercisable for the first time by any individual during any calendar year,
exceeds $100,000.
Performance Options granted under the 1996 Plan will be exercisable after
the period or periods specified in the option agreement evidencing their grant.
Performance Options granted under the 1996 Plan are not exercisable after the
expiration of fifteen years from the date of grant and are not transferable
other than by will or by the laws of descent and distribution. Adjustments in
the number of shares subject to Performance Options granted under the 1996 Plan
can be made by the Board of Directors or the appropriate committee in the event
of a stock dividend or recapitalization resulting in a stock split-up,
combination or exchange of shares.
As of the date of this Prospectus, there are Performance Options to
purchase an aggregate of 240,000 shares of Common Stock outstanding under the
1996 Plan. Mr. Terenzi has been granted Performance Options to purchase 112,500
shares of Common Stock with a exercise price of $5.00 per share, based upon
management's determination of the fair market value of the Company at the
commencement date of Mr. Terenzi's employment with the Company. Mr. Terenzi's
Performance Options vest over a period of three years (subject to earlier
vesting in certain circumstances). Mr. Curci has been granted Performance
Options to purchase 40,000 shares of Common Stock with an exericse price equal
to the initial public offering price per share of the Common Stock offered
hereby. Mr. Curci's Performance Options vest over a period of five years
(subject to earlier vesting in certain circumstances). No SARs have been granted
and no Performance Shares have been granted or sold under the 1996 Plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
David L. Mason, the Company's President and Chief Executive Officer, and
Thomas A. Schelldorf. the Company's Executive Vice President and Chief Operating
Officer, participated in deliberations of the Company's Board of Directors
concerning executive officer compensation during 1995.
CERTAIN TRANSACTIONS
REORGANIZATION
The Company was incorporated in October 1996 to act as a holding company
for the business previously conducted by the Predecessor Corporations which
owned or operated various aspects of the Company's HOPS GRILL & BAR restaurant
system. Pursuant to the terms of the Exchange Agreement, the Company and each of
the shareholders of the Predecessor Corporations have agreed that on the
Exchange Date, the Company will exchange its Common Stock for all of the
outstanding common stock of each of the Predecessor Corporations. Under the
terms of the Exchange Agreement, each of the shareholders of the Predecessor
Corporations will receive, in consideration for the exchange of the outstanding
capital stock of the Predecessor Corporations, shares of the Company's Common
Stock, such that prior to the completion of this offering, the shareholders of
the Predecessor Corporations will own all of the Common Stock of the Company.
See "Reorganization and Prior S Corporation Status."
EARNINGS DISTRIBUTIONS
Since their inception, each of the Predecessor Corporations has been
treated as an S corporation for federal and state income tax purposes. As a
result, the earnings of the Predecessor Corporations have been taxed, for
federal and state income tax purposes, directly to the shareholders
of the Predecessor Corporations. Upon the completion of the Reorganization, the
Company will become responsible for the payment of federal and state income
taxes on its earnings.
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The Predecessor Corporations paid cash dividends to their shareholders in
the aggregate amounts of $365,000, $844,000, $1,424,000, and $1,467,000
representing funds available for distribution, including funds necessary to pay
federal and state income tax obligations, during the years ended December 31,
1993, 1994 and 1995, and during the six months ended June 30, 1996,
respectively. Immediately prior to the Reorganization and in contemplation of
the terms of the New Facility, the Predecessor Corporations will distribute to
their shareholders funds which were previously restricted under the Predecessor
Corporations' prior lending arrangement (approximately $1.2 million as of June
30, 1996). Such restricted funds would have been previously distributed by the
Predecessor Corporations in accordance with their past practice, but for the
restrictions contained in the prior lending arrangement. See "-Reorganization."
INDEBTEDNESS AND GUARANTEES
As of September 30, 1996, the Company currently had an aggregate of
approximately $18.3 million in term loans with Trans Financial Bank, N.A.,
Bowling Green, Kentucky (the "Bank") which bear interest at the Bank's prime
rate plus 0.50% to 1.25%. The Company plans to use all of the proceeds of this
offering and to draw approximately $ million from the New Facility to
repay this indebtedness. Messrs. Mason and Schelldorf personally guaranteed the
existing loans and will be relieved of their obligations under such loans upon
consummation of this offering. Such shareholders will, however, personally
guarantee the Company's New Facility.
APPROVAL BY DISINTERESTED DIRECTORS
The foregoing transactions were entered into between related parties and
were not the result of arms-length negotiations. Accordingly, certain of the
terms of these transactions may be more or less favorable to the Company than
might have been obtained from unaffiliated third parties. The Company will not
enter into any future transactions in which the directors, executive officers or
principal shareholders of the Company and their affiliates have a material
interest unless such transactions are approved by a majority of the
disinterested members of the Board of Directors and are on terms that are no
less favorable to the Company than those that the Company could obtain from
unaffiliated third parties.
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PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock as of the date of this
Prospectus (assuming consummation of the Reorganization), and as adjusted to
reflect the sale of the shares offered by this Prospectus, by (i) each person
known by the Company to own beneficially more than 5% of the Company's Common
Stock, (ii) each executive officer and director of the Company, and (iii) all
executive officers and directors of the Company as a group. Except as otherwise
noted, all holders listed below have sole voting power and investment power over
the shares beneficially owned by them, except to the extent such power may be
shared with such person's spouse.
PERCENT OF SHARES
SHARES BENEFICIALLY OWNED(2)
BENEFICIALLY ---------------------------------
NAME AND ADDRESS(1) OWNED BEFORE OFFERING AFTER OFFERING
------------------- ------------ --------------- ---------------
David L. Mason.............. 735,000(3) 32.7% %
Thomas A. Schelldorf........ 735,000(4) 32.7% %
Mason and Schelldorf
Leasing Company ............ 600,000(5) 26.7% %
Timothy V. Curci............ 112,500 5.0% %
Terence M. Terenzi.......... 28,125(6) 1.2% %
All directors and officers
as a group (4 persons).... 2,210,625 97.0% %
(1) The mailing address of each person or entity isted below is 3030 N.
Rocky Point Drive West, Suite 650, Tampa, Florida 33607.
(2) The percentages shown include the shares of Common Stock actually owned as
of the date of this Prospectus and the shares of Common Stock which the
person or group had the right to acquire within 60 days of such date. In
calculating the percentage of ownership, all shares of Common Stock which
the identified person or group had the right to acquire within 60 days of
the date of this Prospectus upon the exercise of options are deemed to be
outstanding for the purpose of computing the percentage of the shares of
Common Stock owned by such person or group, but are not deemed to be
outstanding for the purpose of computing the percentage of the shares of
Common Stock owned by any other person.
(3) Does not include 600,000 shares of Common Stock of which Mr. Mason may be
deemed to be the beneficial owner as a result of his ownership of a 50%
interest in Mason and Schelldorf Leasing Company. See Note 5.
(4) Does not include 600,000 shares of Common Stock of which Mr. Schelldorf may
be deemed to be the beneficial owner as a result of his ownership of a 50%
interest in Mason and Schelldorf Leasing Company. See Note 5.
(5) A general partnership in which Mr. Mason and Mr. Schelldorf each own a 50%
general partner interest. Mr. Mason and Mr. Schelldorf each disclaims
beneficial ownership of one-half of the shares held of record by Mason and
Schelldorf Leasing Company.
(6) Consists of currently exercisable options to purchase 28,125 shares of
Common Stock held by Mr. Terenzi.
DESCRIPTION OF SECURITIES
GENERAL
The authorized capital stock of the Company consists of 25,000,000 shares
of Common Stock, par value $0.01 per share, and 1,000,000 shares of Preferred
Stock, par value $0.01 per share. As of the date of this Prospectus, there were
issued and outstanding 2,250,000 shares of Common Stock held of record by five
shareholders (after giving effect to the issuance of Common Stock pursuant to
the Reorganization).
The following description is qualified in its entirety by reference to the
Company's Articles of Incorporation and Bylaws, which are filed as exhibits to
the Registration Statement of which this Prospectus is a part.
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COMMON STOCK
The holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of shareholders. Cumulative voting in
the election of directors is not permitted. Subject to preferences that may be
granted to holders of Preferred Stock, holders of Common Stock are entitled to
receive ratably such dividends as may be declared by the Board of Directors out
of funds legally available therefor. See "Dividend Policy." In the event of
liquidation, dissolution or winding up of the Company, holders of Common Stock
are entitled to share ratably in all assets remaining after payment of
liabilities and liquidation preference, if any, which may be granted to the
holders of Preferred Stock. Holders of Common Stock have no conversion,
preemptive or other rights to subscribe for additional shares or other
securities, and there are no redemption or sinking fund provisions with respect
to such shares. The issued and outstanding shares of Common Stock are, and the
shares offered hereby will be upon payment therefor, fully paid and
nonassessable.
PREFERRED STOCK
The Board of Directors has the authority to issue up to 1,000,000 shares
of Preferred Stock in one or more series and to fix the number of shares
constituting any such series and the rights and preferences thereof, including
dividend rates, terms of redemption (including sinking fund provisions),
redemption price or prices, voting rights, conversion rights and liquidation
preferences of the shares constituting such series, without any further vote or
action by the Company's shareholders. The issuance of Preferred Stock by the
Board of Directors could adversely affect the rights of holders of Common Stock.
For example, an issuance of Preferred Stock could result in a class of
securities outstanding that would have preferences over the Common Stock with
respect to dividends and liquidations, and that could (upon conversion or
otherwise) enjoy all of the rights appurtenant to Common Stock.
CERTAIN STATUTORY AND OTHER PROVISIONS
STATUTORY PROVISIONS. The Company is subject to certain anti-takeover
provisions under Florida law that apply to a public corporation organized under
Florida law unless the corporation has elected to opt out of such provisions in
its Articles of Incorporation or (depending on the provision in question) its
Bylaws. The Company has not elected to opt out of certain of these provisions.
The Florida Business Corporation Act (the "Florida Act") contains a provision
that prohibits the voting of shares in a publicly held Florida corporation which
are acquired in a "control share acquisition" unless the board of directors
approves the control share acquisition or the holders of a majority of the
corporation's voting shares (exclusive of shares held by officers of the
corporation, inside directors or the acquiring party) approve the granting of
voting rights as to the shares acquired in the control share acquisition. A
control share acquisition is defined as an acquisition that immediately
thereafter entitles the acquiring party to vote in the election of directors
within each of the following ranges of voting power: (i) one-fifth or more but
less than one-third of such voting power; (ii) one-third or more but less than a
majority of such voting power and (iii) a majority or more of such voting power.
This statutory voting restriction is not applicable in certain circumstances set
forth in the Florida Act.
CLASSIFIED BOARD OF DIRECTORS. Under the Company's Articles of
Incorporation and Bylaws, the Board of Directors of the Company is divided into
three classes, with staggered terms of three years each. Each year the term of
one class expires. The Company's Articles of Incorporation provide that any
vacancies on the Board of Directors shall be filled only by the affirmative vote
of a majority of the directors then in office, even if less than a quorum. The
Articles of Incorporation of the Company also provide that any director may be
removed from office, but only for cause.
SPECIAL VOTING REQUIREMENTS. The Company's Articles of Incorporation
provide that all actions taken by the shareholders must be taken at an annual or
special meeting of the shareholders or by unanimous written consent. The
Articles of Incorporation provide that special meetings of the shareholders may
be called by only a majority of the members of the board of directors, the
Chairman
44
<PAGE>
of the Board or the holders of not less than 25% of the Company's outstanding
voting shares. Under the Company's Bylaws, shareholders will be required to
comply with advance notice provisions with respect to any proposal submitted for
shareholder vote, including nominations for elections to the Board of Directors.
The Articles of Incorporation and Bylaws of the Company contain provisions
requiring the affirmative vote of the holders of at least two-thirds of the
Common Stock to amend certain provisions thereof.
INDEMNIFICATION AND LIMITATION OF LIABILITY. The Florida Act authorizes
Florida corporations to indemnify any person who was or is a party to any
proceeding (other than an action by, or in the right of, the corporation), by
reason of the fact that he or she is or was a director, officer, employee, or
agent of the corporation or is or was serving at the request of the corporation
as a director, officer, employee, or agent of another corporation or other
entity, against liability incurred in connection with such proceeding, including
any appeal thereof, if he or she acted in good faith and in a manner he or she
reasonably believed to be in, or not opposed to, the best interests of the
corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful. In the case of an
action by or on behalf of a corporation, indemnification may not be made if the
person seeking indemnification is adjudged liable, unless the court in which
such action was brought determines such person is fairly and reasonably entitled
to indemnification. The indemnification provisions of the Florida Act require
indemnification if a director or officer has been successful on the merits or
otherwise in defense of any action, suit or proceeding to which he or she was a
party by reason of the fact that he or she is or was a director or officer of
the corporation. The indemnification authorized under Florida law is not
exclusive and is in addition to any other rights granted to officers and
directors under the Articles of Incorporation or Bylaws of the corporation or
any agreement between officers and directors and the corporation. A corporation
may purchase and maintain insurance or furnish similar protection on behalf of
any officer or director against any liability asserted against the officer or
director and incurred by the officer or director in such capacity, or arising
out of the status, as an officer or director, whether or not the corporation
would have the power to indemnify him or her against such liability under the
Florida Act.
The Company's Articles of Incorporation provide for the indemnification of
directors and executive officers of the Company to the maximum extent permitted
by Florida law and for the advancement of expenses incurred in connection with
the defense of any action, suit or proceeding that the director or executive
officer was a party to by reason of the fact that he or she is or was a director
or executive officer of the Company upon the receipt of an undertaking to repay
such amount, unless it is ultimately determined that such person is not entitled
to indemnification.
Under the Florida Act, a director is not personally liable for monetary
damages to the Company or any other person for acts or omissions in his or her
capacity as a director except in certain limited circumstances such as certain
violations of criminal law and transactions in which the director derived an
improper person benefit. As a result, shareholders may be unable to recover
monetary damages against directors for actions taken by them which constitute
negligence or gross negligence or which are in violation of their fiduciary
duties, although injunctive or other equitable relief may be available.
The foregoing provisions of the Florida Act and the Company's Articles of
Incorporation and Bylaws could have the effect of preventing or delaying a
person from acquiring or seeking to acquire a substantial equity interest in, or
control of, the Company.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is SunTrust Bank,
Atlanta, Georgia.
45
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon the completion of this offering, the Company will have shares of Common
Stock outstanding ( shares if the Underwriters' over-allotment option is
exercised in full) assuming no stock options are exercised. Of these shares, the
shares of Common Stock sold in this offering ( shares if the Underwriters'
over-allotment option is exercised in full) will be freely tradeable by persons
other than affiliates of the Company, without restriction under the Securities
Act. The remaining 2,250,000 shares of Common Stock will be "restricted
securities" within the meaning of Rule 144 under the Securities Act, and may not
be sold in the absence of registration under the Securities Act unless an
exemption from registration is available, including the exemptions contained in
Rule 144. Commencing two years after the date of the Reorganization, these
2,250,000 shares of Common Stock will become eligible for sale in the open
market, subject to volume and other limitations imposed by Rule 144. Sales of
all or a portion of such shares could have a material adverse effect upon the
price of the Common Stock. However, the directors, executive officers and
principal shareholders of the Company have agreed not to sell, contract to sell
or otherwise dispose of any of these shares of Common Stock for a period of 180
days after the date of this Prospectus without the prior written consent of the
Representative of the Underwriters.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including an affiliate of the Company, who has
beneficially owned his or her shares for at least two years (including the prior
holding period of any prior owner other than an affiliate) is entitled to sell
within any three-month period that number of shares which does not exceed the
greater of 1% of the outstanding shares of the Common Stock, or the average
weekly trading volume during the four calendar weeks preceding each such sale.
Sales under Rule 144 also are subject to certain manner of sale provisions,
notice requirements, and the availability of current public information about
the Company. A person (or persons whose shares are aggregated) who is not or has
not been deemed an "affiliate" of the Company for at least three months, and who
has beneficially owned shares for at least three years (including the holding
period of any prior owner other than an affiliate) would be entitled to sell
such shares under Rule 144 without regard to the limitations discussed above.
The Company has granted options to purchase an aggregate of 240,000
shares of Common Stock. The resale of the shares acquired upon exercise of these
options will be subject to the two-year holding period and the other
restrictions imposed under Rule 144 unless such shares are registered with the
Securities and Exchange Commission (the "Commission") on Form S-8 under the
Securities Act. The Company intends to file a Registration Statement on Form
S-8 but has agreed with the Underwriters not to do so for at least 180 days
after the date of this Prospectus.
Prior to this offering there has been no market for the Common Stock, and
no accurate prediction can be made of the effect, if any, that market sales of
Restricted Stock or of shares subject to stock options or the availability of
these shares for sale will have on the market price of the Common Stock
prevailing from time to time. Sales of substantial amounts of any of these
shares in the public market could adversely affect prevailing market prices for
the Common Stock.
46
<PAGE>
UNDERWRITING
The Underwriters named below, acting through their representative, Raymond
James & Associates, Inc. (the "Representative"), have severally agreed, subject
to the terms and conditions set forth in the Underwriting Agreement, to purchase
from the Company the following respective number of shares of Common Stock at
the public offering price less the underwriting discounts and commissions set
forth on the cover page of this Prospectus:
UNDERWRITER NUMBER OF SHARES
----------- ----------------
Raymond James & Associates, Inc...............
---------
Total......................................
=========
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent, and that the
Underwriters will purchase the total number of shares of Common Stock shown
above if any of such shares are purchased.
The Company has been advised that the Underwriters propose to offer the
shares of Common Stock directly to the public at the public offering price set
forth on the cover page of this Prospectus and to certain dealers at such price
less a concession not in excess of $ per share. The Underwriters may
allow, and such dealers may reallow, a concession not in excess of $
per share to certain other dealers. After the public offering, the public
offering price and other selling terms may be changed by the Underwriters.
The Company has granted the Underwriters an option, exercisable not later
than 30 days after the date of this Prospectus, to purchase up to an aggregate
of additional shares of Common Stock at the public offering price, less
the underwriting discounts and commissions set forth on the cover page of this
Prospectus. To the extent that the Underwriters exercise such option, each of
the Underwriters will have a firm commitment to purchase approximately the same
percentage thereof which the number of shares of Common Stock to be purchased by
it shown in the above table bears to the total shown, and the Company will be
obligated, pursuant to the option, to sell such shares to the Underwriters. The
Underwriters may exercise this option only to cover over-allotments made in
connection with the sale of the shares of Common Stock offered hereby. If
purchased, the Underwriters will sell such additional shares on the same terms
as those on which the shares of Common Stock offered hereby are being offered.
The Company has agreed to indemnify the Underwriters against, and to
contribute to losses arising out of, certain civil liabilities, including
liabilities under the Securities Act.
The Representative has informed the Company that the Underwriters do not
intend to confirm sales to any accounts over which they exercise discretionary
authority.
The Company has agreed that it will not directly or indirectly offer, sell
or otherwise dispose of any shares of Common Stock or any securities convertible
into or exercisable or exchangeable for, or any rights to purchase or acquire,
Common Stock for a period of 180 days following the date of this Prospectus
without the prior written consent of the Representative. The directors and
executive officers of the Company have entered into a similar agreement not to
dispose of shares for a period of 180 days without the prior written consent of
the Representative.
47
<PAGE>
Prior to this offering there has been no public trading market for the
Company's securities. The public offering price of the shares of Common Stock
will be determined by negotiations among the Company and the Representative of
the Underwriters. Among the factors to be considered in such negotiations will
be prevailing market conditions, the price-earnings ratio of publicly traded
companies that the Company and the Representative of the Underwriters believe to
be comparable to the Company, the results of operations of the Company in recent
periods, estimates of the business potential of the Company, the present state
of the Company's development, and other factors deemed to be relevant. The
Company has applied for the Common Stock to be approved for quotation subject to
official notice of issuance on the Nasdaq National Market under the symbol HOPS.
Following the offering, the Representative of the Underwriters intends to serve
as a market maker for the Company's Common Stock.
The foregoing includes a summary of the principal terms of the
Underwriting Agreement and does not purport to be complete. Reference is made to
the copy of the Underwriting Agreement which is on file as an exhibit to the
Registration Statement of which this Prospectus is a part.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Fowler, White, Gillen, Boggs, Villareal and Banker,
P.A., Tampa, Florida. Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel,
P.A., Miami, Florida is acting as counsel for the Underwriters in connection
with certain legal matters relating to the shares of Common Stock offered
hereby.
EXPERTS
The combined financial statements of the Predecessor Corporations, as of
December 31, 1994 and 1995, and June 30, 1996, and for each of the years in the
three-year period ended December 31, 1995, and for the six-month period ended
June 30, 1996, and the balance sheet of Hops Grill & Bar, Inc. as of October 1,
1996, included herein and elsewhere in the Registration Statement have been
included herein and in the Registration Statement in reliance upon the reports
of KPMG Peat Marwick LLP, independent certified public accountants, appearing
elsewhere herein, and upon the authority of that firm as experts in accounting
and auditing.
48
<PAGE>
AVAILABLE INFORMATION
The Company has filed a Registration Statement on Form S-1 (the
"Registration Statement") with the Commission under the Securities Act in
respect of the Common Stock offered hereby. For purposes of this Prospectus, the
term "Registration Statement" means the initial Registration Statement and any
and all amendments thereto. This Prospectus omits certain information contained
in the Registration Statement as permitted by the rules and regulations of the
Commission. For further information with respect to the Company and the Common
Stock offered hereby, reference is made to the Registration Statement, including
the exhibits thereto. Statements herein concerning the contents of any contract
or other document are not necessarily complete, and in each instance reference
is made to such contract or other document filed with the Commission as an
exhibit to the Registration Statement, or otherwise, each such statement, being
qualified by and subject to such reference in all respects.
As a result of this offering, the Company will become subject to the
informational requirements of the Exchange Act, and in accordance therewith will
file reports, proxy and information statements, and other information with the
Commission. Reports, registration statements, proxy and information statements,
and other information filed by the Company with the Commission can be inspected
and copied at the public reference facilities maintained by the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and
at its regional offices located at 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661; and Seven World Trade Center, Suite 1300, New York, New York
10048. Copies of these material may be obtained at prescribed rates from the
Public Reference Section of the Commission at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549. The Commission maintains a site on the World Wide Web
(http://www.sec.gov) that contains reports, registration statements, proxy and
information statements, and other information.
49
<PAGE>
Index to Financial Statements
PAGE
----
HOPS GRILL & BAR, INC.:
Independent Auditors' Report F-2
Balance Sheet as of October 1, 1996 F-3
PREDECESSOR CORPORATIONS:
Independent Auditors' Report F-4
Combined Balance Sheets as of December 31, 1994 and 1995
and June 30, 1996 F-5
Combined Statements of Earnings for the
Years Ended December 31, 1993, 1994 and 1995 and
the Six Months Ended June 30, 1996 F-6
Combined Statements of Shareholders'Equity for the
Years Ended December 31, 1993, 1994 and 1995 and
the Six Months Ended June 30, 1996 F-7
Combined Statements of Cash Flows for the
Years Ended December 31, 1993, 1994 and 1995 and
the Six Months Ended June 30, 1996 F-8
Notes to Combined Financial Statements F-9
HOPS GRILL & BAR, INC.:
Unaudited Pro Forma Consolidated Financial Information F-15
Unaudited Pro Forma Consolidated Balance Sheet as of June 30, 1996 F-16
Unaudited Pro Forma Consolidated Statement of
Earnings for the Six Months Ended June 30, 1996 F-17
Unaudited Pro Forma Consolidated Statement of
Earnings for the Year Ended December 31, 1995 F-18
Unaudited Pro Forma Consolidated Statement of
Earnings for the Year Ended December 31, 1994 F-19
Unaudited Pro Forma Consolidated Statement of
Earnings for the Year Ended December 31, 1993 F-20
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Shareholders of Hops Grill & Bar, Inc.
We have audited the accompanying balance sheet of Hops Grill & Bar, Inc. as of
October 1, 1996. This balance sheet is the responsibility of the Company's
management. Our responsibility is to express an opinion on the balance sheet
based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the balance sheet is free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the balance sheet. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall balance sheet presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of Hops Grill & Bar, Inc. as of
October 1, 1996, in conformity with generally accepted accounting principles.
/s/ KPMG PEAT MARWICK LLP
Tampa, Florida
October 10, 1996
F-2
<PAGE>
HOPS GRILL & BAR, INC.
Balance Sheet
October 1, 1996
ASSETS
Cash $ -
=======
LIABILITIES AND SHAREHOLDERS' EQUITY
Shareholers' equity:
Preferred stock, $0.01 par value; 1,000,000 shares
authorized; no shares issued or outstanding $ -
Common stock, $0.01 par value; 25,000,000 shares
authorized; no shares issued or outstanding -
-------
$ -
=======
Note:
1. Hops Grill & Bar, Inc. incorporated October 1, 1996, is organizing an
initial public offering and will act as a holding company for the
Predecessor Corporations. Pursuant to an agreement (the "Share Exchange
Agreement"), which will be enetered into prior to the effectiveness of the
public offering, Hops Grill & Bar, Inc. will issue its common stock in
exchange for all of the outstanding common stock of the Predecessor
Corporations, and each shareholder of the Predecessor Corporations will
receive shares of common stock of Hops Grill & Bar, Inc. The combination
will be accounted for using the pooling-of-interests method in accordance
with APB 16. Upon this combination, the consolidated financial statements of
Hops Grill & Bar, Inc. will consist of the combined financial statements of
the Predecessor Corporations, except for the changes in shareholders' equity
to reflect the share exchange.
F-3
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Shareholders of the Predecessor Corporations:
We have audited the accompanying combined balance sheets of the Predecessor
Corporations (the entities defined in note 1) as of December 31, 1994 and 1995
and June 30, 1996, and the related combined statements of earnings,
shareholders' equity and cash flows for the years ended December 31, 1993, 1994
and 1995 and the six months ended June 30, 1996. These financial statements are
the responsibility of management of the Predecessor Corporations. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of the Predecessor
Corporations as of December 3 1, 1994 and 1995, and the results of their
operations and their cash flows for the years ended December 31, 1993, 1994 and
1995 and the six months ended June 30, 1996, in conformity with generally
accepted accounting principles.
/s/ KPMG PEAT MARWICK LLP
Tampa, Florida
October 2, 1996
F-4
<PAGE>
<TABLE>
<CAPTION>
PREDECESSOR CORPORATIONS
COMBINED BALANCE SHEETS
DECEMBER 31, 1994 AND 1995
AND JUNE 30, 1996
DECEMBER 31, JUNE 30,
ASSETS 1994 1995 1996
----------- ---------- ----------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 259,000 410,000 616,000
Restricted cash and investments 1,210,000 1,218,000 1,188,000
Accounts receivable 12,000 61,000 125,000
Preopening costs, net 98,000 263,000 555,000
Inventories 183,000 408,000 584,000
Other current assets 120,000 103,000 116,000
----------- ---------- ----------
Total current assets 1,882,000 2,463,000 3,184,000
Property and equipment, net
(note 2) 10,991,000 18,455,000 22,905,000
Other assets 368,000 828,000 1,017,000
----------- ---------- ----------
$13,241,000 21,746,000 27,106,000
=========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,051,000 1,603,000 2,567,000
Sales taxes payable 89,000 137,000 151,000
Accrued payroll and payroll taxes 369,000 551,000 727,000
Other accrued expenses 410,000 824,000 603,000
Current portion of long-term debt(note 3) 597,000 692,000 2,344,000
----------- ---------- ----------
Total current liabilities 2,516,000 3,807,000 6,392,000
Deferred rent 186,000 187,000 181,000
Long-term debt (note 3) 7,969,000 11,737,000 14,197,000
Other long-term liabilities -- 100,000 102,000
Interest of minority partners 54,000 1,805,000 1,980,000
----------- ---------- ----------
Total liabilities 10,725,000 17,636,000 22,852,000
----------- ---------- ----------
Shareholders' equity:
Common stock -- -- --
Additional paid-in capital 2,183,000 4,110,000 4,215,000
Retained earnings 333,000 -- 39,000
----------- ---------- ----------
Total shareholders' equity 2,516,000 4,110,000 4,254,000
Commitments and contingencies
----------- ---------- ----------
$13,241,000 21,746,000 27,106,000
=========== ========== ==========
</TABLE>
See accompanying notes to combined financial statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
PREDECESSOR CORPORATIONS
COMBINED STATEMENTS OF EARNINGS
YEARS ENDED DECEMBER 31, 1993, 1994, AND 1995 AND SIX MONTHS
ENDED JUNE 30, 1996
YEARS ENDED SIX MONTHS
DECEMBER 31, ENDED
---------------------------------------------- JUNE 30,
1993 1994 1995 1996
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
Sales $ 12,120,000 20,189,000 28,314,000 20,331,000
Restaurant operating expenses:
Cost of sales 3,822,000 6,600,000 9,070,000 6,610,000
Labor and other related expenses 3,404,000 5,792,000 8,147,000 5,692,000
Other restaurant operating expenses 2,762,000 4,569,000 6,811,000 3,987,000
Depreciation and amortization 286,000 800,000 1,242,000 893,000
------------ ----------- ----------- -----------
Total restaurant operating
expenses 10,274,000 17,761,000 25,270,000 17,182,000
------------ ----------- ----------- -----------
Income from restaurant
operations 1,846,000 2,428,000 3,044,000 3,149,000
General and administrative expenses 634,000 1,544,000 2,036,000 774,000
------------ ----------- ----------- -----------
Operating income 1,212,000 884,000 1,008,000 2,375,000
------------ ----------- ----------- -----------
Interest expense, net (158,000) (506,000) (939,000) (606,000)
Other income (loss) 18,000 (71,000) (25,000) (124,000)
------------ ----------- ----------- -----------
Net income before elimination of
minority partners' interest 1,072,000 307,000 44,000 1,645,000
Elimination of minority
partners' interest -- 6,000 43,000 139,000
------------ ----------- ----------- -----------
Net income $ 1,072,000 301,000 1,000 1,506,000
============ =========== =========== ===========
Unaudited pro forma adjustment to
reflect income taxes $ 407,000 114,000 -- 572,000
============ =========== =========== ===========
Unaudited pro forma net income $ 665,000 187,000 1,000 934,000
============ =========== =========== ===========
Unaudited pro forma net income
per share $ .30 .08 -- .41
============ =========== =========== ===========
Unaudited pro forma
shares outstanding 2,250,000 2,250,000 2,250,000 2,250,000
============ =========== =========== ===========
See accompanying notes to combined financial statements.
</TABLE>
F-6
<PAGE>
<TABLE>
<CAPTION>
PREDECESSOR CORPORATIONS
COMBINED STATEMENTS OF SHAREHOLDERS'EQUITY
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
AND SIX MONTHS ENDED JUNE 30, 1996
ADDITIONAL TOTAL
COMMON PAID-IN RETAINED SHAREHOLDERS'
STOCK CAPITAL EARNINGS EQUITY
------- ---------- ---------- -------------
<S> <C> <C> <C> <C>
Balances, December 31, 1992 $ -- 76,000 169,000 245,000
Issuance of common stock -- 21,000 -- 21,000
Net income -- -- 1,072,000 1,072,000
Dividends and distributions -- -- (365,000) (365,000)
------- ---------- ---------- ----------
Balances, December 31, 1993 -- 97,000 876,000 973,000
Issuance of conunon stock -- 40,000 -- 40,000
Contributions -- 2,046,000 -- 2,046,000
Net income -- -- 301,000 301,000
Dividends and distributions -- -- (844,000) (844,000)
------- ---------- ---------- ----------
Balances, December 31, 1994 -- 2,183,000 333,000 2,516,000
Issuance of common stock -- 10,000 -- 10,000
Contributions -- 3,007,000 -- 3,007,000
Net income -- -- 1,000 1,000
Dividends and distributions -- (1,090,000) (334,000) (1,424,000)
------- ---------- ---------- ----------
Balances, December 31, 1995 -- 4,110,000 -- 4,110,000
Contributions -- 105,000 -- 105,000
Net income -- -- 1,506,000 1,506,000
Dividends and distributions -- -- (1,467,000) (1,467,000)
------- ---------- ---------- ----------
Balances, June 30, 1996 $ -- 4,215,000 39,000 4,254,000
======= ========== ========== ==========
</TABLE>
See accompanying notes to combined financial statements.
F-7
<PAGE>
<TABLE>
<CAPTION>
PREDECESSOR CORPORATIONS
COMBINED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
AND SIX MONTHS ENDED JUNE 30, 1996
YEARS ENDED SIX MONTHS
DECEMBER 31, ENDED
------------------------------------------- JUNE 30,
1993 1994 1995 1996
------------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income $ 1,072,000 301,000 1,000 1,506,000
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and amortization 286,000 800,000 1,273,000 915,000
Loss on disposal of fixed assets -- -- 60,000 92,000
Minority interest income -- 6,000 43,000 139,000
(Increase) decrease in accounts receivable 6,000 (10,000) (49,000) (64,000)
Increase in inventories (66,000) (9,000) (225,000) (176,000)
Increase in other current assets and other assets (47,000) (296,000) (443,000) (202,000)
Increase in preopening costs (103,000) (258,000) (588,000) (617,000)
Increase in accounts payable 319,000 392,000 552,000 964,000
Increase (decrease) in accrued expenses
and other liabilities 244,000 394,000 745,000 (35,000)
----------- ---------- ---------- ----------
Net cash provided by operating activities 1,711,000 1,320,000 1,369,000 2,522,000
----------- ---------- ---------- ----------
Cash flows from investing activities:
Additions to property and equipment (3,223,000) (6,849,000) (8,374,000) (5,132,000)
Proceeds from sale of property and equipment -- 73,000 -- --
Sale (purchases) of marketable securities, net (114,000) 75,000 66,000 (28,000)
----------- ---------- ---------- ----------
Net cash used in investing activities (3,337,000) (6,701,000) (8,308,000) (5,160,000)
----------- ---------- ---------- ----------
Cash flows from financing activities:
Proceeds from long-term debt 3,078,000 4,899,000 7,224,000 4,513,000
Repayments of long-term debt (503,000) (692,000) (3,361,000) (401,000)
Capital contributions and issuance of common stock 21,000 2,086,000 3,017,000 105,000
Proceeds from minority partners contributions -- 48,000 1,961,000 285,000
Dividends to shareholders and minority partners (365,000) (844,000) (1,677,000) (1,716,000)
----------- ---------- ---------- ----------
Net cash provided by financing activities 2,231,000 5,497,000 7,164,000 2,786,000
----------- ---------- ---------- ----------
Increase in cash and cash equivalents 605,000 116,000 225,000 148,000
Cash and cash equivalents, beginning of year 551,000 1,156,000 1,272,000 1,497,000
----------- ---------- ---------- ----------
Cash, and cash equivalents, end of year $ 1,156,000 1,272,000 1,497,000 1,645,000
=========== ========== ========== ==========
Supplemental disclosure of cash flow information:
Interest paid $ 186,000 543,000 957,000 622,000
=========== ========== ========== ==========
Interest capitalized $ 59,000 130,000 84,000 43,000
=========== ========== ========== ==========
</TABLE>
See accompanying notes to combined financial statements.
F-8
<PAGE>
PREDECESSOR CORPORATIONS
NOTES TO COMBINED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) PURPOSE AND ORGANIZATION
The combined financial statements presented herein include the accounts
of the following corporations (the "Predecessor Corporations"):
<TABLE>
<CAPTION>
<S> <C> <C>
Hops Grill & Brewery, Inc. Hops of St. Petersburg, Inc.
Hops of Carrollwood, Inc. Hops of Greater West Palm Beach, Inc.
Hops of South Tampa, Inc. Hops of the Ohio Valley, Inc.
Hops of North Tampa, Inc. Hops Partners, Inc.
Hops of Southwest Florida, Inc. Partners II, Inc.
Hops of Southeast Florida, Inc. Hops Partners III, Inc.
Hops of Northeast Florida, Inc. Hops Marketing, Inc.
Hops of Greater Orlando, Inc. Toomy LCN, Inc.
Hops of the Rockies, Inc. Hops Restaurants, Inc.
Cypress Coast Construction Corporation Hops of Port Richey, Inc.
Hops of Palm Harbor, Inc.
</TABLE>
The combined financial statements also include certain assets and
liabilities of Mason and Schelldorf Leasing Company related to land and
brewery equipment. The assets are included in the combined financial
statements as if the Predecessor Corporations had owned them from their
inception.
All significant intercompany accounts have been eliminated in
combination.
The Predecessor Corporations own and operate various aspects of the
"Hops Grill & Bar" restaurant system. As of June 30, 1996, the
restaurant system included sixteen full service, casual dining
restaurants, each of which features an on premise microbrewery. Thirteen
of the restaurants are owned and operated by the Predecessor
Corporations, and three are owned and operated by a joint venture which
is controlled by the Predecessor Corporations.
Hops Grill & Bar, Inc., incorporated in October 1996, is organizing an
initial public offering and will act as a holding company for the
Predecessor Corporations. Pursuant to an agreement (the "Share Exchange
Agreement"), which will be entered into prior to the effectiveness of
the public offering, Hops Grill & Bar, Inc. will issue its common stock
in exchange for all of the outstanding common stock of the Predecessor
Corporations, and each shareholder of the Predecessor Corporations will
receive shares of common stock of Hops Grill & Bar, Inc. The combination
will be accounted for using the pooling-of-interests method in
accordance with APB 16. Upon this combination, the consolidated
financial statements of Hops Grill & Bar, Inc. will consist of the
combined financial statements of the Predecessor Corporations except for
the changes in shareholders' equity to reflect the share exchange.
(B) CASH AND CASH EQUIVALENTS
All highly liquid investments purchased with an original maturity of
less than three months are considered to be cash equivalents. Cash and
cash equivalents, as presented in the combined statements of cash flows,
include restricted cash in money market accounts.
(Continued)
F-9
<PAGE>
PREDECESSOR CORPORATIONS
NOTES TO COMBINED FINANCIAL STATEMENTS
(C) RESTRICTED CASH AND INVESTMENTS
In connection with the existing lending arrangment, certain restaurants
are required to make monthly deposits into a money market account held
by the lender. These funds, along with the marketable equity securities
described below, are restricted and cannot be released without the
approval of the lender.
Marketable equity securities are carried at the lower of aggregate cost
or market value. Marketable equity securities are accounted for under
Statement of Financial Accounting Standards No. 115, ACCOUNTING FOR
CERTAIN INVESTMENTS IN DEBT AND EQUITY SECURITIES. Under this statement,
marketable securities are classified as "trading securities" and are
carried at current market value with an offsetting adjustment to
earnings. The market value of equity securities at December 31, 1994
and 1995 was $197,000 and $131,000, respectively, and $159,000 at
June 30, 1996.
(D) INVENTORIES
Inventories consist of food and beverages, and are stated at the lower
of cost ("first-in, first-out") or market.
(E) PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation and amortization
are provided on a straight-line basis over the estimated useful lives of
the related assets, which range from 5 to 25 years.
(F) CONSTRUCTION IN PROGRESS
All direct costs incurred in the construction of restaurants are
capitalized. Upon opening, these costs are amortized and charged to
expense, based upon their classification as equipment or leasehold
improvements. Any interest expense incurred during construction is
capitalized.
(G) PREOPENING COSTS
Direct incremental costs incurred prior to the opening of new
restaurants are capitalized and amortized over a period of twelve
months. These costs consist primarily of labor costs, costs associated
with hiring and training personnel, and certain other initial opening
expenses. Amortization expense was approximately $37,000, $260,000 and
$418,000 in 1993, 1994 and 1995, respectively, and approximately
$325,000 for the six months ended June 30, 1996.
(Continued)
F-10
<PAGE>
PREDECESSOR CORPORATIONS
NOTES TO COMBINED FINANCIAL STATEMENTS
(H) INCOME TAXES
Profits or losses of the S Corporations combined in these financial
statements are reflected in the individual tax returns of the
shareholders. Distributions to shareholders are, at a minimum, declared
each year in an estimated amount necessary to cover income taxes
incurred by the individual shareholders on taxable profits of the S
Corporations.
The minority partners' interest includes no provision or liability for
income taxes, as such interest and any tax liability related thereto is
the responsibility of the individual minority partners.
As described in note 1(a), Hops Grill & Bar, Inc. is organizing an
initial public offering of common stock, which if completed, will change
the income tax status of the Predecessor Corporations and the
Predecessor Corporations will no longer be eligible for S Corporation
status. At that time, Hops Grill & Bar, Inc. will adopt Statement of
Financial Accounting Standards No. 109, ACCOUNTING FOR INCOME TAXES
(Statement 109). Statement 109 requires the use of the asset and
liability method of accounting for income taxes. Under the asset and
liability method of Statement 109, deferred income taxes are recognized
for the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities
and their respective tax bases.
If the Predecessor Corporations' S Corporation status terminated on June
30, 1996, the net deferred tax liability would be approximately $200,000
(unaudited).
The unaudited pro forma adjustment to reflect income taxes included in
the accompanying combined statements of earnings is for informational
purposes only, and has been calculated at the approximate combined
federal and state statutory rate of 38%.
(I) UNAUDITED PRO FORMA NET INCOME PER SHARE
Unaudited pro forma net income per share is calculated assuming that the
2,250,000 shares of Hops Grill & Bar, Inc.'s common stock to be
outstanding upon consummation of the Share Exchange described in note l
(a) were outstanding at the beginning of each year presented.
(J) USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements, and the reported amount of revenues and expenses
during the reporting period. Actual results could differ from these
estimates.
(Continued)
F-11
<PAGE>
(2) PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
1994 1995 1996
------------ ----------- -----------
<S> <C> <C> <C>
Land $ 2,979,000 4,994,000 5,113,000
Buildings and leasehold improvements 4,658,000 8,417,000 11,024,000
Brewery equipment 1,222,000 1,749,000 2,268,000
Other restaurant equipment 2,687,000 4,222,000 5,194,000
Construction in progress 578,000 1,009,000 1,794,000
------------ ----------- -----------
12,124,000 20,391,000 25,393,000
Less accumulated depreciation (1,133,000) (1,936,000) (2,488,000)
------------ ----------- -----------
$ 10,991,000 18,455,000 22,905,000
============ =========== ===========
</TABLE>
<TABLE>
<CAPTION>
PREDECESSOR CORPORATIONS
NOTES TO COMBINED FINANCIAL STATEMENTS
1994 1995 1996
----------- ---------- ----------
<S> <C> <C> <C>
(3) LONG-TERM DEBT
Long-term debt consists of the following:
Notes payable to bank, interest at prime
plus .50% to 1.25% (9.0% to 9.75% at
December 31, 1994 and 1995, and 8.75%
to 9.5% at June 30, 1996); principal and
interest due monthly, maturing December
1996 through May 2011, collateralized
by buildings, improvements, equipment,
and personally guaranteed by certain
shareholders $ 8,566,000 12,429,000 16,541,000
Less current installments (597,000) (692,000) (2,344,000)
----------- ---------- ----------
Long-term debt, less current
installments $ 7,969,000 11,737,000 14,197,000
=========== ========== ==========
</TABLE>
Aggregate maturities of long-term debt at June 30, 1996 are as follows for
the period ended December 3 1:
1996 $ 1,900,000
1997 1,090,000
1998 1,120,000
1999 1,100,000
2000 1,100,000
Thereafter 10,231,000
-----------
$ 16,541,000
===========
(Continued)
F-12
<PAGE>
PREDECESSOR CORPORATIONS
NOTES TO COMBINED FINANCIAL STATEMENTS
As described in note 1(c), there are certain restrictions on cash and
investments within the current lending agreement.
Upon completion of the initial public offering as discussed in note l(a),
Hops Grill & Bar, Inc. will enter into a new $20,000,000 credit facility
(the "New Facility") with its existing lender. The New Facility will bear
interest at the prime rate, or at the Company's option, at LIBOR plus 2.5%,
and will mature two years from the closing of the loan.
The credit agreement will contain customary representations, warranties and
covenants, as well as prohibitions against any other indebtedness without
the consent of the lender, except for normal trade credit and liabilities,
minor equipment leases, and a prohibition of the payment of dividends. The
New Facility will be secured by a pledge of all of the outstanding common
stock of the Predecessor Corporations, and will be guaranteed by certain
shareholders. In connection with the New Facility, previous restrictions on
cash and investments will terminate.
(4) COMMITMENTS
Restaurant properties, office facilities, and certain equipment are leased
under operating leases, most of which contain renewal options. Total rental
expense was approximately $358,000, $558,000 and $813,000 for the years
ended December 31, 1993, 1994 and 1995, respectively, and $504,000 for the
six months ended June 30, 1996.
Future minimum lease payments under noncancelable operating leases as of
December 31 are as follows:
1996 $ 870,000
1997 920,000
1998 870,000
1999 740,000
2000 600,000
Thereafter 2,130,000
----------
Total minimum lease payments $ 6,130,000
==========
As a part of his initial employment by the Predecessor Corporations, the
Predecessor Corporations agreed to grant to an executive officer options to
purchase up to five percent of the holding company (now identified as Hops
Grill & Bar, Inc.) to be formed for the Predecessor Corporations based upon
the fair market value of the Predecessor Corporations at the time of his
employment in March 1995. Subsequent to the date of these financial
statements, the Predecessor Corporations fulfilled this contractual
obligation by the issuance of options to purchase 112,500 shares of the
Common Stock of the holding company for the Predecessor Corporations (Hops
Grill & Bar, Inc.) to such executive officer with an exercise price of $5.00
per share. These options vest 25% immediately, and subject to certain events
of acceleration, 25% on each anniversary of such grant over the next 3
years.
(5) RELATED PARTY TRANSACTIONS
At June 30, 1996, accounts receivable included $92,000 due from
shareholders.
(Continued)
F-13
<PAGE>
(6) COMMON STOCK
At June 30, 1996, the Predecessor Corporations had in total 321,100 shares
authorized and 3,211 shares issued and outstanding. The par value of the
common stock varies among the Predecessor Corporations and is either $.25
par value, $.Ol par value or no par value.
F-14
<PAGE>
Unaudited Pro Forma Consolidated Financial Information
The following unaudited pro forma consolidated balance sheet as of June 30, 1996
and the unaudited pro forma consolidated statements of earnings for the years
ended December 3 1, 1993, 1994 and 1995 and for the six months ended June 30,
1996 have been prepared using the audited historical financial statements of
Hops Grill & Bar, Inc. and the audited historical financial statements of the
Predecessor Corporations.
The unaudited pro forma consolidated balance sheet reflects (i) the combination
of Hops Grill & Bar, Inc. and the Predecessor Corporations using the
pooling-of-interests method in accordance with APB No. 16; (ii) a planned
distribution to the shareholders of the Predecessor Corporations and (iii) the
impact of implementing Statement of Financial Accounting Standards No. 109,
ACCOUNTING FOR INCOME TAXES.
The unaudited pro forma consolidated statements of earnings reflect (i) the
combination of Hops Grill & Bar, Inc. and the Predecessor Corporations using the
pooling-of-interests method in accordance with APB No. 16 and (ii) the effect on
earnings if the Company had been treated as a C Corporation rather than an S
Corporation for federal and state income tax purposes.
The unaudited pro forma consolidated balance sheet and the unaudited pro forma
consolidated statements of earnings should be read in conjunction with the
historical financial statements and related notes of Hops Grill & Bar, Inc. and
the Predecessor Corporations included elsewhere in this prospectus.
F-15
<PAGE>
<TABLE>
<CAPTION>
HOPS GRILL & BAR, INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
JUNE 30, 1996
HOPS
HOPS THE GRILL &
GRILL & PREDECESSOR PRO FORMA BAR, INC.
ASSETS BAR, INC. CORPORATIONS ADJUSTMENTS PRO FORMA
----------- ------------ ----------- ----------
<S> <C> <C> <C> <C>
Current assets:
Cash and cashequivalents $ -- 616,000 616,000
Restricted cash and investments -- 1,188,000 (1,188,000)(2) --
Accounts receivable -- 125,000 -- 125,000
Preopening costs, net -- 555,000 -- 555,000
Inventories -- 584,000 -- 584,000
Other current assets -- 116,000 -- 116,000
----------- ----------- ----------- ----------
Total current assets -- 3,184,000 (1,188,000) 1,996,000
Property and equipment, net -- 22,905,000 -- 22,905,000
Other assets -- 1,017,000 -- 1,017,000
----------- ----------- ----------- ----------
$ -- 27,106,000 (1,188,000) 25,918,000
=========== =========== =========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ -- 2,567,000 -- 2,567,000
Sales taxes payable -- 151,000 -- 151,000
Accrued payroll and payroll taxes -- 727,000 -- 727,000
Other accrued expenses -- 603,000 -- 603,000
Current portion of long-term debt -- 2,344,000 -- 2,344,000
----------- ----------- ---------- -----------
Total current liabilities -- 6,392,000 -- 6,392,000
Deterred rent -- 181,000 -- 181,000
Long-term debt -- 14,197,000 -- 14,197,000
Other long-term liabilities -- 102,000 200,000(3) 302,000
Interest of minority partners -- 1,980,000 -- 1,980,000
----------- ----------- ---------- -----------
Total liabilities -- 22,852,000 200,000 23,052,000
----------- ----------- ---------- -----------
Shareholders'equity:
Common stock -- -- 23,000 (1) 23,000
Additional paid-in capital -- 4,215,000 (1,149,000)(2) 3,043,000
(23,000)(1) --
Retained earnings -- 39,000 (39,000)(2) (200,000)
(200,000)(3)
----------- ----------- ---------- -----------
Total shareholders' equity -- 4,254,000 (1,388,000) 2,866,000
Commitments and contingencies
----------- ----------- ---------- -----------
$ -- $27,106,000 (1,188,000) 25,918,000
=========== =========== ========== ===========
<FN>
Notes:
(1) To reflect the share exchange between Hops Grill & Bar, Inc. and the
Predecessor Corporations.
(2) To reflect the planned distribution to shareholders.
(3) To reflect the impact of implementing Statement 109 due to the anticipated
change in tax status.
</FN>
</TABLE>
F-16
<PAGE>
<TABLE>
<CAPTION>
HOPS GRILL & BAR, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
SIX MONTHS ENDED JUNE 30, 1996
HOPS
HOPS THE GRILL &
GRILL & PREDECESSOR PRO FORMA BAR, INC.
BAR, INC. CORPORATIONS ADJUSTMENTS PRO FORMA
---------- ------------ ----------- ----------
<S> <C> <C> <C> <C>
Sales $ 20,331,000 20,331,000
Restaurant operating expenses:
Cost of sales 6,610,000 6,610,000
Labor and other related expenses 5,692,000 5,692,000
Other restaurant operating expenses 3,987,000 3,987,000
Depreciation and amortization 893,000 893,000
---------- ---------- ---------- ----------
Total restaurant operating expenses 17,182,000 17,182,000
---------- ---------- ---------- ----------
Income from restaurant operations 3,149,000 3,149,000
General and administrative expenses 774,000 774,000
---------- ---------- ---------- ----------
Operating income 2,375,000 2,375,000
---------- ---------- ---------- ----------
Interest expense, net (606,000) (606,000)
Other income (loss) (124,000) (124,000)
---------- ---------- ---------- ----------
Net income before elimination
of minority partners' interest 1,645,000 1,645,000
Elimination of minority partners'
interest 139,000 139,000
---------- ---------- ---------- ----------
Net income $ 1,506,000 1,506,000
========== ========== ========== ==========
Unaudited pro forma adjustment to
reflect income taxes $ 572,000(1) 572,000
========== ===========
Unaudited pro forma net income $ 934,000
===========
Unaudited pro forma net income per share $ .41
===========
Unaudited pro forma shares outstanding 2,250,000
===========
<FN>
Note:
(1) Reflects the effect on earnings assuming the Company had been treated as a C
Corporation rather than a S Corporation for federal and state income tax
purposes, and assuming that the combined federal and state income tax rates
approximate 38.0%.
</FN>
</TABLE>
F-17
<PAGE>
<TABLE>
<CAPTION>
HOPS GRILL & BAR, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
YEAR ENDED DECEMBER 31, 1995
HOPS
HOPS THE GRILL &
GRILL & PREDECESSOR PRO FORMA BAR, INC.
BAR, INC. CORPORATIONS ADJUSTMENTS PRO FORMA
---------- ------------ ----------- ----------
<S> <C> <C> <C> <C>
Sales $ 28,314,000 28,314,000
Restaurant operating expenses:
Cost of sales 9,070,000 9,070,000
Labor and other related expenses 8,147,000 8,147,000
Other restaurant operating expenses 6,811,000 6,811,000
Depreciation and amortization 1,242,000 1,242,000
---------- ---------- ---------- ----------
Total restaurant operating expenses 25,270,000 25,270,000
---------- ---------- ---------- ----------
Income from restaurant operations 3,044,000 3,044,000
General and administrative expenses 2,036,000 2,036,000
---------- ---------- ---------- ----------
Operating income 1,008,000 1,008,000
---------- ---------- ---------- ----------
Interest expense, net (939,000) (939,000)
Other income (loss) (25,000) (25,000)
---------- ---------- ---------- ----------
Net income before elimination
of minority partners' interest 44,000 44,000
Elimination of minority partners' interest 43,000 43,000
---------- ---------- ---------- ----------
Net income $ 1,000 1,000
========== ========== ========== ==========
Unaudited pro forma adjustment to
reflect income taxes $ -- (1)
========== ==========
Unaudited pro forma net income $ 1,000
==========
Unaudited pro forma net income per share $ --
==========
Unaudited pro forma shares outstanding 2,250,000
==========
<FN>
Note:
(1) Reflects the effect on earnings assuming the Company had been treated as a C
Corporation rather than a S Corporation for federal and state income tax
purposes, and assuming that the combined federal and state income tax rates
approximate 38.0%.
</FN>
</TABLE>
F-18
<PAGE>
<TABLE>
<CAPTION>
HOPS GRILL & BAR, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
YEAR ENDED DECEMBER 31, 1994
HOPS
HOPS THE GRILL &
GRILL & PREDECESSOR PRO FORMA BAR, INC.
BAR, INC. CORPORATIONS ADJUSTMENTS PRO FORMA
---------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Sales $ 20,189,000 20,189,000
Restaurant operating expenses:
Cost of sales 6,600,000 6,600,000
Labor and other related expenses 5,792,000 5,792,000
Other restaurant operating expenses 4,569,000 4,569,000
Depreciation and amortization 800,000 800,000
---------- ---------- ---------- ----------
Total restaurant operating expenses 17,761,000 17,761,000
---------- ---------- ---------- ----------
Income from restaurant operations 2,428,000 2,428,000
General and administrative expenses 1,544,000 1,544,000
---------- ---------- ---------- ----------
Operating income 884,000 884,000
---------- ---------- ---------- ----------
Interest expense, net (506,000) (506,000)
Other income (loss) (71,000) (71,000)
---------- ---------- ---------- ----------
Net income before elimination
of minority partners' interest 307,000 307,000
Elimination of minority partners' interest 6,000 6,000
---------- ---------- ---------- ----------
Net income $ 301,000 301,000
========== ========== ========== ==========
Unaudited pro forma adjustment to
reflect income taxes $114,000(1) 114,000
======== ==========
Unaudited pro forma net income $ 187,000
==========
Unaudited pro forma net income per share $ .08
==========
Unaudited pro forma shares outstanding 2,250,000
==========
<FN>
Note:
(1) Reflects the effect on earnings assuming the Company had been treated as a C
Corporation rather than a S Corporation for federal and state income tax
purposes, and assuming that the combined federal and state income tax rates
approximate 38.0%.
</FN>
</TABLE>
F-19
<PAGE>
<TABLE>
<CAPTION>
HOPS GRILL & BAR, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
YEAR ENDED DECEMBER 31, 1993
HOPS
HOPS THE GRILL &
GRILL & PREDECESSOR PRO FORMA BAR, INC.
BAR, INC. CORPORATIONS ADJUSTMENTS PRO FORMA
---------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Sales $ 12,120,000 12,120,000
Restaurant operating expenses:
Cost of sales 3,822,000 3,822,000
Labor and other related expenses 3,404,000 3,404,000
Other restaurant operating expenses 2,762,000 2,762,000
Depreciation and amortization 286,000 286,000
---------- ---------- ---------- ----------
Total restaurant operating expenses 10,274,000 10,274,000
---------- ---------- ---------- ----------
Income from restaurant operations 1,846,000 1,846,000
General and administrative expenses 634,000 634,000
---------- ---------- ---------- ----------
Operating income 1,212,000 1,212,000
---------- ---------- ---------- ----------
Interest expense, net (158,000) (158,000)
Other income (loss) 18,000 18,000
---------- ---------- ---------- ----------
Net income before elimination
of minority partners' interest 1,072,000 1,072,000
Elimination of minority partners' interest -- --
---------- ---------- ---------- ----------
Net income $ 1,072,000 1,072,000
========== ========== ========== ==========
Unaudited pro forma adjustment to
reflect income taxes $ 407,000(1) 407,000
========== ==========
Unaudited pro forma net income $ 665,000
==========
Unaudited pro forma net income per share $ .30
==========
Unaudited pro forma shares outstanding 2,250,000
==========
<FN>
Note:
(1) Reflects the effect on earnings assuming the Company had been treated as a C
Corporation rather than a S Corporation for federal and state income tax
purposes, and assuming that the combined federal and state income tax rates
approximate 38.0%.
</FN>
</TABLE>
F-20
<PAGE>
[A photograph of four of the Company's employees, one
of whom is holding a plate with a slab of baby back
ribs, french fries, and cole slaw, together with the
text "A Commitment To Quality & Excellence" and
"TEAM HOPS", appears here.]
<PAGE>
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFERING HEREIN CONTAINED, AND IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO BUY
ANY SECURITY OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RELATES, OR AN
OFFER TO OR SOLICITATION OF ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER
OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCE, CREATE AN IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE FACTS HEREIN SET FORTH SINCE THE DATE
HEREOF.
----------
TABLE OF CONTENTS
PAGE
----
Prospectus Summary ....................................................... 2
The Company .............................................................. 4
Reorganization and Prior
S Corporation Status .................................................... 4
Risk Factors ............................................................. 5
Use of Proceeds .......................................................... 11
Dilution ................................................................. 12
Capitalization ........................................................... 13
Dividend Policy .......................................................... 14
Selected Financial Data .................................................. 15
Management's Discussion and Analysis
of Financial Condition and Results
of Operations ........................................................... 16
Business ................................................................. 25
Management ............................................................... 38
Certain Transactions ..................................................... 41
Principal Shareholders ................................................... 43
Description of Securities................................................. 43
Shares Eligible for Future Sale .......................................... 46
Underwriting ............................................................. 47
Legal Matters ............................................................ 48
Experts .................................................................. 48
Available Information .................................................... 49
Index to Financial Statements ............................................ F-1
-----------
UNTIL _______ , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO
THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS
AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- --------------------------------------------------------------------------------
SHARES
[GRAPHIC OMITTED]
HOPS GRILL & BAR, INC.
COMMON STOCK
----------
PROSPECTUS
----------
RAYMOND JAMES & ASSOCIATES, INC.
________, 1996
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Estimated expenses (other than underwriting discounts and commissions) of
the sale of the shares of Common Stock are as follows:
SEC registration fee............................$ 6,000
NASD filing fee................................. 2,500
Nasdaq National Market listing fee.............. 30,000
Legal fees and expenses......................... 150,000
Blue Sky fees and expenses...................... 15,000
Accounting fees and expenses.................... 50,000
Printing and engraving expenses................. 75,000
Transfer agent and registrar fees............... 15,000
Miscellaneous fees and expenses................. 56,500
---------
Total........................................$ 400,000
=========
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Florida Business Corporation Act (the "Florida Act") permits a Florida
corporation to indemnify a present or former director or officer of the
corporation (and certain other persons serving at the request of the corporation
in related capacities) for liabilities, including legal expenses, arising by
reason of service in such capacity if such person shall have acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, and in any criminal proceeding if such person had
no reasonable cause to believe his conduct was unlawful. However, in the case of
actions brought by or in the right of the corporation, no indemnification may be
made with respect to any matter as to which such director or officer shall have
been adjudged liable, except in certain limited circumstances.
The Registrant's Articles of Incorporation and Bylaws provide that the
Registrant shall indemnify directors and executive officers to the fullest
extent now or hereafter permitted by the Florida Act. In addition, the
Registrant may enter into Indemnification Agreements with its directors and
executive officers pursuant to which the Registrant may agree to indemnify such
persons to the fullest extent now or hereafter permitted by the Florida Act.
The indemnification provided by the Florida Business Corporation Act and
the Registrant's Bylaws is not exclusive of any other rights to which a director
or officer may be entitled. The general effect of the foregoing provisions may
be to reduce the circumstances which an officer or director may be required to
bear the economic burden of the foregoing liabilities and expense.
The Registrant may obtain a liability insurance policy for its directors
and officers as permitted by the Florida Act which may extend to, among other
things, liability arising under the Securities Act of 1933, as amended (the
"Securities Act").
II-1
<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
The Registrant was incorporated under the laws of the State of Florida
effective October 1, 1996. Immediately prior to the completion of this offering,
the Registrant will issue an aggregate of 2,250,000 shares of Common Stock to
five persons pursuant to the Exchange Agreement in exchange for all of the
issued and outstanding common stock of the Predecessor Corporations. No
commissions or discounts will be paid or given in connection with this
transaction. Such shares of the Registrant's Common Stock will be issued in
accordance with the exemption provided by Section 4(2) of the Securities Act, as
a transaction not involving a public offering.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) THE FOLLOWING DOCUMENTS ARE FILED AS EXHIBITS TO THIS REGISTRATION
STATEMENT:
*1.1 - Form of Underwriting Agreement.
2.1 - Share Exchange Agreement dated October 7, 1996, among
the Company and the Shareholders of the Predecessor
Corporations.
3.1 - Articles of Incorporation of the Company.
3.2 - Bylaws of the Company.
4.1 - See Exhibits 3.1 and 3.2 for provisions in the Company's
Articles of Incorporation and Bylaws defining the rights of
holders of the Company's Common Stock.
*5.1 - Opinion of Fowler, White, Gillen, Boggs, Villareal and Banker,
P.A. with respect to legality of the Common Stock being issued.
10.1 - 1996 Stock Incentive Plan of the Company.
10.2 - Form of Indemnification Agreement between the Company and each of
its directors and executive officers.
10.3 - Loan Commitment Letter, dated October 4, 1996, between the Company
and Trans Financial Bank.
10.4 - South Florida Development Option Agreement, dated as of
October 7, 1996, among the Company, Kevin Toomy, and Toomy CLN,
Inc.
10.5 - Limited Partnership Agreement of Hops of South Florida, Ltd., among
Hops of South Florida, Inc., Hops Partners, Inc., Toomy CLN, Inc.
and Kevin Torrey.
10.6 - Hops of the Rockies Development Option Agreement, dated as of
January 1, 1996, among the Company, Rocky Mountain Restaurant
Partners, Inc. ("RMRP"), and the Shareholders of RMRP.
10.7 - Limited Partnership Agreement of Hops of the Rockies, Ltd., among
Hops of the Rockies, Inc., Hops Partners, Inc., RMRP, Joseph F.
Timberlake III, and the Shareholders of RMRP.
10.8 - Third Amended and Restated Joint Venture Agreement of
The Hops Northeast Florida Joint Venture No. I, dated as of
March 13, 1996, among Hops of Northeast Florida, Inc., Fitch,
Inc., and HNEF Area Manager II, Ltd.
10.9 - Second Amended and Restated Joint Venture Agreement of The Hops
Northeast Florida Joint Venture No. II, dated as of September 1,
1995, among Hops of Northeast Florida, Inc., Fitch, Inc., and HNEF
Area Manager II, Ltd.
10.10 - Second Amended and Restated Joint Venture Agreement of The Hops
Northeast Florida Joint Venture No. III, dated as of September 1,
1995, among Hops of Northeast Florida, Inc., Fitch, Inc., and HNEF
Area Manager II, Ltd.
*10.11 - Employment Agreement between the Company and Terence M. Terenzi.
*10.12 - Employment Agreement between the Company and Timothy V. Curci.
21.1 - List of subsidiaries of the Company (each of which will become a
subsidiary of the Company pursuant to the Share Exchange Agreement
referred to in Exhibit 2.1).
23.1 - Consent of KPMG Peat Marwick LLP.
II-2
<PAGE>
*23.2 - Consent of Fowler, White, Gillen, Boggs, Villareal and Banker, P.A.
(included in its opinion to be filed as Exhibit 5.1).
24.1 - Powers of Attorney of Directors and Executive Officers (included on
the Signature Page of this Registration Statement).
- ------------
* To be filed by amendment.
(B) THE FOLLOWING FINANCIAL STATEMENT SCHEDULES HAVE BEEN FILED WITH THIS
REGISTRATION STATEMENT:
All schedules for which provision is made in the applicable accounting
regulations of the Commission are not required under the related instructions
or are not applicable, and therefore have been omitted.
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes to provide to the
underwriter at the closing specified in the underwriting agreements,
certificates in such denominations and registered in such names as required by
the underwriter to permit prompt delivery to each purchaser.
(b) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the provisions described under Item 15
above, or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(c) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Tampa, State of Florida,
on October 15, 1996.
HOPS GRILL & BAR, INC.
By: /S/ DAVID L. MASON
-------------------------------------
David L. Mason
CHAIRMAN OF THE BOARD, PRESIDENT,
AND CHIEF EXECUTIVE OFFICER
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the directors and/or
executive officers of Hops Grill & Bar, Inc. whose signature appears below
hereby appoints David L. Mason and Thomas A. Schelldorf, and each of them
severally, as his attorney-in-fact to sign in his name and behalf, in any and
all capacities stated below and to file with the Commission, any and all
amendments, including post-effective amendments to this registration statement,
making such changes in the registration statement as appropriate, and any
registration statement filed pursuant to Rule 462(b) of the Act prepared in
connection therewith, and generally to do all such things in their behalf in
their capacities as officers and directors to enable Hops Grill & Bar, Inc. to
comply with the provisions of the Securities Act of 1933, and all requirements
of the Securities and Exchange Commission.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
/s/ DAVID L. MASON Chairman of the Board, President, October 15, 1996
- ------------------ Chief Executive Officer
DAVID L. MASON (Principal Executive Officer)
/s/ THOMAS A. SCHELLDORF Executive Vice President, Chief October 15, 1996
- ------------------------ Operating Officer, and Director
THOMAS A. SCHELLDORF
/s/ TERENCE TERENZI Chief Financial Officer (Principal October 15, 1996
- ------------------- Financial and Accounting Officer)
TERENCE M. TERENZI
II-4
<PAGE>
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
EXHIBITS
TO
FORM S-1
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
----------
HOPS GRILL & BAR, INC.
- --------------------------------------------------------------------------------
<PAGE>
INDEX TO EXHIBITS
SEQUENTIAL
EXHIBIT PAGE
NO. DESCRIPTION NUMBER
--- ----------- ------
2.1 Share Exchange Agreement dated October 7, 1996, among the
Company and the Shareholders of the Predecessor Corporations.
3.1 Articles of Incorporation of the Company.
3.2 Bylaws of the Company.
10.1 1996 Stock Incentive Plan of the Company.
10.2 Form of Indemnification Agreement between the Company and
each of its directors and executive officers.
10.3 Loan Commitment Letter, dated October 4, 1996, between the
Company and Trans Financial Bank.
10.4 South Florida Development Option Agreement, dated as of
October 7, 1996, among the Company, Kevin Toomy, and
Toomy CLN, Inc.
10.5 Limited Partnership Agreement of Hops of South Florida, Ltd.,
among Hops of South Florida, Inc., Hops Partners, Inc.,
Toomy CLN, Inc., and Kevin Torrey.
10.6 Hops of the Rockies Development Option Agreement, dated as of
January 1, 1996, among the Company, Rocky Mountain Restaurant
Partners, Inc. ("RMRP"), and the Shareholders of RMRP.
10.7 Limited Partnership Agreement of Hops of the Rockies, Ltd.,
among Hops of the Rockies, Inc., Hops Partners, Inc., RMRP,
Joseph F. Timberlake III, and the Shareholders of RMRP.
10.8 Third Amended and Restated Joint Venture Agreement of The Hops
Northeast Florida Joint Venture No. I, dated as of March 13,
1996, among Hops of Northeast Florida, Inc., Fitch, Inc., and
HNEF Area Manager II, Ltd.
10.9 Second Amended and Restated Joint Venture Agreement of The Hops
Northeast Florida Joint Venture No. II, dated as of September 1,
1995, among Hops of Northeast Florida, Inc., Fitch, Inc., and
HNEF Area Manager II, Ltd.
10.10 Second Amended and Restated Joint Venture Agreement of The Hops
Northeast Florida Joint Venture No. III, dated as of September 1,
1995, among Hops of Northeast Florida, Inc., Fitch, Inc., and
HNEF Area Manager II, Ltd.
21.1 List of subsidiaries of the Company (each of which will become
a subsidiary of the Company pursuant to the Share Exchange
Agreement referred to in Exhibit 2.1).
23.1 Consent of KPMG Peat Marwick LLP.
EXHIBIT 2.1
SHARE EXCHANGE AGREEMENT
THIS SHARE EXCHANGE AGREEMENT (this "Agreement") is entered into
effective as of the 7th day of October, 1996, by and among HOPS GRILL & BAR,
INC., a Florida corporation ("Hops"); DAVID L. MASON, an individual ("Mason");
THOMAS A. SCHELLDORF, an individual ("Schelldorf"); TIMOTHY V. CURCI, an
individual ("Curci"); KEVIN TOOMY, an individual ("Toomy"); and MASON AND
SCHELLDORF LEASING COMPANY, a Kentucky general partnership ("M&S"). Mason,
Schelldorf, Curci, Toomy and M&S are sometimes hereinafter referred to as the
"Predecessor Shareholders."
W I T N E S S E T H :
WHEREAS, Mason and Schelldorf each own 50 shares (the "MS Corp A
Shares") of common stock, par value $0.01 per share (the "MS Corp A Common
Stock"), of HOPS RESTAURANTS, INC., a Florida corporation ("MS Corp A");
WHEREAS, Mason and Schelldorf each own 50 shares (the "MS Corp B
Shares") of common stock, par value $0.01 per share (the "MS Corp B Common
Stock"), of HOPS PARTNERS, INC., a Florida corporation ("MS Corp B");
WHEREAS, Mason and Schelldorf each own 50 shares (the "MS Corp C
Shares") of common stock, par value $0.01 per share (the "MS Corp C Common
Stock"), of HOPS OF NORTHEAST FLORIDA, INC., a Florida corporation ("MS Corp
C");
WHEREAS, Mason and Schelldorf each own 50 shares (the "MS Corp D
Shares") of common stock, par value $0.01 per share (the "MS Corp D Common
Stock"), of HOPS OF SOUTHEAST FLORIDA, INC., a Florida corporation ("MS Corp
D");
WHEREAS, Mason and Schelldorf each own 45 shares (the "MS Corp E
Shares") of Class A common stock, par value $0.01 per share (the "MS Corp E
Common Stock"), of HOPS OF GREATER WEST PALM BEACH, INC., a Florida corporation
("MS Corp E");
WHEREAS, Mason and Schelldorf each own 50 shares (the "MS Corp F
Shares") of common stock $0.01 per share (the "MS Corp F Common Stock"), of HOPS
OF THE ROCKIES, INC., a Florida corporation ("MS Corp F");
WHEREAS, Mason and Schelldorf each own 50 shares (the "MS Corp G
Shares") of common stock, no par value (the "MS Corp G Common Stock"), of HOPS
MARKETING, INC., a Florida corporation ("MS Corp G Shares");
WHEREAS, Mason and Schelldorf each own 50 shares (the "MS Corp H
Shares") of common stock $0.01 per share (the "MS Corp H Common Stock"), of
CYPRESS COAST CONSTRUCTION CORPORATION, a Florida corporation ("MS Corp H");
WHEREAS, Mason and Schelldorf each own 50 shares (the "MS Corp I
Shares") of common stock, par value $0.01 per share (the "MS Corp I Common
Stock"), of HOPS OF SOUTH FLORIDA, INC., a Florida corporation ("MS Corp I");
WHEREAS, Mason and Schelldorf each own 45 shares (the "MSC Corp 1 Class
A Shares") of Class A common stock, par value $0.01 per share (the "MSC Corp 1
Class A Common Stock"), and Curci owns 10 shares (the "MSC Corp 1 Class B
Shares") of Class B
<PAGE>
common stock, par value $0.01 per share (the "MSC Corp 1 Class B Common Stock"),
of HOPS PARTNERS II, INC., a Florida corporation ("MSC Corp 1") (the MSC Corp 1
Class A Shares and the MSC Corp 1 Class B Shares are hereinafter collectively
referred to as the "MSC Corp 1 Shares," and the MSC Corp 1 Class A Common Stock
and the MSC Corp 1 Class B Common Stock are hereinafter collectively referred to
as the "MSC Corp 1 Common Stock");
WHEREAS, Mason and Schelldorf each own 45 shares (the "MSC Corp 2 Class
A Shares") of Class A common stock, par value $0.01 per share (the "MSC Corp 2
Class A Common Stock"), and Curci owns 10 shares (the "MSC Corp 2 Class B
Shares") of Class B common stock, par value $0.01 per share (the "MSC Corp 2
Class B Common Stock"), of HOPS PARTNERS III, INC., a Florida corporation ("MSC
Corp 2") (the MSC Corp 2 Class A Shares and the MSC Corp 2 Class B Shares are
hereinafter collectively referred to as "the MSC Corp 2 Shares," and the MSC
Corp 2 Class A Common Stock and the MSC Corp 2 Class B Common Stock are
hereinafter collectively referred to as the "MSC Corp 2 Common Stock");
WHEREAS, Mason and Schelldorf each own 50 shares (the "MSC Corp 3 Class
A Shares") of Class A common stock, par value $0.01 per share (the "MSC Corp 3
Class A Common Stock"), and Curci owns 11 shares (the "MSC Corp 3 Class B
Shares") of Class B common stock, par value $0.01 per share (the "MSC Corp 3
Class B Common Stock"), of HOPS OF GREATER ORLANDO, INC., a Florida corporation
("MSC Corp 3") (the MSC Corp 3 Class A Shares and the MSC Corp 3 Class B Shares
are hereinafter collectively referred to as "the MSC Corp 3 Shares," and the MSC
Corp 3 Class A Common Stock and the MSC Corp 3 Class B Common Stock are
hereinafter collectively referred to as the "MSC Corp 3 Common Stock");
WHEREAS, Mason and Schelldorf each own 45 shares (the "MSC Corp 4 Class
A Shares") of Class A common stock, par value $0.01 per share (the "MSC Corp 4
Class A Common Stock"), and Curci owns 10 shares (the "MSC Corp 4 Class B
Shares") of Class B common stock, par value $0.01 per share (the "MSC Corp 4
Class B Common Stock"), of HOPS OF SOUTHWEST FLORIDA, INC., a Florida
corporation ("MSC Corp 4") (the MSC Corp 4 Class A Shares and the MSC Corp 4
Class B Shares are hereinafter collectively referred to as "the MSC Corp 4
Shares," and the MSC Corp 4 Class A Common Stock and the MSC Corp 4 Class B
Common Stock are hereinafter collectively referred to as the "MSC Corp 4 Common
Stock");
WHEREAS, Mason and Schelldorf each own 45 shares (the "MSC Corp 5 Class
A Shares") of Class A common stock, par value $0.01 per share (the "MSC Corp 5
Class A Common Stock"), and Curci owns 10 shares (the "MSC Corp 5 Class B
Shares") of Class B common stock, par value $0.01 per share (the "MSC Corp 5
Class B Common Stock"), of HOPS OF THE OHIO VALLEY, INC., a Florida corporation
("MSC Corp 5") (the MSC Corp 5 Class A Shares and the MSC Corp 5 Class B Shares
are hereinafter collectively referred to as the "MSC Corp 5 Shares," and the MSC
Corp 5 Class A Common Stock and the MSC Corp 5 Class B Common Stock are
hereinafter collectively referred to as the "MSC Corp 5 Common Stock");
WHEREAS, Mason and Schelldorf each own 45 shares (the "MSC Corp 6 Class
A Shares") of Class A common stock, par value $0.01 per share (the "MSC Corp 6
Class A Common Stock"), and Timothy V. Curci ("Curci") owns 10 shares (the "MSC
Corp 6 Class B Shares") of Class B common stock, par value $0.01 per share (the
"MSC Corp 6 Class B Common Stock"), of HOPS GRILL & BREWERY, INC., a Florida
corporation ("MSC Corp 6") (the
2
<PAGE>
MSC Corp 6 Class A Shares and the MSC Corp 6 Class B Shares are hereinafter
collectively referred to as "the MSC Corp 6 Shares," and the MSC Corp 6 Class A
Common Stock and the MSC Corp 6 Class B Common Stock are hereinafter
collectively referred to as the "MSC Corp 6 Common Stock");
WHEREAS, Mason and Schelldorf each own 90 shares (the "MSC Corp 7 Class
A Shares") of Class A common stock, par value $0.01 per share (the "MSC Corp 7
Class A Common Stock"), and Curci owns 20 shares (the "MSC Corp 7 Class B
Shares") of Class B common stock, par value $0.01 per share (the "MSC Corp 7
Class B Common Stock"), of HOPS OF CARROLLWOOD, INC., a Florida corporation
("MSC Corp 7") (the MSC Corp 7 Class A Shares and the MSC Corp 7 Class B Shares
are hereinafter collectively referred to as "the MSC Corp 7 Shares," and the MSC
Corp 7 Class A Common Stock and the MSC Corp 7 Class B Common Stock are
hereinafter collectively referred to as the "MSC Corp 7 Common Stock");
WHEREAS, Mason and Schelldorf each own 45 shares (the "MSC Corp 8 Class
A Shares") of Class A common stock, par value $0.01 per share (the "MSC Corp 8
Class A Common Stock"), and Curci owns 10 shares (the "MSC Corp 8 Class B
Shares") of Class B common stock, par value $0.01 per share (the "MSC Corp 8
Class B Common Stock"), of HOPS OF NORTH TAMPA, INC., a Florida corporation
("MSC Corp 8") (the MSC Corp 8 Class A Shares and the MSC Corp 8 Class B Shares
are hereinafter collectively referred to as "the MSC Corp 8 Shares," and the MSC
Corp 8 Class A Common Stock and the MSC Corp 8 Class B Common Stock are
hereinafter collectively referred to as the "MSC Corp 8 Common Stock");
WHEREAS, Mason and Schelldorf each own 90 shares (the "MSC Corp 9 Class
A Shares") of Class A common stock, par value $0.01 per share (the "MSC Corp 9
Class A Common Stock"), and Curci owns 20 shares (the "MSC Corp 9 Class B
Shares") of Class B common stock, par value $0.01 per share (the "MSC Corp 9
Class B Common Stock"), of HOPS OF PALM HARBOR, INC., a Florida corporation
("MSC Corp 9") (the MSC Corp 9 Class A Shares and the MSC Corp 9 Class B Shares
are hereinafter collectively referred to as "the MSC Corp 9 Shares," and the MSC
Corp 9 Class A Common Stock and the MSC Corp 9 Class B Common Stock are
hereinafter collectively referred to as the "MSC Corp 9 Common Stock");
WHEREAS, Mason and Schelldorf each own 45 shares (the "MSC Corp 10
Class A Shares") of Class A common stock, par value $0.01 per share (the "MSC
Corp 10 Class A Common Stock"), and Curci owns 10 shares (the "MSC Corp 10 Class
B Shares") of Class B common stock, par value $0.01 per share (the "MSC Corp 10
Class B Common Stock"), of HOPS OF SOUTH TAMPA, INC., a Florida corporation
("MSC Corp 10") (the MSC Corp 10 Class A Shares and the MSC Corp 10 Class B
Shares are hereinafter collectively referred to as "the MSC Corp 10 Shares," and
the MSC Corp 10 Class A Common Stock and the MSC Corp 10 Class B Common Stock
are hereinafter collectively referred to as the "MSC Corp 10 Common Stock");
WHEREAS, Mason and Schelldorf each own 45 shares (the "MSC Corp 11
Class A Shares") of Class A common stock, par value $0.01 per share (the "MSC
Corp 11 Class A Common Stock"), and Curci owns 10 shares (the "MSC Corp 11 Class
B Shares") of Class B common stock, par value $0.01 per share (the "MSC Corp 11
Class B Common Stock"), of HOPS OF ST. PETERSBURG, INC., a Florida corporation
("MSC Corp 11") (the MSC Corp 11 Class A Shares and the MSC Corp 11 Class B
Shares are hereinafter collectively referred to
3
<PAGE>
as "the MSC Corp 11 Shares," and the MSC Corp 11 Class A Common Stock and the
MSC Corp 11 Class B Common Stock are hereinafter collectively referred to as the
"MSC Corp 11 Common Stock");
WHEREAS, Mason and Schelldorf each own 45 shares (the "MSC Corp 12
Class A Shares") of Class A common stock, par value $0.01 per share (the "MSC
Corp 12 Class A Common Stock"), and Curci owns 10 shares (the "MSC Corp 12 Class
B Shares") of Class B common stock, par value $0.01 per share (the "MSC Corp 12
Class B Common Stock"), of HOPS OF PORT RICHEY, INC., a Florida corporation
("MSC Corp 12") (the MSC Corp 12 Class A Shares and the MSC Corp 12 Class B
Shares are hereinafter collectively referred to as "the MSC Corp 12 Shares," and
the MSC Corp 12 Class A Common Stock and the MSC Corp 12 Class B Common Stock
are hereinafter collectively referred to as the "MSC Corp 12 Common Stock");
WHEREAS, Mason and Schelldorf each own 45 shares (the "MSC Corp 13
Class A Shares") of Class A Common Stock, par value $0.01 per share (the "MSC
Corp 13 Class A Common Stock"), and Curci owns 10 shares (the "MSC Corp 13 Class
B Shares") of Class B Common Stock, par value $0.01 per share (the "MSC Corp 13
Class B Common Stock"), of HOPS OF THE CAROLINAS, INC., a Florida corporation
("MSC Corp 13") (the MSC Corp 13 Class A Shares and the MSC Corp 13 Class B
Shares are hereinafter collectively referred to as "the MSC Corp 13 Shares", and
the MSC Corp 13 Class A Common Stock and the MSC Corp 13 Class B Common Stock
are hereinafter collectively referred to as the "MSC Corp 13 Common Stock");
WHEREAS, M&S owns 100 shares (the "Property Corp Shares") of common
stock, par value $0.01 per share (the "Property Corp Common Stock"), of HOPS
PROPERTIES, INC., a Florida corporation ("Property Corp");
WHEREAS, Kevin Toomy owns 1,000 shares (the "Toomy Shares") of the
common stock, par value $0.25 per share (the "Toomy Common Stock"), of TOOMY
LCN, INC., a Florida corporation ("Toomy Corp");
WHEREAS, the MS Corp A Shares, the MS Corp B Shares, the MS Corp C
Shares, the MS Corp D Shares, the MS Corp E Shares, the MS Corp F Shares, the MS
Corp G Shares, the MS Corp H, and the MS Corp I shall be collectively
hereinafter referred to as the "MS Shares"; the MSC Corp 1 Shares, the MSC Corp
2 Shares, the MSC Corp 3 Shares, the MSC Corp 4 Shares, the MSC Corp 5 Shares,
the MSC Corp 6 Shares, the MSC Corp 7 Shares, the MSC Corp 8 Shares, the MSC
Corp 9 Shares, the MSC Corp 10 Shares, the MSC Corp 11 Shares, the MSC Corp 12
Shares, and the MSC Corp 13 Shares shall be collectively hereinafter referred to
as the "MSC Shares"; and the MS Shares, the MSC Shares, the Property Corp
Shares, and the Toomy Shares shall collectively hereinafter be referred to as
the "Predecessor Shares";
WHEREAS, the MS Corp A Common Stock, the MS Corp B Common Stock, the MS
Corp C Common Stock, the MS Corp D Common Stock, the MS Corp E Common Stock, the
MS Corp F Common Stock, the MS Corp G Common Stock, the MS Corp H Common Stock,
and the MS Corp I Common Stock shall hereinafter be referred to as the "MS
Common Stock"; the MSC Corp 1 Common Stock, the MSC Corp 2 Common Stock, the MSC
Corp 3 Common Stock, the MSC Corp 4 Common Stock, the MSC Corp 5 Common Stock,
the MSC Corp 6 Common Stock, the MSC Corp 7 Common Stock, the MSC Corp 8 Common
Stock, the MSC Corp 9 Common Stock, the MSC Corp 10 Common Stock, the MSC Corp
11 Common Stock, the MSC Corp 12 Common Stock, and the MSC Corp 13 Common Stock
shall hereinafter be referred to as the "MSC Common Stock"; and the MS Common
Stock, the MSC Common Stock, the Property Corp Common Stock, and the Toomy
Common Stock shall collectively hereinafter be referred to as the "Predecessor
Common Stock";
WHEREAS, MS Corp A, MS Corp B, MS Corp C, MS Corp D, MS Corp E, MS Corp
F, MS Corp G, MS Corp H, MS Corp I, MSC Corp 1, MSC Corp 2, MSC Corp 3, MSC Corp
4, MSC Corp 5, MSC Corp 6, MSC Corp 7, MSC Corp 8, MSC Corp 9, MSC Corp 10, MSC
Corp 11, MSC Corp 12, MSC Corp 13, Property Corp, and Toomy Corp shall be
hereinafter collectively referred to as the "Predecessor Subsidiaries"; and
4
<PAGE>
WHEREAS, Hops desires to acquire all of the outstanding Predecessor
Shares by issuing shares of common stock, par value $0.01 per share (the "Hops
Common Stock"), in exchange for the Predecessor Shares, and the Predecessor
Shareholders desire to acquire Hops Common Stock by exchanging their Predecessor
Shares for the shares of Hops Common Stock in a tax free exchange pursuant to
Section 351 of the Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the premises and the mutual
covenants, and agreements herein set forth, the parties hereto, intending
legally to be bound hereby, agree as follows:
SECTION 1. EXCHANGE OF PREDECESSOR SHARES FOR HOPS COMMON STOCK.
(a) EXCHANGE OBLIGATIONS. On the terms and subject to the conditions
set forth in this Agreement, immediately prior to the consummation of the
initial public offering of Hops Common Stock is consummated or such other date
as may be determined by the Board of Directors of Hops (the "Closing Date"), the
Predecessor Shareholders shall exchange the Predecessor Shares, for shares of
Hops Common Stock, and Hops shall issue shares of Hops Common Stock in the
manner described in Section 2 in exchange for the Predecessor Shares. On the
Closing Date, the Predecessor Shareholders shall deliver to Hops for exchange
and transfer to Hops all certificates representing the Predecessor Shares duly
endorsed in blank or accompanied by stock powers executed in blank.
(b) EFFECTIVE DATE; COMMENCEMENT OF EXCHANGES. This Agreement shall be
deemed effective for all purposes as of the date hereof, and shall thereafter
inure to the benefit of and be binding upon the parties hereto and their
respective successors, heirs, legal representatives and permitted assigns. The
exchange of the Predecessor Shares for Hops Common Stock shall for all purposes
be deemed to occur as a single transaction on the Closing Date set forth in
Section 1(a) above. Immediately following the exchanges set forth herein, the
Predecessor Shareholders will own one hundred percent (100%) of the Hops Common
Stock, which shall be the only shares of Hops capital stock then outstanding.
The exchanges set forth herein, are intended to be tax free to all parties
hereto pursuant to the terms of Section 351 of the Code. Following the exchanges
of Predecessor Shares, the Predecessor Subsidiaries shall cease to qualify as
S-corporations under the Code.
SECTION 2. CONVERSION.
(a) CONVERSION RATE. In accordance with Section 1, Hops shall issue to
the Predecessor Shareholders, as aggregate consideration for the Predecessor
Shares, shares of Hops Common Stock, free of all Liens (as defined below), in
the amounts listed opposite each Predecessor Shareholder's name on the schedule
attached hereto as SCHEDULE A. Accordingly, on the Closing Date or as soon
thereafter as practicable, certificates representing shares of Hops Common Stock
shall be delivered to the Predecessor Shareholders in the amounts listed on
SCHEDULE A.
(b) FRACTIONAL SHARES. In its sole discretion, Hops may elect (i) to
round up to the nearest whole share, in lieu of issuing fractional shares of
Hops Common Stock, or (ii) to pay the fair market value of such fractional
shares to the holders who would otherwise be entitled
5
<PAGE>
to such fractional shares of Hops Common Stock, as determined in good faith by
its Board of Directors.
SECTION 3. REPRESENTATIONS, WARRANTIES AND ACKNOWLEDGMENTS OF THE
PREDECESSOR SHAREHOLDERS.
(a) PREDECESSOR AUTHORITY. Each of the Predecessor Shareholders hereby
severally and not jointly represents and warrants to Hops that (i) such
Predecessor Shareholder is and will be as of the Closing Date the lawful owner
and holder of record of his respective shares of Predecessor Common Stock, free
and clear of all liens, restrictions, pledges, charges, encumbrances, mortgages,
security interests and claims of any kind (collectively, "Liens"), other than
permitted liens set forth on SCHEDULE B which will be extinguished on the
Closing Date; (ii) such Predecessor Shareholder has and will have as of the
Closing Date full authority to execute and deliver this Agreement and to perform
his obligations hereunder; (iii) this Agreement constitutes and will constitute
as of the Closing Date a valid and binding obligation of such Predecessor
Shareholder; (iv) such Predecessor Shareholder has no legal obligation, absolute
or contingent, to any other person or entity to sell any of his Predecessor
Shares to effect any merger, consolidation or other reorganization of any of the
Predecessor Subsidiaries or to enter into any agreement which would affect such
Predecessor Shareholder's title or right to deliver the Predecessor Shares on
the Closing Date, or on such date as his Predecessor Shares are exchanged, free
and clear of all Liens; and (v) such Predecessor Shareholder currently has no
plan or intention to sell, exchange or otherwise dispose of more than 20% of his
shares of Hops Common Stock once received pursuant to this Agreement, other than
pursuant to a transfer to a trust that qualifies as a grantor trust under
Sections 671 through 679 of the Code, with respect to which such Predecessor
Shareholder is the grantor, or any other transfer that is disregarded for
purposes of the "control immediately after" requirement of Section 351 of the
Code.
(b) INVESTMENT REPRESENTATIONS. Each of the Predecessor Shareholders
hereby represents and warrants to Hops that he/she/it: (i) is knowledgeable,
sophisticated and experienced in financial and business matters and is capable
of evaluating the merits and risks of the transactions contemplated by this
Agreement, including the prospective investment in the shares of Hops Common
Stock, and the undersigned is an "accredited investor" within the meaning of
Rule 501 promulgated under the Securities Act of 1933, as amended (the "Act");
(ii) has had a reasonable opportunity to ask questions of and receive answers
from Hops concerning Hops and this Agreement, and all such questions, if any,
have been answered to his/her/its full satisfaction; (iii) has requested,
received, reviewed and considered all information that he/she/it deems relevant
in making an informed decision to execute this Agreement and to acquire the
shares of Hops Common Stock; (iv) understands that the shares of Hops Common
Stock (x) have not been registered under the Act or applicable securities laws
of any state, based upon an exemption from such registration requirements for
non-public offerings pursuant to Sections 3(b) and/or 4(2) of the Act and/or
Regulation D promulgated under the Act, (y) will be "restricted securities," as
said term is defined in Rule 144 of the rules and regulations promulgated under
the Act and, (z) may not be sold or otherwise transferred unless their transfer
has first been registered under the Act and all applicable state securities
laws, or unless exemptions from such registration provisions are available with
respect to said resale or transfer (and he/she/it is able to obtain an opinion
of counsel acceptable to Hops to that effect); and (v) is acquiring the shares
of Hops
6
<PAGE>
Common Stock solely for his/her/its own account, for investment purposes only,
and not with a view towards the resale or distribution thereof.
(c) STOCK TRANSFER LEGENDS. Each of the Predecessor Shareholders hereby
acknowledges that each certificate evidencing the shares of Hops Common Stock
will bear a legend substantially in the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND ARE "RESTRICTED
SECURITIES" AS THAT TERM IS DEFINED IN RULE 144 UNDER THE ACT. THE
SHARES MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED
EXCEPT PURSUANT TO THE EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT,
OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE ACT, THE
AVAILABILITY OF WHICH IS TO BE ESTABLISHED TO THE SATISFACTION OF THE
COMPANY.
(d) SPECIAL REPRESENTATIONS AND WARRANTIES OF TOOMY. Toomy hereby makes
to Hops, the representations and warranties set forth on SCHEDULE C to this
Agreement, which representations and warranties shall be considered as an
inducement for Hops to enter into this Agreement and shall be considered a part
of this Agreement for all purposes.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF HOPS. Hops hereby
represents and warrants to the Predecessor Shareholders as follows:
(a) ORGANIZATION, GOOD STANDING AND QUALIFICATION. Hops is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Florida, has all requisite power to own, lease and operate all
of its properties and assets and to carry on its business as it is now being
conducted, and is duly qualified to do business and in good standing in all
jurisdictions in which it owns or leases properties, or conducts any business so
as to require such qualification and in which the failure to be duly qualified
could have material adverse effect upon Hops.
(b) CORPORATE AUTHORITY. Hops has the full corporate power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder; the execution, delivery and performance of this Agreement by Hops and
the consummation of transactions contemplated hereby have been duly authorized
by all requisite corporate action of Hops; and this Agreement constitutes a
valid and binding obligation of Hops.
(c) CAPITALIZATION. As of the Closing Date, all of the issued and
outstanding shares of Hops Common Stock will have been duly authorized, validly
issued, fully paid and nonassessable. The shares of Hops Common Stock, when
issued in exchange for the Predecessor Shares as contemplated by this Agreement,
will have been duly authorized, validly issued, fully paid and will be
nonassessable.
(d) BOARD APPROVAL. The Board of Directors of Hops has approved this
Agreement and the transactions contemplated hereby.
7
<PAGE>
SECTION 5. TERMINATION OF PRIOR SHAREHOLDER AGREEMENTS.
(a) PRIOR AGREEMENTS. Mason and Schelldorf hereby acknowledge that they
are parties to certain Shareholder Agreements and Stock Restriction & Retirement
Agreements (collectively, as amended or restated from time to time, the "Prior
MS Agreements") relating to their ownership of shares of common stock of MS Corp
A, MS Corp B, MS Corp C, MS Corp D, MS Corp E, MS Corp F, MS Corp G, MS Corp H,
and MS Corp I and certain matters related thereto; and Mason, Schelldorf and
Curci hereby acknowledge that they are parties to certain Shareholder Agreements
and Stock Restriction & Retirement Agreements (collectively, as amended or
restated from time to time, the "Prior MSC Agreements") relating to their
ownership of shares of common stock of MSC Corp 1, MSC Corp 2, MSC Corp 3, MSC
Corp 4, MSC Corp 5, MSC Corp 6, MSC Corp 7, MSC Corp 8, MSC Corp 9, MSC Corp 10,
MSC Corp 11, and MSC Corp 12 and certain matters related thereto.
(b) TERMINATION OF PRIOR AGREEMENTS.
(i) Mason and Schelldorf hereby agree that the Prior MS Agreements
shall automatically terminate upon the Closing Date, and each
party thereto shall have no further obligations thereunder to
the other party thereto, and thereafter the Prior MS
Agreements shall be of no further force or effect. Each of
Mason and Schelldorf hereby waive any rights he may have had
under the Prior MS Agreements arising out of, relating to, or
resulting from the transactions contemplated by this
Agreement.
(ii) Mason, Schelldorf and Curci hereby agree that the Prior MSC
Agreements shall automatically terminate effective upon the
Closing Date, and each party thereto shall have no further
obligations or duties thereunder to the other parties thereto,
and thereafter the Prior MSC Agreements shall be of no further
force or effect. Each of Mason, Schelldorf and Curci hereby
waive any rights he may have had under the Prior MSC
Agreements arising out of, relating to, or resulting from the
transactions contemplated by this Agreement.
SECTION 6. TERMINATION.
This Agreement shall terminate and be of no further force or effect if
Hops shall not have consummated its initial public offering on or before March
31, 1997, unless this Agreement shall have previously been extended in a written
amendment to this Agreement executed by all parties hereto.
SECTION 7. MISCELLANEOUS.
(a) ENTIRE AGREEMENT; MODIFICATION. This Agreement constitutes the
entire agreement among the parties and supersedes all other agreements and
understandings, oral and written, between the parties hereto with respect to the
subject matter hereof. No modification of this Agreement shall be valid unless
made in writing and signed by the parties hereto.
8
<PAGE>
(b) COUNTERPARTS. This Agreement may be executed by hand or by
facsimile in two or more counterparts, each of which when so executed shall be
deemed to be an original, and all of which when taken together shall constitute
one and the same instrument.
(c) NON-ASSIGNABILITY; THIRD PARTY BENEFICIARIES. This Agreement shall
be assignable by any party hereto only with the prior written consent of the
other parties hereto. This Agreement shall not benefit or create any right or
cause of action in or on behalf of any person other than the parties.
(d) SECTION HEADINGS. The section headings contained in this Agreement
are for reference purposes only and shall not affect the meaning or
interpretation of this Agreement.
(e) GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH
AND GOVERNED BY THE LAWS OF THE STATE OF FLORIDA WITHOUT GIVING EFFECT TO
FLORIDA PRINCIPLES OF CONFLICTS OF LAWS THAT WOULD OTHERWISE PROVIDE FOR THE
APPLICATION OF THE SUBSTANTIVE LAWS OF ANOTHER JURISDICTION.
(f) SEVERABILITY. If any provision in this Agreement shall for any
reason be determined to be invalid or unenforceable, the remaining provisions of
this Agreement shall nevertheless continue to be valid and enforceable as though
the invalid or unenforceable provision had not been a part hereof.
9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed effective as of the date first above-written.
HOPS GRILL & BAR, INC.
By: /s/ DAVID L. MASON
-------------------------------------
David L. Mason, President and
Chief Executive Officer
"Hops"
PREDECESSOR SHAREHOLDERS OF
HOPS GRILL & BAR, INC. (MS Corp A)
/s/ DAVID L. MASON
-------------------------------------
David L. Mason
/s/ THOMAS A. SCHELLDORF
-------------------------------------
Thomas A. Schelldorf
PREDECESSOR SHAREHOLDERS OF
HOPS PARTNERS, INC. (MS Corp B)
/s/ DAVID L. MASON
-------------------------------------
David L. Mason
/s/ THOMAS A. SCHELLDORF
-------------------------------------
Thomas A. Schelldorf
PREDECESSOR SHAREHOLDERS OF
HOPS OF NORTHEAST FLORIDA, INC. (MS Corp C)
/s/ DAVID L. MASON
-------------------------------------
David L. Mason
/s/ THOMAS A. SCHELLDORF
-------------------------------------
Thomas A. Schelldorf
10
<PAGE>
PREDECESSOR SHAREHOLDERS OF HOPS OF
SOUTHEAST FLORIDA, INC. (MS Corp D)
/s/ DAVID L. MASON
-------------------------------------
David L. Mason
/s/ THOMAS A. SCHELLDORF
-------------------------------------
Thomas A. Schelldorf
PREDECESSOR SHAREHOLDERS OF HOPS OF GREATER
WEST PALM BEACH, INC. (MS Corp E)
/s/ DAVID L. MASON
-------------------------------------
David L. Mason
/s/ THOMAS A. SCHELLDORF
-------------------------------------
Thomas A. Schelldorf
PREDECESSOR SHAREHOLDERS OF HOPS OF THE
ROCKIES, INC. (MS Corp F)
/s/ DAVID L. MASON
-------------------------------------
David L. Mason
/s/ THOMAS A. SCHELLDORF
-------------------------------------
Thomas A. Schelldorf
PREDECESSOR SHAREHOLDERS OF HOPS MARKETING,
INC. (MS Corp G)
/s/ DAVID L. MASON
-------------------------------------
David L. Mason
/s/ THOMAS A. SCHELLDORF
-------------------------------------
Thomas A. Schelldorf
11
<PAGE>
PREDECESSOR SHAREHOLDERS OF CYPRESS COAST
CONSTRUCTION CORPORATION (MS Corp H)
/s/ DAVID L. MASON
-------------------------------------
David L. Mason
/s/ THOMAS A. SCHELLDORF
-------------------------------------
Thomas A. Schelldorf
PREDECESSOR SHAREHOLDERS OF HOPS OF SOUTH
FLORIDA, INC. (MS Corp I)
/s/ DAVID L. MASON
-------------------------------------
David L. Mason
/s/ THOMAS A. SCHELLDORF
-------------------------------------
Thomas A. Schelldorf
PREDECESSOR SHAREHOLDERS OF HOPS PARTNERS
II, INC. (MSC Corp 1)
/s/ DAVID L. MASON
-------------------------------------
David L. Mason
/s/ THOMAS A. SCHELLDORF
-------------------------------------
Thomas A. Schelldorf
/s/ TIMOTHY V. CURCI
-------------------------------------
Timothy V. Curci
PREDECESSOR SHAREHOLDERS OF HOPS PARTNERS
III, INC. (MSC Corp 2)
/s/ DAVID L. MASON
-------------------------------------
David L. Mason
/s/ THOMAS A. SCHELLDORF
-------------------------------------
Thomas A. Schelldorf
/s/ TIMOTHY V. CURCI
-------------------------------------
Timothy V. Curci
12
<PAGE>
PREDECESSOR SHAREHOLDERS OF HOPS OF GREATER
ORLANDO, INC. (MSC Corp 3)
/s/ DAVID L. MASON
-------------------------------------
David L. Mason
/s/ THOMAS A. SCHELLDORF
-------------------------------------
Thomas A. Schelldorf
/s/ TIMOTHY V. CURCI
-------------------------------------
Timothy V. Curci
PREDECESSOR SHAREHOLDERS OF HOPS OF
SOUTHWEST FLORIDA, INC. (MSC Corp 4)
/s/ DAVID L. MASON
-------------------------------------
David L. Mason
/s/ THOMAS A. SCHELLDORF
-------------------------------------
Thomas A. Schelldorf
/s/ TIMOTHY V. CURCI
-------------------------------------
Timothy V. Curci
PREDECESSOR SHAREHOLDERS OF HOPS OF THE
OHIO VALLEY, INC. (MSC Corp 5)
/s/ DAVID L. MASON
-------------------------------------
David L. Mason
/s/ THOMAS A. SCHELLDORF
-------------------------------------
Thomas A. Schelldorf
/s/ TIMOTHY V. CURCI
-------------------------------------
Timothy V. Curci
13
<PAGE>
PREDECESSOR SHAREHOLDERS OF HOPS GRILL &
BREWERY, INC. (MSC Corp 6)
/s/ DAVID L. MASON
-------------------------------------
David L. Mason
/s/ THOMAS A. SCHELLDORF
-------------------------------------
Thomas A. Schelldorf
/s/ TIMOTHY V. CURCI
-------------------------------------
Timothy V. Curci
PREDECESSOR SHAREHOLDERS OF HOPS OF
CARROLLWOOD, INC. (MSC Corp 7)
/s/ DAVID L. MASON
-------------------------------------
David L. Mason
/s/ THOMAS A. SCHELLDORF
-------------------------------------
Thomas A. Schelldorf
/s/ TIMOTHY V. CURCI
-------------------------------------
Timothy V. Curci
PREDECESSOR SHAREHOLDERS OF HOPS OF NORTH
TAMPA, INC. (MSC Corp 8)
/s/ DAVID L. MASON
-------------------------------------
David L. Mason
/s/ THOMAS A. SCHELLDORF
-------------------------------------
Thomas A. Schelldorf
/s/ TIMOTHY V. CURCI
-------------------------------------
Timothy V. Curci
14
<PAGE>
PREDECESSOR SHAREHOLDERS OF HOPS OF PALM
HARBOR, INC. (MSC Corp 9)
/s/ DAVID L. MASON
-------------------------------------
David L. Mason
/s/ THOMAS A. SCHELLDORF
-------------------------------------
Thomas A. Schelldorf
/s/ TIMOTHY V. CURCI
-------------------------------------
Timothy V. Curci
PREDECESSOR SHAREHOLDERS OF HOPS OF SOUTH
TAMPA, INC. (MSC Corp 10)
/s/ DAVID L. MASON
-------------------------------------
David L. Mason
/s/ THOMAS A. SCHELLDORF
-------------------------------------
Thomas A. Schelldorf
/s/ TIMOTHY V. CURCI
-------------------------------------
Timothy V. Curci
PREDECESSOR SHAREHOLDERS OF HOPS OF ST.
PETERSBURG, INC. (MSC Corp 11)
/s/ DAVID L. MASON
-------------------------------------
David L. Mason
/s/ THOMAS A. SCHELLDORF
-------------------------------------
Thomas A. Schelldorf
/s/ TIMOTHY V. CURCI
-------------------------------------
Timothy V. Curci
15
<PAGE>
PREDECESSOR SHAREHOLDERS OF HOPS OF PORT
RICHEY, INC. (MSC Corp 12)
/s/ DAVID L. MASON
-------------------------------------
David L. Mason
/s/ THOMAS A. SCHELLDORF
-------------------------------------
Thomas A. Schelldorf
/s/ TIMOTHY V. CURCI
-------------------------------------
Timothy V. Curci
PREDECESSOR SHAREHOLDERS OF
HOPS OF THE CAROLINAS, INC. (MSC Corp 13)
/s/ DAVID L. MASON
-------------------------------------
David L. Mason
/s/ THOMAS A. SCHELLDORF
-------------------------------------
Thomas A. Schelldorf
/s/ TIMOTHY V. CURCI
-------------------------------------
Timothy V. Curci
PREDECESSOR SHAREHOLDERS OF
HOPS PROPERTIES, INC. (Property Corp)
MASON AND SCHELLDORF LEASING COMPANY:
By: /s/ DAVID L. MASON
-------------------------------------
David L. Mason, General Partner
By: /s/ THOMAS A. SCHELLDORF
-------------------------------------
Thomas A. Schelldorf, General Partner
PREDECESSOR SHAREHOLDER OF TOOMY LCN, INC.
(Toomy Corp)
/s/ KEVIN TOOMY
-------------------------------------
Kevin Toomy
16
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE A
PERCENTAGE AGGREGATE
NUMBER OF OWNERSHIP NUMBER OF PERCENTAGE
PREDECESSOR PREDECESSOR PREDECESSOR SHARES PREDECESSOR SHARES OF HOPS OWNERSHIP
SHAREHOLDERS SUBSIDIARY TO BE EXCHANGED SUBSIDIARY TO BE RECEIVED HOPS, INC.
------------ ----------- ------------------ ----------- -------------- -----------
<S> <C> <C> <C> <C> <C>
David L. Mason Hops Restaurants, Inc. 50 50 % 735,000 32.67%
Hops Partners, Inc. 50 50
Hops of Northeast Florida, Inc. 50 50
Hops of Southeast Florida, Inc. 50 50
Hops of Greater West Palm Beach, Inc. 45 Class A 50
Hops of the Rockies, Inc. 50 50
Hops Marketing, Inc. 50 50
Cypress Coast Construction Corporation 50 50
Hops of South Florida, Inc. 50 50
Hops Partners II, Inc. 45 Class A 45
Hops Partners III, Inc. 45 Class A 45
Hops of Greater Orlando, Inc. 50 Class A 45
Hops of Southwest Florida, Inc. 45 Class A 45
Hops of the Ohio Valley, Inc. 45 Class A 45
Hops Grill & Brewery, Inc. 45 Class A 45
Hops of Carrollwood, Inc. 90 Class A 45
Hops of North Tampa, Inc. 45 Class A 45
Hops of Palm Harbor, Inc. 90 Class A 45
Hops of South Tampa, Inc. 45 Class A 45
Hops of St. Petersburg, Inc. 45 Class A 45
Hops of Port Richey, Inc. 45 Class A 45
Hops of the Carolinas, Inc. 45 Class A 45
Thomas A. Schelldorf Hops Restaurants, Inc. 50 50 % 735,000 32.67%
Hops Partners, Inc. 50 50
Hops of Northeast Florida, Inc. 50 50
Hops of Southeast Florida, Inc. 50 50
Hops of Greater West Palm Beach, Inc. 45 Class A 50
Hops of the Rockies, Inc. 50 50
Hops Marketing, Inc. 50 50
Cypress Coast Construction Corporation 50 50
Hops of Southeast Florida, Inc. 50 50
Hops Partners II, Inc. 45 Class A 45
Hops Partners III, Inc. 45 Class A 45
Hops of Greater Orlando, Inc. 50 Class A 45
Hops of Southwest Florida, Inc. 45 Class A 45
Hops of the Ohio Valley, Inc. 45 Class A 45
Hops Grill & Brewery, Inc. 45 Class A 45
Hops of Carrollwood, Inc. 90 Class A 45
Hops of North Tampa, Inc. 45 Class A 45
Hops of Palm Harbor, Inc. 90 Class A 45
Hops of South Tampa, Inc. 45 Class A 45
Hops of St. Petersburg, Inc. 45 Class A 45
Hops of Port Richey, Inc. 45 Class A 45
Hops of the Carolinas, Inc. 45 Class A 45
Timothy V. Curci Hops Partners II, Inc. 10 Class B 10 % 112,500 5.00%
Hops Partners III, Inc. 10 Class B 10
Hops of Greater Orlando, Inc. 11 Class B 10
Hops of Southwest Florida, Inc. 10 Class B 10
Hops of the Ohio Valley, Inc. 10 Class B 10
Hops Grill & Brewery, Inc. 10 Class B 10
Hops of Carrollwood, Inc. 20 Class B 10
Hops of North Tampa, Inc. 10 Class B 10
Hops of Palm Harbor, Inc. 20 Class B 10
Hops of South Tampa, Inc. 10 Class B 10
Hops of St. Petersburg, Inc. 10 Class B 10
Hops of Port Richey, Inc. 10 Class B 10
Hops of the Carolinas, Inc. 10 Class B 10
Kevin Toomy Toomy LCN, Inc. 1,000 100 % 67,500 3.00%
Mason and Schelldorf Hops Properties, Inc. 100 100 % 600,000 26.66%
Leasing Company
</TABLE>
<PAGE>
SCHEDULE B
PERMITTED LIENS
None.
<PAGE>
SCHEDULE C
REPRESENTATIONS AND WARRANTIES OF TOOMY
Toomy hereby represents and warrants to Hops Grill & Bar, Inc. ("Hops")
as follows:
(A) OWNERSHIP OF SHARES AND CAPACITY TO SELL.
Toomy owns beneficially and of record 1,000 Toomy Shares (which
represent 100% of the issued and outstanding capital stock of Toomy LCN, Inc., a
Florida corporation) and has the full legal right, power, and authority to sell,
convey, assign, and transfer the Toomy Shares to Hops pursuant to this Agreement
free and clear of any lien, claim, charge, encumbrance, or restriction
whatsoever, so that upon delivery of the Toomy Shares to Hops, good, valid, and
marketable title to the Toomy Shares will vest in Hops free and clear of any
lien, claim, charge, encumbrance, or restriction whatsoever.
(B) CORPORATE ORGANIZATION.
Toomy LCN, Inc. is a corporation duly organized, validly existing, and
in good standing under the laws of the State of Florida. Toomy LCN, Inc. has all
requisite corporate power and authority to own, operate, and lease its
properties and to carry on its business as now being conducted and as presently
contemplated to be conducted. Toomy has heretofore delivered to Hops complete
and correct copies of the Articles of Incorporation and Bylaws of Toomy LCN,
Inc. as presently in effect.
(C) CAPITALIZATION.
The authorized capital stock of Toomy LCN, Inc. consists of 1,000
shares of common stock, par value $0.25 per share. The Toomy Shares are all of
the issued and outstanding shares of capital stock of Toomy LCN, Inc. There are
no shares of common stock of Toomy LCN, Inc. held by Toomy LCN, Inc. as treasury
shares. All of the Toomy Shares are duly authorized and issued, fully paid, and
non-assessable. There are no outstanding subscriptions, options, warrants,
calls, rights, contracts, commitments, understandings, restrictions, or
arrangements relating to the issuance, sale, or transfer of any of the Toomy
Shares or any other shares of capital stock of Toomy LCN, Inc., including any
rights of conversion or exchange under any outstanding securities or other
instruments. There are no voting trusts or other agreements or understandings
with respect to the capital stock of Toomy LCN, Inc.
(D) SUBSIDIARIES AND EQUITY INVESTMENTS.
Except for its limited partnership interest in Hops of Southeast
Florida, Ltd. (the "Joint Venture"), Toomy LCN, Inc. does not own any capital
stock or other equity securities of any corporation or any direct or indirect
equity or ownership interest in any business or entity. Other than pursuant to
the limited partnership agreement pursuant to which the Joint Venture was
formed, Toomy LCN, Inc. is not subject to any obligation or requirement to
provide funds to or make any investment (in the form of a loan, capital
contribution, or
C-1
<PAGE>
otherwise) in any business or entity. Toomy LCN, Inc. owns its limited
partnership interest in the Joint Venture free and clear of any lien, claim,
charge, encumbrance, or restriction whatsoever.
(E) AUTHORIZATION.
No corporate proceedings on the part of Toomy LCN, Inc. are necessary
to approve and authorize the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby except as have already been
obtained or will be obtained prior to the Closing Date as appropriate. Assuming
that this Agreement constitutes the valid and binding obligation of the other
parties hereto, this Agreement constitutes the valid and binding obligations of
Toomy, enforceable in accordance with its terms, except as the enforceability
hereof may be subject to or limited by applicable bankruptcy, insolvency,
reorganization, or other similar laws affecting creditors' rights generally and
to general principles of equity being applied at the discretion of the courts.
(F) CONSENTS AND APPROVALS.
Neither the execution and delivery by Toomy of this Agreement, nor the
consummation by Toomy of the transactions contemplated hereby, nor compliance by
Toomy with any of the provisions hereof will (i) conflict with or result in a
breach of any provision of the Articles of Incorporation or Bylaws of Toomy LCN,
Inc.; (ii) violate any order, writ, injunction, decree, judgment, ruling, law,
rule or regulation of any court or governmental authority, applicable to Toomy
LCN, Inc. or Toomy, or any of their respective properties; (iii) require any
consent, approval, or authorization of, or notice to, or declaration, filing, or
registration with, any governmental or regulatory authority; or (iv) violate or
conflict with, or result in a breach of, or constitute a default under, or
require consents from any other party to, or result in a right of termination or
cancellation of, or result in acceleration of any right or creation of any lien
under, any note, bond, mortgage, indenture, deed of trust, license, franchise,
permit, lease, contract, agreement, or other instrument or commitment or
obligation relating to the business of Toomy LCN, Inc. or to which either Toomy
or Toomy LCN, Inc. is or was a party or by which either of them or any of their
respective properties may be or was bound or affected.
(G) NO VIOLATION.
Neither Toomy nor Toomy LCN, Inc. is in violation of, or, to the best
knowledge of Toomy, under investigation with respect to or threatened to be
charged or given notice with respect to, any statute, rule, regulation, order,
judgment, injunction, decree, or other law, of any court or governmental
authority relating to the business of Toomy LCN, Inc. which would have a
material adverse effect on the business of Toomy LCN, Inc.
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<PAGE>
(H) FINANCIAL STATEMENTS.
Toomy has previously delivered to Hops the unaudited balance sheet of
Toomy LCN, Inc. as of December 31, 1995, and the related statements of income,
retained earnings, and changes in financial position for the year then ended
(the "Toomy 1995 Financial Statements"), together with accompanying notes, as
compiled by Omni Tax & Financial, Certified Public Accountants. The Toomy 1995
Financial Statements present fairly the financial position of Toomy LCN, Inc. at
December 31, 1995, and the results of operations and changes in financial
position for the year then ended.
Toomy has previously delivered to Hops the unaudited balance sheet of
Toomy LCN, Inc. as of June 30, 1996, and the related statement of income for the
six-month period then ended (the "Toomy Interim Financial Statements"), as
compiled by Omni Tax & Financial, Certified Public Accountants. The Toomy
Interim Financial Statements present fairly the financial position of Toomy LCN,
Inc. at June 30, 1996, and the results of operations for the six-month period
then ended, except for usual and customary adjustments occurring at year end.
The Toomy 1995 Financial Statements and the Interim Financial
Statements have been prepared from and are in accordance with the books and
records of Toomy LCN, Inc.
(I) ABSENCE OF UNDISCLOSED LIABILITIES.
Toomy LCN, Inc. did not have as of December 31, 1995, any material
liabilities or obligations except for liabilities reflected on the balance sheet
included in the Toomy 1995 Financial Statements (the "Toomy 1995 Balance Sheet")
and did not have as of June 30, 1996, any material liabilities or obligations
except for liabilities reflected on the balance sheet included in the Interim
Financial Statements (the "Toomy Interim Balance Sheet"), and since June 30,
1996, Toomy LCN, Inc. has not incurred any material liabilities or obligations.
(J) ABSENCE OF CERTAIN CHANGES
Since June 30, 1996, Toomy LCN, Inc. has operated, and its business has
been conducted, in the ordinary course, and there has not been any change in or
effect on Toomy LCN, Inc. that is materially adverse to the business,
properties, earnings, prospects, or condition (financial or otherwise). Without
limiting the generality of the foregoing, since June 30, 1996, there has not
been, occurred, or arisen, (i) any indebtedness other than trade liabilities;
(ii) any agreement requiring the maintenance of a specified net worth; (iii) any
assumption, guarantee, endorsement, or other liability or responsibility
(whether direct, contingent, or otherwise) for the obligations of any other
individual, corporation, or other entity; (iv) any loans, advances, capital
contributions, gifts, or charitable contributions to, or investments in, any
other individual, corporation, or other entity; (v) any general increases in the
compensation of employees or any increases in the compensation payable or to
become payable to any officer or key employee; (vi) any declaration or payment
of any dividends or any other payment or distribution with respect to the
capital stock of Toomy LCN, Inc. or the grant of any options, warrants, calls,
or commitments of any kind with respect to the capital stock of Toomy LCN, Inc.;
(vii) any payment, discharge, or satisfaction of any claim, liability, or
obligation (absolute, accrued, contingent, or otherwise), other than the
payment, discharge,
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<PAGE>
or satisfaction, in the ordinary course of business and consistent with past
practice, of trade liabilities reflected on the Interim Balance Sheet or
incurred in the ordinary course of business and consistent with past practice of
Toomy LCN, Inc. since the date of the Interim Balance Sheet; (viii) any lien on
any of the assets of Toomy LCN, Inc.; (ix) any cancellation of debts or waiver
of any claims or rights of substantial value or any sale, transfer, or other
disposition of any of the properties or assets of Toomy LCN, Inc., except in the
ordinary course of business and consistent with past practice; (x) any capital
expenditures or commitments in excess of Two Thousand Five Hundred Dollars (U.S.
$2,500) each or Five Thousand Dollars (U.S. $5,000) in the aggregate; (xi) any
grant or extension of any power of attorney to any individual, corporation, or
other entity; or (xii) any agreement, whether in writing or otherwise, to do any
of the foregoing.
(K) LEGAL PROCEEDINGS.
There are no claims, actions, suits, inquiries, investigations, or
other proceedings pending or, to the best knowledge of Toomy, threatened or
imminent, relating to Toomy or Toomy LCN, Inc. before any court or governmental
body; nor is there any reasonable basis for any such proceedings. Neither Toomy
nor Toomy LCN, Inc. is subject to any judgment, order, decree, or any
governmental restriction which is likely to result in any change in or effect on
Toomy LCN, Inc. that is materially adverse to the business, properties,
earnings, prospects, or condition (financial or otherwise) of Toomy LCN, Inc.
(L) TITLE TO PROPERTIES AND RELATED MATTERS.
SCHEDULE L attached hereto sets forth (i) an accurate and reasonably
detailed listing of the machinery, equipment, vehicles, and other items of
tangible personal property owned or leased by Toomy LCN, Inc., having in the
case of each item a value in excess of Five Hundred Dollars (U.S. $500),
indicating in each case whether owned or leased, and (ii) an accurate listing of
real property leased by Toomy LCN, Inc. Toomy LCN, Inc. owns no real property.
Toomy LCN, Inc. has good, valid, and marketable title to all of its
assets and any other property which Toomy LCN, Inc. purports to own; such assets
and properties and title thereto are free and clear of all title defects and all
liens, mortgages, pledges, claims, charges, security interests, and other
encumbrances (all of the foregoing encumbrances being referred to herein as a
"Lien" or "Liens"), except, with respect to each such property, Liens which (i)
are disclosed in SCHEDULE L attached hereto; (ii) are reflected on the Interim
Balance Sheet; or (iii) relate to current Taxes (as defined below) not yet due;
and which, in any event, do not materially detract from or impair the
marketability, value, or present use of such property (the foregoing exceptions
being referred to herein as the "Permissible Exceptions").
(M) EMPLOYEE BENEFIT PLANS.
Toomy LCN, Inc. does not directly or indirectly maintain any bonus,
deferred compensation, hospitalization or other medical, stock purchase,
pension, life or other insurance, profit-sharing, or retirement plan or
arrangement or other employee benefit plan or arrangement which is an "employee
pension benefit plan," as such term is defined in
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Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended,
and the rules and regulations promulgated thereunder ("ERISA"), or a
"multi-employer plan," as that term is defined in Section 3(37) of ERISA.
(N) TAXES AND TAX RETURNS.
There are no Liens with respect to Taxes (except for Permissible
Exceptions). For purposes of this SCHEDULE C, (i) the term "Taxes" shall mean
all taxes, charges, fees, levies, or other assessments, including, without
limitation, income, gross receipt, excise, property, sales, use, license,
payroll, and franchise taxes, imposed by the United States, or any state, local,
or foreign government or subdivision or agency thereof, whether computed on a
unitary, combined, or any other basis; and such term shall include any interest
and penalties or additions to tax; and (ii) the term "Tax Return" shall mean any
report, return, or other document or information required to be supplied to a
taxing authority in connection with Taxes.
All Tax Returns required to be filed by or on behalf of Toomy LCN, Inc.
with respect to all periods ended prior to the date of this Agreement have been
duly filed with the appropriate authorities and such Tax Returns are accurate in
all material respects. All Taxes (including estimated tax payments) required to
be shown on such Tax Returns or claimed to be due from Toomy LCN, Inc. or with
respect to its business have been paid or reflected as a liability on the books
and records of Toomy LCN, Inc. All deficiencies asserted as a result of any
federal, state, or local tax audits have been paid or finally settled and no
issue has been raised in any such audit which, by application of the same or
similar principles, reasonably could be expected to result in a proposed
deficiency for any other period not so audited. No state of facts exists or has
existed which would constitute grounds for the assessment of any tax liability
with respect to the periods which have not been audited by the Internal Revenue
Service or by other appropriate federal or state authorities. There are no
outstanding agreements or waivers extending the statutory period of limitation
applicable to any Tax Return for any period.
(O) MATERIAL CONTRACTS.
SCHEDULE O attached hereto lists and briefly describes all Material
Contracts, whether domestic or foreign. As used herein the term "Material
Contract" shall mean a contract, agreement, instrument, arrangement,
understanding, lease, or rental agreement, whether written or oral, to which
Toomy LCN, Inc. is a party, which provides for aggregate payments in excess of
Five Hundred Dollars (U.S. $500) during that portion of its term which follows
the Closing Date.
(P) PERSONNEL.
SCHEDULE P attached hereto sets forth a list of all material plans,
contracts, agreements, programs, and policies relating to employment,
compensation, employee benefits; and other personnel matters, in each such case
with respect to directors, officers, or employees of Toomy LCN, Inc.; and Toomy
LCN, Inc. is not in default with respect to any of its obligations under any of
such plans, contracts, agreements, programs, and policies.
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Neither Hops nor Toomy LCN, Inc. is or will be, by reason of the consummation of
the transactions contemplated hereby, liable to any employees of Toomy LCN, Inc.
for any amount of severance pay or for any other similar payments.
(Q) DISCLOSURE.
No representation or warranty by Toomy in this Agreement, and no
written statement contained in any document, certificate, or other writing
delivered by or on behalf of Toomy or Toomy LCN, Inc. to Hops contains any
untrue statement of material fact or omits to state any material fact necessary
to make the statements herein or therein, in light of the circumstances under
which they were made, not misleading.
C-6
EXHIBIT 3.1
ARTICLES OF INCORPORATION
OF
HOPS GRILL & BAR, INC.
THE UNDERSIGNED, acting as sole incorporator of HOPS GRILL & BAR, INC.
(hereinafter, the "Corporation") under the Florida Business Corporation Act,
Chapter 607 of the Florida Statutes, as hereafter amended and modified (the
"FBCA"), hereby adopts the following Articles of Incorporation for the
Corporation, pursuant to Section 607.0203(1) of the Florida Statutes:
ARTICLE 1
NAME
The name of the Corporation is: Hops Grill & Bar, Inc.
ARTICLE 2
EXISTENCE OF CORPORATION
The Corporation shall have perpetual existence.
ARTICLE 3
BUSINESS AND ACTIVITIES
The Corporation may, and is authorized to, engage in any activity or
business now or hereafter permitted under the laws of the United States and of
the State of Florida.
ARTICLE 4
CAPITAL STOCK
4.1 AUTHORIZED SHARES. The total number of shares of all classes of capital
stock that the Corporation shall have the authority to issue shall be 26,000,000
shares, of which 25,000,000 shares shall be Common Stock having a par value of
$0.01 per share ("Common Stock") and 1,000,000 shares shall be Preferred Stock,
$0.01 par value per share ("Preferred Stock"). The Board of Directors is
expressly authorized, pursuant to Section 607.0602 of the FBCA, to provide for
the classification and reclassification of any unissued shares of Common Stock
or Preferred Stock and the issuance thereof in one or more classes or series
without the approval of the shareholders of the Corporation, all within the
limitations set forth in Section 607.0601 of the FBCA.
<PAGE>
4.2 COMMON STOCK.
(A) RELATIVE RIGHTS. The Common Stock shall be subject to all of the
rights, privileges, preferences and priorities of the Preferred Stock as set
forth in the Articles of Amendment to these Articles of Incorporation that may
hereafter be filed pursuant to Section 607.0602 of the FBCA to establish the
respective class or series of the Preferred Stock. Except as otherwise provided
in these Articles of Incorporation, each share of Common Stock shall have the
same rights as and be identical in all respects to all the other shares of
Common Stock.
(B) VOTING RIGHTS. Except as otherwise provided in these Articles of
Incorporation, except as otherwise provided by the FBCA and except as may be
determined by the Board of Directors with respect to the Preferred Stock, only
the holders of Common Stock shall be entitled to vote for the election of
directors of the Corporation and for all other corporate purposes. Upon any such
vote, each holder of Common Stock shall, except as otherwise provided by the
FBCA, be entitled to one vote for each share of Common Stock held by such
holder.
(C) DIVIDENDS. Whenever there shall have been paid, or declared and set
aside for payment, to the holders of the shares of any class of stock having
preference over the Common Stock as to the payment of dividends, the full amount
of dividends and of sinking fund or retirement payments, if any, to which such
holders are respectively entitled in preference to the Common Stock, then the
holders of record of the Common Stock and any class or series of stock entitled
to participate therewith as to dividends, shall be entitled to receive
dividends, when, as, and if declared by the Board of Directors, out of any
assets legally available for the payment of dividends thereon.
(D) DISSOLUTION, LIQUIDATION, WINDING UP. In the event of any
dissolution, liquidation, or winding up of the Corporation, whether voluntary or
involuntary, the holders of record of the Common Stock then outstanding, and all
holders of any class or series of stock entitled to participate therewith in
whole or in part, as to the distribution of assets, shall become entitled to
participate in the distribution of assets of the Corporation remaining after the
Corporation shall have paid, or set aside for payment, to the holders of any
class of stock having preference over the Common Stock in the event of
dissolution, liquidation, or winding up, the full preferential amounts (if any)
to which they are entitled, and shall have paid or provided for payment of all
debts and liabilities of the Corporation.
4.3 PREFERRED STOCK.
(A) ISSUANCE, DESIGNATIONS, POWERS, ETC. The Board of Directors is
expressly authorized, subject to the limitations prescribed by the FBCA and the
provisions of these Articles of Incorporation, to provide, by resolution and by
filing Articles of Amendment to these Articles of Incorporation, which, pursuant
to Section 607.0602(4) of the FBCA shall be effective without shareholder
action, for the issuance from time to time of the shares of
2
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the Preferred Stock in one or more classes or series, to establish from time to
time the number of shares to be included in each such class or series, and to
fix the designations, powers, preferences and other rights of the shares of each
such class or series and to fix the qualifications, limitations and restrictions
thereon, including, but without limiting the generality of the foregoing, the
following:
(1) the number of shares constituting that class or series and the
distinctive designation of that class or series;
(2) the dividend rate on the shares of that class or series,
whether dividends shall be cumulative, noncumulative or
partially cumulative and, if so, from which date or dates, and
the relative rights of priority, if any, of payments of
dividends on shares of that class or series;
(3) whether that class or series shall have voting rights, in
addition to the voting rights provided by the FBCA, and, if
so, the terms of such voting rights;
(4) whether that class or series shall have conversion privileges,
and, if so, the terms and conditions of such conversion,
including provision for adjustment of the conversion rate in
such events as the Board of Directors shall determine;
(5) whether or not the shares of that class or series shall be
redeemable, and, if so, the terms and conditions of such
redemption, including the dates upon or after which they shall
be redeemable, and the amount per share payable in case of
redemption, which amount may vary under different conditions
and at different redemption dates;
(6) whether that class or series shall have a sinking fund for the
redemption or purchase of shares of that class or series, and,
if so, the terms and amount of such sinking fund;
(7) the rights of the shares of that class or series in the event
of voluntary or involuntary liquidation, dissolution, or
winding up of the Corporation, and the relative rights of
priority, if any, of payment of shares of that class or
series; and
(8) any other relative powers, preferences, and rights of that
class or series, and qualifications, limitations or
restrictions on that class or series.
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(B) DISSOLUTION, LIQUIDATION, WINDING UP. In the event of any
liquidation, dissolution or winding up of the Corporation, whether voluntary or
involuntary, the holders of Preferred Stock of each class or series shall be
entitled to receive only such amount or amounts as shall have been fixed by the
Articles of Amendment to these Articles of Incorporation or by the resolution or
resolutions of the Board of Directors providing for the issuance of such class
or series.
4.4 NO PREEMPTIVE RIGHTS. Except as the Board of Directors may otherwise
determine, no shareholder of the Corporation shall have any preferential or
preemptive right to subscribe for or purchase from the Corporation any new or
additional shares of capital stock, or securities convertible into shares of
capital stock, of the Corporation, whether now or thereafter authorized.
ARTICLE 5
BOARD OF DIRECTORS
5.1 CLASSIFICATION. Except as otherwise provided in these Articles of
Incorporation or Articles of Amendment filed pursuant to Section 4.3 hereof
relating to the rights of the holders of any class or series of Preferred Stock,
voting separately by class or series, to elect additional directors under
specified circumstances, the number of directors of the Corporation shall be as
fixed from time to time by or pursuant to these Articles of Incorporation or by
bylaws of the Corporation (the "Bylaws"). The directors, other than those who
may be elected by the holders of any class or series of Preferred Stock voting
separately by class or series, shall be classified, with respect to the time for
which they severally hold office, into three classes, Class I, Class II and
Class III, each of which shall be as nearly equal in number as possible, and
shall be adjusted from time to time in the manner specified in the Bylaws to
maintain such proportionality. Each initial director in Class I shall hold
office for a term expiring at the 1999 annual meeting of the shareholders; each
initial director in Class II shall hold office for a term expiring at the 1998
annual meeting of the shareholders; and each initial director in Class III shall
hold office for a term expiring at the 1997 annual meeting of the shareholders.
Notwithstanding the foregoing provisions of this Section 5.1, each director
shall serve until such directors' successor is duly elected and qualified or
until such directors' earlier death, resignation or removal. At each annual
meeting of the shareholders, the successors to the class of directors whose term
expires at that meeting shall be elected to hold office for a term expiring at
the annual meeting of the shareholders held in the third year following the year
of their election and until their successors shall have been duly elected and
qualified or until such director's earlier death, resignation or removal.
5.2 REMOVAL.
(A) REMOVAL FOR CAUSE. Except as otherwise provided pursuant to the
provisions of these Articles of Incorporation or Articles of Amendment relating
to the rights of the holders of any class or series of Preferred Stock, voting
separately by class or series, to
4
<PAGE>
elect directors under specified circumstances, any director or directors may be
removed from office at any time, but only for cause (as defined in Section
5.2(B) hereof) and only by the affirmative vote, at a special meeting of the
shareholders called for such a purpose, of not less than sixty-six and
two-thirds percent (66 2/3%) of the total number of votes of the then
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors, voting together as a single class, but
only if notice of such proposed removal was contained in the notice of such
meeting. At least thirty (30) days prior to such special meeting of
shareholders, written notice shall be sent to the director or directors whose
removal will be considered at such meeting. Any vacancy on the Board of
Directors resulting from such removal or otherwise shall be filled only by vote
of a majority of the directors then in office, although less than a quorum, and
any director so chosen shall hold office until the next election of the class
for which such director shall have been chosen and until his or her successor
shall have been elected and qualified or until any such director's earlier
death, resignation or removal.
(B) "CAUSE" DEFINED. For the purposes of this Section 5.2, "cause"
shall mean (i) misconduct as a director of the Corporation or any subsidiary of
the Corporation which involves dishonesty with respect to a substantial or
material corporate activity or corporate assets, or (ii) conviction of an
offense punishable by one (1) or more years of imprisonment (other than minor
regulatory infractions and traffic violations which do not materially and
adversely affect the Corporation).
5.3 CHANGE OF NUMBER OF DIRECTORS. In the event of any increase or decrease
in the authorized number of directors, the newly created or eliminated
directorships resulting from such increase or decrease shall be apportioned by
the Board of Directors among the three classes of directors so as to maintain
such classes as nearly equal as possible. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director.
5.4 DIRECTORS ELECTED BY HOLDERS OF PREFERRED STOCK. Notwithstanding the
foregoing, whenever the holders of any one or more classes or series of
Preferred Stock issued by the Corporation shall have the right, voting
separately by class or series, to elect one or more directors at an annual or
special meeting of shareholders, the election, term of office, filling of
vacancies and other features of such directorships shall be governed by the
terms of these Articles of Incorporation, as amended by Articles of Amendment
applicable to such classes or series of Preferred Stock, and such directors so
elected shall not be divided into classes pursuant to this Article 5 unless
expressly provided by the Articles of Amendment applicable to such classes or
series of Preferred Stock.
5.5 EXERCISE OF BUSINESS JUDGMENT. In discharging his or her duties as a
director of the Corporation, a director may consider such factors as the
director considers relevant, including the long-term prospects and interests of
the corporation and its shareholders, the social, economic, legal, or other
effects of any corporate action or inaction upon the employees, suppliers,
customers of the Corporation or its subsidiaries, the communities and
5
<PAGE>
society in which the Corporation or its subsidiaries operate, the economy of the
State of Florida and the United States, and any other factors permitted under
the FBCA.
5.6 INITIAL NUMBER OF DIRECTORS. The number of directors constituting the
initial Board of Directors of the Corporation is five (5). The number of
directors may be increased or decreased from time to time as provided in the
Bylaws, but in no event shall the number of directors be less than three (3).
ARTICLE 6
ACTION BY SHAREHOLDERS
6.1 CALL FOR SPECIAL MEETING. Special meetings of the shareholders of the
Corporation may be called at any time, but only by (a) the Chairman of the Board
of the Corporation, (b) a majority of the directors in office, although less
than a quorum, and (c) the holders of not less than twenty-five percent (25%) of
the total number of votes of the then outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors, voting
together as a single class.
6.2 SHAREHOLDER ACTION BY UNANIMOUS WRITTEN CONSENT. Any action required or
permitted to be taken by the shareholders of the Corporation must be affected at
a duly called annual or special meeting of the shareholders, and may not be
effected by any consent in writing by such shareholders, unless such written
consent is unanimous.
ARTICLE 7
INDEMNIFICATION
7.1 PROVISION OF INDEMNIFICATION. The Corporation shall, to the fullest
extent permitted or required by the FBCA, including any amendments thereto (but
in the case of any such amendment, only to the extent such amendment permits or
requires the Corporation to provide broader indemnification rights than prior to
such amendment), indemnify its Directors and Executive Officers against any and
all Liabilities, and advance any and all reasonable Expenses, incurred thereby
in any Proceeding to which any such Director or Executive Officer is a party or
in which such Director or Executive Officer is deposed or called to testify as a
witness because he or she is or was a Director or Executive Officer of the
Corporation. The rights to indemnification granted hereunder shall not be deemed
exclusive of any other rights to indemnification against Liabilities or the
advancement of Expenses which a Director or Executive Officer may be entitled
under any written agreement, Board of Directors' resolution, vote of
shareholders, the FBCA, or otherwise. The Corporation may, but shall not be
required to, supplement the foregoing rights to indemnification against
Liabilities and advancement of Expenses by the purchase of insurance on behalf
of any one or more of its Directors or Executive Officers whether or not the
Corporation would be obligated to indemnify or advance Expenses to such Director
or Executive Officer under this
6
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Article. For purposes of this Article, the term "Directors" includes former
directors of the Corporation and any director who is or was serving at the
request of the Corporation as a director, officer, employee, or agent of another
corporation, partnership, joint venture, trust, or other enterprise, including,
without limitation, any employee benefit plan (other than in the capacity as an
agent separately retained and compensated for the provision of goods or services
to the enterprise, including, without limitation, attorneys-at-law, accountants,
and financial consultants). The term "Executive Officers" includes those
individuals who are or were at any time "executive officers" of the Corporation
as defined in Securities and Exchange Commission Rule 3b-7 promulgated under the
Securities Exchange Act of 1934, as amended. All other capitalized terms used in
this Article 7 and not otherwise defined herein have the meaning set forth in
Section 607.0850, Florida Statutes (1995). The provisions of this Article 7 are
intended solely for the benefit of the indemnified parties described herein,
their heirs and personal representatives and shall not create any rights in
favor of third parties. No amendment to or repeal of this Article 7 shall
diminish the rights of indemnification provided for herein prior to such
amendment or appeal.
ARTICLE 8
AMENDMENTS
8.1 ARTICLES OF INCORPORATION. Notwithstanding any other provision of these
Articles of Incorporation or the Bylaws of the Corporation (and notwithstanding
that a lesser percentage may be specified by law) the affirmative vote of
sixty-six and two-thirds percent (66 2/3%) of the total number of votes of the
then outstanding shares of the capital stock of the Corporation entitled to vote
generally in the election of directors, voting together as a single class, shall
be required (unless separate voting by classes is required by the FBCA, in which
event the affirmative vote of sixty-six and two-thirds percent (66 2/3%) of the
number of shares of each class or series entitled to vote as a class shall be
required), to amend or repeal, or to adopt any provision inconsistent with the
purpose or intent of, Articles 5, 6, 7 or this Article 8 of these Articles of
Incorporation. Notice of any such proposed amendment, repeal or adoption shall
be contained in the notice of the meeting at which it is to be considered.
Subject to the provisions set forth herein, the Corporation reserves the right
to amend, alter, repeal or rescind any provision contained in these Articles of
Incorporation in the manner now or hereafter prescribed by law.
8.2 BYLAWS. The shareholders of the Corporation may adopt or amend a bylaw
which fixes a greater quorum or voting requirement for shareholders (or voting
groups of shareholders) than is required by the FBCA. The adoption or amendment
of a bylaw that adds, changes or deletes a greater quorum or voting requirement
for shareholders must meet the same quorum or voting requirement and be adopted
by the same vote and voting groups required to take action under the quorum or
voting requirement then in effect or proposed to be adopted, whichever is
greater.
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ARTICLE 9
AFFILIATED TRANSACTIONS
The Corporation expressly elects, pursuant to Section 607.0901(5)(a) of the
FBCA, not to be governed by the provisions and rules pertaining to affiliated
transactions contained in Section 607.0901 of the FBCA.
ARTICLE 10
INITIAL REGISTERED OFFICE AND AGENT
The Initial Registered Agent of the Corporation is Fowler, White, Gillen,
Boggs, Villareal and Banker, P.A. and the address of the Initial Registered
Office of the Corporation is 501 East Kennedy Boulevard, Suite 1700, Tampa,
Florida 33602, Attention: R. Alan Higbee, Esq.
ARTICLE 11
PRINCIPAL OFFICE AND MAILING ADDRESS
The address of the Principal Office of the Corporation and its mailing
address is 3030 North Rocky Point Drive West, Suite 650, Tampa, Florida 33607.
The location of the Principal Office and the mailing address shall be subject to
change as may be provided in the Bylaws.
ARTICLE 12
INCORPORATOR
The name and address of the sole incorporator of the corporation is R. Alan
Higbee, Esq., Fowler, White, Gillen, Boggs, Villareal and Banker, P.A., 501 East
Kennedy Boulevard, Suite 1700, Tampa, Florida 33602.
IN WITNESS WHEREOF, these Articles of Incorporation have been signed by the
undersigned incorporator this 30th day of September, 1996.
/s/ R. ALAN HIGBEE
--------------------------------
R. Alan Higbee, Incorporator
8
<PAGE>
ACCEPTANCE OF APPOINTMENT
BY INITIAL REGISTERED AGENT
THE UNDERSIGNED, having been named in Article 10 of the foregoing Articles
of Incorporation as Initial Registered Agent at the office designated therein,
hereby accepts such appointment and agrees to act in such capacity. The
undersigned hereby states that he is familiar with, and hereby accepts, the
obligations set forth in Section 607.0505, Florida Statutes, and the undersigned
will further comply with any other provisions of law made applicable to him as
Registered Agent of the Corporation.
DATED this 30th day of September, 1996.
FOWLER, WHITE, GILLEN, BOGGS,
VILLAREAL AND BANKER, P.A.
/s/ R. ALAN HIGBEE
-------------------------
R. Alan Higbee, For the Firm
9
EXHIBIT 3.2
BYLAWS
OF
HOPS GRILL & BAR, INC.
(A FLORIDA CORPORATION)
<PAGE>
TABLE OF CONTENTS
ARTICLE 1
DEFINITIONS
Section 1.1 Definitions.................................................... 1
ARTICLE 2
OFFICES
Section 2.1 Principal and Business Offices................................ 1
Section 2.2 Registered Office............................................. 1
ARTICLE 3
SHAREHOLDERS
Section 3.1 Annual Meeting................................................ 1
Section 3.2 Special Meeting............................................... 1
Section 3.3 Place of Meeting.............................................. 2
Section 3.4 Notice of Meeting............................................. 2
Section 3.5 Waiver of Notice.............................................. 3
Suction 3.6 Fixing of Record Date......................................... 3
Section 3.7 Shareholders' List for Meetings............................... 4
Section 3.9 Quorum........................................................ 4
Section 3.9 Voting of Shares.............................................. 5
Section 3.10 Vote Required................................................. 5
Section 3.11 Conduct of Meeting............................................ 5
Section 3.12 Inspectors of Election........................................ 5
Section 3.13 Proxies....................................................... 6
Section 3.14 Action by Shareholders Without Meeting........................ 6
Section 3.15 Acceptance of Instruments Showing Shareholder Action.......... 6
ARTICLE 4
BOARD OF DIRECTORS
Section 4.1 General Powers and Number..................................... 7
Section 4.2 Qualifications................................................ 7
Section 4.3 Term of Office................................................ 7
Section 4.4 Nominations of Directors...................................... 8
Section 4.5 Removal....................................................... 8
Section 4.6 Resignation................................................... 8
Section 4.7 Vacancies..................................................... 8
Section 4.8 Compensation.................................................. 9
Section 4.9 Regular Meetings.............................................. 9
Section 4.10 Special Meetings.............................................. 9
Section 4.11 Notice........................................................10
Section 4.12 Waiver of Notice..............................................10
Section 4.13 Quorum and Voting.............................................10
Section 4.14 Conduct of Meetings...........................................10
Section 4.15 Committees....................................................10
Section 4.16 Action Without Meeting........................................11
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ARTICLE 5
OFFICERS
Section 5.1 Number........................................................11
Section 5.2 Election and Term of Office...................................12
Section 5.3 Removal.......................................................12
Section 5.4 Resignation...................................................12
Section 5.5 Vacancies.....................................................12
Section 5.6 Chairman of the Board.........................................12
Section 5.7 President.....................................................12
Section 5.8 Vice President................................................13
Section 5.9 Secretary.....................................................13
Section 5.10 Treasurer.....................................................13
Section 5.11 Assistant Secretaries and Treasurers..........................13
Section 5.12 Other Assistants and Acting Officers..........................13
Section 5.13 Salaries......................................................14
ARTICLE 6
CONTRACTS, CHECKS AND DEPOSITS; SPECIAL CORPORATE ACTS
Section 6.1 Contracts.....................................................14
Section 6.2 Checks, Drafts, etc...........................................14
Section 6.3 Deposits......................................................14
Section 6.4 Voting of Securities Owned by Corporation.....................14
ARTICLE 7
CERTIFICATES FOR SHARES; TRANSFER OF SHARES
Section 7.1 Consideration for Shares......................................14
Section 7.2 Certificates for Shares.......................................15
Section 7.3 Transfer of Shares............................................15
Section 7.4 Restrictions on Transfer......................................15
Section 7.5 Lost, Destroyed, or Stolen Certificates.......................15
Section 7.6 Stock Regulations.............................................16
ARTICLE 8
SEAL
Section 8.1 Seal..........................................................16
ARTICLE 9
BOOKS AND RECORDS
Section 9.1 Books and Records.............................................16
Section 9.2 Shareholders' Inspection Rights...............................16
Section 9.3 Distribution of Financial Information.........................16
Section 9.4 Other Reports.................................................16
ii
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ARTICLE 10
INDEMNIFICATION
Section 10.1 Provision of Indemnification..................................16
ARTICLE 11
AMENDMENTS
Section 11.1 Power to Amend................................................17
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ARTICLE 1
DEFINITIONS
SECTION 1.1 DEFINITIONS. The following terms shall have the following
meanings for purposes of these bylaws:
"ACT" means the Florida Business Corporation Act, as it may be amended
from time to time, or any successor legislation thereto.
"CORPORATION" means Hops Grill & Bar, Inc., a Florida corporation.
"DELIVER" or "DELIVERY" includes delivery by hand; United States mail;
facsimile, telegraph, teletype or other form of electronic transmission, with
written confirmation or other acknowledgment of receipt; and private mail
carriers handling nationwide mail services.
"PRINCIPAL OFFICE" means the office (within or without the State of
Florida) where the Corporation's principal executive offices are located, as
designated in the Articles of Incorporation until an annual report has been
filed with the Florida Department of State, and thereafter as designated in the
annual report.
ARTICLE 2
OFFICES
SECTION 2.1 PRINCIPAL AND BUSINESS OFFICES. The Corporation may have
such principal and other business offices, either within or without the State of
Florida, as the Board of Directors may designate or as the business of the
Corporation may require from time to time.
SECTION 2.2 REGISTERED OFFICE. The registered office of the Corporation
required by the Act to be maintained in the State of Florida may but need not be
identical with the principal office if located in the State of Florida, and the
address of the registered office may be changed from time to time by the Board
of Directors or by the registered agent. The business office of the registered
agent of the Corporation shall be identical to such registered office.
ARTICLE 3
SHAREHOLDERS
SECTION 3.1 ANNUAL MEETING.
(a) CALL BY DIRECTORS. The annual meeting of shareholders shall be held
within four months after the close of each fiscal year of the Corporation on a
date and at a time and place designated by the Board of Directors, for the
purpose of electing directors and for the transaction of such other business as
may come before the meeting. If the election of directors shall not be held on
the day fixed as herein provided for any annual meeting of shareholders, or at
any adjournment thereof, the Board of Directors shall cause the election to be
held at a special meeting of shareholders as soon thereafter as is practicable.
The failure to hold the annual meeting of the shareholders within the time
stated in these bylaws shall not affect the terms of office of the officers or
directors of the Corporation or the validity of any corporate action.
(b) BUSINESS AT ANNUAL MEETING. At an annual meeting of the
shareholders of the Corporation, only such business shall be conducted as shall
have been properly brought before the meeting. To be properly brought before an
annual meeting, business must be (i) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Board of Directors, (ii)
otherwise properly
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brought before the meeting by or at the direction of the Board of Directors, or
(iii) otherwise properly brought before the meeting by a shareholder. For
business to be properly brought before an annual meeting by a shareholder, the
shareholder must have given timely notice thereof in writing to the Secretary of
the Corporation. To be timely, a shareholder's notice shall be received at the
principal business office of the Corporation no later than the date designated
for receipt of shareholders' proposals in a prior public disclosure made by the
Corporation. If there has been no such prior public disclosure, then to be
timely, a shareholder's notice must be delivered to or mailed and received at
the principal business office of the Corporation not less than sixty (60) days
nor more then ninety (90) days prior to the annual meeting of shareholders;
PROVIDED, HOWEVER, that in the event that less than seventy (70) days' notice of
the date of the meeting is given to shareholders by notice or prior public
disclosure, notice by the shareholders, to be timely, must be received by the
Corporation not later than the close of business on the tenth day following the
day on which the Corporation gave notice or made a public disclosure of the date
of the annual meeting of the shareholders. A shareholder's notice to the
Secretary shall set forth as to each matter the shareholder proposes to bring
before the annual meeting (i) a brief description of the business desired to be
brought before the annual meeting and the reasons for conducting such business
at the annual meeting, (ii) the name and address, as they appear on the
Corporation's stock books, of the shareholders proposing such business, and
(iii) the class and number of shares of the Corporation which are beneficially
owned by the shareholder, (iv) any material interest of the shareholder in such
business, and (v) the some information required by clauses (ii), (iii) and (iv)
above with respect to any other shareholder that, to the knowledge of the
shareholder proposing such business, supports such proposal. Notwithstanding
anything in these bylaws to the contrary, no business shall be conducted at an
annual meeting except in accordance with the procedures set forth in this
Section 3.1(b). The Chairman of an annual meeting shall, if the facts warrant,
determine and declare to the annual meeting that a matter of business was not
properly brought before the meeting in accordance with the provisions of this
Section 3.1(b), and if the Chairman shall so determine, the Chairman shall so
declare at the meeting and any such business not properly brought before the
meeting shall not be transacted.
SECTION 3.2 SPECIAL MEETINGS.
(a) CALL BY DIRECTORS. Special meetings of shareholders of the
Corporation, for any purpose or purposes, may be called by (i) the Chairman of
the Board (if any) or (2) a majority of the directors in office, although less
than a quorum.
(b) CALL BY SHAREHOLDERS. The Corporation shall call a special meeting
of shareholders in the event that the holders of at least twenty-five percent
(25%) of all of the votes entitled to be cast on any issue proposed to be
considered at the proposed special meeting sign, date, and deliver to the
Secretary one or more written demands for the meeting describing one or more
purposes for which it is to be held. The Corporation shall give notice of such a
special meeting within sixty days after the date that the demand is delivered to
the Corporation.
SECTION 3.3 PLACE OF MEETING. The Board of Directors may designate any
place, either within or without the State of Florida, as the place of meeting
for any annual or special meeting of shareholders. If no designation is made,
the place of meeting shall be the principal office of the Corporation.
SECTION 3.4 NOTICE OF MEETING.
(a) CONTENT AND DELIVERY. Written notice stating the date, time, and
place of any meeting of shareholders and, in the case of a special meeting, the
purpose or purposes for which the meeting is called, shall be delivered not less
than ten days nor more then sixty days before the date of the meeting by or at
the direction of the President or the Secretary, or the officer or persons duly
calling the meeting, to each shareholder of record entitled to vote at such
meeting and to such other persons as required by the Act. Unless the Act
requires otherwise, notice of an annual meeting need not
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include a description of the purpose or purposes for which the meeting is
called. If mailed, notice of a meeting of shareholders shall be deemed to be
delivered when deposited in the United States mail, addressed to the shareholder
at his or her address as it appears on the stock record books of the
Corporation, with postage thereon prepaid.
(b) NOTICE OF ADJOURNED MEETINGS. If an annual or special meeting of
shareholders is adjourned to a different date, time, or place the Corporation
shall not be required to give notice of the new date, time, or place if the new
date, time, or place is announced at the meeting before adjournment; PROVIDED,
HOWEVER, that if a new record date for an adjourned meeting is or must be fixed,
the Corporation shall give notice of the adjourned meeting to persons who are
shareholders as of the new record date who are entitled to notice of the
meeting.
(c) NO NOTICE UNDER CERTAIN CIRCUMSTANCES. Notwithstanding the other
provisions of this Section, no notice of a meeting of shareholders need be given
to a shareholder if: (i) an annual report and proxy statement for two
consecutive annual meetings of shareholders, or (ii) all, and at least two,
checks in payment of dividends or interest on securities during a twelve-month
period have been sent by first-class, United States mail, addressed to the
shareholder at his or her address as it appears an the share transfer books of
the Corporation, and returned undeliverable. The obligation of the Corporation
to give notice of a shareholders' meeting to any such shareholder shall be
reinstated once the Corporation has received a new address for such shareholder
for entry on its share transfer books.
SECTION 3.5 WAIVER OF NOTICE.
(a) WRITTEN WAIVER. A shareholder may waive any notice required by the
Act or these bylaws before or after the date and time stated for the meeting in
the notice. The waiver shall be in writing and signed by the shareholder
entitled to the notice, and be delivered to the Corporation for inclusion in the
minutes or filing with the corporate records. Neither the business to be
transacted at nor the purpose of any regular or special meeting of shareholders
need be specified in any written waiver of notice.
(b) WAIVER BY ATTENDANCE. A shareholder's attendance at a meeting, in
person or by proxy, waives objection to all of the following: (i) lack of notice
or defective notice of the meeting, unless the shareholder at the beginning of
the meeting objects to holding the meeting or transacting business at the
meeting; and (ii) consideration of a particular matter at the meeting that is
not within the purpose or purposes described in the meeting notice, unless the
shareholder objects to considering the matter when it is presented.
SECTION 3.6 FIXING OF RECORD DATE.
(a) GENERAL. The Board of Directors may fix in advance a date as the
record date for the purpose of determining shareholders entitled to notice of a
shareholders' meeting, entitled to vote, or take any other action. In no event
may a record date fixed by the Board of Directors be a date preceding the date
upon which the resolution fixing the record date is adopted or a date more than
seventy days before the date of meeting or action requiring a determination of
shareholders.
(b) SPECIAL MEETING. The record date for determining shareholders
entitled to demand a special meeting shall be the close of business on the date
the first shareholder delivers his or her demand to the Corporation.
(c) SHAREHOLDER ACTION BY UNANIMOUS WRITTEN CONSENT. If no prior action
is required by the Board of Directors pursuant to the Act, the record date for
determining shareholders entitled to take action without a meeting shall be the
close of business on the date the first signed written consent with respect to
the action in question is delivered to the Corporation, but if prior action is
required by the Board of Directors pursuant to the Act, such record date shall
be the close of business on the
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date on which the Board of Directors adopts the resolution taking such prior
action unless the Board of Directors otherwise fixes a record date. Any action
of the shareholders of the Corporation taken without a meeting shall be effected
only upon the unanimous written consent of all shareholders entitled to take
such action.
(d) ABSENCE OF BOARD DETERMINATION FOR SHAREHOLDERS' MEETING. If the
Board of Directors does not determine the record date for determining
shareholders entitled to notice of and to vote at an annual or special
shareholders' meeting, such record date shall be the close of business on the
day before the first notice with respect thereto is delivered to shareholders.
(e) ADJOURNED MEETING. A record date for determining shareholders
entitled to notice of or to vote at a shareholders' meeting is effective for any
adjournment of the meeting unless the Board of Directors fixes a new record
date, which it must do if the meeting is adjourned to a date more than 120 days
after the date fixed for the original meeting.
SECTION 3.7 SHAREHOLDERS' LIST FOR MEETINGS.
(a) PREPARATION AND AVAILABILITY. After a record date for a meeting of
shareholders has been fixed, the Corporation shall prepare an alphabetical list
of the names of all of the shareholders entitled to notice of the meeting. The
list shall be arranged by class or series of shares, if any, and show the
address of and number of shares held by each shareholder. Such list shall be
available for inspection by any shareholder for a period of ten days prior to
the meeting or such shorter time as exists between the record date and the
meeting date, and continuing through the meeting, at the Corporation's principal
office, at a place identified in the meeting notice in the city where the
meeting will be held, or at the office of the Corporation's transfer agent or
registrar, if any. A shareholder or his or her agent may, on written demand,
inspect the list, subject to the requirements of the Act, during regular
business hours and at his or her expense, during the period that it is available
for inspection pursuant to this Section. A shareholder's written demand to
inspect the list shall describe with reasonable particularity the purpose for
inspection of the list, and the Corporation may deny the demand to inspect the
list if the Secretary determines that the demand was not made in good faith and
for a proper purpose or if the list is not directly connected with the purpose
stated in the shareholder's demand, all subject to the requirements of Section
607.1602(3) of the Act. Notwithstanding anything herein to the contrary, the
Corporation shall make the shareholders' list available at any annual meeting or
special meeting of shareholders and any shareholder or his or her agent or
attorney may inspect the list at any time during the meeting or any adjournment
thereof.
(b) PRIMA FACIE EVIDENCE. The shareholders' list is PRIMA FACIE
evidence of the identity of shareholders entitled to examine the shareholders'
list or to vote at a meeting of shareholders.
(c) FAILURE TO COMPLY. If the requirements of this Section have not
been substantially complied with, or if the Corporation refuses to allow a
shareholder or his or her agent or attorney to inspect the shareholders' list
before or at the meeting, on the demand of any shareholder, in person or by
proxy, who failed to get such access, the meeting shall be adjourned until such
requirements are complied with.
(d) VALIDITY OF ACTION NOT AFFECTED. Refusal or failure to prepare or
make available the shareholders' list shall not affect the validity of any
action taken at a meeting of shareholders.
SECTION 3.8 QUORUM.
(a) WHAT CONSTITUTES A QUORUM. Shares entitled to vote as a separate
voting group may take action on a matter at a meeting only if a quorum of those
shares exists with respect to that matter. If the Corporation has only one class
of stock outstanding, such class shall constitute a separate voting group for
purposes of this Section. Except as otherwise provided in the Act, a majority of
the votes
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entitled to be cast on the matter shall constitute a quorum of the
voting group for action on that matter.
(b) PRESENCE OF SHARES. Once a share is represented for any purpose at
a meeting, other than for the purpose of objecting to holding the meeting or
transacting business at the meeting, it is considered present for purposes of
determining whether a quorum exists for the remainder of the meeting and for any
adjournment of that meeting unless a new record date is or must be set for the
adjourned meeting.
(c) ADJOURNMENT IN ABSENCE OF QUORUM. Where a quorum is not present,
the holders of a majority of the shares represented and who would be entitled to
vote at the meeting if a quorum were present may adjourn such meeting from time
to time.
SECTION 3.9 VOTING OF SHARES. Except as provided in the Articles of
Incorporation or the Act, each outstanding share, regardless of class, is
entitled to one vote on each matter voted on at a meeting of shareholders.
SECTION 3.10 VOTE REQUIRED.
(a) MATTERS OTHER THAN ELECTION OF DIRECTORS. If a quorum exists,
except in the case of the election of directors, action on a matter shall be
approved by a majority of the votes cast at such meeting, unless the Act or the
Articles of Incorporation require a greater number of affirmative votes.
(b) ELECTION OF DIRECTORS. Each director shall be elected by a
plurality of the votes cast by the shares entitled to vote in the election of
directors at a meeting at which a quorum is present. Each shareholder who is
entitled to vote at an election of directors has the right to vote the number of
shares owned by him or her for as many persons as there are directors to be
elected. Shareholders do not have a right to cumulate their votes for directors.
SECTION 3.11 CONDUCT OF MEETING. The Chairman of the Board of
Directors, and if there be none, or in his or her absence, the President, and in
his or her absence, a Vice President in the order provided under the Section of
these bylaws titled "Vice Presidents," and in their absence, any person chosen
by the shareholders present shall call a shareholders' meeting to order and
shall act as presiding officer of the meeting, and the Secretary of the
Corporation shall act as secretary of all meetings of the shareholders, but, in
the absence of the Secretary, the presiding officer may appoint any other person
to act as secretary of the meeting. The presiding officer of the meeting shall
have broad discretion in determining the order of business at a shareholders'
meeting. The presiding officer's authority to conduct the meeting shall include,
but in no way be limited to, recognizing shareholders entitled to speak, calling
for the necessary reports, stating questions and putting them to a vote, calling
for nominations, and announcing the results of voting. The presiding officer
also shall take such actions as are necessary and appropriate to preserve order
at the meeting. The rules of parliamentary procedure need not be observed in the
conduct of shareholders' meetings.
SECTION 3.12 INSPECTORS OF ELECTION. Inspectors of election may be
appointed by the Board of Directors to act at any meeting of shareholders at
which any vote is taken. If inspectors of election are not so appointed, the
presiding officer of the meeting may, and on the request of any shareholder
shall, make such appointment. Each inspector, before entering upon the discharge
of his or her duties, shall take and sign an oath faithfully to execute the
duties of inspector at such meeting with strict impartiality and according to
the best of his or her ability. The inspectors of election shall determine the
number of shares outstanding, the voting rights with respect to each, the shares
represented at the meeting, the existence of a quorum, and the authenticity,
validity, and effect of proxies; receive votes, ballots, consents, and waivers;
hear and determine all challenges and questions arising in connection with the
vote; count and tabulate all votes, consents, and waivers; determine and
announce the result; and do such acts as are proper to conduct the election or
vote with fairness to all
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shareholders. No inspector, whether appointed by the Board of Directors or by
the person meting as presiding officer of the meeting, need be a shareholder.
The inspectors may appoint and retain other persons or entities to assist the
inspectors In the performance of the duties of the inspectors. On request of the
person presiding at the meeting, the inspectors shall make a report in writing
of any challenge, question or matter determined by them and execute a
certificate of any fact found by them.
SECTION 3.13 PROXIES.
(a) APPOINTMENT. At all meetings of shareholders, a shareholder may
vote his or her shares in person or by proxy. A shareholder may appoint a proxy
to vote or otherwise act for the shareholder by signing an appointment form,
either personally or by his or her attorney-in-fact. If an appointment form
expressly provides, any proxy holder may appoint, in writing, a substitute to
act in his or her, place. A telegraph, telex, or a cablegram, a facsimile
transmission of a signed appointment form, or a photographic, photostatic, or
equivalent reproduction of a signed appointment form is a sufficient appointment
form.
(b) WHEN EFFECTIVE. An appointment of a proxy is effective when
received by the Secretary or other officer or agent of the Corporation
authorized to tabulate votes. An appointment is valid for up to eleven (11)
months unless a longer period is expressly provided in the appointment form. An
appointment of a proxy is revocable by the shareholder unless the appointment
form conspicuously states that it is irrevocable and the appointment is coupled
with an interest.
SECTION 3.14 ACTION BY SHAREHOLDERS WITHOUT MEETING.
(a) REQUIREMENTS FOR UNANIMOUS WRITTEN CONSENT. Any action required or
permitted by the Act to be taken at any annual or special meeting of
shareholders may be taken without a meeting, without prior notice, and without a
vote if one or more written consents describing the action taken shall be signed
and dated by the holders of all (and not less than all) of the outstanding
capital stock of the Corporation entitled to vote thereon. Such consents must be
delivered to the principal office of the Corporation in Florida, the
Corporation's principal place of business, the Secretary, or another officer or
agent of the Corporation having custody of the books in which proceedings of
meetings of shareholders are recorded. No written consent shall be effective to
take the corporate action referred to therein unless, within sixty days of the
date of the earliest dated consent delivered in the manner required herein,
written consents signed by the number of holders required to take action are
delivered to the Corporation by delivery as set forth in this Section.
(b) REVOCATION OF WRITTEN CONSENTS. Any written consent may be revoked
prior to the date that the Corporation receives the required number of consents
to authorize the proposed action. No revocation is effective unless in writing
and until received by the Corporation at its principal office in Florida or its
principal place of business, or received by the Secretary or other officer or
agent having custody of the books in which proceedings of meetings of
shareholders are recorded.
(c) SAME EFFECT AS VOTE AT MEETING. A consent signed under this Section
has the effect of a meeting vote and may be described as such in any document.
Whenever action is taken by written consent pursuant to this Section, the
written consent of the shareholders consenting thereto or the written reports of
inspectors appointed to tabulate such consents shall be filed with the minutes
of proceedings of shareholders.
SECTION 3.15 ACCEPTANCE OF INSTRUMENTS SHOWING SHAREHOLDER ACTION. If
the name signed on a vote, consent, waiver, or proxy appointment corresponds to
the name of a shareholder, the Corporation, if acting in good faith, may accept
the vote, consent, waiver, or proxy appointment and give it effect as the Act of
a shareholder. If the name signed on a vote, consent, waiver, or proxy
appointment does not correspond to the name of a shareholder, the Corporation,
if acting in good faith,
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may accept the vote, consent, waiver, or proxy appointment and give it effect as
the Act of the shareholder if any of the following apply:
(a) The shareholder is an entity and the name signed purports to be
that of an officer or agent of the entity;
(b) The name signed purports to be that of an administrator, executor,
guardian, personal representative, or conservator representing the shareholder
and, if the Corporation requests, evidence of fiduciary status acceptable to the
Corporation is presented with respect to the vote, consent, waiver, or proxy
appointment;
(c) The name signed purports to be that of a receiver or trustee in
bankruptcy, or assignee for the benefit of creditors of the shareholder and, if
the Corporation requests, evidence of this status acceptable to the Corporation
is presented with respect to the vote, consent, waiver, or proxy appointment;
(d) The name signed purports to be that of a pledgee, beneficial owner,
or attorney-in-fact of the shareholder and, if the Corporation requests,
evidence acceptable to the Corporation of the signatory's authority to sign for
the shareholder is presented with respect to the vote, consent, waiver, or proxy
appointment; or
(e) Two or more persons are the shareholder as cotenants or fiduciaries
and the name signed purports to be the name of at least one of the co-owners and
the person signing appears to be acting on behalf of all co-owners.
The Corporation may reject a vote, consent, waiver, or proxy appointment if the
Secretary or other officer or agent of the Corporation who is authorized to
tabulate votes, acting in good faith, has reasonable basis for doubt about the
validity of the signature on it or about the signatory's authority to sign for
the shareholder.
ARTICLE 4
BOARD OF DIRECTORS
SECTION 4.1 GENERAL POWERS AND NUMBER. All corporate powers shall be
exercised by or under the authority of, and the business and affairs of the
Corporation managed under the direction of, the Board of Directors. The
Corporation shall have five (5) directors initially. The number of directors may
be increased or decreased from time to time by vote of a majority of the Board
of Directors, but shall never be less than three (3).
SECTION 4.2 QUALIFICATIONS. Directors must be natural persons who are
eighteen years of age or older but need not be residents of the State of Florida
or shareholders of the Corporation.
SECTION 4.3 TERM OF OFFICE. The directors shall be classified, with
respect to the time for which they severally hold office, into three (3)
classes, Class I, Class II and Class III, each of which shall be as nearly equal
in number as possible. Class I shall be established for a term expiring at the
annual meeting of shareholders to be held in 1999 and shall consist initially of
two (2) directors, Class II shall be established for a term expiring at the
annual meeting of shareholders to be held in 1998 and shall consist initially of
two (2) directors. Class III shall be established for a term expiring at the
annual meeting of shareholders to be held in 1997 and shall consist initially of
one (1) director. Each director shall hold office until his or her successors
are elected and qualified, or until such director's earlier death, resignation
or removal as hereinafter provided. At each annual meeting of the shareholders
of Corporation, the successors of the class of directors whose terms expire at
that meeting shall be elected to hold office for a term expiring at the annual
meeting of shareholders held in the
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third year following the year of their election. Unless otherwise provided in
the Articles of Incorporation, when the number of directors of the Corporation
is changed, the Board of Directors shall determine the class or classes to which
the increased or decreased number of directors shall be apportioned, PROVIDED,
HOWEVER, that no decrease in the number of directors shall affect the term of
any director then in office.
SECTION 4.4 NOMINATIONS OF DIRECTORS. Except as otherwise provided
pursuant to the provisions of the Articles of Incorporation or Articles of
Amendment relating to the rights of the holders of any class or series of
Preferred Stock, voting separately by class or series, to elect directors under
specified circumstances, nominations of persons for election to the Board of
Directors may be made by the Chairman of the Board on behalf of the Board of
Directors or by any shareholder of the Corporation entitled to vote for the
election of directors at the annual meeting of the shareholders who complies
with the notice provisions set forth in this Section 4.4. To be timely, a
shareholder's notice shall be received at the principal business office of the
Corporation no later than the date designated for receipt of shareholders'
proposals in a prior public disclosure made by the Corporation. If there has
been no such prior public disclosure, then to be timely, a shareholder's
nomination must be delivered to or mailed and received at the principal business
office of the Corporation not less than sixty (60) days nor more than ninety
(90) days prior to the annual meeting of shareholders; PROVIDED, HOWEVER, that
in the event that less than seventy (70) days' notice of the date of the meeting
is given to the shareholders or prior public disclosure of the date of the
meeting is made, notice by the shareholder to be timely must be so received not
later than the close of business on the tenth day following the day on which
such notice of the date of the annual meeting was mailed or such public
disclosure was made. A shareholder's notice to the Secretary shall set forth (i)
as to each person the shareholder proposes to nominate for election or election
as a director, (A) the name, age, business address and residence address of such
proposed nominee, (B) the principal occupation or employment of such person, (C)
the class and number of shares of capital stock of the Corporation which are
beneficially owned by such person, and (D) any other information relating to
such person that is required to be disclosed in solicitations of proxies for
election of directors, or is otherwise required, in each case pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended (including
without limitation such person's written consent to being named in the proxy
statement as a nominee and to serving as a director if elected); and (ii) as to
the shareholder giving notice (A) the name and address, as they appear on the
Corporation's books, of the shareholder proposing such nomination, and (B) the
class and number of shares of stock of the Corporation which are beneficially
owned by the shareholder. No person shall be eligible for election as a director
of the Corporation unless nominated in accordance with the procedures set forth
in this Section 4.4. The Chairman of the meeting shall, if the facts warrant,
determine and declare to the annual meeting that a nomination was not made in
accordance with the provisions of this Section 4.4, and if the Chairman shall so
determine, the Chairman shall so declare at the meeting and the defective
nomination shall be disregarded.
SECTION 4.5 REMOVAL.
(a) GENERALLY. Except as otherwise provided pursuant to the provisions
of the Articles of Incorporation or Articles of Amendment relating to the rights
of the holders of any class or series of Preferred Stock, voting separately by
class or series, to elect directors under specified circumstances, any director
or directors may be removed from office at any time, but only for cause (as
defined in Section 4.5(b) hereof) and only by the affirmative vote, at a special
meeting of the shareholders called for such a purpose, of not less than
sixty-six and two-thirds percent (66-2/3%) of the total number of votes of the
then outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors, voting together as a single class, but
only if notice of such proposed removal was contained in the notice of such
meeting. At least thirty (30) days prior to such special meeting of
shareholders, written notice shall be sent to the director or directors whose
removal will be considered at such meeting. Any vacancy on the Board of
Directors resulting from such removal or otherwise shall be filled only by vote
of a majority of the directors then in office, although less then
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a quorum, and any director so chosen shall hold office until the next election
of the class for which such directors shall have been chosen and until his or
her successor shall have been elected and qualified or until any such director's
earlier death, resignation or removal.
(b) "CAUSE" DEFINED. For the purposes of this Section 4.5, "cause"
shall mean (i) misconduct as a director of the Corporation or any subsidiary of
the Corporation which involves dishonesty with respect to a substantial or
material corporate activity or corporate assets, or (ii) conviction of an
offense punishable by one (1) or more years of imprisonment (other than minor
regulatory infractions and traffic violations which do not materially and
adversely affect the Corporation).
SECTION 4.6 RESIGNATION. A director may resign at any time by
delivering written notice to the Board of Directors or its Chairman (if any) or
to the Corporation. A director's resignation is effective when the notice is
delivered unless the notice specifies a later effective date.
SECTION 4.7 VACANCIES.
(a) WHO MAY FILL VACANCIES. Except as provided below, whenever any
vacancy occurs on the Board of Directors, including a vacancy resulting from an
increase in the number of directors, it may be filled by the affirmative vote of
a majority of the remaining directors though less than a quorum of the Board of
Directors. Any director elected in accordance with the preceding sentence shall
hold office until his or her successor is duly elected and qualified, and such
successor shall complete such director's remaining term.
(b) DIRECTORS ELECTING BY VOTING GROUPS. Whenever the holders of shares
of any voting group are entitled to elect a class of one or more directors by
the provisions of the Articles of Incorporation, vacancies in such class may be
filled by holders of shares of that voting group or by a majority of the
directors then in office elected by such voting group or by a sole remaining
director so elected. If no director elected by such voting group remains in
office, unless the Articles of Incorporation provide otherwise, directors not
elected by such voting group may fill vacancies.
(c) PROSPECTIVE VACANCIES. A vacancy that will occur at a specific
later date, because of a resignation effective at a later date or otherwise, may
be filled before the vacancy occurs, but the new director may not take office
until the vacancy occurs.
SECTION 4.8 COMPENSATION. The Board of Directors, irrespective of any
personal interest of any of its members, may establish reasonable compensation
of all directors for services to the Corporation as directors, officers, or
otherwise, or may delegate such authority to an appropriate committee. The Board
of Directors also shall have authority to provide for or delegate authority to
an appropriate committee to provide for reasonable pensions, disability or death
benefits, and other benefits or payments, to directors, officers, and employees
and to their families, dependents, estates, or beneficiaries on account of prior
services rendered to the Corporation by such directors, officers, and employees.
SECTION 4.9 REGULAR MEETINGS. A regular meeting of the Board of
Directors shall be held without other notice than this bylaw immediately after
the annual meeting of shareholders and each adjourned session thereof. The place
of such regular meeting shall be the same as the place of the meeting of
shareholders which precedes it, or such other suitable piece as may be announced
at such meeting of shareholders. The Board of Directors may provide, by
resolution, the date, time, and place, either within or without the State of
Florida, for the holding of additional regular meetings of the Board of
Directors without notice other than such resolution.
SECTION 4.10 SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called by the Chairman of the Board (if any), the President, or
not less than one-third (1/3) of the members of the Board of Directors. The
person or persons calling the meeting may fix any place, either within
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or without the State of Florida, as the place for holding any special meeting of
the Board of Directors, and if no other place is fixed, the place of the meeting
shall be the principal office of the Corporation in the State of Florida.
SECTION 4.11 NOTICE. Special meetings of the Board of Directors must be
preceded by at least two days' notice of the date, time, and place of the
meeting. The notice need not describe the purpose of the special meeting.
SECTION 4.12 WAIVER OF NOTICE. Notice of a meeting of the Board of
Directors need not be given to any director who signs a waiver of notice either
before of after the meeting. Attendance of a director at a meeting shall
constitute a waiver of notice of such meeting and waiver of any and all
objections to the place of the meeting, the time of the meeting, or the manner
in which it has been called or convened, except when a director states, at the
beginning of the meeting or promptly upon arrival at the meeting, any objection
to the transaction of business because the meeting is not lawfully called or
convened.
SECTION 4.13 QUORUM AND VOTING. A quorum of the Board of Directors
consists of a majority of the number of directors prescribed by these bylaws (or
if no number is proscribed, the number of directors in office immediately before
the meeting begins). If a quorum is present when a vote is taken, the
affirmative vote of a majority of directors present is the Act of the Board of
Directors. A director who is present at a meeting of the Board of Directors or a
committee of the Board of Directors when corporate action is taken is deemed to
have assented to the action taken unless, (i) he or she objects at the beginning
of the meeting (or promptly upon his or her arrival) to holding it or
transacting specified business at the meeting; or (ii) he or she votes against
or abstains from the action taken.
SECTION 4.14 CONDUCT OF MEETINGS.
(a) PRESIDING OFFICER. The Board of Directors may elect from among its
members a Chairman of the Board of Directors, who shall preside at meetings of
the Board of Directors. The Chairman, and if there be none, or in his or her
absence, the President and in his or her absence, a Vice President in the order
provided under the Section of these bylaws titled "Vice Presidents," and in his
or her absence, any director chosen by the directors present, shall call
meetings of the Board of Directors to order and shall act as presiding officer
of the meeting.
(b) MINUTES. The Secretary of the Corporation shall act as secretary of
all meetings of the Board of Directors but in the absence of the Secretary, the
presiding officer may appoint any other person present to act as secretary of
the meeting. Minutes of any regular or special meeting of the Board of Directors
shall be prepared and distributed to each director.
(c) ADJOURNMENTS. A majority of the directors present, whether or not a
quorum exists, may adjourn any meeting of the Board of Directors to another time
and place. Notice of any such adjourned meeting shall be given to the directors
who are not present at the time of the adjournment and, unless the time and
place of the adjourned meeting are announced at the time of the adjournment, to
the other directors.
(d) PARTICIPATION BY CONFERENCE CALL OR SIMILAR MEANS. The Board of
Directors may permit any or all directors to participate in a regular or a
special meeting by, or conduct the meeting through the use of, any means of
communication by which all directors participating may simultaneously hear each
other during the meeting. A director participating in a meeting by this means is
deemed to be present in person at the meeting.
SECTION 4.15 COMMITTEES. The Board of Directors, by resolution adopted
by a majority of the full Board of Directors, may designate from among its
members an Executive Committee and one
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or more other committees, which may include, by way of example and not as a
limitation, a Compensation Committee (for the purpose of establishing and
implementing an executive compensation policy) and an Audit Committee (for the
purpose of examining and considering matters relating to the financial affairs
Of the Corporation). Each committee shall have two or more members, who serve at
the pleasure of the Board of Directors, provided that the Compensation Committee
and the Audit Committee shall consist of at least two Independent Directors. For
purposes of this section, "Independent Director" shall mean a person other than
an officer or employee of the Corporation or any subsidiary of the Corporation
or any other individual having a relationship which, in the opinion of the Board
of Directors, would interfere with the exercise of independent judgment in
carrying out the responsibilities of a director. To the extent provided in the
resolution of the Board of Directors establishing and constituting such
committees, such committees shall have and may exercise all the authority of the
Board of Directors, except that no such committee shall have the authority to:
(a) approve or recommend to shareholders actions or proposals required
by the Act to be approved by shareholders;
(b) fill vacancies on the Board of Directors or any committee thereof;
(c) adopt, amend, or repeal these bylaws;
(d) authorize or approve the reacquisition of shares unless pursuant to
a general formula or method specified by the Board of Directors; or
(e) authorize or approve the issuance or sale or contract for the sale
of shares, or determine the designation and relative rights, preferences, and
limitations of a voting group except that the Board of Directors may authorize a
committee (or a senior executive officer of the Corporation) to do so within
limits specifically prescribed by the Board of Directors.
The Board of Directors, by resolution adopted in accordance with this Section,
may designate one or more directors as alternate members of any such committee,
who may act in the place and stead of any absent member or members at any
meeting of such committee. The provisions of these bylaws which govern meetings,
notice and waiver of notice, and quorum and voting requirements of the Board of
Directors apply to committees and their members as well.
SECTION 4.16 ACTION WITHOUT MEETING. Any action required or permitted
by the Act to be taken at a meeting of the Board of Directors or a committee
thereof may be taken without a meeting if the action is taken by all (and not
less than all) members of the Board or of the committee. The action shall be
evidenced by one or more written consents describing the action taken, signed by
each director or committee member and retained by the Corporation. Such action
shall be effective when the last director or committee member signs the consent,
unless the consent specifies a different effective date. A consent signed under
this Section has the effect of a vote at a meeting and may be described as such
in any document.
ARTICLE 5
OFFICERS
SECTION 5.1 NUMBER. The principal officers of the Corporation shall be
a Chairman, a President, the number of Vice Presidents, if any, as authorized
from time to time by the Board of Directors, a Secretary, and a Treasurer, each
of whom shall be elected by the Board of Directors. Such other officers and
assistant officers as may be deemed necessary may be elected or appointed by the
Board of Directors. The Board of Directors may also authorize any duly appointed
officer to appoint one or more officers or assistant officers. The same
individual may simultaneously hold more than one office.
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SECTION 5.2 ELECTION AND TERM OF OFFICE. The officers of the
Corporation to be elected by the Board of Directors shall be elected annually by
the Board of Directors at the first meeting of the Board of Directors held after
each annual meeting of the shareholders. If the election of officers shall not
be held at such meeting, such election shall be held as soon thereafter as is
practicable. Each officer shall hold office until his or her successor shall
have been duly elected or until his or her prior death, resignation, or removal.
SECTION 5.3 REMOVAL. The Board of Directors may remove any officer and,
unless restricted by the Board of Directors, an officer may remove any officer
or assistant officer appointed by that officer, at any time, with or without
cause and notwithstanding the contract rights, if any, of the officer removed.
The appointment of an officer does not of itself create contract rights.
SECTION 5.4 RESIGNATION. An officer may resign at any time by
delivering notice to the Corporation. The resignation shall be effective when
the notice is delivered, unless the notice specifies a later effective date and
the Corporation accepts the later effective date. If a resignation is made
effective at a later date and the Corporation accepts the future affective date,
the pending vacancy may be filled before the effective date, but the successor
may not take office until the effective date.
SECTION 5.5 VACANCIES. A vacancy in any principal office because of
death, resignation, removal, disqualification, or otherwise, shall be filled as
soon thereafter as practicable by the Board of Directors for the unexpired
portion of the term.
SECTION 5.6 CHAIRMAN OF THE BOARD. The Chairman of the Board (the
"Chairman") shall be a member of the Board of Directors of the Corporation and
shall preside over all meetings of the Board of Directors and shareholders of
the Corporation. The Chairman shall have authority, subject to such rules as may
be prescribed by the Board of Directors, to appoint such agents and employees of
the Corporation as he or she shall doom necessary, to prescribe their powers,
duties and compensation, and to delegate authority to them. Such agents and
employees shall hold office at the direction of the Chairman. The Chairman shall
have authority to sign certificates for shares of the Corporation the issuance
of which shall have been authorized by resolution of the Board of Directors, and
to execute and acknowledge, on behalf of the Corporation, all deeds, mortgages,
bonds, contracts, leases, reports, and all other documents or instruments
necessary or proper to be executed in the course of the Corporation's regular
business, or which shall be authorized by resolution of the Board of Directors;
and, except as otherwise provided by law or the Board of Directors, the Chairman
may authorize the President or any Vice President or other officer or agent of
the Corporation to execute and acknowledge such documents or instruments in his
or her place and stead. In general, he or she shall perform all duties as may be
prescribed by the Board of Directors from time to time.
SECTION 5.7 PRESIDENT. The President shall be the chief executive
officer of the Corporation and, subject to the direction of the Board of
Directors, shall in general supervise and control all of the business and
affairs of the Corporation. If the Chairman of the Board is not present, the
President shall preside at all meetings of the Board of Directors and
shareholders. The President shall have authority, subject to such rules as may
be prescribed by the Board of Directors, to appoint such agents and employees of
the Corporation as he or she shall deem necessary, to prescribe their powers,
duties and compensation, and to delegate authority to them. Such agents and
employees shall hold office at the discretion of the President. The President
shall have authority to sign certificates for shares of the Corporation the
issuance of which shall have been authorized by resolution of the Board of
Directors, and to execute and acknowledge, on behalf of the Corporation, all
deeds, mortgages, bonds, contracts, leases, reports, and all other documents or
instruments necessary or proper to be executed in the course of the
Corporation's regular business, or which shall be authorized by resolution of
the Board of Directors; and, except as otherwise provided by law or the Board of
Directors, the President may authorize any Vice President or other officer or
agent of the Corporation to execute and acknowledge such documents or
instruments in his or her place and stead. In general he or she shall
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perform all duties incident to the office of President and such other duties as
may be prescribed by the Board of Directors from time to time.
SECTION 5.8 VICE PRESIDENT. In the absence of the President or in the
event of the President's death, inability or refusal to act, or in the event for
any reason it shall be impracticable for the President to act personally, the
Vice President, if any (or in the event there be more than one Vice President,
the Vice Presidents in the order designated by this Board of Directors, or in
the absence of any designation, then in the order of their election), shall
perform the duties of the President, and when so acting, shall have all the
powers of and be subject to all the restrictions upon the President. Any Vice
President may sign certificates for shares of the Corporation the issuance of
which shall have been authorized by resolution of the Board of Directors; and
shall perform such other duties and have such authority as from time to time may
be delegated or assigned to him or her by the President or by the Board of
Directors. The execution of any instrument of the Corporation by any Vice
President shall be conclusive evidence, as to third parties, of his or her
authority to act in the stead of the President. The Corporation may have one or
more Executive Vice Presidents and one or more Senior Vice Presidents, who shall
be Vice Presidents for purposes hereof.
SECTION 5.9 SECRETARY. The Secretary shall: (i) keep, or cause to be
kept, minutes of the meetings of the shareholders and of the Board of Directors
(and of committees thereof) in one or more books provided for that purpose
(including records of actions taken by the shareholders or the Board of
Directors (or committees thereof) without a meeting); (ii) be custodian of the
corporate records and of the seal of the Corporation, if any, and if the
Corporation has a seal, see that it is affixed to all documents the execution of
which on behalf of the Corporation under its seal is duly authorized; (iii)
authenticate the records of the Corporation; (iv) maintain a record of the
shareholders of the Corporation, in a form that permits preparation of a list of
the names and addresses of all shareholders, by class or series of shares and
showing the number and class or series of shares held by each shareholder; (v)
have general charge of the stock transfer books of the Corporation; and (vi) in
general perform all duties incident to the office of Secretary and have such
other duties and exercise such authority as from time to time may be delegated
or assigned by the President or by the Board of Directors.
SECTION 5.10 TREASURER. The Treasurer shall: (i) have charge and
custody of and be responsible for all funds and securities of the Corporation,
(ii) maintain appropriate accounting records; (iii) receive and give receipts
for moneys due and payable to the Corporation from any source whatsoever, and
deposit all such moneys in the name of the Corporation in such banks, trust
companies, or other depositaries as shall be selected in accordance with the
provisions of these bylaws; and (iv) in general perform all of the duties
incident to the office of Treasurer and have such other duties and exercise such
other authority as from time to time may be delegated or assigned by the
President or by the Board of Directors. If required by the Board of Directors,
the Treasurer shall give a bond for the faithful discharge of his or her duties
in such sum and with such surety or sureties as the Board of Directors shall
determine.
SECTION 5.11 ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. There
shall be such number of Assistant Secretaries and Assistant Treasurers as the
Board of Directors may from time to time authorize. The Assistant Treasurers
shall respectively, if required by the Board of Directors, give bonds for the
faithful discharge of their duties in such sums and with such sureties as the
Board of Directors shall determine. The Assistant Secretaries and Assistant
Treasurers, in general, shall perform such duties and have such authority as
shall from time to time be delegated or assigned to them by the Secretary or the
Treasurer, respectively, or by the President or the Board of Directors.
SECTION 5.12 OTHER ASSISTANTS AND ACTING OFFICERS. The Board of
Directors shall have the power to appoint, or to authorize any duly appointed
officer of the Corporation to appoint, any person to act as assistant to any
officer, or as agent for the Corporation in his or her stead, or to perform the
duties of such officer whenever for any reason it is impracticable for such
officer to act
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personally, and such assistant or acting officer or other agent so appointed by
the Board of Directors or an authorized officer shall have the power to perform
all the duties of the office to which he or she is so appointed to be an
assistant, or as to which he or she is so appointed to act, except as such power
may be otherwise defined or restricted by the Board of Directors or the
appointing officer.
SECTION 5.13 SALARIES. The salaries of the principal officers shall be
fixed from time to time by the Board of Directors or by a duly authorized
committee thereof, and no officer shall be prevented from receiving such salary
by reason of the fact that he or she is also a director of the Corporation.
ARTICLE 6
CONTRACTS, CHECKS AND DEPOSITS; SPECIAL CORPORATE ACTS
SECTION 6.1 CONTRACTS. The Board of Directors may authorize any officer
or officers, or any agent or agents to enter into any contract or execute or
deliver any instrument in the name of and on behalf of the Corporation, and such
authorization may be general or confined to specific instances. In the absence
of other designation, all deeds, mortgages, and instruments of assignment or
pledge made by the Corporation shall be executed in the name of the Corporation
by the President or one of the Vice Presidents; the Secretary or an Assistant
Secretary, when necessary or required, shall attest and affix the corporate
seal, if any, thereto; and when so executed no other party to such instrument or
any third party shall be required to make any inquiry into the authority of the
signing officer or officers.
SECTION 6.2 CHECKS, DRAFTS, ETC. All checks, drafts or other orders for
the payment of money, notes, or other evidences of indebtedness issued in the
name of the Corporation, shall be signed by such officer or officers, agent or
agents of the Corporation and in such manner as shall from time to time be
determined by or under the authority of a resolution of the Board of Directors.
SECTION 6.3 DEPOSITS. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the Corporation
in such banks, trust companies, or other depositaries as may be selected by or
under the authority of a resolution of the Board of Directors.
SECTION 6.4 VOTING OF SECURITIES OWNED BY CORPORATION. Subject always
to the specific directions of the Board of Directors, (i) any shares or other
securities issued by any other corporation and owned or controlled by the
Corporation may be voted at any meeting of security holders of such other
corporation by the President of the Corporation if he or she be present, or in
his or her absence by any Vice President of the Corporation who may be present,
and (ii) whenever, in the judgment of the President, or in his or her absence,
of any Vice President, it is desirable for the Corporation to execute a proxy or
written consent in respect of any such shares or other securities, such proxy or
consent shall be executed in the name of the Corporation by the President or one
of the Vice Presidents of the Corporation, without necessity of any
authorization by the Board of Directors, affixation of corporate seal, if any,
at countersignature or attestation by another officer. Any person or persons
designated in the manner above stated as the proxy or proxies of the Corporation
shall have full right, power, and authority to vote the shares or other
securities issued by such other corporation and owned or controlled by the
Corporation the same as such shares or other securities might be voted by the
Corporation.
ARTICLE 7
CERTIFICATES FOR SHARES; TRANSFER OF SHARES
SECTION 7.1 CONSIDERATION FOR SHARES. The Board of Directors may
authorize shares to be issued for consideration consisting of any tangible or
intangible property or benefit to the Corporation, Including cash, promissory
notes, services performed, promises to perform services evidenced by a
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written contract, or other securities of the Corporation. Before the Corporation
issues shares, the Board of Directors shall determine that the consideration
received or to be received for the shares to be issued is adequate. The
determination of the Board of Directors is conclusive insofar as the adequacy of
consideration for the issuance of shares relates to whether the shares are
validly issued, fully paid, and nonassessable. The Corporation may place in
escrow shares issued for future services or benefits or a promissory note, or
make other arrangements to restrict the transfer of the shares, and may credit
distributions in respect of the shares against their purchase price, until the
services are performed, the note is paid, or the benefits are received. If the
services are not performed, the note is not paid, or the benefits are not
received, the Corporation may cancel, in whole or in part, the shares escrowed
or restricted and the distributions credited.
SECTION 7.2 CERTIFICATES FOR SHARES. Every holder of shares in the
Corporation shall be entitled to have a certificate representing all shares to
which he or she is entitled unless the Board of Directors authorizes the
issuance of some or all shares without certificates. Any such authorization
shall not affect shares already represented by certificates until the
certificates are surrendered to the Corporation. If the Board of Directors
authorizes the issuance of any shares without certificates, within a reasonable
time after the issue or transfer of any such shares, the Corporation shall send
the shareholder a written statement of the information required by the Act or
the Articles of Incorporation to be set forth on certificates, including any
restrictions on transfer. Certificates representing shares of the Corporation
shall be in such form, consistent with the Act, as shall be determined by the
Board of Directors. Such certificates shall be signed (either manually or in
facsimile) by the President or any Vice President or any other persons
designated by the Board of Directors and may be sealed with the seal of the
Corporation or a facsimile thereof. All certificates for shares shall be
consecutively numbered or otherwise identified. The name and address of the
person to whom the shares represented thereby are issued, with the number of
shares and date of issue, shall be entered on the stock transfer books of the
Corporation. Unless the Board of Directors authorizes shares without
certificates, all certificates surrendered to the Corporation for transfer shall
be canceled and no new certificate shall be issued until the former certificate
for a like number of shares shall have been surrendered and canceled, except as
provided in these bylaws with respect to lost, destroyed, or stolen
certificates. The validity of a share certificate is not affected if a person
who signed the certificate (either manually or in facsimile) no longer holds
office when the certificate is issued.
SECTION 7.3 TRANSFER OF SHARES. Prior to due presentment of a
certificate for shares for registration of transfer, the Corporation may treat
the registered owner of such shares as the person exclusively entitled to vote,
to receive notifications, and otherwise to have and exercise all the rights and
power of an owner. Where a certificate for shares is presented to the
Corporation with a request to register a transfer, the Corporation shall not be
liable to the owner or any other person suffering loss as a result of such
registration of transfer if (i) there were on or with the certificate the
necessary endorsements, and (ii) the Corporation had no duty to inquire into
adverse claims or has discharged any such duty. The Corporation may require
reasonable assurance that such endorsements are genuine and effective and
compliance with such other regulations as may be prescribed by or under the
authority of the Board of Directors.
SECTION 7.4 RESTRICTIONS ON TRANSFER. The face or reverse side of each
certificate representing shares shall bear a conspicuous notation as required by
the Act or the Articles of Incorporation of the restrictions imposed by the
Corporation upon the transfer of such shares.
SECTION 7.5 LOST, DESTROYED, OR STOLEN CERTIFICATES. Unless the Board
of Directors authorizes shares without certificates, where the owner claims that
certificates for shares have been lost, destroyed, or wrongfully taken, a new
certificate shall be issued in place thereof if the owner (i) so requests before
the Corporation has notice that such shares have been acquired by a bone fide
purchaser, (ii) files with the Corporation a sufficient indemnity bond if
required by the Board of Directors or any principal officer, and (iii) satisfies
such other reasonable requirements as may be prescribed by at under the
authority of the Board of Directors.
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SECTION 7.6 STOCK REGULATIONS. The Board of Directors shall have the
power end authority to make all such further rules and regulations not
inconsistent with law as they may deem expedient concerning the issue, transfer,
and registration of shares of the Corporation.
ARTICLE 8
SEAL
SECTION 8.1 SEAL. The Board of Directors may provide for a corporate
seal for the Corporation.
ARTICLE 9
BOOKS AND RECORDS
SECTION 9.1 BOOKS AND RECORDS.
(a) The Corporation shall keep as permanent records minutes of all
meetings of the shareholders and Board of Directors, a record of all actions
taken by the shareholders or Board of Directors without a meeting, and a record
of all actions taken by a committee of the Board of Directors in place of the
Board of Directors on behalf of the Corporation.
(b) The Corporation shall maintain accurate accounting records.
(c) The Corporation or its agent shall maintain a record of the
shareholders in a form that permits preparation of a list of the names and
addresses of all shareholders in alphabetical order by class of shares showing
the number and series of shares held by each.
(d) The Corporation shall keep a copy of all written communications
within the preceding three years to all shareholders generally or to all
shareholders of a class or series, including the financial statements required
to be furnished by the Act, and a copy of its most recent annual report
delivered to the Department of State.
SECTION 9.2 SHAREHOLDERS' INSPECTION RIGHTS. Shareholders are entitled
to inspect and copy records of the Corporation as permitted by the Act.
SECTION 9.3 DISTRIBUTION OF FINANCIAL INFORMATION. The Corporation
shall prepare and disseminate financial statements to shareholders as required
by the Act.
SECTION 9.4 OTHER REPORTS. The Corporation shall disseminate such other
reports to shareholders as are required by the Act, including reports regarding
indemnification in certain circumstances and reports regarding the issuance or
authorization for issuance of shares in exchange for promises to render services
in the future.
ARTICLE 10
INDEMNIFICATION
SECTION 10.1 PROVISION OF INDEMNIFICATION. The Corporation shall, to
the fullest extent permitted or required by the Act, including any amendments
thereto (but in the case of any such amendment, only to the extent such
amendment permits or requires the Corporation to provide broader indemnification
rights than prior to such amendment), indemnify its Directors and Executive
Officers against any and all Liabilities, and advance any and all reasonable
Expenses, incurred thereby in any Proceeding to which any such Director or
Executive Officer is a Party or in which such
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Director or Executive Officer is deposed or called to testify as a witness
because he or she is or was a Director or Executive Officer of the Corporation.
The rights to indemnification granted hereunder shall not be deemed exclusive of
any other rights to indemnification against liabilities or the advancement of
Expenses which a Director or Executive Officer may be entitled under any written
agreement, Board of Directors' resolution, vote of shareholders, the Act, or
otherwise. The Corporation may, but shall not be required to, supplement the
foregoing rights to indemnification against Liabilities and advancement of
Expenses by the purchase of insurance on behalf of any one or more of its
Director or Executive Officers whether or not the Corporation would be obligated
to indemnify or advance Expenses to such Director or Executive Officer under
this Article. For purposes of this Article, the term "Directors" includes former
directors of the Corporation and any director who is or was serving at the
request of the Corporation as a director, officer, employee, or agent of another
corporation, partnership, joint venture, trust, or other enterprise, including,
without limitation, any employee benefit plan (other than in the capacity as an
agent separately retained and compensated for the provision of goods or services
to the enterprise, including, without limitation, attorneys-at-law, accountants,
and financial consultants). The term "Executive Officers" includes those
individuals who are or were at any time "executive officers" of the Corporation
as defined in Securities and Exchange Commission Rule 3b-7 promulgated under the
Securities Exchange Act of 1934, as amended. All other capitalized terms used in
this Article 10 and not otherwise defined herein have the meaning set forth in
Section 607.0850, Florida Statutes (1995). The provisions of this Article 10 are
intended solely for the benefit of the indemnified parties described herein,
their heirs and personal representatives and shall not create any rights in
favor of third parties. No amendment to or repeal of this Article 10 shall
diminish the rights of indemnification provided for herein prior to such
amendment or repeal.
ARTICLE 11
AMENDMENTS
SECTION 11.1 POWER TO AMEND. These bylaws may be amended or repealed by
either the Board of Directors or the shareholders, unless the Act reserves the
power to amend these bylaws generally or any particular bylaw provision, as the
case may be, exclusively to the shareholders or unless the shareholders, in
amending or repealing these bylaws generally or any particular bylaw provision,
provide expressly that the Board of Directors may not amend or repeal these
bylaws or such bylaw provision, as the case may be. The shareholders of the
Corporation may adopt or amend a bylaw provision which fixes a greater quorum or
voting requirement for shareholders (or voting groups of shareholders) than is
required by the Act. The adoption or amendment of a bylaw provision that adds,
changes or deletes a greater quorum or voting requirement for shareholders must
meet the same quorum or voting requirement and be adopted by the same vote and
voting groups required to take action under the quorum or voting requirement
then in effect or proposed to be adopted, whichever is greater.
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EXHIBIT 10.1
AS ADOPTED
OCTOBER 7, 1996
HOPS GRILL & BAR, INC.
1996 STOCK INCENTIVE PLAN
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SECTION 1. ESTABLISHMENT AND PURPOSE OF THE PLAN. This 1996 Stock
Incentive Plan (the "Plan") is established by Hops Grill & Bar, Inc., a Florida
corporation (the "Company"), as of October 7, 1996. The Plan is designed to
enable the Company to attract, retain and motivate key employees of the Company,
by providing for or increasing their proprietary interest in the Company. The
Plan provides for the grant of options ("Options") which qualify as incentive
stock options ("Incentive Stock Options") under Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), as well as options which do not
so qualify ("Non-Qualified Options"), for the grant of stock appreciation rights
("Stock Appreciation Rights") and for the sale or grant of restricted stock
("Restricted Stock").
SECTION 2. STOCK SUBJECT TO PLAN. The maximum number of shares of stock
that may be subject to Options or Stock Appreciation Rights granted hereunder
and the number of shares of stock that may be sold or granted as Restricted
Stock hereunder shall not in the aggregate exceed 375,000 shares of Common
Stock, par value $0.01 per share ("Common Stock") of the Company, subject to the
adjustments under Section 13 hereof. The shares which may be subject to Options
granted and Restricted Stock sold or granted under the Plan may be authorized
and unissued Common Stock or Common Stock reacquired by the Company and held as
treasury stock.
Shares of stock which are subject to the unexercised portions of any
Options that expire, terminate or are canceled, shares of stock which are not
required to satisfy the exercise of any Stock Appreciation Rights that expire,
terminate or are canceled or exercised, and shares of Restricted Stock which are
reacquired by the Company pursuant to the restrictions thereon, may again become
available for the grant of Options or Stock Appreciation Rights and the sale or
grant of Restricted Stock under this Plan. If a Stock Appreciation Right is
exercised, any Option or portion thereof which is surrendered in connection with
that exercise shall terminate and the shares theretofore subject to that Option
or portion thereof shall be available for further use under the Plan.
SECTION 3. SHARES SUBJECT TO AGREEMENT. All shares issuable under Options
or Stock Appreciation Rights and all shares of Restricted Stock sold or granted
pursuant to this Plan shall be subject to the restrictions contained in the
written agreement required under Section 4 hereof evidencing the terms under
which shares of Common Stock are granted or sold under this Plan.
SECTION 4. ADMINISTRATION OF THE PLAN. The Plan shall be administered by a
committee ("the Committee") appointed by the Board of Directors (the "Board") of
the Company. If no persons are designated by the Board to serve on the
Committee, the Plan shall be administered by the Board and all references herein
to the Committee shall refer to the Board. If the Company shall become a
reporting company under the Securities Exchange
<PAGE>
Act of 1934, as amended (the "Exchange Act"), the Committee shall satisfy the
requirements of Exchange Act Rule 16b-3 by consisting of (a) the Board or (b) a
committee of the Board composed of two or more Non-Employee Directors (as such
term is defined in Rule 16b-3). The Board shall have the discretion from time to
time to add, remove, or replace members of the Committee, and shall have the
sole authority to fill vacancies on the Committee.
All actions of the Committee shall be authorized by a majority vote
thereof at a duly called meeting or upon the unanimous written consent of all
Committee members. The Committee shall have the sole authority, in its absolute
discretion, to adopt, amend, and rescind such rules and regulations as, in its
opinion, may be advisable in the administration of the Plan, to construe and
interpret the Plan, the rules and regulations, and the agreements and other
instruments evidencing Options and Stock Appreciation Rights granted and
Restricted Stock sold or granted under the Plan and to make all the
determinations deemed necessary or advisable for the administration of the Plan.
All decisions, determinations, and interpretations of the Committee shall be
final and conclusive upon the Participants (as defined below).
Subject to the express provisions of the Plan, the Committee shall
determine the number of shares subject to grants or sales and terms thereof,
including the provisions relating to the exercisability of Options and Stock
Appreciation Rights, lapse and non-lapse restrictions upon the Common Stock
obtained or obtainable under the Plan, and the termination and/or forfeiture of
Options, Stock Appreciation Rights and Restricted Stock under the Plan. The
terms upon which Options and Stock Appreciation Rights are granted and
Restricted Stock is sold or granted shall be evidenced by a written agreement
executed by the Company and, if the Committee so requires, the Participant to
whom such are granted or sold.
SECTION 5. ELIGIBILITY. Persons who shall be eligible for grants of
Options or Stock Appreciation Rights or sales or grants of Restricted Stock
hereunder ("Eligible Employees") shall be key employees of the Company or its
subsidiaries, and shall include members of senior management and directors of
the Company who are employees of the Company or its subsidiaries. Persons who
are directors of the Company who are not employees of the Company or its
subsidiaries ("Outside Directors") shall be eligible for grants of Options. The
Committee may from time to time determine the Eligible Employees who shall
participate under the Plan (such Eligible Employees are referred to as
"Participants") through grants of Non-Qualified Options, Incentive Stock Options
and, if applicable, Stock Appreciation Rights, and/or through sales or grants of
Restricted Stock.
SECTION 6. TERMS AND CONDITIONS OF OPTIONS GRANTED TO ELIGIBLE EMPLOYEES.
No Option shall be granted to an Eligible Employee for a term of more than
fifteen years. Options may in the discretion of the Committee be granted to
Eligible Employees with associated Stock Appreciation Rights or be amended so as
to provide associated Stock Appreciation Rights. The Option agreement may
contain such other terms, provisions, and conditions as may be determined by the
Committee (not inconsistent with the Plan). The Committee shall designate as
such those Options intended to be eligible to qualify and be treated as
Incentive Stock Options and, correspondingly, those Options not intended to be
eligible to qualify and be treated as Incentive Stock Options.
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<PAGE>
SECTION 7. EXERCISE PRICE OF OPTIONS GRANTED TO ELIGIBLE EMPLOYEES. The
exercise price for each Non-Qualified Option granted hereunder to an Eligible
Employee shall not be less than fifty percent (50%) of the Fair Market Value (as
defined in Section 18 hereof) of the Common Stock on the date the Option is
granted. The exercise price of any Option intended to be eligible to qualify and
be treated as an Incentive Stock Option shall not be less than the Fair Market
Value of the Common Stock on the date such Incentive Stock Option is granted,
except that if such Incentive Stock Option is granted to a participant who on
the date of grant is treated under Code Section 424(d) as owning stock (not
including stock purchasable under outstanding options) possessing more than ten
percent (10%) of the total combined voting power of all classes of the Company's
stock, the exercise price shall not be less than one hundred ten percent (110%)
of the Fair Market Value of the Common Stock on the date such Incentive Stock
Option is granted.
Payment for Common Stock purchased upon exercise of any Option granted
hereunder to an Eligible Employee shall be in cash at the time of exercise,
except that, if either the Option so provides or the Committee so permits, and
if the Company is not then prohibited from purchasing or acquiring shares of its
Common Stock, such payment may be made in whole or in part with shares of stock
of the same class as the stock then subject to the Option. The value of any such
stock delivered as payment hereunder shall be determined by such means as the
Committee shall establish. The Committee also may on an individual basis permit
payment or agree to permit payment by such alternative means as may be lawful,
including by delivery of an executed exercise notice together with irrevocable
instructions to a broker promptly to deliver to the Company the amount of sale
or loan proceeds required to pay the exercise price.
SECTION 8. NON-QUALIFIED OPTIONS GRANTED TO OUTSIDE DIRECTORS. A
Participant who is an Outside Director may be granted Options to acquire shares
of Common Stock; PROVIDED, that if the Company is a reporting company under the
Exchange Act such grant shall comply with the requirements for an exemption
under Exchange Act Rule 16b-3 as in effect at the time.
SECTION 9. NON-TRANSFERABILITY. Any Option granted under this Plan shall
by its terms be non-transferable by the Participant other than by will or the
laws of descent and distribution (in which case such descendant or beneficiary
shall be subject to all terms of the Plan applicable to Participants) and is
exercisable during the Participant's lifetime only by the Participant or by the
Participant's guardian or legal representative.
SECTION 10. INCENTIVE STOCK OPTIONS. The aggregate Fair Market Value
(determined at the time the Incentive Stock Option is granted) of the shares for
which an Option that is intended to be eligible to qualify and be treated as an
Incentive Stock Option may become exercisable for the first time (determined
without regard to any potential acceleration in exercisability of such Incentive
Stock Option) under this Plan and any other stock option plan of the Company and
its affiliates shall not exceed $100,000 in any calendar year.
-3-
<PAGE>
SECTION 11. STOCK APPRECIATION RIGHTS. The Committee may, under such terms
and conditions as it deems appropriate, grant to any Eligible Employee selected
by the Committee Stock Appreciation Rights, which may or may not be associated
with Options. Upon exercise of a Stock Appreciation Right the Participant shall
be entitled to receive payment of an amount equal to the excess of the Fair
Market Value of the underlying shares on the date of exercise over the Stock
Appreciation Right's exercise price. Such payment may be made in shares of
Common Stock valued at their Fair Market Value on the date of exercise or in
cash, or partly in shares and partly in cash, as the Committee may designate.
The Committee may require that any Stock Appreciation Right shall be subject to
the condition that the Committee may at any time in its absolute discretion not
allow the exercise of such Stock Appreciation Right. The Committee may further
impose such conditions, if any, on the exercise of Stock Appreciation Rights as
may be necessary or appropriate to comply with Rule 16b-3 under the Exchange
Act.
SECTION 12. RESTRICTED STOCK. The Committee may sell or grant Restricted
Stock under the Plan (either independently or in connection with the exercise of
Options or Stock Appreciation Rights under the Plan) to Eligible Employees
selected by the Committee. The Committee shall in each case determine the number
of shares of Restricted Stock to be sold or granted, the price at which such
shares are sold, if applicable, and the terms or duration of the restrictions to
be imposed upon those shares.
SECTION 13. ADJUSTMENTS. If at any time the class of shares subject to
this Plan is changed into or exchanged for a different number or kind of shares
or securities, as the result of any one or more reorganizations,
recapitalizations, stock splits, reverse stock splits, stock dividends or
similar events, an appropriate adjustment shall be made in the number, exercise
or sale price and/or type of shares or securities for which Options or Stock
Appreciation Rights may thereafter be granted and Restricted Stock may
thereafter be sold or granted under this Plan. The Committee also shall
designate the appropriate changes which shall be made in Options, Stock
Appreciation Rights, or rights to purchase Restricted Stock then outstanding
under this Plan, and the Committee may do so either at the time the Option or
Stock Appreciation Right is granted or Restricted Stock offered or at the time
of the event causing the adjustment. Any such adjustment in outstanding Options
shall be made without changing the aggregate exercise price applicable to the
unexercised portions of such Options. Any such adjustments in outstanding rights
to purchase Restricted Stock shall be made without changing the aggregate
purchase price of such Restricted Stock.
SECTION 14. DURATION OF PLAN. Options may not be granted nor Restricted
Stock sold or granted under the Plan after October 6, 2006.
SECTION 15. SHAREHOLDER APPROVAL. No Options or Stock Appreciation Rights
granted under this Plan may be exercised and no Restricted Stock may be sold or
granted prior to approval of this Plan by the holders of the majority of the
outstanding shares of voting stock of the Company.
-4-
<PAGE>
SECTION 16. AMENDMENT AND TERMINATION OF THE PLAN. Except as set forth
below, the Board may at any time alter, amend, suspend or terminate the Plan.
The Committee may amend the Plan or any agreement issued hereunder to the extent
necessary for any Option or Stock Appreciation Right granted or Restricted Stock
sold or granted under the Plan to comply with applicable tax or securities laws.
No Option or Stock Appreciation Right may be granted during any suspension
or after the termination of the Plan, and no amendment, suspension or
termination of the Plan or of any agreement issued hereunder shall, without the
consent of the affected holder of such Option, Stock Appreciation Right or
Restricted Stock, alter or impair any rights or obligations in any Option, Stock
Appreciation Right or Restricted Stock theretofore granted or sold to him under
the Plan.
SECTION 17. NATURE OF PLAN. This Plan is intended to qualify as a
compensatory benefit plan within the meaning of Rule 701 under the Securities
Act of 1933, as amended.
SECTION 18. DEFINITION OF "FAIR MARKET VALUE." As used in this Plan, the
"Fair Market Value" of the shares of Common Stock on any date shall mean:
(a) the closing sales price, regular way, or in the absence thereof, the
mean of the last reported bid and asked quotations, on such date on
the national securities exchange having the greatest volume of
trading in the shares of Common Stock during the thirty-day period
preceding such date (or if such exchange was not open for trading on
such date, the next preceding date on which it was open); or
(b) if there is no price as specified in (a), the final reported sales
price, or if not reported in the following manner, the mean of the
closing high bid and low asked prices, in the over-the-counter market
for the shares of Common Stock as reported by the Nasdaq National
Market or, if such organization is not in existence, by an
organization providing similar services, on such date (or if such
date is not a date for which such system or organization generally
provides reports, then on the next preceding date for which it does
so); or
(c) if there also is no price as specified in (b), the price determined
by the Committee by reference to bid-and-asked quotations for the
shares of Common Stock provided by members of an association of
brokers and dealers registered pursuant to subsection 15(b) of the
1934 Act, which members make a market in the shares of Common Stock,
for such recent dates as the Committee shall determine to be
appropriate for fairly determining current market value; or
(d) if there also is no price as specified in (c), the amount determined
in good faith by the Committee based on such relevant facts, which
may include opinions of independent experts, as may be available to
the Committee.
SECTION 19. CANCELLATION OF OPTIONS. Except for Options granted to Outside
Directors under Section 8 of the Plan, any Option granted under the Plan may be
canceled
-5-
<PAGE>
at any time with the consent of the holder and a new Option may be granted to
such holder in lieu thereof.
SECTION 20. WITHHOLDING OF TAXES. Whenever shares of Common Stock are to
be issued with respect to the exercise of Options or amounts are to be paid or
income received with respect to Stock Appreciation Rights or Restricted Stock
under this Plan, the Committee in its discretion may require the Participant to
remit to the Company, prior to the delivery of any certificate or certificates
for such shares or the payment of any such amounts, all or any part of an amount
or, at the Participant's request pursuant to a procedure established by the
Committee, may withhold delivery of a sufficient number of shares or of a
sufficient amount from the Participant's compensation determined in the
Committee's discretion to be sufficient to satisfy Federal, state and local
withholding tax obligations which the Company or its counsel determine may arise
with respect to such exercise or payment.
-6-
EXHIBIT 10.2
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT, dated as of the _________ day of
_____________ , 1996, between HOPS GRILL & BAR, INC., a Florida corporation (the
"Company"), and _____________________, a resident of the State of Florida (the
"Indemnitee").
RECITALS
A. The Company desires to retain the services of the Indemnitee as an
executive officer or director of the Company.
B. As a condition to the Indemnitee's agreement to continue to serve as
an executive officer or director of the Company, the Indemnitee requires that he
be indemnified from liability to the fullest extent permitted by law.
C. The Company is willing to indemnify the Indemnitee to the fullest
extent permitted by law in order to retain the services of the Indemnitee.
NOW, THEREFORE, for and in consideration of the mutual premises and
covenants contained herein, the Company and the Indemnitee agree as follows:
SECTION 1. MANDATORY INDEMNIFICATION IN ACTIONS, SUITS OR PROCEEDINGS
OTHER THAN THOSE BY OR IN THE RIGHT OF THE COMPANY. Subject to Section 4 hereof,
the Company shall indemnify and hold harmless the Indemnitee from and against
any and all claims, damages, expenses (including attorneys' fees), judgments,
fines (including excise taxes assessed with respect to an employee benefit
plan), amounts paid in settlement and all other liabilities actually and
reasonably incurred by him in connection with the investigation, defense,
prosecution, settlement or appeal of any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Company) and to
which the Indemnitee was or is a party or is threatened to be made a party by
reason of the fact that the Indemnitee is or was an officer, director,
shareholder, employee or agent of the Company, or is or was serving at the
request of the Company as an officer, director, partner, trustee, employee or
agent of another corporation, partnership, joint venture, trust, employee
benefit plan, or other enterprise, or by reason of anything done or not done by
the Indemnitee in any such capacity or capacities, provided that the Indemnitee
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Company, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his conduct was
unlawful.
SECTION 2. MANDATORY INDEMNIFICATION IN ACTIONS OR SUITS BY OR IN THE
RIGHT OF THE COMPANY. Subject to Section 4 hereof, the Company shall indemnify
and hold harmless the Indemnitee from and against any and all expenses
(including attorneys' fees) and amounts paid in settlement actually and
reasonably incurred by him in connection with the investigation, defense,
settlement or appeal of any threatened, pending or completed action or suit by
or in the right of the Company to procure a judgment in its favor and to which
the Indemnitee was or is a party or is threatened to be made a party by reason
of the fact that the Indemnitee is or was an officer, director, shareholder,
employee or agent of the Company, or is or was serving at the request of the
Company as an officer,
<PAGE>
director, partner, trustee, employee or agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise, or
by reason of anything done or not done by the Indemnitee in such capacity or
capacities, provided that (i) the Indemnitee acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
Company, (ii) indemnification for amounts paid in settlement shall not exceed
the estimated expense of litigating the proceeding to conclusion, and (iii) no
indemnification shall be made in respect of any claim, issue or matter as to
which the Indemnitee shall have been adjudged to be liable for misconduct in the
performance of his duty to the Company unless and only to the extent that the
court in which such action or suit was brought (or any other court of competent
jurisdiction) shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, the Indemnitee is
fairly and reasonably entitled to indemnity for such expenses which such court
shall deem proper.
SECTION 3. REIMBURSEMENT OF EXPENSES FOLLOWING ADJUDICATION OF
NEGLIGENCE. The Company shall reimburse the Indemnitee for any expenses
(including attorneys' fees) and amounts paid in settlement actually and
reasonably incurred by him in connection with the investigation, defense,
settlement or appeal of any action or suit described in Section 2 hereof that
results in an adjudication that the Indemnitee was liable for negligence, gross
negligence or recklessness (but not wilful misconduct) in the performance of his
duty to the Company; provided, however, that the Indemnitee acted in good faith
and in a manner he believed to be in the best interests of the Company.
SECTION 4. AUTHORIZATION OF INDEMNIFICATION.
4.1. INDEMNIFICATION DETERMINATION. Any indemnification under Sections 1
and 2 hereof (unless ordered by a court) and any reimbursement made under
Section 3 hereof shall be made by the Company only as authorized in the specific
case upon a determination (the "Determination") that indemnification or
reimbursement of the Indemnitee is proper in the circumstances because the
Indemnitee has met the applicable standard of conduct set forth in Section 1, 2
or 3 hereof, as the case may be. Subject to Sections 5.6, 5.7, 5.8 and 8 of this
Agreement, the Determination shall be made in the following order of preference:
(a) first, by the Company's Board of Directors (the "Board") by
majority vote or consent of a quorum consisting of directors ("Disinterested
Directors") who are not, at the time of the Determination, named parties to such
action, suit or proceeding; or
(b) next, if such a quorum of Disinterested Directors cannot be
obtained, by majority vote or consent of a committee duly designated by the
Board (in which designation all directors, whether or not Disinterested
Directors, may participate) consisting solely of two or more Disinterested
Directors; or
(c) next, if such a committee cannot be designated, by any
independent legal counsel (who may be the outside counsel regularly employed by
the Company); or
2.
<PAGE>
(d) next, if such legal counsel determination cannot be obtained, by
vote or consent of the holders of a majority of the Company's common stock that
are represented in person or by proxy and entitled to vote at a meeting called
for such purpose.
4.2. NO PRESUMPTIONS. The termination of any action, suit or 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 that he reasonably believed to be in
or not opposed to the best interests of the Company, and with respect to any
criminal action or proceeding, had reasonable cause to believe that his conduct
was unlawful.
4.3. BENEFIT PLAN CONDUCT. The Indemnitee's conduct with respect to an
employee benefit plan for a purpose he reasonably believed to be in the
interests of the participants in and beneficiaries of the plan shall be deemed
to be conduct that the Indemnitee reasonably believed to be not opposed to the
best interests of the Company.
4.4. RELIANCE AS SAFE HARBOR. For purposes of any Determination hereunder,
the Indemnitee shall be deemed to have acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Company, or, with respect to any criminal action or proceeding, to have had no
reasonable cause to believe his conduct was unlawful, if his action is based on
(i) the records or books of account of the Company or another enterprise,
including financial statements, (ii) information supplied to him by the officers
of the Company or another enterprise in the course of their duties, (iii) the
advice of legal counsel for the Company or another enterprise, or (iv)
information or records given or reports made to the Company or another
enterprise by an independent certified public accountant or by an appraiser or
other expert selected with reasonable care by the Company or another enterprise.
The term "another enterprise" as used in this Section 4.4 shall mean any other
corporation or any partnership, joint venture, trust, employee benefit plan or
other enterprise of which the Indemnitee is or was serving at the request of the
Company as an officer, director, partner, trustee, employee or agent. The
provisions of this Section 4.4 shall not be deemed to be exclusive or to limit
in any way the other circumstances in which the Indemnitee may be deemed to have
met the applicable standard of conduct set forth in Sections 1, 2 or 3 hereof,
as the case may be.
4.5. SUCCESS ON MERITS OR OTHERWISE. Notwithstanding any other provision
of this Agreement to the extent that the Indemnitee has been successful on the
merits or otherwise in defense of any action, suit or proceeding described in
Section 1 or 2 hereof or in defense of any claim, issue or matter therein, he
shall be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection with the investigation, defense,
settlement or appeal thereof. For purposes of this Section 4.5, the term
"successful on the merits or otherwise" shall include, but not be limited to,
(i) any termination, withdrawal, or dismissal (with or without prejudice) of any
claim action, suit or proceeding against the Indemnitee without any express
finding of liability or guilt against him, (ii) the expiration of 120 days after
the making of any claim or threat of an action, suit or proceeding without the
institution of the same and without any promise or payment made to induce a
settlement, or (iii) the settlement of any action, suit or proceeding under
Section 1, 2 or 3 hereof pursuant to which the Indemnitee pays less than
$25,000.
3.
<PAGE>
4.6. PARTIAL INDEMNIFICATION OR REIMBURSEMENT. If the Indemnitee is
entitled under any provision of this Agreement to indemnification and/or
reimbursement by the Company for some or a portion of the claims, damages,
expenses (including attorneys' fees), judgments, fines or amounts paid in
settlement by the Indemnitee in connection with the investigation, defense,
settlement or appeal of any action specified in Section 1, 2 or 3 hereof, but
not, however, for the total amount thereof, the Company shall nevertheless
indemnify and/or reimburse the Indemnitee for the portion thereof to which the
Indemnitee is entitled. The party or parties making the Determination shall
determine the portion (if less than all) of such claims, damages, expenses
(including attorneys' fees), judgments, fines or amounts paid in settlement for
which the Indemnitee is entitled to indemnification and/or reimbursement under
this Agreement.
4.7. LIMITATIONS ON INDEMNIFICATION. No indemnification pursuant to
Sections 1 and 2 hereof shall be paid by the Company if a judgment (after
exhaustion of all appeals) or other final adjudication determines that the
Indemnitee's actions, or omissions to act, were material to the cause of action
so adjudicated and constitute:
(a) a violation of criminal law, unless the Indemnitee had reasonable
cause to believe his conduct was lawful or had no reasonable cause to believe
his conduct was unlawful;
(b) a transaction from which the Indemnitee received an improper
personal benefit within the meaning of Section 607.0850(7) of the Florida
Business Corporation Act;
(c) a circumstance under which the liability provisions of Section
607.0834 of the Florida Business Corporation Act are applicable; or
(d) wilful misconduct or conscious disregard for the best interests
of the Company in a proceeding by or in the right of the Company to procure a
judgment in its favor or in a proceeding by or in the right of a shareholder of
the Company.
SECTION 5. PROCEDURES FOR DETERMINATION OF WHETHER
STANDARDS HAVE BEEN SATISFIED.
5.1. COSTS. All costs of making the Determination required by Section 4.1
hereof shall be borne solely by the Company, including, but not limited to, the
costs of legal counsel proxy solicitations and judicial determinations. The
Company shall also be solely responsible for paying (i) all reasonable expenses
incurred by the Indemnitee to enforce this Agreement including, but not limited
to, the costs incurred by the Indemnitee to obtain court-ordered indemnification
pursuant to Section 8 hereof, regardless of the outcome of any such application
or proceeding, and (ii) all costs of defending any suits or proceedings
challenging payments to the Indemnitee under this Agreement.
5.2. TIMING OF THE DETERMINATION. The Company shall use its best efforts
to make the Determination contemplated by Section 4.1 hereof promptly. In
addition, the Company agrees:
4.
<PAGE>
(a) if the Determination is to be made by the Board or a committee
thereof, such Determination shall be made not later than 15 days after a written
request for a Determination (a "Request") is delivered to the Company by the
Indemnitee;
(b) if the Determination is to be made by independent legal counsel,
such Determination shall be made not later than 30 days after a Request is
delivered to the Company by the Indemnitee; and
(c) if the Determination is to be made by the shareholders of the
Company, such Determination shall be made not later than 120 days after a
Request is delivered to the Company by the Indemnitee.
The failure to make a Determination within the above-specified time period shall
constitute a Determination approving full indemnification or reimbursement of
the Indemnitee. Notwithstanding anything herein to the contrary, a Determination
may be made in advance of (i) the Indemnitee's payment (or incurring) of
expenses with respect to which indemnification or reimbursement is sought,
and/or (ii) final disposition of the action, suit or proceeding with respect to
which indemnification or reimbursement is sought.
5.3. REASONABLENESS OF EXPENSES. The evaluation and finding as to the
reasonableness of expenses incurred by the Indemnitee for purposes of this
Agreement shall be made (in the following order of preference) within 15 days of
the Indemnitee's delivery to the Company of a Request that includes a reasonable
accounting of expenses incurred:
(a) first by the Board by a majority vote of a quorum consisting of
Disinterested Directors; or
(b) next, if a quorum cannot be obtained under subdivision (a), by
majority vote or consent of a committee duly designated by the Board (in which
designation all directors, whether or not Disinterested Directors, may
participate), consisting solely of two or more Disinterested Directors; or
(c) next, if a finding cannot be obtained under either subdivision
(a) or (b), by vote or consent of the holders of a majority of the Company's
Common Stock that are represented in person or by proxy at a meeting called for
such purpose.
All expenses shall be considered reasonable for purposes of this Agreement if
the finding contemplated by this Section 5.3 is not made within the prescribed
time. The finding required by this Section 5.3 may be made in advance of the
payment (or incurring) of the expenses for which indemnification or
reimbursement is sought.
5.4. PAYMENT OF INDEMNIFIED AMOUNT. Immediately following a Determination
that the Indemnitee has met the applicable standard of conduct set forth in
Section 1, 2 or 3 hereof, as the case may be, and the finding of reasonableness
of expenses contemplated by Section 5.3 hereof, or the passage of time
prescribed for making such determination(s), the Company shall pay to the
Indemnitee in cash the amount to which the Indemnitee is entitled to be
indemnified and/or reimbursed, as the case may be, without further authorization
or
5.
<PAGE>
action by the Board; provided, however, that the expenses for which
indemnification or reimbursement is sought have actually been incurred by the
Indemnitee.
5.5. SHAREHOLDER VOTE ON DETERMINATION. The Indemnitee and any other
shareholder who is a party to the proceeding for which indemnification or
reimbursement is sought shall be entitled to vote on any Determination to be
made by the Company's shareholders, including a Determination made pursuant to
Section 5.7 hereof. In addition, in connection with each meeting at which a
shareholder Determination will be made, the Company shall solicit proxies that
expressly include a proposal to indemnify or reimburse the Indemnitee. The
Company proxy statement relating to the proposal to indemnify or reimburse the
Indemnitee shall not include a recommendation against indemnification or
reimbursement.
5.6. SELECTION OF INDEPENDENT LEGAL COUNSEL. If the Determination required
under Section 4.1 is to be made by independent legal counsel, such counsel shall
be selected by the Indemnitee with the approval of the Board, which approval
shall not be unreasonably withheld. The fees and expenses incurred by counsel in
making any Determination (including Determinations pursuant to Section 5.8
hereof) shall be borne solely by the Company regardless of the results of any
Determination and, if requested by counsel, the Company shall give such counsel
an appropriate written agreement with respect to the payment of their fees and
expenses and such other matters as may be reasonably requested by counsel.
5.7. RIGHT TO APPEAL AN ADVERSE DETERMINATION BY BOARD. If a Determination
is made by the Board or a committee thereof that the Indemnitee did not meet the
applicable standard of conduct set forth in Section 1, 2 or 3 hereof, upon the
written request of the Indemnitee and the Indemnitee's delivery of $500 to the
Company, the Company shall cause a new Determination to be made by the Company's
shareholders at the next regular or special meeting of shareholders. Subject to
Section 8 hereof such Determination by the Company's Shareholders shall be
binding and conclusive for all purposes of this Agreement.
5.8. RIGHT TO SELECT FORUM FOR DETERMINATION. If, at any time subsequent
to the date of this Agreement, Continuing Directors do not constitute a majority
of the members of the Board, or there is otherwise a change in control of the
Company (as contemplated by Item 403(c) of Regulation S-K), then upon the
request of the Indemnitee, the Company shall cause the Determination required by
Section 4.1 hereof to be made by independent legal counsel selected by the
Indemnitee and approved by the Board (which approval shall not be unreasonably
withheld), which counsel shall be deemed to satisfy the requirements of clause
(3) of Section 4.1 hereof. If none of the legal counsel selected by the
Indemnitee are willing and/or able to make the Determination, then the Company
shall cause the Determination to be made by a majority vote or consent of a
Board committee consisting solely of Continuing Directors. For purposes of this
Agreement a "Continuing Director" means either a member of the Board at the date
of this Agreement or a person nominated to serve as a member of the Board by a
majority of the then Continuing Directors.
5.9. ACCESS BY INDEMNITEE TO DETERMINATION. The Company shall afford to
the Indemnitee and his representatives ample opportunity to present evidence of
the facts upon which the Indemnitee relies for indemnification or reimbursement
together with other
6.
<PAGE>
information relating to any requested Determination. The Company shall also
afford the Indemnitee the reasonable opportunity to include such evidence and
information in any Company proxy statement relating to a shareholder
Determination.
5.10. JUDICIAL DETERMINATIONS IN DERIVATIVE SUITS. In each action or suit
described in Section 2 hereof, the Company shall cause its counsel to use its
best efforts to obtain from the Court in which such action or suit was brought
(i) an express adjudication whether the Indemnitee is liable for negligence or
misconduct in the performance of his duty to the Company, and, if the Indemnitee
is so liable, (ii) a determination whether and to what extent, despite the
adjudication of liability but in view of all the circumstances of the case
(including this Agreement), the Indemnitee is fairly and reasonably entitled to
indemnification.
SECTION 6. SCOPE OF INDEMNITY. The actions, suits and proceedings
described in Sections 1 and 2 hereof shall include, for purposes of this
Agreement, any actions that involve, directly or indirectly, activities of the
Indemnitee both in his official capacities as a Company director or officer and
actions taken in another capacity while serving as director or officer,
including, but not limited to, actions or proceedings involving (i) compensation
paid to the Indemnitee by the Company, (ii) activities by the Indemnitee on
behalf of the Company, including actions in which the Indemnitee is plaintiff,
(iii) actions alleging a misappropriation of a "corporate opportunity," (iv)
response to a takeover attempt or threatened takeover attempt of the Company,
(v) transactions by the Indemnitee in Company securities, and (vi) the
Indemnitee's preparation for and appearance (or potential appearance) as a
witness in any proceeding relating, directly or indirectly, to the Company. In
addition, the Company agrees that, for purposes of this Agreement, all services
performed by the Indemnitee on behalf of, in connection with or related to any
subsidiary of the Company, any employee benefit plan established for the benefit
of employees of the Company or any subsidiary, any corporation or partnership or
other entity in which the Company or any subsidiary has a 5% ownership interest,
or any other affiliate of the Company, shall be deemed to be at the request of
the Company.
SECTION 7. ADVANCE FOR EXPENSES.
7.1. MANDATORY ADVANCE. Expenses (including attorneys' fees, court costs,
judgments, fines, amounts paid in settlement and other payments) incurred by the
Indemnitee in investigating, defending, settling or appealing any action, suit
or proceeding described in Section 1 or 2 hereof shall be paid by the Company in
advance of the final disposition of such action, suit or proceeding. The Company
shall promptly pay the amount of such expenses to the Indemnitee, but in no
event later than 10 days following the Indemnitee's delivery to the Company of a
written request for an advance pursuant to this Section 7, together with a
reasonable accounting of such expenses.
7.2. UNDERTAKING TO REPAY. The Indemnitee hereby undertakes and agrees to
repay to the Company any advances made pursuant to this Section 7 if and to the
extent that it shall ultimately be found that the Indemnitee is not entitled to
be indemnified by the Company for such amounts.
7.3. MISCELLANEOUS. The Company shall make the advances contemplated by
this Section 7 regardless of the Indemnitee's financial ability to make
repayment, and regardless
7.
<PAGE>
whether indemnification of the Indemnitee by the Company will ultimately be
required. Any advances and undertakings to repay pursuant to this Section 7
shall be unsecured and interest-free.
SECTION 8. COURT-ORDERED INDEMNIFICATION. Regardless of whether the
Indemnitee has met the standard of conduct set forth in Sections 1, 2 or 3
hereof, as the case may be, and notwithstanding the presence or absence of any
Determination whether such standards have been satisfied, the Indemnitee may
apply for indemnification (and/or reimbursement pursuant to Section 3 or 12
hereof to the court conducting any proceeding to which the Indemnitee is a party
or to any other court of competent jurisdiction. On receipt of an application,
the court, after giving any notice the court considers necessary, may order
indemnification (and/or reimbursement) if it determines that the Indemnitee is
fairly and reasonably entitled to indemnification (and/or reimbursement) in view
of all the relevant circumstances (including this Agreement).
SECTION 9. NONDISCLOSURE OF PAYMENTS. Except as expressly required by
Federal securities laws, neither party shall disclose any payments under this
Agreement unless prior approval of the other party is obtained. Any payments to
the Indemnitee that must be disclosed shall, unless otherwise required by law,
be described only in Company proxy or information statements relating to special
and/or annual meetings of the Company's shareholders, and the Company shall
afford the Indemnitee the reasonable opportunity to review all such disclosures
and, if requested, to explain in such statement any mitigating circumstances
regarding the events reported.
SECTION 10. COVENANT NOT TO SUE, LIMITATION OF ACTIONS AND RELEASE OF
CLAIMS. No legal action shall be brought and no cause of action shall be
asserted by or on behalf of the Company (or any of its subsidiaries) against the
Indemnitee, his spouse, heirs, executors, personal representatives or
administrators after the expiration of two years from the date the Indemnitee
ceases (for any reason) to serve as either director or an executive officer of
the Company, and any claim or cause of action of the Company (or any of its
subsidiaries) shall be extinguished and deemed released unless asserted by
filing of a legal action within such two year period.
SECTION 11. INDEMNIFICATION OF EXECUTIVE'S ESTATE. Notwithstanding any
other provision of this Agreement, and regardless whether indemnification of the
Indemnitee would be permitted and/or required under this Agreement, if the
indemnitee is deceased, the Company shall indemnify and hold harmless the
Indemnitee's estate, spouse, heirs, administrators, personal representatives and
executors (collectively the "Indemnitee's Estate") against, and the Company
shall assume, any and all claims, damages, expenses (including attorneys' fees),
penalties, judgments, fines and amounts paid in settlement actually incurred by
the Indemnitee or the Indemnitee's Estate in connection with the investigation,
defense, settlement or appeal of any action described in Section 1 or 2 hereof.
Indemnification of the Indemnitee's Estate pursuant to this Section 11 shall be
mandatory and not require a Determination or any other finding that the
Indemnitee's conduct satisfied a particular standard of conduct.
8.
<PAGE>
SECTION 12. MISCELLANEOUS.
12.1. NOTICE PROVISION. Any notice, payment, demand or communication
required or permitted to be delivered or given by the provisions of this
Agreement shall be deemed to have been effectively delivered or given and
received on the date personally delivered to the respective party to whom it is
directed, or when deposited by registered or certified mail, with postage and
charges prepaid and addressed to the parties at the addresses set forth above
their signatures to this Agreement.
12.2. ENTIRE AGREEMENT. Except for the Company's Articles of
Incorporation, this Agreement constitutes the entire understanding of the
parties and supersedes all prior understandings, whether written or oral,
between the parties with respect to the subject matter of this Agreement.
12.3. SEVERABILITY OF PROVISIONS. If any provision of this Agreement is
held to be illegal, invalid, or unenforceable under present or future laws
effective during the term of this Agreement such provision shall be fully
severable; this Agreement shall 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 shall remain in full
force and effect and shall not be affected by the illegal, invalid, or
unenforceable provision or by its severance from this Agreement. Furthermore, in
lieu of each such illegal, invalid, or unenforceable provision there shall 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.
12.4. APPLICABLE LAW. This Agreement shall be governed by and construed
under the laws of the State of Florida.
12.5. EXECUTION IN COUNTERPARTS. This Agreement and any amendment may be
executed simultaneously or in two or more counterparts, each of which together
shall constitute one and the same instrument.
12.6. COOPERATION AND INTENT. The Company shall cooperate in good faith
with the Indemnitee and use its best efforts to ensure that the Indemnitee is
indemnified and/or reimbursed for liabilities described herein to the fullest
extent permitted by law.
12.7. AMENDMENT. No amendment, modification or alteration of the terms of
this Agreement shall be binding unless in writing, dated subsequent to the date
of this Agreement and executed by the parties.
12.8. BINDING EFFECT. The obligations of the Company to the Indemnitee
hereunder shall survive and continue as to the Indemnitee even if the Indemnitee
ceases to be a director, officer, employee and/or agent of the Company. Each and
all of the covenants, terms and provisions of this Agreement shall be binding
upon and inure to the benefit of the successors to the Company and, upon the
death of the Indemnitee, to the benefit of the estate, heirs, executors,
administrators and personal representatives of the Indemnitee.
9.
<PAGE>
12.9. GENDER AND NUMBER. Wherever the context shall so require, all words
herein in the male gender shall be deemed to include the female or neuter
gender, all singular words shall include the plural and all plural words shall
include the singular.
12.10. NONEXCLUSIVITY. The rights of indemnification and reimbursement
provided in this Agreement shall be in addition to any rights to which the
Indemnitee may otherwise be entitled by statute, bylaw, agreement, vote of
shareholders or otherwise.
12.11. EFFECTIVE DATE. The provisions of this Agreement shall cover
claims, actions, suits and proceedings whether now pending or hereafter
commenced and shall be retroactive to cover acts or omissions or alleged acts or
omissions which heretofore have taken place.
THE COMPANY:
HOPS GRILL & BAR, INC.
By:__________________________________
Title:_______________________________
3030 N. Rocky Point Drive West
Suite 650
Tampa, Florida 33607
THE INDEMNITEE:
_____________________________________
Name:________________________________
Address:
_____________________________________
_____________________________________
_____________________________________
10.
EXHIBIT 10.3
October 4, 1996
Mr. David Mason
Mr. Thomas Schelldorf
Hops Grill & Bar, Inc.
RE: LOAN COMMITMENT FOR HOPS GRILL & BAR, INC.
AND RELATED ENTITIES (COLLECTIVELY, "HOPS")
Gentlemen:
Trans Financial Bank (the "Bank") hereby confirms its commitment to
make a credit line available to the Borrower identified below of $20,000,000
(hereinafter "the Loan") for the following described purposes in accordance with
and subject to the following general terms and conditions:
1. PURPOSE OF COMMITMENT: This commitment expresses the general terms and
conditions under which the Bank will commit to make the Loan. The Bank will
require the Borrower to enter into a definitive loan agreement before the Loan
is made, with such additional terms and conditions as it may deem advisable. In
addition, before the Loan is made, Borrower will be required to execute and
deliver to the Bank a promissory note, loan agreement, guaranties, stock pledges
and such other documents and security instruments as may be required by the Bank
and are consistent with the terms hereof. The Loan shall be subject to the
detailed terms and conditions set out in such loan agreement, instruments and
documents, as well as the terms and conditions set out below.
2. CONDITIONS TO COMMITMENT: This commitment assumes and is conditioned upon:
(i) the successful completion of an initial public offering in the approximate
amount of $15,000,000 or more by Hops Grill & Bar, Inc. or an affiliate of Hops
Grill & Bar, Inc., which affiliate has been approved by the Bank (the "Public
Company"); (ii) the application of the net proceeds of the public offering to
repay existing indebtedness of Hops to the Bank.
3. BORROWER: The Borrower shall be Public Company.
4. AMOUNT OF LOAN: $20,000,000.
1
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Mr. David Mason
Mr. Thomas Schelldorf
October 4, 1996
5. PURPOSE OF LOAN: The proceeds of the Loan shall be used solely to [1] repay
the balance of loans from the Bank to Hops which remain after the application of
the proceeds of the public offering, [2] to fund future development of
additional Hops restaurants, and [3] for general working capital purposes.
6. FEE: The Bank shall receive a fee in the amount of Two Hundred Fifty
Thousand Dollars ($250,000) at closing.
7. INTEREST RATE OPTIONS: At Borrower's periodic option as described in the
Loan Agreement, either at New York Prime Rate or at LIBOR plus 250 basis points.
8. TERM OF LOAN: The Loan will mature on the last day of the twenty-fourth
month after its closing.
9. REPAYMENT TERMS: Payments of interest due monthly and principal due at
maturity.
10. LATE PENALTY: A late penalty of 5% of the required monthly payment amount
shall be paid by the Borrower any time a required payment is not received by the
Bank within ten days of its due date.
11. COLLATERAL: [1] The collateral for the Loan shall consist of the following:
[1] the personal guaranties of David L. Mason and Thomas A. Schelldorf (the
"Guarantors"), which shall be secured by the pledge to the Bank of life
insurance, in the amount of $2.0 million on the life of each of the Guarantors;
[2] a pledge by the Borrower of all of the stock of the subsidiaries of the
Borrower (which constitutes substantially all of the assets of the Borrower);
[3] a negative pledge by the Borrower with respect to all of the existing assets
previously financed by the Bank and refinanced by the proceeds of the public
offering and the Loan and on all assets of any new Hops restaurants financed
with the proceeds of the Loan; and [4] a prohibition on any other indebtedness
of the Borrower without the consent of the Bank, except for normal trade credit
and liabilities and an agreed-upon amount of minor equipment leases.
12. REPORTING REQUIREMENTS: Borrower shall provide Bank copies of all reports
filed with the Securities and Exchange Commission ("SEC") simultaneously with
filing such reports with the SEC as well as reports and certificates required by
the Loan Agreement.
2
<PAGE>
Mr. David Mason
Mr. Thomas Schelldorf
October 4, 1996
13. CLOSING DATE: The Loan shall be closed on or before December 31, 1996;
otherwise, this commitment and all obligations of Bank hereunder will terminate.
14. LOAN DOCUMENTATION: All documentation, including the loan agreement,
note, guaranties and other security instruments will be prepared or reviewed by
counsel selected by Bank and will be in form, content, and execution
satisfactory to the Bank. Borrower shall pay Bank upon demand for all reasonable
fees paid Bank's attorney.
15. EXPENSES: Borrower shall pay all taxes and assessments, and all
recording fees, registration taxes, title insurance premiums and other charges
of the title company, attorney's fees (excluding the fees of counsel for the
Bank and appraisal fees) and all other expenses of the Bank in closing the Loan,
whether or not the Loan contemplated hereunder is made, unless the Loan is not
made because of the wrongful action of the Bank. This payment and reimbursement
of the Bank's fees and expenses shall be in addition to the facilitate fee.
16. ASSIGNMENT BY BORROWER, TRANSFER OF TITLE AND OTHER LIENS: This Commitment
may not be assigned by Borrower without the Bank's consent.
17. BANK NOT A JOINT VENTURE: Notwithstanding anything to the contrary herein
contained, the Bank by making this Commitment or by any action taken pursuant
hereto, shall not be deemed a partner or joint venturer with the Borrower, the
Borrower shall not hold itself out as such, and the Borrower shall indemnify and
hold Bank harmless from any and all damages resulting from such a construction
of the parties and their relationship.
18. CLOSING DOCUMENTS: The Closing of the Loan shall occur on or before
December 31, 1996. In addition to the loan documents mentioned above, Borrower
shall deliver to the Bank all or any of the following documents, in form and
substance satisfactory to the Bank and its counsel:
[a] A favorable opinion of counsel for Borrower as to certain of the
matters set forth in the Loan Agreement and the other loan
documents; and
[b] Such other documents, certificates and instruments as the Bank
may reasonably request to establish the due organization,
validity and enforceability of any loan document, or to establish
the security for the benefit of the Bank as contemplated by this
commitment.
19. EVENTS OF DEFAULT: The usual and customary terms, to be specified in the
Loan Agreement.
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<PAGE>
Mr. David Mason
Mr. Thomas Schelldorf
October 4, 1996
This commitment to make the Loan shall expire and be void and of no
effect if not accepted by delivery to the Bank on or before November 1, 1996, of
this letter, executed by Borrower as set out below. This commitment and the
agreement arising upon such acceptance shall be construed and governed in all
respects in accordance with the laws of Kentucky.
The Bank sincerely appreciates the opportunity to make this offer for
the Loan. Please call should you have any questions concerning the above.
Very truly yours,
TRANS FINANCIAL BANK
By: /s/ TOMMY W. COLE
-----------------------------
Title: EXECUTIVE VICE PRESIDENT
--------------------------
HOP'S ACCEPTANCE: The undersigned has read the foregoing Commitment Letter, and
hereby accepts the Bank's offer to make the Loan under the terms and conditions
therein as of the 7TH day of OCTOBER, 1996.
HOPS GRILL & BAR, INC.
By: /s/ DAVID L. MASON
-----------------------------
Title: CEO
--------------------------
4
EXHIBIT 10.4
SOUTH FLORIDA
DEVELOPMENT OPTION AGREEMENT
THIS SOUTH FLORIDA DEVELOPMENT OPTION AGREEMENT ("Agreement") is made
effective as of this 7th day of October, 1996, by and between HOPS GRILL & BAR,
INC., a corporation organized and existing under the laws of the State of
Florida (hereinafter referred to as "Hops"), KEVIN TOOMY, an individual residing
at 7701 Newport Lane, Parkland, Florida 33067 (hereinafter referred to as
"Toomy"), and TOOMY CLN, INC., a corporation organized and existing under the
laws of the State of Florida (hereinafter referred to as "TC").
W I T N E S S E T H:
WHEREAS, the principals of Hops own all of the issued and outstanding
shares of common stock of Hops of South Florida, Inc., a corporation organized
and existing under the laws of the State of Florida ("HSF");
WHEREAS, as of the date hereof, Toomy is the sole owner of TC, subject to
the limited minority interest transfers permitted under Section 9(h) hereof;
WHEREAS, HSF, TC, Hops Partners, Inc., a Florida corporation (hereinafter
referred to as "HPI"), and Kevin Torrey, the proposed Territory Area Manager
(hereinafter referred to as "Torrey"), are parties to that certain Limited
Partnership Agreement of even date herewith (the "Partnership Agreement")
whereby HSF, TC, HPI, and Torrey formed Hops of South Florida, Ltd., a Florida
limited partnership (the "Partnership") for the purpose of developing and
operating, directly or indirectly, certain Hops Grill & Bar restaurants
(including, but not necessarily limited to, the Initial Restaurant (as defined
herein)) in the Territory (as defined herein) pursuant to the terms and
conditions contained therein; and
WHEREAS, Hops has agreed to grant to Toomy the option to participate in
the development and operation of the Initial Restaurant and certain Additional
Restaurant(s) (as defined herein) in the Territory (as defined herein), if any,
pursuant to the terms and conditions contained herein.
<PAGE>
NOW, THEREFORE, in consideration of the mutual promises and agreements
contained herein, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto, intending to be legally bound thereby, agree as follows:
DEFINITIONS
The following definitions shall apply to the following terms as used in
this Agreement:
(1) "Additional Restaurants" means restaurant(s) (in addition to the
Initial Restaurant) to be developed and operated in the Territory prior to the
expiration or termination of Toomy's rights hereunder.
(2) "Hops" means Hops Grill & Bar, Inc., a corporation organized and
existing under the laws of the State of Florida which, either directly or
through one or more subsidiaries, is the owner of all rights under the unique
"Hops Grill & Bar" system of restaurant development, theme and operation.
(3) "Hops Offer" means the notice and information served upon Toomy by
Hops pursuant to Section 2(b).
(4) "Initial Restaurant" means the first restaurant to be developed and
operated, directly or indirectly, by the Partnership as described in Section 1
hereof.
(5) "Operating Agreement" means the agreement(s) to be entered into by the
Partnership (or one or more Second-Tier Partnerships) governing the development
and operation of each restaurant to be developed and operated, directly or
indirectly, by the Partnership within the Territory pursuant to this Agreement.
(6) "Option Fee" shall mean the fee payable by Toomy to Hops pursuant to
Section 2(e) hereof, for the right to participate in the development and
operation of Additional Restaurants.
(7) "Option Period" shall have the meaning as set forth in Section 2(d). (
(8) "Partnership" means the Florida limited partnership formed by HSF, TC,
HPI, and Torrey pursuant to the Partnership Agreement and the laws of the State
of Florida and known as Hops of South Florida, Ltd.
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(9) "Partnership Agreement" means the agreement in which HSF, Toomy, HPI,
and Torrey formed the Partnership under the laws of the State of Florida for the
purpose of owning and operating, directly or indirectly, certain restaurants
within the Territory.
(10) "Second-Tier Partnership" means a limited partnership that may be
formed at the discretion of Hops and HSF for the purpose of developing or
operating the Initial Restaurant or any Additional Restaurant(s) pursuant to
this Agreement whereby (i) HSF will be a general partner which will have a one
percent (1%) equity interest in such partnership, (ii) the manager of the
Initial Restaurant or any Additional Restaurant(s) may be a limited partner
which may have up to a ten percent (10%) equity interest in such partnership,
and (iii) the Partnership will be a limited partner that will own the remaining
equity interest in such partnership.
(11) "System" shall mean a unique system owned by Hops, and associated
with "Hops Grill & Bar Restaurants," which specialize in the sale of high
quality, moderately priced, American food with a microbrewery and includes
proprietary rights in certain valuable trade names, service marks and
trademarks, including the service mark "Hops Grill & Bar", designs and color
schemes for restaurant premises, signs, equipment, procedures and formulae for
preparing food and beverage products, specifications for certain food and
beverage products, inventory methods, operating methods, financial control
concepts, training methods and teaching techniques.
(12) "Territory" shall mean Dade, Broward, Palm Beach and Martin Counties
in the State of Florida.
1. INITIAL RESTAURANT.
(a) On the date hereof, HSF, TC, HPI, and Torrey have executed the
Partnership Agreement for the purpose of the development and operation, direct
or indirect, of the Initial Restaurant. It is hereby agreed by the parties that
the Initial Restaurant will be located in Plantation (Broward County), Florida
and will be owned indirectly by the Partnership through a Second-Tier
Partnership known as "Hops of Plantation, Ltd." which will initially be owned as
follows: HSF will own a 1% interest as the sole general partner; HSF will own a
0.1% as a limited partner; and the Partnership will own a 98.9% interest as a
limited partner. The parties hereby acknowledge that at the discretion of Hops
and HSF, up to ten percent (10%) of
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<PAGE>
Hops of Plantation, Ltd. may be owned by a manager of the Plantation restaurant
at a future date.
(b) [REMOVED AND RESERVED.]
(c) Upon the execution of this Agreement, Toomy shall pay to Hops a fee in
the amount of seven thousand five hundred dollars (U.S.$7,500) for the right to
participate with HSF, through the Partnership (and potentially a Second-Tier
Partnership), in the development and operation of the Initial Restaurant. Such
fee, once paid, shall be non-refundable.
(d) Attached hereto as EXHIBIT 1(D) is the form of the Operating Agreement
to be executed by HSF, the Partnership (or the Second-Tier Partnership, if
appropriate) and TC relating to the Initial Restaurant. The Operating Agreement
for the Initial Restaurant will be executed at the time of the execution of this
Agreement.
2. ADDITIONAL RESTAURANTS; GRANT OF OPTION.
(a) [REMOVED AND RESERVED.]
(b) TOOMY RIGHT OF FIRST REFUSAL. If, during the Option Period as
described in Section 2(d), Hops desires, directly or indirectly, to develop
Additional Restaurant(s) in the Territory, Hops shall first serve written notice
(hereinafter called the "Hops Offer") to that effect upon Toomy, stating the
proposed location of the Additional Restaurant(s) to be developed, reasonable
demographic information regarding the location, and the estimated capital (both
equity and debt) required to develop and operate such Additional Restaurant(s).
Toomy shall have the option to participate in the development and operation of
any such Additional Restaurant(s) upon the terms set forth in Section 3 hereof
by giving written notice to Hops of the acceptance by Toomy of the Hops Offer
and making payment to Hops of the Option Fee described in Section 2(e) hereof,
within fifteen (15) days after the date of the Hops Offer.
(c) RIGHT OF HOPS TO DEVELOP. In the event that Toomy fails to timely
accept a Hops Offer or TC or Toomy fail to timely negotiate and execute the
agreements necessary to develop and operate such Additional Restaurant(s) as
provided in Section 4 hereof, Hops shall be free to develop and operate the
Additional Restaurant(s) described in the Hops Offer (i) on its own, directly or
indirectly through one or more subsidiaries or related entities, or (ii) with
any third party upon such terms as Hops shall, in its sole discretion, elect.
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<PAGE>
(d) OPTION PERIOD. For purposes of this Section 2, the Option Period shall
commence upon the effective date of this Agreement and shall expire upon the
earlier of:
(i) the date upon which HSF or Hops (or any affiliate of Hops) shall
acquire the Partnership interest of TC;
(ii) the date upon which HSF or Hops (or any affiliate of Hops) shall
acquire the direct or indirect interest of Toomy in any
Additional Restaurant(s);
(iii) the date upon which Toomy shall allow any Hops Offer to expire
without acceptance or Toomy shall fail to timely negotiate and
execute the agreements necessary to develop and operate any
Additional Restaurant(s) as provided in Section 4 hereof; or
(iv) the date of the termination of this Agreement as provided in
Section 5 hereof.
(e) OPTION FEE. TC shall pay an Option Fee to Hops with respect to each
Additional Restaurant in which Toomy shall participate pursuant to Sections 2(a)
or 2(b) hereof in an amount equal to U.S. $7,500 for each Additional Restaurant.
With respect to Additional Restaurants pursuant to Section 2(a) hereof, the
Option Fee shall be paid by Toomy to Hops immediately prior to the time that
Hops, HSF, the Partnership or any Second-Tier Partnership makes a financial
commitment for the property for the Additional Restaurant either by means of
lease or purchase agreement. With respect to Additional Restaurants in which
Toomy shall participate pursuant to Section 2(b) hereof, the Option Fee shall be
paid by Toomy with the acceptance of the Hops Offer as provided in Section 2(b)
hereof. All Option Fees, once paid, shall be non-refundable.
(f) LIMITATION. The option granted to Toomy hereunder shall extend only to
Additional Restaurants (in addition to the Initial Restaurant), if any, to be
developed in the Territory during the term of this Agreement as described in
Section 5 hereof (subject to the early termination of the Option Period as
provided in Section 2(d) hereof), and except as may otherwise be agreed by Hops
in its sole discretion in a future writing, Toomy shall have no rights with
respect to any restaurants other that those specifically provided for herein.
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3. EXTENT OF PARTICIPATION.
(a) In the event that Toomy timely accepts a Hops Offer to participate in
the development and operation of the Additional Restaurant(s) pursuant to the
provisions of Section 2(b) hereof, Toomy shall be entitled to participate in the
development and operation of the Additional Restaurant(s) only through the
Partnership (and any associated Second-Tier Partnership designated by Hops or
HSF) unless otherwise approved by Hops, in its sole discretion, upon the terms
provided for in this Agreement and the Partnership Agreement and Toomy shall
cause TC to:
(i) make the additional capital contributions and loan or guarantee
commitments, pro rata with HSF (or Hops or an affiliate of
Hops), necessary to fund the development and operation of any
such Additional Restaurant(s); and
(ii) execute the then current Operating Agreement (or similar
agreements) required for the Additional Restaurant(s).
(b) Hops' participation in any Additional Restaurant(s) may be through
Hops or HSF (or any other affiliate of Hops selected by Hops), in its sole
discretion.
(c) In the event that the development of any Additional Restaurants in
which Toomy shall exercise his right to participate hereunder, occurs through a
Second-Tier Partnership, unless otherwise agreed upon by Toomy, the Partnership
(or such other entity as designated by Hops which shall substitute for the
Partnership with respect to such Additional Restaurant) shall own a minimum of
eighty-eight and 9/10 percent (88.9%) of the equity of such Second-Tier
Partnership.
4. ADDITIONAL RESTAURANT AGREEMENTS.
(a) As soon as possible (but in any event within thirty (30) days) after
the mutual agreement to develop Additional Restaurant(s) as provided in Section
2(a) hereof or the acceptance by Toomy of any Hops Offer pursuant to Section
2(b) above, Toomy and TC shall, in good faith, negotiate and enter into, any
amendment to the Partnership Agreement reasonably
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requested by Hops or HSF to effectuate the development and operation of any such
Additional Restaurant(s).
(b) OPERATING AGREEMENT. In the event that Toomy shall exercise his option
to participate in the development and operation of the Additional Restaurant(s)
pursuant to the provisions of Section 2(b), Toomy hereby agrees and covenants to
execute with Hops and the Partnership (or any appropriate Second-Tier
Partnership) an Operating Agreement that specifies the terms and conditions upon
which the Additional Restaurant(s) are to be operated. Such Operating Agreement
shall conform in form and substance to the form of Operating Agreement (or
similar agreement) then in use by Hops; provided, however, that anything in this
Agreement to the contrary notwithstanding, the Operating Agreement (or similar
agreements) required to be executed by Toomy and/or TC with respect to
Additional Restaurants shall not contain terms which materially and adversely
alter the obligations of Toomy or TC as compared with the Operating Agreement
for the Initial Restaurant.
5. TERMINATION.
(a) This Agreement shall terminate on the date that is four (4) years from
the date of the opening of the Initial Restaurant to the public, unless sooner
terminated pursuant to the terms hereof.
(b) Hops shall have the right to terminate this Agreement immediately upon
written notice to Toomy stating the reason for such termination, and Toomy shall
no longer have any rights created by this Agreement in the event of:
(i) the filing by Toomy or TC of a petition in bankruptcy or an
arrangement for the benefit for reorganization; the filing
against Toomy or TC of a petition in bankruptcy, an arrangement
for the benefit of creditors, or petition for reorganization,
not dismissed within sixty (60) days of the filing thereof; the
making of an arrangement by Toomy or TC for the benefit of
creditors; or the appointment of a receiver or trustee for Toomy
or TC, which receiver or trustee shall not have been dismissed
within sixty days of such appointment; or
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(ii) the breach by Toomy or TC of this Agreement, the Partnership
Agreement or of any other agreement with HSF, Hops or any
affiliate thereof or any operating or other agreement related to
the Initial Restaurant or any Additional Restaurant(s). This
Agreement shall not be deemed terminated because of the breach
of the Partnership Agreement or any other agreement with HSF,
Hops or any affiliate thereof, during any period during which
Toomy or TC may cure any such breach pursuant to the terms of
the Partnership Agreement or any such other agreement, as
applicable.
(c) The obligations and limitations of Toomy and TC pursuant to Section 6
and Section 9(h) below shall survive any termination of this Agreement.
6. CONFIDENTIALITY; RESTRICTIONS UPON COMPETITION.
(a) CONFIDENTIALITY.
(i) CONFIDENTIAL INFORMATION. For purposes of this Agreement, the
term "Confidential Information" shall mean any and all
information disclosed or made known to Toomy or TC by Hops (or
its affiliates) or obtained by Toomy or TC, directly or
indirectly, as a consequence of or through Toomy's association,
dealings, discussions or relationship with Hops (or its
affiliates), which information is not generally known in the
industry in which Hops is or may become engaged, concerning Hops
or Hops' products, services, operations, processes, techniques,
research, engineering, development, programming, techniques of
application, properties, constructions, inventions, discoveries,
concepts, ideas, designs, methods, formulas, plans,
organization, accounting, intellectual property, marketing,
selling, purchasing, merchandising, contracting, leasing,
renting, computer programming, recording, manufacturing,
business plan(s), strategies, negotiations, advertising and/or
promotional concepts or materials, copy, logos, customers,
distributors, suppliers, agents, employees, representatives,
marketing contacts, prospects, references,
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business associates or otherwise associated persons or entities
and any and all other information which may be considered as the
proprietary or intellectual property or trade secret of Hops
under applicable law whether or not such information was
intentionally or unintentionally disclosed or made known to
Toomy or TC and whether or not such information is written or
complete and as it may exist from time to time.
(ii) USE AND DISCLOSURE OF INFORMATION. Toomy and TC recognize and
acknowledge that all and each item of Hops' Confidential
Information is a valuable, special, and unique asset of Hops and
the System. Toomy and TC further recognize and agree that such
Confidential Information must remain confidential in order to
maintain its value to both Hops and to all of the restaurant
operators operating under the System, both now and in the
future. Accordingly, Toomy and TC will not, directly or
indirectly, during or after the term of this Agreement, compete
by use of, disclose, disseminate, publish or use, or permit the
competition through use of, disclosure, dissemination,
publishing or use of the Confidential Information, or any part
thereof, to or for itself or any other person, group, firm,
corporation, association, or any other entity for any reason or
purpose whatsoever, except as may be required in the good faith
operation of the Initial Restaurant or Additional Restaurants.
Upon termination of this Agreement and the Operating Agreements
relating to the Initial Restaurant and each Additional
Restaurant, Toomy and TC shall immediately return to Hops all
System manuals and all other documents, records, notebooks,
computer disks or tape (or other computer storage media) and
similar repositories containing Confidential Information,
including all copies thereof, then in the possession, control or
influence of Toomy or TC, whether prepared by Hops (or its
affiliates), Toomy or TC or their respective employees or
affiliates or others.
(iii) BREACH OR THREATENED BREACH. In the event of a breach or
threatened breach by Toomy of the provisions of this Agreement,
Hops shall be
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entitled to an injunction (without the posting of bond),
restraining Toomy from using any of the Confidential Information
or from rendering any services to any person, firm, corporation,
association, or other entity to whom any of the Confidential
Information has been disclosed. Nothing herein shall be
construed as prohibiting Hops from pursuing any other remedies
available to it for such breach or threatened breach, including
the recovery of damages from Toomy, TC and/or any party or
parties to whom such disclosure has been made or who has (have)
been in any way involved in such breach or threatened breach or
who has (have) encouraged or solicited such breach or threatened
breach or who has (have) benefitted from such breach or
threatened breach. This agreement by Toomy and TC shall be
construed as an agreement independent of any other provision of
any agreement, and the existence of any claim or cause of action
of Toomy, TC or any other person or entity, whether predicated
on this Agreement or otherwise, shall not constitute a defense
to the enforcement of this Agreement by Hops or any other
person, firm, corporation or entity.
(b) RESTRICTIONS UPON COMPETITION.
(i) For a period which shall end upon the earlier of: (A) five (5)
years following the date of the opening of the Initial
Restaurant to the general public; (B) the date upon which Toomy
is no longer a direct or indirect owner of the Initial
Restaurant or any Additional Restaurant; or (C) the date upon
which neither Toomy nor TC is responsible for any restaurant
operating duties under any Operating Agreement, Toomy may not be
involved, directly or indirectly, in any manner or capacity
whatsoever, with any restaurant or restaurant concept, as Toomy
must devote his entire business time and energy to the Initial
Restaurant and the Additional Restaurants.
(ii) In addition to, and not in limitation of, the restrictions
contained in Section 6(a) hereof, during the term of this
Agreement and each Operating
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Agreement and for a period of five (5) years following the
termination of the last such Operating Agreement, Toomy and TC
shall not, directly or indirectly, within any state of the
United States (or similar jurisdiction within any foreign
country) in which Hops or its affiliates operates or licenses or
otherwise authorizes others to operate restaurants under the
System (the "Restricted Territory"), enter into or engage in any
business in competition with the business of Hops or its
affiliates (or any operator of restaurants under the Hops
System), as it now exists or may exist in the future, either as
an individual on his own account, or as a partner, joint
venturer, employee, agent, salesman, contractor, officer,
director, stockholder or otherwise. For purposes of this Section
6(b)(ii), a business shall be deemed competitive with the
business of Hops if it utilizes, directly or indirectly, a menu,
theme, design, motif, concept, method of operation or other
distinctive characteristic of the Hops System as it shall exist
from time to time. While not limiting the generality of the
preceding sentence, (A) any restaurant or bar operating its own
microbrewery (or affiliated with an entity which operates a
microbrewery) shall be deemed to be a direct competitor of Hops;
and (B) an "American-style" restaurant which does not utilize,
directly or indirectly, a menu, theme, design, motif, concept,
method of operation or other distinctive characteristic of the
Hops System as it shall exist from time to time shall not be
deemed competitive with the business of Hops. This covenant on
the part of Toomy and TC is made by Toomy and TC to induce Hops
to enter into this Agreement with Toomy and TC and to grant
Toomy and TC access to Hops' Confidential Information and Toomy
and TC hereby acknowledges the sufficiency of the consideration
received by him and it for this covenant. This covenant on the
part of Toomy and TC shall be construed as an agreement
independent of any other provision in this Agreement or any
other Agreement between Toomy or TC and Hops (or any affiliate
of Hops); and the existence of any claim or cause of action
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of Toomy against Hops (or any affiliate of Hops), whether
predicated on this Agreement or otherwise, shall not constitute
a defense to the enforcement by Hops of this covenant. It is
agreed by the parties hereto, however, that if any portion of
this covenant is held to be unreasonable, arbitrary or against
public policy, the covenant herein shall be considered divisible
both as to time and geographical area; and each month of the
specified period shall be deemed a separate period of time, and
each state, county or other political subdivision within the
Restricted Territory shall be deemed a separate geographical
area so that the lesser period of time or geographical area
shall remain effective so long as the same is not unreasonable,
arbitrary, or against public policy. The parties hereto agree
that, in the event any court determines the specified time
period or the specified geographical area covered by this
covenant to be unreasonable, arbitrary, or against public
policy, a lesser time period or geographical area which is
determined to be reasonable, non-arbitrary and not against
public policy may be enforced against Toomy and TC. It is
further agreed by the parties hereto that in the event of a
breach or violation or threatened breach or violation by Toomy
or TC of the provisions of this covenant, Hops shall be entitled
to an injunction (without the provision of bond by Hops)
restraining Toomy and/or TC from, directly or indirectly,
engaging in business in competition with Hops in breach or
violation of this covenant, and restraining Toomy and or TC from
any direct or indirect association with any person, firm,
corporation, association, partnership, venture or other entity
engaging in business in competition with Hops or its affiliates
in the Restricted Territory, whether directly or indirectly.
Nothing herein shall be construed as prohibiting Hops from
pursuing any other remedies available to it by law or by this
Agreement for breach, violation or threatened breach or
violation of the provisions of this covenant, including, by way
of illustration and not by way of limitation, the recovery of
damages from Toomy and TC or any other
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person, firm, corporation or entity. The provisions of this
covenant shall survive the termination of this Agreement for the
purpose of providing Hops with the protection of the covenants
of Toomy provided herein.
(iii) Toomy and TC hereby acknowledge that this covenant is a
reasonable and necessary requirement of Hops for the protection
of the legitimate and valid business interests of Hops and other
restaurant operators under the System. Toomy and TC hereby agree
that this covenant is a reasonable and necessary restraint of
trade and does not violate the Sherman Antitrust Act, the
Florida Antitrust Act or the common law. The parties hereto
specifically acknowledge and agree, for all purposes, that the
specified time period and the specified geographical area set
forth in this covenant is both reasonable and necessary for the
protection of Hops' interests.
(iv) Should an action have to be brought by Hops against Toomy or TC
to enforce this covenant, the period of restriction shall be
deemed to begin running on the date of entry of an order
granting Hops preliminary injunctive relief and shall continue
uninterrupted for the next succeeding five (5) year period.
Toomy and TC acknowledge and agree that the intent and purpose
of this covenant is to preclude Toomy and TC from competing with
Hops for a full five (5) year period and that such purpose and
effect would be frustrated by measuring the period of
restriction from the date of termination of Toomy's or TC's last
Operating Agreement where Toomy or TC failed to honor this
covenant until directed to do so by court order.
(v) The restrictions contained in Section 6(a) above shall not apply
to ownership of less than two percent (2%) of the shares of a
company whose shares are listed and traded on a national
securities exchange, if such shares are owned for investment
only, and are not owned by an officer, director, employee or
consultant of such publicly traded company.
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7. DISPUTE RESOLUTION.
(a) In the event there should arise any misunderstanding or disagreement
between the parties as to the compliance with the terms and conditions of this
Agreement, or as to whether either party has grounds hereunder entitling it to
terminate this Agreement, or any other dispute related to this Agreement
including arbitrability of the dispute, it is mutually agreed that such
differences, if they cannot be satisfactorily resolved between the parties
within thirty (30) days after either party seeking arbitration delivers notice
of same to the other party, shall be submitted to a single arbitrator, if the
parties agree upon one; otherwise, to a board of three arbitrators, of whom one
shall be selected by each party within twenty (20) days after such 30-day
period, and a third arbitrator shall be selected by these two selected
arbitrators. If one of the parties fails to timely select an arbitrator, the
arbitrator that was timely selected shall be the sole arbitrator. If neither
party timely selects an arbitrator, the first arbitrator selected thereafter
shall be the sole arbitrator, no others being appointed. Where each of the
parties timely selects an arbitrator, said arbitrators will have ten (10) days
from the end of the twenty (20) day period to select the third arbitrator. In
the event the arbitrators are unable to timely agree on the third arbitrator,
either party may petition any official of the American Arbitration Association
for appointment of the third arbitrator and the parties agree to accept any
arbitrator appointed by such official subject to the limitations hereof.
Arbitrators must be reasonably independent of the parties and their principals.
Persons who are hereby expressly disqualified to serve as arbitrators are
principals of the parties, relatives of said principals, employees of the
parties or said principals, persons not residing within 100 miles of Tampa,
Florida, attorneys, accountants and other business persons having professional
or business relationships with the parties or said principals.
(b) Arbitration shall proceed in accordance with the rules of the American
Arbitration Association. The arbitration shall be conducted in Tampa, Florida.
The arbitrators shall have all the powers permitted arbitrators under the laws
of the State of Florida. The decision and award of such single arbitrator, if
only one is used, or any two of such board if three are used, as the case may
be, shall be final and binding upon the parties, their heirs, legal
representatives, successors and assigns respectively, and shall have the same
force and effect as though such decision had been handed down by a court of
final jurisdiction. The cost of arbitrator(s) is to
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be shared equally by the parties. Each party shall be responsible for and shall
pay for the expenses of presenting its respective case, including depositions,
attorney's fees and costs and witness fees which expenses shall not be subject
to award by the arbitrator(s), nor shall such expenses be subject to award by
any court or other judicial authority. The parties shall deposit, at the
beginning of the arbitration process, with the arbitrator(s) an amount equal to
the estimated costs (including arbitrators' time charges) of the total
arbitration. Arbitrators' time charges shall be at the same rate for all
arbitrators. Each of the parties hereto covenants to abide by any arbitration
decision.
(c) In the event that it becomes necessary for any party to this Agreement
to enforce a decision of arbitration through legal proceedings, the parties
hereby agree that the Circuit Court for the Thirteenth Judicial Circuit in and
for Hillsborough County, Florida, Tampa Division, and the United States District
Court for the Middle District of Florida, Tampa Division, shall have exclusive
jurisdiction to hear and determine any such matters. Each party hereby expressly
submits and consents in advance to such jurisdiction and venue in any action or
proceeding whether commenced by or brought against them in either of such
Courts. In any such court proceeding the prevailing party shall be entitled to
reimbursement of all costs and expenses, which may be reasonably incurred or
paid in connection therewith, including without limitation, attorney's fees and
costs at the trial court and appellate court levels.
8. REPRESENTATIONS AND WARRANTIES. Toomy and TC hereby jointly and severally
acknowledge, represent, warrant and agree as follows:
(a) Toomy acknowledges that all documents, records and books pertaining to
the Partnership, the Initial Restaurant and the proposed Additional Restaurants
have been made available for inspection by him, his attorney, his accountant
and/or his other advisors. Toomy and/or his advisors have had a reasonable
opportunity to ask questions of and receive answers from representatives of Hops
and HSF concerning the Partnership, the Initial Restaurant and the proposed
Additional Restaurants, and to obtain additional information, to the extent
possessed or obtainable without unreasonable effort or expense, necessary to
verify the accuracy of the information contained in all documents and materials
that have been made available to him and/or his advisors. All such questions
have been answered to the full satisfaction of Toomy.
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No oral representations have been made or oral information furnished to Toomy or
his advisors in connection with his review of the documents, records and books
pertaining to the Partnership, the Initial Restaurant and the proposed
Additional Restaurants that were in any way inconsistent with such documents,
records and books.
(b) Toomy has been advised by Hops and HSF that the Partnership was formed
for the purpose of developing and operating certain "Hops Grill & Bar"
restaurants in the Territory; provided, however, that the decision as to the
actual development and the timing of the actual development of the Initial
Restaurant and the Additional Restaurants will rest solely with Hops and HSF and
may be influenced by numerous factors beyond the control of Hops, HSF, and
Toomy, some of which may not relate to the Partnership or its restaurant
operations and accordingly, the Initial Restaurant and the Additional
Restaurants may not be built in accordance with the original schedule, if any,
developed by Hops and HSF and, it is possible that, in a worst case, all or a
portion of the Initial Restaurant and the Additional Restaurants may not be
constructed. Additionally, once constructed, any decision regarding the
continued operation of some or all of the Initial Restaurant or the Additional
Restaurants, if any, will rest solely with HSF and may be influenced by factors
unrelated to the business of the Partnership.
(c) Toomy is aware that HSF is an affiliate of Hops and that as a part of
its business operations, Hops will be actively involved in the development and
operation of restaurants other than those to be owned and operated, directly or
indirectly, by the Partnership and that Toomy shall have no right in or to any
of the portion of the business operations or opportunities of Hops or its
affiliates other than those specifically granted to Toomy herein. Toomy
acknowledges that some of the restaurants that may be developed, directly or
indirectly, by Hops (other than the Initial Restaurant or the Additional
Restaurants to be developed hereunder) may directly or indirectly compete with
the restaurants to be developed and operated hereunder.
(d) Toomy (i) has adequate means of providing for his current needs and
possible personal contingencies, (ii) has no need for liquidity with respect to
his interest in the Partnership, (iii) is able to bear the substantial economic
risk of holding his interest in the Partnership for an indefinite period, (iv)
can afford a complete loss of his contributions to and obligations with respect
to the Partnership, and (v) does not have an overall commitment to assets that
are not readily marketable that is disproportionate to his net worth, and
Toomy's
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purchase of his interest in the Partnership will not cause such overall
commitment to become excessive.
(e) Toomy acknowledges and agrees that it is the parties' belief that, in
his hands, his interest in the Partnership does not constitute a security under
the Securities Act of 1933, as amended (the "Act"), or any applicable securities
laws. Toomy understands that neither the offering nor the sale of his interest
in the Partnership has been registered under the Act or any state securities
laws. Toomy further understands that in the event his interest in the
Partnership were determined to constitute a security under the Act or any
applicable state securities laws, his interest in the Partnership would have to
be held indefinitely unless (i) the sale or other transfer thereof were
registered under the Act, or (ii) an exemption from such registration were
available. Toomy further understands that (i) HPI has the right to purchase his
interest in the Partnership in the circumstances and on the terms specified in
the Partnership Agreement, and (ii) the transferability of his interest in the
Partnership is subject to the requirements of this Agreement and the Partnership
Agreement.
(f) Toomy's interest in the Partnership is being purchased solely for his
own account and not for the account of any other person and not for
distribution, assignment or resale to others and no other person has a direct or
indirect beneficial interest in Toomy's interest in the Partnership.
(g) Toomy hereby confirms to Hops, HSF and the Partnership that neither
the entry of performance of this Agreement or the Agreements for the Partnership
or any Second-Tier Partnership will cause Toomy to breach any existing agreement
or obligation of Toomy with any other person or entity.
9. MISCELLANEOUS.
(a) Any notice or other communication required or which may be given
hereunder shall be in writing and shall be delivered personally, telegraphed or
telexed, or sent express mail, postage prepaid, and shall be deemed given when
so delivered personally, telegraphed or telexed, or if mailed, two days after
the date of mailing, as follows:
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Hops:
3030 North Rocky Point Drive West
Suite 650
Tampa, Florida 33607
Attention: David L. Mason
Toomy:
7701 Newport Lane
Parkland, Florida 33067
Toomy CLN, Inc.:
7701 Newport Lane
Parkland, Florida 33067
Attention: Kevin Toomy
(b) BINDING AGREEMENT. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their successors and assigns; provided,
except as provided in Section 9(h) hereof that this Agreement may not be
assigned by any party without the consent of the other party to this Agreement.
(c) AMENDMENT. This Agreement may be amended only by an instrument in
writing executed by all of the parties to this Agreement.
(d) ENTIRE AGREEMENT. This Agreement, including the exhibits and other
documents referred to herein which form a part hereof, contains the entire
understanding of the parties with respect to the transactions contemplated
hereby and supersede all prior arrangements or understandings with respect
thereto. There are no restrictions, agreements, promises, warranties, covenants,
or undertakings other than those expressly set forth herein or therein
(e) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
each of which shall be deemed an original.
(f) GOVERNING LAW. This Agreement shall be governed by the laws of the
State of Florida (regardless of the laws that might be applicable under
principles of conflicts of law) as to all matters including, but not limited to,
matters of validity, construction, effect and performance.
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(g) SEPARABILITY. If any section, subsection or other provision of this
Agreement, or the application of such section, subsection or provision, is held
invalid, then the remainder of this Agreement and the application of such
section, subsection or provision to person or circumstance other than those with
respect to which it is held invalid, shall not be affected thereby.
(h) ASSIGNMENT. Except as provided in this Section 9(h), neither this
Agreement nor the rights hereunder may be assigned by Toomy or TC. The parties
hereto understand that Toomy's participation in the Initial Restaurant and the
Additional Restaurants, if any, will be through TC. Toomy and TC hereby agree
that Toomy shall, at all times, retain a minimum of 51% of the equity interest
in and absolute voting and other control of TC. Toomy may sell or otherwise
assign up to 49% of the equity of TC to persons who have received the prior
written approval of Hops (which approval shall not be unreasonably delayed or
withheld). Any such transferee of an interest in such corporation may be
required, as a condition to the consent of Hops, to execute reasonable
confidentiality and transfer agreements as are deemed necessary by Hops to
assure the compliance by such transferees with the spirit of this Agreement.
Additionally, the Bylaws of TC shall reflect that the issuance and transfer of
shares of stock (or other equity interests in such corporation) is restricted by
the terms of this Agreement and the following legend shall appear conspicuously
upon the face of each stock certificate of (or certificate otherwise
representing an interest in) such corporation: "The transfer of this stock (or
interest) is subject to the terms and conditions of a Development Option
Agreement dated October 7, 1996 by and between Toomy and Hops and the Bylaws of
the corporation." Toomy hereby acknowledges that the purpose of the aforesaid
transfer restrictions and procedures is to protect the trademarks, trade secrets
and operating procedures of Hops. Toomy and TC hereby acknowledge that
non-compliance with the transfer restrictions and procedures set forth in this
Section 9(h) shall constitute a breach of this Agreement by Toomy and TC.
[SIGNATURES ON FOLLOWING PAGE]
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IN WITNESS WHEREOF, the undersigned have entered into this Agreement as of
the date first above written.
HOPS:
HOPS GRILL & BAR, INC.
By: /s/ DAVID L. MASON
----------------------------
David L. Mason, President
TC:
TOOMY CLN, INC.
By: /s/ KEVIN TOOMY
---------------------------
Kevin Toomy, President
TOOMY:
/s/ KEVIN TOOMY
------------------------------
Kevin Toomy, Individually
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EXHIBIT 10.5
LIMITED PARTNERSHIP AGREEMENT
OF
HOPS OF SOUTH FLORIDA, LTD.
(FIRST TIER)
This LIMITED PARTNERSHIP AGREEMENT ("Agreement") is entered into and
effective as of the filing of the Certificate of Limited Partnership of Hops of
South Florida, Ltd., with the Secretary of State of the State of Florida by and
among: Hops of South Florida, Inc., a Florida corporation, as General Partner
(hereinafter the "General Partner"), and Hops Partners, Inc., a Florida
corporation (hereinafter "HPI"), Toomy CLN, Inc., a Florida corporation
(hereinafter "TC"), and Kevin Torrey, an individual (hereinafter "Torrey"), as
Limited Partners (HPI, TN, and Torrey are hereinafter referred to individually
as a "Limited Partner" and collectively as the "Limited Partners"). The General
Partner and the Limited Partners may sometimes be hereinafter referred to as the
"Partners."
W I T N E S S E T H:
WHEREAS, the Partners desire to form a limited partnership under the laws
of the State of Florida for the purpose of owning and operating one or more
restaurants under the Hops System (as described herein) in the "Territory"
described in the South Florida Development Option Agreement between Hops Grill &
Bar, Inc. ("Hops"), Kevin Toomy, an individual ("Toomy"), and TC of even date
herewith (the "Development Option Agreement").
NOW, THEREFORE, in consideration of the mutual promises and agreements
herein contained and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto, intending to be
legally bound thereby, agree as set forth herein.
SECTION 1. ORGANIZATION OF THE LIMITED PARTNERSHIP.
(a) FORMATION. The Partners hereby form a limited partnership (hereinafter
the "Partnership") under the Florida Revised Uniform Limited Partnership Act,
which Act, except as otherwise provided herein, shall govern the rights and
obligations of the parties hereto.
(b) NAME. The Partnership name shall be, and the business of the
Partnership shall be conducted under the name, "Hops of South Florida, Ltd."
(c) PRINCIPAL ADDRESS. The principal office address of the Partnership in
Florida, unless changed by the General Partner upon notice to the Limited
Partners, shall be c/o Hops of South Florida, Inc., 3030 North Rocky Point Drive
West, Suite 650, Tampa, Florida 33607.
(d) PURPOSE AND CHARACTER OF THE BUSINESS OF THE PARTNERSHIP. The purpose
and character of the business of the Partnership shall be:
(i) to own the majority equity ownership, directly or indirectly, of
one or more restaurants that feature a microbrewery under the
Hops System (together with any and all other directly or
indirectly related business) within the Territory and to
exercise majority equity control of each such restaurant that
features a microbrewery (hereinafter the "Business"); and
(ii) to undertake and carry on all activities necessary or advisable
in connection with the operations and management of the
Business, all upon such terms and
<PAGE>
conditions as the General Partner may deem to be in the best
interest of the Partnership subject to the limitations provided
herein.
(e) TERM. The Partnership shall commence as of the date of the filing of
the Certificate of Limited Partnership after the execution of the Partnership
Agreement by all the Partners and shall continue for a period ending on the
earliest to occur of the following:
(i) December 31, 2046;
(ii) The date on which substantially all of the property owned by the
Partnership is sold or otherwise disposed of and the proceeds
distributed in accordance with the provisions hereof;
(iii) The date on which the Partnership is dissolved pursuant to the
provisions hereof; or
(iv) The date on which the Partnership is dissolved by operation of
law or judicial decree.
SECTION 2. CAPITAL OF THE PARTNERSHIP.
(a) GENERAL PARTNER.
(i) The General Partner and its address are set forth in Exhibit
2(a) hereto.
(ii) The General Partner has made or shall immediately make Capital
Contributions to the Partnership as set forth opposite its name
on Exhibit 2(a) hereto. The General Partner shall NOT have the
right to withdraw or reduce its contribution to capital except
upon dissolution or as otherwise provided in this Agreement or
by law.
(b) LIMITED PARTNERS.
(i) The Limited Partners and their addresses are set forth in
Exhibit 2(a) hereto.
(ii) The Limited Partners shall immediately make, or have already
made, Capital Contributions to the Partnership in the amounts
set forth opposite their respective names in Exhibit 2(a)
hereto. The Limited Partners shall NOT have the right to
withdraw or reduce their respective contributions to capital
except upon dissolution or as otherwise provided in this
Agreement or by law.
(c) CAPITAL ACCOUNTS.
(i) CAPITAL ACCOUNT BALANCES. The initial balance in each Partner's
Capital Account shall be equal to the Capital Contributions made
by such Partner.
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(ii) Each Partner's Capital Account shall be increased by:
(A) the amount of cash and the Book Value of any property
subsequently CONTRIBUTED to the Partnership by such Partner
(net of liabilities secured by such contributed property
which the Partnership is considered to assume or take
subject to under Code Section 752); and
(B) such Partner's allocated share of Profits; and
(C) any items of income or gain of the Partnership specially
allocated to such Partner.
(iii) Each Partner's Capital Account shall be decreased by:
(A) the amount of cash and the Book Value of any property
DISTRIBUTED to such Partner (net of liabilities secured by
such distributed property which the distributee Partner is
considered to assume or take subject to under Code Section
752), and
(B) such Partner's share of Losses, and
(C) any items of deduction, loss or deduction specially
allocated to such Partner.
(d) REPAYMENT OF CAPITAL ACCOUNTS AND INTEREST THEREON.
(i) Each Partner shall NOT accrue interest on its Capital Account.
(ii) Under circumstances involving a return of any Capital
Contribution, no Partner shall have the right to receive
property other than cash, except as may be otherwise specified
by the General Partner.
SECTION 3. PROFITS, LOSSES.
(a) SHARING OF LOSSES. The Partners shall share Losses as follows:
(i) First, to each of the Partners proportionately to the extent of
their respective Positive Capital Account(s), if any, until such
are reduced to zero;
(ii) Second, to each of the Partners based on their percentage
sharing of losses as described on Exhibit 2(a) hereto (or as
such percentages are changed pursuant to the terms hereof).
(b) SHARING OF PROFITS. The Partners shall share Profits as follows:
(i) First, to the General Partner and Limited Partners in proportion
to their respective Negative Capital Account(s), if any, until
such are equal to zero.
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(ii) Second, to each of the Partners based upon their percentage
sharing of profits as described on Exhibit 2(a) (or as such
percentages are changed pursuant to the terms hereof).
SECTION 4. REQUIRED LOANS.
(a) REQUIRED LOANS.
(i) In addition to the initial Capital Contributions of the Partners
as provided in Section 2 above, during the period commencing
with the date of this Agreement and ending on the twentieth
(20th) anniversary of such date, each of the Partners, except
Torrey, agrees to loan or cause to be loaned to the Partnership,
on an as needed basis, amounts required for the operation and
business activities of the Partnership ("Required Loans");
provided, the total principal amount of all such Required Loans
shall not exceed in the aggregate U.S. $200,000 per restaurant
owned, in the majority, directly or indirectly by the
Partnership. All Required Loans shall be apportioned between the
Partners, except Torrey (whose apportioned share of the Required
Loans shall be provided by HPI), on a pro rata basis, based upon
their then current sharing of Profits.
(ii) The Required Loans shall be in the nature of revolving lines of
credit to the Partnership to be advanced against a
non-negotiable promissory note of the Partnership to each
respective Partner. Each such advance shall bear interest from
the date advanced until repaid at the Prime Rate and all
principal and any accrued but unpaid interest not paid pursuant
to Section 6(a)(iii)(B) hereof, shall become finally due and
payable, if not sooner paid pursuant to Section 6(a)(iii)(B)
hereof, at the end of the twentieth (20th) year of the term of
this Agreement. Upon the expiration of the twentieth (20th)
anniversary of the term of this Agreement (whether or not the
Agreement is renewed), none of the Partners shall have further
obligations to make further Required Loans to the Partnership.
Accrued interest upon outstanding advances under the Required
Loans, if any, shall be due and payable on a quarterly basis
with both principal and interest to be prepaid from Cash Flow
from Operations.
(iii) The aforesaid Required Loans shall be made to the Partnership
upon calls made by the General Partner. Upon the issuance of a
call for Required Loans each Partner, except Torrey (whose
apportioned share of the Required Loans shall be provided by
HPI), shall proportionately make such Required Loans within five
(5) business days after receipt of the notice of such call.
(b) [REMOVED AND RESERVED.]
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SECTION 5. ADDITIONAL CAPITAL CONTRIBUTIONS AND LOANS.
(a) ADDITIONAL RESTAURANTS. If the Partnership shall develop and operate
more than one restaurant as contemplated by the Development Option Agreement,
the Partners, except Torrey (whose additional capital contributions shall be
governed by the terms of the Employment Agreement by and among the Partnership,
the General Partner and Torrey), shall proportionately contribute such
additional capital to the Partnership as shall be deemed necessary by the
General Partner, consistent with the terms of the Development Option Agreement,
when requested to do so by the General Partner. In the event Toomy (or TC) shall
elect not to participate in any "Additional Restaurant" (as that term is defined
in the Development Option Agreement) pursuant to the terms of the Development
Option Agreement, such election shall not be considered to be a default under
this Agreement and such Additional Restaurant (and Future Additional
Restaurants) will be developed outside of the Partnership as described in the
Development Option Agreement.
(b) ADDITIONAL FUNDING.
(i) If additional funds, over and above: (x) the initial Capital
Contributions of the Partners, (y) Capital Contributions
required for additional restaurants as described in Section 5(a)
above, and (z) any other required Capital Contributions or any
Required Loans from any Partner, should become necessary, then
the General Partner shall take the following actions:
(A) Review the need for funding and verify that additional
funds are definitely required;
(B) Utilize any existing and available contingency financing
line to fund the requirement;
(C) Review the project requirements and determine if aspects of
the project can be revised, reduced, modified, etc.; and
(D) Consider the existing financing and ascertain feasibility
of expanding the available financing, refinancing, etc. to
fund the requirement;
(ii) Upon the accomplishment of the foregoing and if such actions do
not, in the judgment of the General Partner, result in
elimination of the need for additional funding, then the General
Partner may, in its sole discretion, demand that the Partners,
except for Torrey (whose proportionate share of a Special
Contribution (as defined herein) shall be provided by HPI), in
proportion with their sharing of Profits, contribute additional
capital (a "Special Contribution") or make additional loans
("Additional Loans") to the Partnership. Such demand shall be in
the form of verbal or written notice ("Notice") to the Partners
specifying the amount of additional funds that are needed and
whether such additional funds should be contributed to the
Partnership as a Special Contribution or Additional Loans. No
creditor of the Partnership shall have any right to force the
General Partner to send a Notice.
(iii) Upon receipt of the Notice, each Partner, except Torrey (whose
proportionate share of a Special Contribution (as defined
herein) shall be provided by HPI), in proportion with its then
sharing of Profits, SHALL as expeditiously as possible and
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without a delay which will harm the Partnership (and in any
event within ten (10) days of the Notice), make such Special
Contribution or Additional Loan as required by the Notice in
proportion to each Partner's sharing in the Profits of the
Partnership. With the consent of the General Partner, the
Special Contributions or Additional Loans may be in a series
made as and when the funds become necessary, e.g. monthly to
fund operating shortfalls.
(iv) In the event that any Additional Loan is made to the
Partnership, the provisions of Section 4(a) above will govern
the interest rate of such loan and such Additional Loan(s) shall
be repaid to the Partner(s) from the distributions of the
Partnership in accordance with the priorities set forth in
Section 6 hereof.
(v) In addition to the above, any Partner may, at any time, at the
request of the General Partner make voluntary Additional Loans
to the Partnership which will, for all purposes, be treated as
Additional Loans made pursuant to a Notice given by the General
Partner pursuant to Section 5(b)(ii) above.
(c) DEFAULT IN PAYMENT TO PARTNERSHIP BY PARTNER.
(i) If at any time any Partner shall breach this Agreement by
failing to make its respective Required Loans, Additional Loans
or Special Contributions pursuant to the call provisions of
Section 4 or Section 5 (hereinafter referred to as a
"Non-Contributing Partner"), such Non-Contributing Partner shall
be considered in breach of this Agreement and (without otherwise
limiting any other remedies which the other Partners may have
against such Non-Contributing Partner) the other Partners,
except Torrey, shall have the right (but not the obligation) to
make an excess contribution ("Excess Contribution") to the
Partnership to cover such unpaid Required Loans, Additional
Loans or Special Contributions of the Non-Contributing Partner.
(ii) In the event that a Partner makes an Excess Contribution, such
Excess Contribution shall be deemed to be a loan ("Excess Loan")
to the NonContributing Partner by virtue of whose breach of this
Agreement such Excess Contribution was required. The Excess Loan
shall bear interest at a rate equal to the lesser of (a) the
maximum rate permitted under applicable law or (b) the greater
of (i) the Prime Rate plus two percent (2%) or (ii) ten percent
(10%) per annum, and shall be due and payable upon demand and
shall be secured by a lien and security interest upon any
distributions to be made to the Non-Contributing Partner
pursuant to this Limited Partnership Agreement. The Excess Loan
shall be an obligation of such Non-Contributing Partner and, if
not sooner paid by such Non-Contributing Partner, shall be due
and payable out of the first available distributions to be made
to the Non-Contributing Partner by the Partnership, with the
application of payments thereof to principal and/or interest
being at the sole discretion of the payee thereof. To the extent
of any payments of Excess Loans directly by the Partnership to
any Partner who made an Excess Contribution, such Partner who
made the Excess Contribution shall subrogate all rights which
such Partner had against the Non-Contributing Partner to the
Partnership. Any interest on Excess Loans paid by the
Partnership shall be charged solely to the capital account of
the Non-Contributing Partner who occasioned any such Excess
Loan.
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<PAGE>
(iii) Without limiting any other remedies set forth herein or at law,
if any Excess Loan is not repaid in full by such
Non-Contributing Partner within one hundred twenty (120) days
after the same has been advanced on its behalf, then the
proportionate share of Partnership Profits and Losses of such
Non-Contributing Partner shall (at the option of the Partner who
is owed any such Excess Loan) be reduced and the proportionate
share of Partnership Profits and Losses of the Partner making
any such Excess Loan shall be increased as follows: The unpaid
balance (including principal and accrued interest) of any such
Excess Loan shall be divided by a sum equal to (a) the aggregate
amount of all Capital Contributions theretofore made to the
Partnership by the Partners (excluding any such contributions
deemed to have been made on account of any such Excess Loan),
plus (b) the unpaid balance of accrued interest and principal of
any such Excess Loan, less (c) all withdrawals of capital to all
Partners, in the aggregate. The quotient thus obtained shall be
multiplied by one hundred percent (100%). The resulting
percentage amount will then be subtracted from such
Non-Contributing Partner's then existing proportionate share of
Partnership Profits and Losses (provided same shall not be
reduced below zero) and an equivalent amount shall be added to
the respective proportionate share of Partnership Profits and
Losses of the Partner who made any such Excess Loan. Immediately
following such adjustment in the proportionate share of
Partnership Profits and Losses of the Partners, it shall be
deemed that the unpaid balance (including principal and accrued
interest) of any such Excess Loan shall have been converted into
an additional Capital Contribution by the Partner making such
Excess Loan and a Capital Contribution withdrawal by the
NonContributing Partner and the Capital Accounts of the Partners
shall be adjusted accordingly, and the Non-Contributing Partner
shall have no further liability to repay such Excess Loan.
SECTION 6. DISTRIBUTIONS.
(a) CASH FLOW FROM OPERATIONS DISTRIBUTIONS.
(i) CASH FLOW FROM OPERATIONS TAX EFFECT. Notwithstanding anything
herein to the contrary, in the event that any Partner receives
an allocation of income, gain, etc. as shown on the K-1 form or
other federal income tax reporting forms of similar nature
prepared by or on behalf of the Partnership which requires such
Partner or its respective partners or shareholders or ultimate
owners to make a payment in cash to the United States Internal
Revenue Service by reason of the items of allocation from the
Partnership, then the Partnership shall distribute cash, to or
on behalf of such Partner, at least equal to the actual tax
obligation (I.E., the required IRS cash payment) of such Partner
by reason of his/its status as a Partner of the Partnership,
less amounts distributed to such Partners pursuant to this
Section 6 during the past twelve months, if any, and such
distribution shall occur prior to the time when the returns with
the required cash payment are due. Any such payments by the
Partnership required by this Section 6(a)(i) will be treated as
a distribution of Cash Flow from Operations as provided in
Section 6(a)(ii) below and shall reduce any amount otherwise
payable. If there is no current entitlement then the taxes
payment would be an advance against future distributions of Cash
Flow from Operations.
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<PAGE>
(ii) DISTRIBUTION OF CASH FLOW FROM OPERATIONS. Distributions of Cash
Flow from Operations may be made from time to time in the
discretion of the General Partner, in the following order of
priority:
(A) First, the General Partner shall have the right to
distribute monthly to Torrey up to ten percent (10%) of the
monthly net profits of the Partnership (as described in the
Employment Agreement between Torrey, the Partnership, the
General Partner and HPI) as determined by the internal
accountants of the Partnership, with such distributions to
be an advance against the proportional distributions to
which Torrey is otherwise entitled from time to time;
(B) Second, before any further distribution of Cash Flow from
Operations, the Partnership shall pay in full any
Additional Loans, Excess Loans and Required Loans as
defined herein;
(C) Third, Cash Flow from Operations shall then be distributed
to the General Partner and Limited Partners proportional in
relation to their net Positive Capital Accounts until
reduced to zero;
(D) Fourth, Cash Flow from Operations shall then be distributed
to the Partners based upon their then percentage sharing of
profits as described on Exhibit 2(a) (or as such
percentages are changed pursuant to the terms hereof).
(b) DISTRIBUTION OF CAPITAL. The General Partner may at anytime
proportionately return to the Partners all or any portion of their respective
Capital Contributions, subject to the limitations provided in the Act.
SECTION 7. CERTAIN RIGHTS AND LIMITATIONS OF THE LIMITED PARTNERS.
(a) NO PARTICIPATION IN THE MANAGEMENT OF PARTNERSHIP BUSINESS.
(i) Except as specifically provided herein, the Limited Partners, AS
LIMITED PARTNERS, shall not take part in, or interfere in any
manner with, the conduct or control of the Partnership business
and the Limited Partners shall not have any right or authority
to act for or bind the Partnership, AND THE LIMITED PARTNERS
SHALL THEREFORE HAVE NO PERSONAL LIABILITY FOR THE OBLIGATIONS
OR LIABILITIES OF THE PARTNERSHIP SOLEY BY REASON OF THEIR
STATUS AS PARTNERS OF THE PARTNERSHIP. Any individual Limited
Partner (or employee, partner, shareholder, officer or director
of a Limited Partner) may be an employee, officer and/or
director of the General Partner and accomplish any duties as
such employee, executive or director in his representative
corporate capacity and not as a limited partner or as an
individual.
(ii) During the term of this Partnership Agreement neither Toomy nor
TC (or any other affiliate of Toomy) shall in any way engage in
or own an interest in any other business venture of any nature
which might be competitive with the business of the Partnership.
The Partnership and/or the General Partner may engage any
Limited Partner or persons or firms associated with them for
specific
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purposes and may otherwise deal with such Limited Partner or
persons in firms associated with them on terms and for
compensation to be agreed upon by any such Limited Partner (or
persons or firms associated with them, as the case may be) and
the Partnership or the General Partner, as the case may be.
(iii) EACH Limited Partner, except Torrey, MUST CONSENT to the
following matters (which are specifically excluded from the
powers of the General Partner):
(A) the dissolution and winding-up of the Partnership;
(B) a change in the basic nature of the Business of the
Partnership;
(C) the admission, removal or retention of a new General
Partner;
(D) an amendment to this Partnership Agreement.
All other matters are under the exclusive discretion of the
General Partner.
(b) EXERCISE OF RIGHTS, POWERS AND DUTIES. If a vote of the Partnership is
required in the exercise of rights, powers and duties hereunder, each of the
General Partner and the Limited Partners shall have one (1) vote for each
percentage of interest in Profits owned by such Partner on all issues,
questions, matters and decisions with respect to the Partnership to the extent
not resolved by the provisions of this Agreement, and to such extent such
matters shall be resolved by the vote of a majority in interest of the Partners,
and if the matter cannot be resolved by vote, the matter shall be submitted to
arbitration as provided herein.
SECTION 8. RIGHTS, POWERS AND DUTIES OF THE GENERAL PARTNER.
(a) RIGHTS AND POWERS OF THE GENERAL PARTNER.
(i) Except as otherwise provided herein, the General Partner shall
have the full and exclusive right, power and authority to manage
and control the business and affairs of the Partnership and to
make all decisions regarding the business of the Partnership,
and the General Partner shall have all of the rights, powers and
obligations of a general partner of a limited partnership under
the Act.
(ii) In addition to any other rights and powers which it may possess,
and except as otherwise limited by this Agreement, the General
Partner shall have specific rights and powers required or
appropriate to the management of the Partnership business which
are as follows:
(A) To do all acts and things in the ordinary course of
business related to the business of the Partnership;
(B) To manage, develop, promote, improve, maintain and service
Partnership business;
(C) To acquire and to enter into any contract or policy of
liability and/or other insurance which the General Partner
deems necessary and proper
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for the protection of the Partners and the Partnership and
for the conservation of its assets or for any purpose
convenient or beneficial to the Partnership;
(D) To employ from time to time persons, firms or corporations
for the operation and management of the Partnership
business, including, but not limited to, attorneys,
accountants, advisors, supervisors, managers and personnel,
consultants and engineers, on reasonable terms and for
reasonable compensation;
(E) To compromise, arbitrate, or otherwise adjust claims in
favor of or against the Partnership and to commence or
defend litigation with respect to the Partnership or any
assets of the Partnership;
(F) To make (or elect not to make) elections under the tax laws
of the United States or any other country or any state as
to the treatment of Partnership income, gain, loss,
deduction and credit, and as to all other relevant matters;
and
(G) To perform any and all other acts or activities customary
or incidental to the Partnership purposes and the foregoing
powers and to execute any and all instruments to effectuate
the Partnership purposes and foregoing powers.
(iii) The General Partner shall have all the rights and powers and be
subject to all the liabilities of a partner in a partnership
without limited partners.
(iv) The General Partner shall have the right, in its sole
discretion, to cause the Partnership to invest in one or more
restaurants pursuant to the terms in the Development Option
Agreement. The General Partner shall have the right to provide
the restaurant manager(s) with equity without payment of
substantial capital or loans other than service contributions to
the extent permitted by the Development Option Agreement.
(b) TRANSACTIONS WITH GENERAL PARTNER.
(i) The Partnership may enter into reasonable arm's-length
transactions, contracts, agreements or arrangements with any
Partner and/or any affiliate of any Partner.
(ii) The Partnership may purchase materials, goods, and supplies, and
may purchase or rent equipment from any Partner and/or any
affiliate of any Partner if approved in advance by the General
Partner. If a Partner and/or affiliate of any Partner sells,
rents or furnishes materials, goods, supplies, or equipment
(herein collectively called "goods") for the benefit or use,
directly or indirectly, of the Partnership, then the charges,
rents and prices therefor shall be fair and competitive.
(iii) Nothing herein shall preclude reimbursement for reasonable and
necessary out-of-pocket Partnership business expenses paid by a
Partner which are not otherwise
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provided for in this Agreement so long as such reimbursements
are approved in advance by the General Partner.
(c) DUTIES AND OBLIGATIONS OF THE GENERAL PARTNER.
(i) With the assistance of such accounting firm as may be selected
by the General Partner, the General Partner shall prepare, or
cause to be prepared, and shall file on or before the due date
(or any extension thereof) any United States federal, state or
local tax returns required to be filed by the Partnership. The
General Partner shall cause the Partnership to pay any taxes
payable by the Partnership.
(ii) The General Partner shall manage the Partnership to the best of
its ability and conduct the operations contemplated under this
Agreement in a careful and prudent manner in accordance with
good and traditional business practice.
(iii) SPECIAL DUTIES OF GENERAL PARTNER. The General Partner shall be
responsible for and shall have the authority to conduct all
general administrative matters of the Partnership which shall
include, but shall not be limited to, the coordination of:
(A) all legal and accounting matters on behalf of the
Partnership, including the maintenance of the general
accounting systems of the Partnership and coordinating the
functions of the accountants and lawyers that will service
the Partnership;
(B) all payroll matters on behalf of the Partnership;
(C) all accounts payable matters on behalf of the Partnership
(except those that must be handled on a local level, which
shall be the responsibility of TC);
(D) all banking and financial matters of the Partnership;
(E) all financial reporting to Hops pursuant to the terms of
any Operating Agreement utilizing restaurant and other
operating data to be provided by TC as the operator of the
restaurants; and
(F) the compliance by the Partnership of all administrative
aspects of any Operating Agreement.
The General Partner shall receive no direct compensation for
administration and coordination, and all costs and expenses
payable to third parties relating to administrative matters of
the Partnership shall be the sole responsibility of the
Partnership. [BY WAY OF EXAMPLE, BUT NOT IN LIMITATION, OF THE
ABOVE, THE GENERAL PARTNER WILL UNDERTAKE (I) ALL OF THE
INTERNAL ACCOUNTING AND BOOKKEEPING OF THE PARTNERSHIP,
INCLUDING THE DAILY MAINTENANCE OF THE PARTNERSHIP'S BOOKS AND
RECORDS AND (II) WILL COORDINATE WITH THE PARTNERSHIP'S
ACCOUNTANTS, THE PREPARATION OF THE PARTNERSHIP'S TAX RETURNS
AND THE AUDIT OF THE PARTNERSHIP'S BOOKS AND RECORDS; AND THE
GENERAL PARTNER SHALL RECEIVE NO COMPENSATION FOR SUCH INTERNAL
ACCOUNTING AND BOOKKEEPING OR FOR THE TIME SPENT BY THE GENERAL
PARTNER IN COORDINATING WITH THE PARTNERSHIP'S ACCOUNTANTS,
HOWEVER, THE PARTNERSHIP SHALL BE SOLELY RESPONSIBLE FOR ALL
FEES AND EXPENSES OWING TO THE PARTNERSHIP'S ACCOUNTANTS FOR THE
PREPARATION OF SUCH TAX RETURNS AND THE CONDUCT OF THE AUDIT.]
Hops shall be entitled to receive the compensation set forth in
the Development Option Agreement and the Operating Agreement
relating to each restaurant to be owned and operated by the
Partnership.
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(iv) The General Partner shall undertake its duties pursuant to this
Section in a manner so as to assure compliance with the
administrative provisions of all Operating Agreements to which
an entity owned by the Partnership is a party. The failure by
the General Partner to cause an entity owned by the Partnership
to comply with the administrative provisions of any such
Operating Agreement (unless such non-compliance is waived by
Hops) shall be considered a breach of this Agreement by the
General Partner.
SECTION 9. LIMITED PARTNER SPECIAL PROVISIONS.
(a) DEVELOPMENT OPPORTUNITY. The Partners acknowledge that TC has certain
development options on restaurants in the South Florida area pursuant to the
Development Option Agreement of even date herewith which shall govern certain of
the Partners with respect to the matters set forth therein. To the extent
required by any lender to the Partnership, HPI and TC shall guarantee such
financing on a joint and several basis. Any other third-party financing of the
Partnership shall also be so guaranteed.
(b) WITHDRAWAL OF OR DISTRIBUTIONS IN REDUCTION OF CAPITAL CONTRIBUTIONS.
(i) No Limited Partner shall have the right to withdraw or reduce
its Capital Contribution to the Partnership, except as a result
of the dissolution of the Partnership or as provided in this
Agreement.
(ii) No Limited Partner shall have the right to demand or receive
property other than cash in return for its Capital Contribution.
Any withdrawal or reduction of Partnership capital actually
received by a Partner shall be made in accordance with this
Agreement; provided, however, that no part of the capital shall
be withdrawn unless all liabilities of the Partnership (except
liabilities to Partners) have been paid, or unless the
Partnership has assets sufficient to secure payment of the same.
(iii) The Limited Partners understand that pursuant to the Act if the
Partnership distributes cash (or other assets), which causes a
reduction of their respective Capital Accounts in the
Partnership below the stated capital of the Partnership
specified in the Affidavit of Capital Contributions, for one (1)
year such Limited Partner may be liable to the Partnership for
any sum returned to it, but not in excess of the sum distributed
to it which reduced the Capital Account below the stated
capital, with interest, to discharge Partnership liabilities to
all creditors who extended credit, or whose claims arose, before
such return of capital to such Limited Partner.
(c) NO RIGHT OF PARTITION OR RIGHT TO COMPEL SALE. The Limited Partners
shall not have the right to require the partition of Partnership property or to
compel any sale or appraisal of Partnership assets except as provided in this
Agreement, notwithstanding any provision of law to the contrary.
(d) RIGHT TO LIST OF PARTNERS ON REQUEST. Any Limited Partner shall be
entitled, upon request, to have mailed to it a list of the names, addresses, and
ownership of record of each Partner of the Partnership.
(e) RIGHT TO INFORMATION. Each Limited Partner shall be entitled to:
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(i) inspect the Partnership books kept at the place selected by the
General Partner, during reasonable business hours, upon
reasonable notice, and copy any of them at such Limited
Partner's expense; and
(ii) have, on demand, true and full information of all things
materially affecting the Partnership and a formal accounting of
Partnership affairs whenever circumstances render it just and
reasonable.
(f) ACTS AND EXERCISE OF RIGHTS UNDER THIS AGREEMENT. No act granted to,
or right exercised by, a Limited Partner under this Agreement shall impose any
personal liability on any Limited Partner.
(g) WITHDRAWAL OF A LIMITED PARTNER. No Limited Partner may withdraw from
the Partnership.
(h) SPECIAL DUTIES OF TC. Unless otherwise determined by the General
Partner, TC shall be responsible for and shall have the authority to conduct all
of the operational matters of each restaurant to be owned and operated directly
or indirectly by the Partnership which duties shall include, but shall not be
limited to:
(i) the provision or employment of all direct restaurant management
as required by the Operating Agreement relating to such
restaurant or as otherwise necessary for the operation of any
restaurant to be owned and operated directly or indirectly by
the Partnership;
(ii) the employment, termination and supervision of all restaurant
employees; and
(iii) the compliance by the Partnership and any entities owned by the
Partnership of all operating aspects of any Operating Agreement.
TC shall receive no compensation for the conduct of such operational matters
except as provided hereunder. All expenses related to the operation of each
restaurant to be owned and operated by an entity owned by the Partnership shall
be the sole responsibility of the Partnership or an entity owned by the
Partnership. [BY WAY OF EXAMPLE, BUT NOT LIMITATION, OF THE ABOVE, (I) TC SHALL
BE RESPONSIBLE FOR THE RECRUITING, HIRING AND ULTIMATE SUPERVISION OF ALL
EMPLOYEES OF EACH RESTAURANT TO BE OPERATED BY THE PARTNERSHIP OR AN ENTITY
OWNED BY THE PARTNERSHIP; AND (II) TC SHALL RECEIVE NO COMPENSATION FOR ITS
RECRUITING, HIRING AND SUPERVISION ACTIVITIES, EXCEPT AS PROVIDED HEREUNDER,
HOWEVER, THE PARTNERSHIP OR AN ENTITY OWNED BY THE PARTNERSHIP SHALL BE SOLELY
RESPONSIBLE FOR THE ACTUAL COMPENSATION (INCLUDING WAGES AND BENEFITS) OF THE
EMPLOYEES OF SUCH RESTAURANTS.]
Unless otherwise instructed by the Partnership, TC shall undertake its
duties pursuant to this Section in a manner so as to assure absolute and strict
compliance with the operating provisions of all Operating Agreements to which
the Partnership or an entity owned by the Partnership is a party. The failure by
TC to cause the Partnership or an entity owned by the Partnership to comply with
the operating provisions of any such Operating Agreement (unless such
non-compliance is waived by the Partnership) shall be considered a breach of
this Agreement by TC. TC shall not be deemed to be in default under the
provisions of this Section 9(h) unless TC shall have received at least thirty
(30) days written notice of any alleged default under the terms of any such
Operating Agreement during which thirty (30) day period, if such default was
curable, TC was allowed to attempt to cure any such alleged default. TC shall be
solely responsible for the cost of any TC management personnel not directly
related to the management of a restaurant owned by the Partnership or an entity
owned by the Partnership, if any.
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(i) EXCLUSIVE BUSINESS OF TC/TOOMY. The parties hereto acknowledge and
agree that TC and Toomy shall exclusively devote their time and efforts to the
operation of the restaurants to be owned and operated under entities owned by
the Partnership; provided, however, that this restriction will not be construed
as preventing Toomy from investing his personal assets in any other business
which does not compete with the Business of the Partnership where the form and
manner of such investment will make Toomy a passive investor in such business
and will not require services of any significance on Toomy's part in the
operation of the affairs of such business and which will not interfere with
Toomy's obligations to the Partnership.
SECTION 10. GENERAL PARTNER SPECIAL PROVISION.
WITHDRAWAL OF A GENERAL PARTNER AND SALE, ASSIGNMENT AND ENCUMBRANCE OF A
GENERAL PARTNER'S INTEREST. The General Partner shall not sell, assign,
encumber, or otherwise dispose of any or all of its Partnership Interest in the
Partnership, or withdraw from the Partnership; or resign as the General Partner
without the prior written consent of the Limited Partners.
SECTION 11. DISPOSITION OF A PARTNER'S PARTNERSHIP INTEREST
(a) The Partners acknowledge that HPI has a right to purchase the
Partnership Interest of Torrey pursuant to an Employment
Agreement of even date herewith (the "Employment Agreement") and
the Partners hereby consent to such purchase and agree to abide
by the terms of the purchase right in the Employment Agreement.
The Partners acknowledge and agree that the limitations on the
Torrey Partnership Interest are specified in the Employment
Agreement and the Agreement between Torrey under which his
partnership interest was purchased and included herein by this
reference and shall govern this Agreement. The Partners hereby
agree that in the event that HPI purchases the Partnership
Interest of Torrey pursuant to the Employment Agreement, HPI, in
its sole discretion, may select an individual to assume the
responsibilities of Torrey and to allocate a Partnership
Interest to such individual, and the Partners hereby agree to
execute and deliver any and all instruments and documents,
including any amendment to this Agreement deemed necessary or
appropriate by HPI, to effectuate such transactions.
(b) (i) At no time during the term of this Agreement shall TC, directly
or indirectly, sell, assign, transfer, mortgage, encumber,
pledge or otherwise similarly deal with or dispose of all or any
portion of its interest in the Partnership, without first
obtaining the written consent of the General Partner, or, in the
absence of such written consent, without first complying with
the terms of this Section 11. Any attempted sale, assignment,
transfer, mortgage, pledge, grant, hypothecation or other
disposition of any interest in the Partnership by TC, in
violation of the provisions of this Section 11, shall be null
and void and of no force or effect. For purposes of this
Agreement, the transfer or distribution, directly or indirectly,
of an equity interest or other rights in or the issuance of
additional securities in TC, other than pursuant to the
provisions of this Section 11 shall be deemed a disposition of
the Partnership interest of TC and the General Partner shall be
entitled to purchase the Partnership interest of TC in
accordance with the terms of Section 11(c) hereof.
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(ii) Toomy hereby acknowledges that the other Partners have consented
to Toomy's participation in the Partnership through TC as a
convenience to Toomy. Toomy hereby agrees that he shall at all
times remain the sole shareholder of TC unless he obtains the
consent of the General Partner to admit an additional
shareholder to TC (whether through the issuance of stock by TC
or the transfer of stock by Toomy) which consent may be withheld
in the sole discretion of the General Partner. If consented to
by the General Partner, any such additional shareholder in TC
may be required, as a condition to the consent of the General
Partner, to execute reasonable confidentiality and transfer
agreements as are deemed necessary by the General Partner to
assure the compliance by such transferees with the spirit of
this Agreement and any agreements related to this Agreement
and/or the Hops System. Additionally, the Bylaws of TC shall
reflect that the issuance and transfer of shares of stock (or
other equity interests in TC) is restricted by the terms of this
Agreement. The following legend shall appear conspicuously upon
the face of each stock certificate of (or certificate otherwise
representing an interest in) TC: "The transfer of this stock (or
interest) is subject to the terms and conditions of a
Partnership Agreement dated October 7, 1996, by and between this
corporation and Hops of South Florida, Inc. and others and the
Bylaws of the corporation." TC hereby acknowledges that the
purpose of the aforesaid transfer restrictions and procedures is
to protect the trademarks, trade secrets and operating
procedures of Hops and affiliates and the partnership interests
of General Partner contained herein. TC hereby acknowledges that
non-compliance with such transfer restrictions and procedures
shall constitute an absolute breach of this Agreement by TC.
Upon the execution of this Agreement and periodically thereafter
at the reasonable request of the General Partner, TC shall
provide the General Partner with a photocopy of its current
Bylaws and all issued and outstanding stock certificates to
demonstrate compliance with this Agreement.
(c) (i) TC shall not transfer any interest in the Partnership for a
period beginning upon the date hereof and ending two (2) years
after the date of the opening of the initial restaurant directly
or indirectly by the Partnership, without the express prior
written consent of the General Partner which may be withheld in
the discretion of the General Partner. If following the period
described in the immediately preceding sentence, TC desires,
directly or indirectly, to sell, assign, transfer or in any way
dispose of all or any portion of the Partnership interest of TC
to any third party, TC shall first serve notice (hereinafter
called an "Offer to Sell") to that effect upon the General
Partner. The Offer to Sell shall set forth the amount of
Partnership interest of TC desired to be sold or otherwise
disposed of, the price, terms and conditions of such proposed
sale and the name and address of the proposed third party
purchaser (and in the case of a proposed purchaser that is not a
natural person, the principals of such proposed purchaser), and
shall offer to sell such Partnership interest to HPI at the
price and on the terms of sale described in the Offer to Sell.
(ii) The General Partner shall have the absolute right to prohibit
the sale of the Partnership interest identified in the Offer to
Sell if the General Partner, in its reasonable determination,
shall disapprove of the purchaser identified in the Offer to
Sell. In making such determination, the General Partner may
consider, among other things, the reputation, financial position
and restaurant operating experience
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of the proposed purchaser, as well as concerns as to the
protection of the trade secrets and proprietary information of
the Hops System that result from the competitive nature of any
other business operations directly or indirectly related to the
potential purchaser. TC shall promptly provide the General
Partner with any information regarding the potential purchaser,
reasonably requested by the General Partner, in order to
evaluate the potential purchaser, including, but not limited to
financial statements and a detailed business history of such
potential purchaser. The General Partner will notify TC in
writing of its approval or disapproval of any such potential
purchaser within sixty (60) days after receipt by the General
Partner of the Offer to Sell.
(iii) Whether or not the potential purchaser is approved by the
General Partner as provided in Section 11(c), HPI shall have the
first right to purchase all of the Partnership interest so
offered by giving notice of acceptance to TC within one hundred
twenty (120) days after receipt by the General Partner of the
said Offer to Sell.
(iv) In the event the General Partner shall not have disapproved of
the purchaser identified in the Offer to Sell as set forth in
Section 11(c)(ii) above and HPI fails or refuses to purchase the
Partnership interest of TC as provided in Section 11(c)(iii)
above, TC shall be free to sell the Partnership interest so
identified in the Offer to Sell to the person or entity
identified in the Offer to Sell on the price and terms set forth
in the Offer to Sell; provided, however, that TC shall not
transfer or otherwise dispose of such Partnership interest to
any person or entity other than the third party identified in
the Offer to Sell or for a price less than or on terms more
favorable than those set forth in the Offer to Sell without
first reoffering such Partnership interest to HPI as set forth
in Section 11(c)(i). If TC does not consummate the sale of its
Partnership interest so identified in its Offer to Sell within
ninety (90) days after the expiration of the period for HPI's
acceptance of such Offer to Sell, the provisions of this Article
11 shall reattach to such interest and such interest shall not
be sold without reoffer to HPI.
(v) The provisions of this Section 11(c) to the contrary
notwithstanding, TC shall make no transfer of its Partnership
interest as provided in this Section 11(c) unless the person or
entity acquiring such interest shall execute and deliver to the
General Partner (or HPI) such documentation as the General
Partner (or HPI) may reasonably require to assure the
confidentiality of the trade secrets and proprietary information
associated with the Hops System and to make the purchaser a
party to this Agreement (specifically including but not limited
to the transfer restrictions as they previously related to TC
and the purchase option of HPI set forth in Section 11(i)
hereof) and all other agreements related to the restaurants
operated by entities owned by the Partnership to which TC was
(or is) a party.
(d) (i) If TC or Toomy shall breach this Agreement, or if the
Development Option Agreement shall be terminated or breached
other than by Hops (or any affiliate thereof), or if Toomy shall
breach the Management Agreement, TC shall be deemed to have made
an Offer to Sell (which shall be deemed received by the General
Partner only when the General Partner has actual knowledge of
such breach) all of the Partnership interest owned by TC to HPI
for the price and
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upon the terms specified in this Section 11(d). HPI shall have
the right to purchase the Partnership interest of TC so offered
by giving notice of acceptance to TC within one hundred twenty
(120) days after the deemed receipt by the General Partner of
the Offer to Sell. In the event that HPI fails or refuses to
purchase all of the Partnership interest of TC, the remaining
provisions of this Agreement shall continue to apply to the
Partnership interest of TC.
(ii) DETERMINATION OF PURCHASE PRICE AND TERMS. In the event that the
Partnership interest of TC is to be purchased pursuant to the
foregoing provisions of this Section 11(d), the following
provisions shall apply:
(A) PRICE. The purchase price of the Partnership interest of TC
shall be determined pursuant to Section 11(f)(ii) hereof.
(B) TIME AND METHOD OF PAYMENT. Upon the closing of any sale
pursuant to this Section 11(d), HPI shall pay the purchase
price for the Partnership interest of TC purchased pursuant
to this Section 11(d) as follows:
(1) PAYMENT UPON CLOSING. At the option of HPI, all of the
purchase price or an amount equal to the greater of:
.1 twenty percent (20%) of the purchase price; or
.2 the amount of the actual federal income tax
obligation (i.e. the required IRS cash payment)
of TC owing to the Internal Revenue Service as
specified on the federal income tax return for
the calendar year during which the consummation
of the purchase of the Partnership interest of TC
occurs, as the direct result of the purchase of
the Partnership interest of TC (which federal
income tax obligation shall be the minimum
possible tax obligation of TC taking into
consideration all available elections by TC such
as installment sales treatment),
shall then be paid in cash. In the event that the amount of
the cash payment required at closing under Section
11(d)(ii)(B).2 cannot be determined as of the date of the
closing of the sale, HPI shall pay to TC the amount
specified in Section 11(d)(ii)(B).1 at the closing and
after a determination of the amount set forth in Section 11
(d)(ii)(B).2 has been made by TC and agreed upon by HPI, if
the amount set forth in Section 11(d)(ii)(B).2 is greater
than the amount paid to TC pursuant to Section
11(d)(ii)(B).1, then HPI shall pay to TC, the difference
between the amount paid in cash at closing and the amount
determined under Section 11(d)(ii)(B).2.
(2) PROMISSORY NOTE. Any part of the purchase price which
is not paid in cash shall be evidenced by a negotiable
promissory note of HPI payable to and delivered to TC.
The promissory note shall bear interest at the Prime
Rate and shall be payable over a period of sixty (60)
months with interest only on a quarterly basis payable
during the first twelve (12) months and thereafter
sixteen (16) equal quarterly payments of principal
(totaling all of
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the principal due thereunder) and interest payable
during the following forty-eight (48) months. The
promissory note of HPI shall provide that more or the
entire principal sum remaining unpaid at any time may
be paid at any time with interest to date of payment
only. The promissory note shall also provide for
acceleration of the maturity of the unpaid principal
and accrued interest at the option of HPI upon default
in the payment of any installment of principal or
interest for fifteen (15) days or more.
(e) (i) In the event that Toomy shall die, become permanently disabled
or otherwise involuntarily cease to be in operational control of
TC (such occurrences hereinafter referred to as a "Buyout Event"
or "Buyout Events"), TC shall sell and HPI shall purchase all of
the Partnership interest of TC for the price set forth in
Section 11(f)(iii) hereof and upon the terms set forth in this
Section 11(e). TC shall notify HPI immediately of the occurrence
of a Buyout Event. The failure of TC to notify HPI of a Buyout
Event within thirty (30) days of its occurrence shall constitute
a breach of this Agreement by TC. The purchase of the
Partnership interest of TC by HPI, pursuant to this Section
11(e), shall take place within one hundred eighty (180) days of
the date upon which HPI receives notice of the Buyout Event (or
if HPI is not provided with such notice, such closing shall take
place on the date which HPI shall demand).
(ii) DETERMINATION OF PURCHASE PRICE AND TERMS. In the event that the
Partnership interest of TC is to be purchased pursuant to the
foregoing provisions of this Section 11(e), the following
provisions shall apply:
(A) PRICE. The purchase price of the Partnership interest of TC
shall be determined pursuant to Section 11(f)(iii) hereof.
(B) MANNER OF PAYMENT. The purchase price of the Partnership
interest of TC to be purchased pursuant to the provisions
of this Section 11(e) shall be paid as follows:
(1) PAYMENT UPON CLOSING. At the option of HPI, all of the
purchase price or an amount equal to the greater of:
.1 twenty percent (20%) of the purchase price;
.2 Fifty Thousand Dollars (U.S. $50,000), not to
exceed the purchase price; or
.3 one hundred percent (100%) (but not to exceed
the entire purchase price) of all proceeds from
life insurance policies, if any, on the life of
Toomy payable to the Partnership or any Partner
other than TC by reason of the death of Toomy,
shall then be paid in cash.
(2) PROMISSORY NOTE. Any part of the purchase price which
is not then paid in cash shall be evidenced by a
negotiable promissory note of HPI payable to and
delivered to TC. The promissory note shall bear
interest at the Prime Rate and shall be payable over a
period of sixty (60) months with interest only on a
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quarterly basis payable during the first twelve (12)
months and thereafter sixteen (16) equal quarterly
payments of principal (totaling all of the principal
due thereunder) and interest payable during the
following forty-eight (48) months. The promissory note
of HPI shall provide that more or the entire principal
sum remaining unpaid at any time may be paid at any
time with interest to date of payment only. The
promissory note shall also provide for acceleration of
the maturity of the unpaid principal and accrued
interest at the option of HPI upon default in the
payment of any installment of principal or interest
for fifteen (15) days or more.
(f) (i) For purposes of this Section 11, the following terms shall have
the following meanings:
(A) "TPP" means TC's percentage sharing of the Profits of
the Partnership as described on Exhibit 2(a) hereof
(or as such percentage is changed pursuant to the
terms of this Agreement);
(B) "BV" means the Book Value of the Partnership as
defined in Section 22(b) hereof as of the end of the
month immediately preceding the event (or the last to
occur of the events) which shall cause the purchase of
TC's Partnership interest pursuant to this Section 11;
and
(C) "CF" means the Partnership's Cash Flow from Operations
(as defined in Section 22(e) hereof) for the most
recent 12 months of operations of the Partnership.
(ii) The purchase price for the Partnership interest of TC to be
purchased pursuant to Section 11(d) above shall be the lesser
of:
(A) TPP x BV; or
(B) TPP x 5 x CF.
(iii) The purchase price for the Partnership interest of TC to be
purchased pursuant to Sections 11(c) and 11(e) shall be:
TPP x 5 x CF.
(iv) The purchase price for the Partnership Interest of TC that may
purchased pursuant to Section 11(i) only shall be its "fair
market value" which shall be calculated by determining the fair
market value of the Partnership and multiplying such value by
TC's then current percentage sharing of the Profits of the
Partnership. The fair market value of TC's Partnership Interest
may be determined upon the mutual agreement of HPI and TC at any
time during the period of thirty (30) days after TC's receipt of
the Call Notice (as defined below). In the event that HPI and TC
are unable to agree upon the fair market value of TC's
Partnership Interest during such thirty (30) day period, then,
at the
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request of HPI, the fair market value of TC's Partnership
Interest shall be determined by an appraisal to be made by an
independent appraiser jointly selected by HPI and TC. If HPI and
TC cannot agree upon an appraiser, then within forty (40) days
of the Call Notice each party shall select an independent
appraiser and within fifty (50) days of the Call Notice, the two
appraisers selected by HPI and TC shall select a third
independent appraiser, and the appraisal shall be made by the
third appraiser. HPI and TC shall work together, in good faith,
to obtain a final appraisal, if necessary, within seventy (70)
days of the date of the Call Notice. If an appraisal shall
become necessary pursuant to this Section 11(f)(iv), HPI and TC
shall work in good faith with the appraiser performing the
appraisal to obtain a final appraisal within seventy (70) days
of the Call Notice (or such longer period of time as the
appraiser may advise the parties is required). The results of
such appraisal shall be binding upon Toomy. Notwithstanding any
other provision of this Section 11 to the contrary, if an
appraisal occurs pursuant to this Section 11(f)(iv), HPI shall
have thirty (30) days following the announcement of the
appraisers' decision within which to elect whether or not to
purchase TC's Partnership Interest as described in the Call
Notice (as defined below). In the event HPI elects not to
purchase the Partnership Interests of TC, the Call Notice
originally issued by HPI shall be deemed null and void and all
provisions of this Section 11 shall continue to apply to TC and
its Partnership Interest. In the event of such an appraisal,
each party shall bear its own legal and other costs and shall
split the appraisal fees.
(g) In the event that the Partnership or any Partner shall elect to obtain
insurance on the life of Toomy, to fund the purchase of the Partnership interest
of TC pursuant to this Section 11 or for other reasonable business reasons, TC
shall cooperate fully in obtaining such insurance including Toomy's submission
to reasonable medical examinations.
(h) [REMOVED AND RESERVED.]
(i) In the event that the Partnership, directly or indirectly, opens to
the public the Initial Restaurant (as defined in the Development Option
Agreement) and six (6) or more Additional Restaurants (as defined in the
Development Option Agreement), HPI shall have the right, but not the obligation,
at any time and from time to time after the date upon which the sixth Additional
Restaurant is opened to the general public, upon notice (the "Call Notice") in
accordance with Section 17 hereof to TC, to acquire all or any part of TC's
Partnership Interest at the purchase price set forth in Section 11(f)(iv) with
the terms of purchase to be as otherwise specified in Section 11(d)(ii)(B)
hereof. The Call Notice shall set forth (A) the amount of TC's Partnership
Interest to be purchased by HPI pursuant to this Section 11(i) and (B) the date
upon which the closing of such purchase shall take place. The closing of such
purchase(s), if any, pursuant to this Section 11(i) shall occur on a date set
forth by HPI which date shall be on or before the date which is ninety (90) days
after the determination of a final purchase price pursuant to Section 11(f)(iv)
whether by the agreement of HPI and TC or appraisal.
(j) (i) With respect to the purchase of the Partnership interest of TC
pursuant to the terms of Sections 11(d), 11(e), and 11(i)
hereof, in the event that Hops Grill & Bar, Inc. (the current
owner of the Hops System, as that term is defined in Section
22(k) hereof) or any affiliate of Hops Grill & Bar, Inc. or any
other entity that has been formed to perpetuate the development
of restaurants under the Hops System (hereinafter referred to
collectively as "Public Hops") has completed its initial public
offering pursuant to a registration statement filed with
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and declared effective by the United States Securities and
Exchange Commission, then at the SOLE DISCRETION of HPI (or its
successors or assigns), HPI (or its successors or assigns) may
make payment of the purchase price for the purchase of TC's
partnership under Sections 11(d), 11(e) and 11(i) hereof by
delivery of stock of Public Hops valued as set forth in Section
11(j)(i) hereof.
(ii) For purposes of determining the number of shares of stock to be
delivered by HPI (or its successors or assigns) to TC pursuant
to a purchase of TC's Partnership interest to be paid in Public
Hops stock pursuant to Section 11(j)(i), HPI (or its successors
or assigns) shall deliver to TC at the closing of such purchase,
the number of shares of Public Hops common stock determined by
dividing (x) the applicable purchase price as set forth in
Section 11(f) hereof by (y) the mean of the daily averages of
the reported high and low sale prices of Public Hops common
stock on its primary market during each of the preceding five
trading days ending on the day fifth trading day prior to the
closing of the purchase.
(iii) In the event that HPI (or its successors or assigns) elects to
purchase TC's Partnership interest in exchange for Public Hops
common stock pursuant to Section 11(j)(i) hereof, HPI (or its
successors or assigns) shall cause Public Hops to enter into,
effective as of the date of such closing, a registration rights
agreement with TC in substantially the form of the Registration
Rights Agreement attached to this Partnership Agreement as
Exhibit 11(j)(iii) hereto.
SECTION 12. DISSOLUTION, LIQUIDATION AND TERMINATION OF THE PARTNERSHIP.
(a) DISSOLUTION OF THE PARTNERSHIP.
(i) The Partnership shall automatically dissolve upon the first to
occur of any of the following events:
(A) The withdrawal, as defined in the Act, of a General Partner,
unless:
(1) the remaining General Partner(s), if any, elect in
writing within ninety (90) days after such event to
reconstitute the Partnership, to continue as the
General Partner(s) and to continue the Partnership and
its business as provided hereinafter; or
(2) if there is no remaining General Partner, within
ninety (90) days after such event, a majority of the
Limited Partners by Interest agree in writing to
reconstitute the Partnership and to elect a successor
general partner, as of the date of the withdrawal of
the General Partner or Partners, to continue the
business of the Partnership, and such successor
general partner agrees in writing to accept such
election as provided hereinafter.
(B) The sale or other disposition, not including an exchange,
of all of the assets of the Partnership (except under
circumstances where all or a
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portion of the purchase price is payable after the closing
of the sale or other disposition);
(C) The expiration of the term of the Partnership as set forth
herein;
(D) The execution by those Partners owning at least fifty
percent (50%) of the Interest of the Partnership of an
instrument dissolving the Partnership; or
(E) The occurrence of any other event that would cause the
mandatory dissolution of the Partnership under the Act.
(b) CONTINUATION OF THE PARTNERSHIP.
(i) Notwithstanding anything contained herein to the contrary, (A)
the dissolution and commencement of winding up of a General
Partner that itself is a separate partnership, or (B) in the
case of a General Partner that is a corporation, the filing of a
certificate of dissolution or its equivalent for such
corporation or the revocation and nonreinstatement of its
character, shall not constitute the "withdrawal" of any such
General Partner for purposes of the Act and shall not
consequently cause the dissolution of the Partnership. In any
such event, however, the Interest in the Partnership of any
General Partner with respect to which any such event has
occurred shall, upon election of a majority in interest of the
Limited Partners, be converted to that of a Limited Partner, and
such Partner shall have none of the powers of a General Partner
under this Agreement or applicable law, and shall have only the
rights and powers of a Limited Partner in the Partnership with
the same rights of a Limited Partner to share in any Partnership
profits, losses, gains and distributions in accordance with its
Interest.
(ii) Upon the occurrence of the Partnership having no General
Partners, the Limited Partners may, within ninety (90) days
after the occurrence of such event, continue the Partnership and
the Partnership shall continue as a limited partnership pursuant
to this Agreement; provided, however, that the Limited Partners
then shall elect a substitute General Partner who agrees to act
as General Partner and continue the Partnership. If a substitute
General Partner is so selected and accepts, such substitute
General Partner shall acquire an Interest in the Partnership
which will entitle the substitute General Partner to hold in the
aggregate at least a one percent (1%) Interest, which one
percent shall be transferred by and come from the Interest of
the former General Partner without compensation to the former
General Partner for same. Subject to other written agreements
and exceptions agreed to by the Limited Partners, the substitute
General Partner shall assume from and after the date of
substitution and upon becoming a party of this Partnership
Agreement, all the rights, powers and obligations of the General
Partner under this Partnership Agreement. In the event a
substitute General Partner can not be appointed and admitted
within a reasonable time after the special meeting called
pursuant to this Section, and there is no General Partner
remaining, the Partnership shall be dissolved and liquidated as
provided herein.
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(iii) Upon the occurrence of the expiration of the term of the
Partnership, the Partners by majority vote in Interest may
within thirty (30) days after the occurrence of such event,
elect to continue the Partnership. Upon such election, the
Partnership Agreement shall be amended to reflect the new
expiration date of the term of the Partnership as selected by
the Partners and an amended Certificate of Limited Partnership
shall be filed by the General Partner to reflect same.
(c) ADDITIONAL GENERAL PARTNER. In the event a General Partner's interest
is converted to that of a Limited Partner, a majority of the Limited Partners
may admit an additional General Partner to the Partnership.
(d) DEATH, ETC. OF A LIMITED PARTNER. The death, disability, dissolution,
or adjudication as bankrupt of a Limited Partner shall not dissolve the
Partnership, but the rights of a Limited Partner to share in the Profits and
Losses of the Partnership and to receive distributions of Partnership funds
shall, upon the happening of such an event, devolve upon the Limited Partner's
estate, legal representative or successors in interest, as the case may be,
subject to this Agreement and any other agreement of the Partners, and the
Partnership shall continue as a limited partnership.
(e) PROVISIONS CUMULATIVE; WAIVER. All provisions of this Agreement
relative to the dissolution, liquidation and termination of the Partnership
shall be cumulative, that is, the exercise or use of one of the provision hereof
shall not preclude the exercise or use of any other provision hereof. Each
Partner expressly waives any right which it might otherwise have to dissolve the
Partnership except as set forth in this Section 12. Nothing contained in this
Section 12 is intended to grant any Partner the right to dissolve the
Partnership at will (by retirement, dissolution, resignation, withdrawal or
otherwise), or to exonerate any Partner from liability to the Partnership and
the remaining Partners if such Partner acts in contravention hereof.
(f) LIQUIDATION.
(i) Upon dissolution of the Partnership, its liabilities shall be
paid in the order provided herein. The General Partner shall
cause the Partnership's property to be sold in such manner as to
obtain the best prices for such property, and shall cause the
cancellation of the Partnership's Certificate of Limited
Partnership. Pending such sales, the General Partner shall have
the right to continue to operate and otherwise to deal with the
Partnership property. In the event there is no General Partner
remaining, the other Partners by majority vote in Interest shall
elect, in accordance with the provisions hereof, a person to
perform the functions of the General Partner in liquidating the
assets of the Partnership and winding up its affairs. Gain or
loss realized on the sale(s) or other disposition(s) of the
Partnership's assets will be credited to (in the case of gain)
or charged against (in the case of loss) each Partner's Capital
Account to the extent allocable to it hereunder.
(ii) In settling accounts after dissolution, the assets of the
Partnership shall be paid out in the following priority order
after the allocation of the Partnership Profits and Losses
pursuant to Section 3(a) and 3(b):
(A) to secured parties in repayment of indebtedness owed;
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(B) to unsecured third party creditors, in the order of
priority as provided by law;
(C) to the holders of the indebtedness owed for any Partner
financing proportionally until paid in full;
(D) to reserves as specified by the General Partner; provided,
however, that at the expiration of such period of time as a
majority in Interest of the Partners shall deem advisable,
the balance of such reserves remaining after the payment of
such contingencies shall be distributed in the manner
hereinafter set forth in this Section;
(E) to each Partner (proportional to their respective Net
Capital Investment) the accounts of their respective Net
Capital Investment;
(F) to distribute all remaining cash proportionately to the
Partners based on their relative positive Capital Accounts;
(G) to each Partner in accordance with their then sharing of
Profits.
(g) TERMINATION OF PARTNERSHIP.
(i) Upon dissolution and liquidation of the Partnership, the
Partnership shall be terminated as rapidly as business
circumstances will permit.
(ii) After payment of all expenses of liquidation and of all debts
and liabilities of the Partnership in such order or priority as
provided herein, and all resulting items of Partnership income,
gain, loss or deduction are credited or debited to the capital
accounts of the Partners the Partnership shall be terminated
formally for state and federal purposes.
(h) FINAL ACCOUNTING. Each of the Partners shall be furnished a statement
setting forth the assets and liabilities of the Partnership as of the date of
the winding-up of the Partnership's affairs. Any Partner may, at its sole cost,
cause an audit of such statement to be conducted by an independent certified
public accountant. Upon compliance by the winding-up General Partner or the
dissolution trustee, as the case may be, the Partners shall cease to be partners
and the General Partner or trustee shall execute and cause to be filed a
certificate of cancellation of the Certificate of Limited Partnership of the
Partnership and any and all other documents necessary with respect to such
termination and cancellation.
SECTION 13. REPORTING. The General Partner shall keep all records in accordance
with the provisions of Section 704(b) of the Code and provide monthly updates
regarding actual project costs compared with budget estimates, operations status
reports delineating actual results compared with economic pro forma estimates,
business estimates necessary to achieve break even, and a marketing plan
outlining business prospects.
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SECTION 14. POWERS AND COMPLIANCE.
(a) POWERS. The Partnership shall be empowered to do any and all acts and
things necessary, appropriate, incidental to, or convenient for, the furtherance
and accomplishment of the purposes stated in Section 1(d) hereof, including, but
not limited to, the following:
(i) To develop, convey, buy, own, improve, rent, lease, sell,
operate and generally deal in all kinds of property (personal
and real) in any manner or way whatsoever;
(ii) To borrow money and issue evidences of indebtedness and to
secure the same by mortgage, pledge or other lien or security
interest in furtherance of the business and all purposes of the
Partnership;
(iii) To carry on any other activities and enter into, perform and
carry out contracts of any kind necessary to, in connection
with, or incidental to the accomplishment of the purposes of the
Partnership, specifically including, but not limited to, the
execution and delivery of leases, mortgage documents, other real
property instruments, the execution of contracts with brokers,
contractors, engineers, and architects, and other related
documents;
(iv) To repay in whole or in part, refinance, recast, increase,
modify or extend any mortgages affecting the assets of the
Partnership, and in connection therewith to execute any
extensions, renewals or modifications of such mortgages;
(v) To employ managers, agents and representatives for the purpose
of accomplishing the business of the Partnership and to pay
compensation therefor; and
(vi) To do any and all other acts and things which may be necessary,
incidental to, or convenient to, the conduct and continuance of
the Partnership Business as contemplated under this Agreement.
(b) CERTIFICATE OF LIMITED PARTNERSHIP. The General Partner may file this
Limited Partnership Agreement and Certificate of Limited Partnership as the
Certificate of Limited Partnership of the Partnership with the Office of the
Secretary of State of the State of Florida, or the General Partner may at its
sole option file a separate Certificate of Limited Partnership disclosing only
the information about this Limited Partnership which is required to be disclosed
by the Florida Statutes. The General Partner shall also file as appropriate the
Affidavit of Capital Contributions certifying the capital contributions of the
Limited Partners.
(c) COMPLIANCE WITH LAW. The General Partner shall from time to time
execute or cause to be executed all such certificates and other documents and do
or cause to be done all such filings, recordings, publications and other acts
necessary (or, in the judgment of the General Partner, appropriate) to comply
with the applicable laws of any jurisdiction in which the Partnership shall
conduct its business.
(d) STATUTORY AGENT. The statutory agent for service of process on the
Partnership is Fowler, White, Gillen, Boggs, Villareal and Banker, P.A.
(Attention: R. Alan Higbee, Esq.), whose address is 501 East Kennedy Boulevard,
Suite 1700, Tampa, Florida 33602. The statutory agent for service of process may
be changed at any time by act of the General Partner.
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SECTION 15. AMENDMENTS.
(a) PROPOSAL AND ADOPTION OF AMENDMENTS GENERALLY.
(i) Any amendment to this Agreement may be proposed by any Partner.
(ii) Amendments to this Agreement shall be adopted only if the
General Partners and the Limited Partners, except Torrey, have
approved the Amendment.
(iii) The General Partner, without the necessity of signatures of
other Partners, except as required hereunder, shall, as soon as
possible after the adoption and execution of any amendment to
this Agreement, make any filings or publications required or
desirable to reflect such amendment, including any required
filing or recordation of any certificate of limited partnership
or other instrument or similar document.
SECTION 16. MEETINGS, CONSENTS AND VOTING.
(a) MEETINGS. The General Partner may call a meeting of the Partners at
the principal place of business of the Partnership in Florida.
(b) CONSENTS AND ACTS. Any consent or act of a Partner required by this
Agreement may be given as follows:
(i) by a written consent, given by the Partner, to the act or thing
or consent.
(ii) by the affirmative vote by the Partner to the doing of the act
or thing for which the consent is solicited at any meeting of
the Partners.
(c) VOTING. Each Partner shall be entitled to one vote per percentage
point of Partnership Interest (proportioned for fractions of a percent).
Decisions of the Partnership, except as specifically otherwise provided for in
this Partnership Agreement, shall be accomplished by majority vote of the
Interest of the Partners. Any vote of a Partner may be cast by another Partner
or Person pursuant to a written proxy in favor of such other Partner or Person.
SECTION 17. NOTICE; NOTIFICATION.
(a) MANNER OF NOTICE AND CHANGE OF ADDRESS. Any Notice required or desired
to be made in connection with this Agreement shall be made in conformance with
the definition of same contained herein. Any Partner may, by Notice to the other
Partners, specify any other address for the receipt of notices, notifications,
requests, consents, approvals, waivers or other communications in connection
with this Agreement.
(b) NOTIFICATION TO THE PARTNERSHIP OR THE GENERAL PARTNER. Any Notice to
the Partnership or the General Partner shall be sent to the principal office of
the Partnership, as set forth in this Agreement, or as same may be changed by
Notice of the General Partner.
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SECTION 18. BOOKS AND RECORDS; ACCOUNTING; TAX ELECTIONS; ETC.
(a) CAPITAL TRANSFERS.
(i) Except for any Negative Capital Account or other adverse tax
status of a Partner which shall always remain with the
transferring Partner in a partner to partner transfer until the
Interest of the transferring Partner no longer exists, if any
Partnership Interest or part thereof is transferred in
accordance with the terms of this Agreement, the transferee
shall succeed to the Capital Account of the transferor to the
extent it relates to the transferred Partnership Interest.
(ii) In the event any assets of the Partnership are distributed
in-kind, the Capital Accounts of the Partners shall be adjusted
prior to any such distribution to reflect how any resulting
Profit and Loss, based on the Book Value of such asset at the
time of distribution, would have been allocated.
(b) TAX INFORMATION AND ELECTIONS. The General Partner shall use its best
efforts to furnish to the Partners within ninety (90) days of the end of each
Fiscal Year all information necessary to permit the Partners to prepare all
federal, state and local tax returns they are required to file for the Fiscal
Year. The Partnership shall elect to use such methods of depreciation as the
General Partner determines. In the event of a transfer of all or part of the
Interest of any Partner in the Partnership, the Partnership may elect pursuant
to Code Section 754 to adjust the basis of the assets of the Partnership upon
written request of the transferee, unless such election will have a materially
unfavorable effect upon the Partners other than the transferee Partner.
(c) CODE SECTION 754 ELECTION. In the event of a distribution of property
made in the manner provided in Section 734 of the Code, or in the event of a
transfer of any Partnership Interest permitted by this Agreement made in the
manner provided in Section 743 of the Code, the Partners, by majority vote in
Interest, may elect to file an election under Section 754 of the Code in
accordance with the procedures set forth in the applicable regulations
promulgated thereunder.
(d) TAX RETURNS AND AUDIT. The tax returns of the Partnership shall be
prepared by, and the Partnership shall be audited by, the accounting firm
selected by the General Partner.
(e) ALLOCATION IN EVENT OF TRANSFER. Each item of income, gain, loss,
deduction or credit allocable to a Partner's Interest that is transferred in
whole or in part during any year shall, if permitted by law, be allocated
according to the varying ownership Interests of the Partners during the year. In
applying this rule, the General Partner shall choose one of the following two
methods:
(i) prorate the Limited Partnership items over the Limited
Partnership's year by assigning the appropriate portion of each
such item to each day in the period to which it is attributable;
or
(ii) elect to utilize the precise method of an interim closing of the
Limited Partnership's books. If the General Partner chooses the
latter method, then any period subject to this method shall be
treated as a fiscal year for purposes hereof.
(f) TAX MATTERS PARTNER. The General Partner and its chief executive shall
be the "Tax Matters Partner" for purposes of the Tax Treatment of Partnership
Items Act of 1982, and shall have the authority to exercise all functions
provided for in said Act, or in regulations promulgated thereunder by Treasury,
including, but not limited to, the extent permitted by such regulations, the
authority to delegate the
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function of Tax Matters Partner to any other person. In the event the General
Partner resigns as Tax Matters Partner or its entire Partnership Interest is
disposed of or terminated or changed to a limited partnership interest, a
majority in Interest of the Partners other than the General Partner shall
designate another General Partner who shall become the Tax Matters Partner.
(g) TAX BASIS. An individual tax basis record shall be maintained for each
Partner. The tax basis record of each Partner shall be established and shall be
adjusted as of the close of each taxable year of the Partnership (or, when
appropriate, as of the close of the taxable year of the Partnership for such
Partner) in accordance with United States federal income tax law and procedure
as the same may exist from time to time.
(h) COMPLIANCE WITH CODE SECTION 704(B). The manner in which Capital
Accounts are to be maintained pursuant to Section 2 is intended to comply with
the requirements of Code Sec. 704(b), as amended, and the Treasury Regulations
promulgated thereunder (or corresponding sections of later statutes and
regulations).
(i) COMPLIANCE WITH TIMING REQUIREMENTS OF REGULATIONS. In the event the
Partnership is "liquidated" within the meaning of Treasury Regulation Section
1.704-1(b)(2)(ii)(g) (or corresponding sections of later regulations)
distributions shall be made to the General Partner and the Limited Partners as
set forth in Section 12 who have Positive Capital Accounts in compliance with
Treasury Regulation Section 1.704-1(b)(2)(ii)(b)(2) (or corresponding sections
of later regulations).
(j) BASIS ALLOCATIONS. The basis (or cost) of any Partnership Code Section
38 property shall be allocated among the General Partner and the Limited
Partners in accordance with Treasury Regulation Section 1.46-3(f)(2)(i). All tax
credits shall be allocated among the General Partner and the Limited Partners in
accordance with applicable law.
(k) ADDITIONAL LIMITED PARTNERS. In the event additional Partners are
admitted to the Partnership pursuant to the provisions hereof on different dates
during any fiscal year, the Profits (or Losses) allocated to the Partners for
each such fiscal year shall be allocated among the Partners in proportion to the
Partnership Interest each holds from time to time during such fiscal year in
accordance with Code Section 706, using any convention permitted by law and
selected by the General Partner.
(l) ALLOCATION TIMING. For purposes of determining the Profits, Losses or
any other items allocable to any period, Profits, Losses, and any such other
items shall be determined on a daily, monthly, or other basis, as determined by
the General Partner using any permissible method under Code Section 706 and the
Treasury Regulations thereunder.
(m) COMPLIANCE WITH TIMING REQUIREMENTS OF REGULATIONS. In the event the
Partnership is "liquidated" within the meaning of Treasury Regulation Section
1.704-1(b)(2)(ii)(g):
(i) distributions shall be made to the General Partner and the
Limited Partners who have Positive Capital Accounts in
compliance with Treasury Regulation Section
1.704-1(b)(2)(ii)(b)(2), and
(ii) if any Partner's Capital Account has a deficit balance (after
giving effect to all contributions, distributions, and
allocations for all taxable years, including the year during
which such liquidation occurs), such Partner shall not
contribute to
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the capital of the Partnership the amount necessary to restore
such deficit balance to zero in compliance with Treasury
Regulation Section 1.704-1(b)(2)(ii)(b)(3).
(n) QUALIFIED INCOME OFFSET. In the event any Partner unexpectedly
receives any adjustments, allocations or distributions described in Treasury
Regulation Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) or
1.704-1(b)(2)(ii)(d)(6) ("Unexpected Adjustments"), items of Partnership income
and gain shall be specially allocated to such Partner in an amount and manner
sufficient to eliminate the deficit balances in such Partner's capital account
created by such Unexpected Adjustments as quickly as possible. Any special
allocations of items of income or gain pursuant to this Section shall be taken
into account in computing subsequent credits of Profits or Minimum Gain so that
the net amount of any items so allocated and the Profits or Losses or Minimum
Gain, to the extent possible, be equal to the net amount that would have been
allocated to each such Partner if such Unexpected Adjustments had not occurred.
(o) ACCOUNTING.
(i) The fiscal year of the Partnership shall end on the last day of
December of each year.
(ii) The books of account of the Partnership shall be kept and
maintained at all times at the principal place of business of
the Partnership or at another place or places approved by the
General Partner. The books of account shall be maintained
according to generally accepted accounting principles,
consistently applied, and shall show all items of income and
expense.
SECTION 19. INDEMNITIES.
(a) The General Partner and its affiliates or agents, employees, directors
or officers shall not be liable, responsible or accountable in damages or
otherwise to the Partnership or any of the Partners for any act or omission
performed or omitted in good faith on behalf of the Partnership and in a manner
reasonably believed by it or them to be within the scope of the authority
granted to a General Partner by this Agreement and in the best interests of the
Partnership, including, but not limited to, errors of judgment, except for bad
faith or willful misconduct. For purpose of this provision, any action or
omission taken on advice of counsel for the Partnership shall be deemed as
having been taken in good faith; provided, however, that the absence of such
advice shall not be deemed to constitute evidence of other than good faith.
(b) The Limited Partners and their affiliates or agents, employees,
directors or officers shall not be liable, responsible or accountable in damages
or otherwise to the Partnership or any of the Partners for any act or omission
performed or omitted in good faith on behalf of the Partnership and in a manner
reasonably believed by it or them to be in the best interests of the
Partnership, including, but not limited to, errors of judgment. For purposes of
this provision, any action or omission taken on advice of counsel shall be
deemed in the best interest of the Partnership.
(c) The Partnership, or its receiver, custodian or trustee, shall (from
the assets of the Partnership, no Limited Partner being obligated to contribute
to the Partnership for such purpose) indemnify, save harmless and pay all
judgments and claims against any Partner, or its affiliates or agents,
employees, directors or officers, from and with respect to any liability or
damage (including all liabilities under federal and state securities laws)
incurred by reason of any action, inaction or decision performed
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or made in connection with the business of the Partnership, including, but not
limited to, errors of judgment, provided that such actions, inactions or
decisions were reasonably believed by the Partner, or its affiliates or agents,
employees, directors or officers, to be in the best interests of the Partnership
and, provided further that, with regard to General Partners, such actions,
inactions, or decisions were reasonably believed by the General Partner, or its
affiliates or agents, employees, director or officers, to be within the scope of
its or their authority under this Agreement. This indemnification shall include
the payment of all attorneys' fees and other expenses incurred by the Partner,
or its affiliates or agents, employees, directors and officers, in connection
with the defense of any such claim made against it or them, including, without
limitation, any claim asserted by any Limited Partner individually, as a class
action or as a Partnership derivative action.
SECTION 20. ARBITRATION.
(a) In the event there should arise any misunderstanding or disagreement
between any of the parties as to the compliance with the terms and conditions of
this Agreement, or as to whether either party has grounds hereunder entitling it
to terminate this Agreement, or any other dispute related to this Agreement
including arbitrability of the dispute, it is mutually agreed that such
differences, if they cannot be satisfactorily resolved between the parties
within thirty (30) days after either party seeking arbitration delivers notice
of same to the other party, shall be submitted to a single arbitrator, if the
parties agree upon one; otherwise, to a board of three arbitrators, of whom one
shall be selected by each party within twenty (20) days after such 30-day
period, and a third arbitrator shall be selected by these two selected
arbitrators. If one of the parties fails to timely select an arbitrator, the
arbitrator that was timely selected shall be the sole arbitrator. If neither
party timely selects an arbitrator, the first arbitrator selected thereafter
shall be the sole arbitrator, no others being appointed. Where each of the
parties timely selects an arbitrator, said arbitrators will have ten (10) days
from the end of the twenty (20) day period to select the third arbitrator. In
the event the arbitrators are unable to timely agree on the third arbitrator,
either party may petition any official of the American Arbitration Association
for appointment of the third arbitrator and the parties agree to accept any
arbitrator appointed by such official subject to the limitations hereof.
Arbitrators must be reasonably independent of the parties and their principals.
Persons who are hereby expressly disqualified to serve as arbitrators are
principals of the parties, relatives of said principals, employees of the
parties or said principals, persons not residing within 100 miles of Tampa,
Florida, attorneys, accountants and other business persons having professional
or business relationships with the parties or said principals.
(b) Arbitration shall proceed in accordance with the rules of the American
Arbitration Association. The arbitration shall be conducted in Tampa, Florida.
The arbitrators shall have all the powers permitted arbitrators under the laws
of the State of Florida. The decision and award of such single arbitrator, if
only one is used, or any two of such board if three are used, as the case may
be, shall be final and binding upon the parties, their heirs, legal
representatives, successors and assigns respectively, and shall have the same
force and effect as though such decision had been handed down by a court of
final jurisdiction. The cost of arbitrator(s) is to be shared equally by the
parties. Each party shall be responsible for and shall pay for the expenses of
presenting its respective case, including depositions, attorney's fees and costs
and witness fees which expenses shall not be subject to award by the
arbitrator(s), nor shall such expenses be subject to award by any court or other
judicial authority. The parties shall deposit, at the beginning of the
arbitration process, with the arbitrator(s) an amount equal to the estimated
costs (including arbitrators' time charges) of the total arbitration.
Arbitrators' time charges shall be at the same rate for all arbitrators. Each of
the parties hereto covenants to abide by any arbitration decision.
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(c) In the event that it becomes necessary for any party to this Agreement
to enforce a decision of arbitration through legal proceedings, the parties
hereby agree that the Circuit Court for the Thirteenth Judicial Circuit in and
for Hillsborough County, Florida, Tampa Division, and the United States District
Court for the Middle District of Florida, Tampa Division, shall have exclusive
jurisdiction to hear and determine any such matters. Each party hereby expressly
submits and consents in advance to such jurisdiction and venue in any action or
proceeding whether commenced by or brought against them in either of such
Courts. In any such court proceeding the prevailing party shall be entitled to
reimbursement of all costs and expenses, which may be reasonably incurred or
paid in connection therewith, including without limitation, attorney's fees and
costs at the trial court and appellate court levels.
SECTION 21. MISCELLANEOUS PROVISIONS.
(a) BINDING PROVISIONS. The covenants and agreements contained herein
shall be binding upon and shall inure to the benefit of the heirs, personal
representatives, permitted successors and permitted assigns of the respective
parties hereto.
(b) APPLICABLE LAW. This Agreement shall be construed and interpreted in
accordance with the laws of the State of Florida. Venue shall be in Hillsborough
County, Florida for both arbitration and legal proceedings.
(c) SEPARABILITY OF PROVISIONS. If any provision or provisions hereof are
determined to be invalid and contrary to any existing or future law, such
invalidity shall not impair the operation of, or affect those portions of, this
Agreement that are valid.
(d) ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
among the parties. This Agreement supersedes any prior agreement or
understanding among the parties and may not be modified or amended in any manner
other than as set forth herein.
(e) SECTION TITLES. Section titles are for convenience of reference only
and shall not control or alter the meaning of this Agreement as set forth in the
text.
(f) WAIVER OF APPRAISAL. If any individual Partner, if any, shall die, any
inventory and appraisement of the property of the Partnership right provided for
under Florida law, or any similar provision of law which may be enacted in
substitution therefor, is hereby waived by all Partners and the Interest of such
Partner in the Partnership shall be settled and disposed of as provided in this
Partnership Agreement.
(g) FURTHER ACTION. Each Partner shall execute and deliver all documents,
provide all information and take or forebear from all such action as may be
necessary or appropriate to achieve the purposes of this Partnership Agreement.
(h) REFERENCE TO STATUTORY OR REGULATORY PROVISIONS. All reference to
statutory or regulatory provisions shall be deemed to include reference to
corresponding provisions of subsequent law or regulation.
(i) TRIAL BY JURY WAIVER. The Partners waive trial by jury to the extent
permitted by law.
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(j) LEGAL REPRESENTATION. The General Partner shall select an attorney or
attorneys to represent the Partnership. Individual attorneys for each Partner
are not prohibited from representing, and are entitled to represent, the
Partnership and each Partner, from time to time, subject to itemization of all
charges and strict allocation of those legal services provided to the
Partnership and those legal services provided to a Partner. Itemized billings
shall be available for review by any Partner. In the event that any dispute
arises between or among the Partners, each Partner hereby agrees that any law
firm that has rendered or is rendering legal services to the Partnership or HPI
(or any affiliate of the Partnership or HPI) may continue such representation of
the Partnership or HPI (or any affiliate of the Partnership or HPI), and may
represent the Partnership or HPI (or any affiliate of the Partnership or HPI) in
such dispute, and each Partner hereby waives any actual or potential future
conflict of interest that may arise as a result of such law firm's
representation of the Partnership or HPI (or any affiliate of the Partnership or
HPI) in connection with any such dispute.
SECTION 22. DEFINED TERMS. The defined terms used in this Agreement shall,
unless the context otherwise requires, have the meanings specified in this
Section. The singular shall include the plural and the masculine gender shall
include the feminine and neuter and vice versa, as the context requires.
(a) "Act" means the Florida Revised Uniform Limited Partnership Act, as
amended.
(b) "Book Value" means, with respect to any asset of the Partnership, the
adjusted basis of the asset for Federal income tax purposes, except as follows:
(i) The initial Book Value of any asset contributed by a Partner to
the Partnership shall be the gross fair market value of such
asset, as determined by the contributing Partner and the
Partnership;
(ii) The Book Values of all Partnership assets shall be adjusted to
equal their respective gross fair market values, as determined
by accountants, appraisers or valuation consultants designated
by the General Partner in accordance with Code Section 704 and
7701(g) as of the following times:
(A) Acquisition of an additional interest in the Partnership by
any new or existing Partner in exchange for more than a de
minimus capital contribution if, at the time of such
acquisition, the Partnership assets have appreciated by
more than a de minimus amount since acquisition of such
Partnership assets;
(B) The liquidation of a Partner's interest in the Partnership,
other than on dissolution of the Partnership, in exchange
for more than a de minimus distribution of money by the
partnership if, at the time of distribution, the
Partnership assets have appreciated by more than a de
minimus amount;
(C) Distribution, other than on dissolution of the Partnership,
by the Partnership to a Partner of more than a de minimus
amount of Partnership assets other than money, if the
Partners reasonably determine that such adjustment is
necessary or appropriate to reflect the relative economic
interests of the Partners; or
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(D) The termination of the Partnership for Federal income tax
purposes pursuant to Code Section 708(b)(1), constituting a
liquidation of the Partnership within the meaning of
Treasury Regulation Section 1.704- 1(b)(2)(ii)(g).
(iii) The Book Value of any Partnership asset distributed to any
Partner shall be the gross fair market value, determined as
described above, of such asset on the date of distribution; and
(iv) If the Book Value of an asset has been determined or adjusted
pursuant to Section 22(b)(i) or Section 22(b)(ii) above, such
Book Value shall thereafter be adjusted by the Depreciation
taken into account with respect to such asset for purposes of
computing Profits and Losses.
(c) "by the Partners" means by vote of a majority in total Interest of the
Partners.
(d) "Capital Account", as to any Partner, means such partner's capital
account as provided in Section 2 hereof.
(e) "Cash Flow from Operations" means the excess of cash revenues of the
Partnership over cash payments by the Partnership made in the ordinary course of
business, including, but not limited to cash receipts and payments generated by
the operations of the business of the Partnership, but determined as follows:
(i) Depreciation and amortization shall not be considered as a
deduction.
(ii) Principal debt reduction of any liability shall be considered as
a deduction.
(iii) Amounts paid for capital expenditures shall be considered as a
deduction, unless paid for by funds provided from insurance or
unless provided for by a Capital Contribution.
(iv) Any amount of compensation, fringe benefit or return on net
capital investment paid a Partner, who is acting in a capacity
other than as a Partner, pursuant to an employment or other
agreement with the Partnership shall be treated as an expense of
the Partnership in determining Cash Flow from Operations.
(v) Any amounts set aside by the Partners for the restoration or
creation of reserves in amounts determined by the Partners, to
provide for working capital, payment of indebtedness, expenses
or contingencies of the Partnership, or in connection with the
property of the Partnership shall be excluded.
(vi) Amounts paid to Torrey pursuant to Section 6(a)(ii)(A) hereof
shall be considered as a deduction to the extent considered as
an advance against future distributions to Torrey.
(vii) Cash Flow from Operations shall not include net cash proceeds
received by the Partnership from (1) sales and other
dispositions of Partnership assets, proceeds of mortgage
financing and refinancing, proceeds of condemnation awards,
insurance proceeds, and other similar items attributable to
capital; or (2) all
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principal and interest payments with respect to any note or
other obligation received by the Partnership in connection with
sales and other dispositions of Partnership assets; or (3) sales
of easements, rights of way or similar interests; in any such
case less any portion which is reinvested, used to pay
Partnership expenses, debt payments and fees or is used to
establish reserves, all as determined by the General Partner.
(f) "Certificate of Limited Partnership" means the Certificate of Limited
Partnership as originally filed with the Secretary of State of the State of
Florida and as amended from time to time.
(g) "Code" means the United States Internal Revenue Code of 1986, as
amended (or any corresponding provision of succeeding law).
(h) "Development Option Agreement" means the South Florida Development
Option Agreement setting forth the rights with respect to the development of
restaurants under the Hops System within the Territory.
(i) "Fiscal Year" means, with respect to the Partnership, the calendar
year.
(j) "General Partner" means Hops of South Florida, Inc., or any successor
General Partner or other general partner.
(k) "Hops System" means the unique system of restaurant development, theme
and operation developed and owned by Hops which is, in part, characterized by
(1) the maintenance of uniform high quality standards in connection with the
preparation and sale of Hops-approved food and beverage products, (2) the
uniform high standards of appearance of the individual restaurant units, (3) the
use of distinctive trademarks, service marks, building designs and advertising
signs representing a uniformly high quality of product and services, and (4) the
undertaking by Hops and its affiliates of the obligation to maintain and enhance
the goodwill and public acceptance of the system (and of Hops' trade names,
service marks, trademarks) by strict adherence to the high standards required by
Hops.
(l) "Interest," "Limited Partnership Interest," "General Partnership
Interest" and "Partnership Interest" means the entire ownership interest (which
may, either for its Capital Account or its interest in Profits, Losses,
distributable cash flow, etc., be expressed as a percentage) of a Partner at any
particular time, including the rights and obligations of such Partner under this
Agreement and the Act.
(m) "Limited Partner" means Hops Partners, Toomy CLN, Inc., and Torrey and
any Person who is a Limited Partner at the time of reference thereto, in such
Person's capacity as a Limited Partner in the Partnership.
(n) "Management Agreement" means the Management Agreement dated as of
October 7, 1996, by and between Hops of Southeast Florida, Ltd. and Toomy.
(o) "Negative Capital Account" means, as to a Partner at a point in time,
the amount, if any, by which (a) the sum of the aggregate Losses and
distributions allocated to such Partner prior to such point in time exceeds (b)
the sum of the aggregate Capital Contributions of such Partner, the aggregate
operating Profits and gains allocated prior to such point in time to such
Partner.
(p) "Net Capital Investment" means the contributions made pursuant to
Section 2 reduced by distributions of capital.
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<PAGE>
(q) "Notice" means a writing, containing the information required by this
Agreement or otherwise desired to be communicated to any Person in connection
with this Partnership, sent by courier, telecopier, hand delivery or registered
or certified mail, return receipt requested, postage prepaid, to such Person at
the address of such Person specified in Exhibit 2(a) hereto if such Person is a
Partner or as changed by such Partner by Notice hereunder, and if such Person is
not a Partner, then at the last known address for such Person; provided,
however, that any communication containing the information sent to the Person
and actually received by the Person shall constitute Notice for all purposes of
this Agreement as of the date of receipt by the Person. Each such notice shall
be deemed delivered:
(i) on the date delivered to the said address if by hand delivery,
(ii) on the date upon which it is transmitted by telecopier, if sent
by telecopier, to the proper telephone fax number of the
recipient, and
(iii) on the date upon which the return receipt is signed or delivery
is refused or the notice is designated by the postal authorities
as not deliverable, as the case may be, if mailed by registered
certified mail.
(r) "Profits or Losses" for any Fiscal Year or other period shall mean the
taxable income or loss of the Partnership for such year as determined for
Federal income tax purposes, in accordance with Code Section 703(a) (for this
purpose, all items of income, gain, loss or deduction required to be separately
stated pursuant to Code Section 703(a)(1) shall be included in taxable income or
loss) with the following adjustments:
(i) Any income of the Partnership that is exempt from Federal income
tax shall be added to such taxable income or loss;
(ii) Gain or loss resulting from any disposition of Partnership
property with respect to which gain or loss is recognized for
Federal income tax purposes shall be computed with reference to
the Book Value of the property disposed of;
(iii) In lieu of the depreciation, amortization and other cost
recovery deduction taken into account in computing such taxable
income or loss, Depreciation shall be taken into account for
such fiscal year.
(iv) Any expenditure of the Partnership described in Code Section
705(a)(2)(B) or treated as Code Section 705(a)(2)(B)
expenditures pursuant to Treasury Regulation Section
1.704-1(b)(2)(iv) and not otherwise taken into account in
computing Profits and Losses shall be subtracted from such
taxable income or loss;
(v) In the event the Book Value of any Partnership asset is adjusted
pursuant to the provisions hereof, the amount of such adjustment
shall be taken into account as gain or loss from the disposition
of such asset for purposes of computing Profits or Losses;
(vi) Notwithstanding the foregoing, any items which are specially
allocated shall not be taken into account in computing Profits
or Losses; and
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<PAGE>
(vii) Any amount of compensation, fringe benefit or return on net
capital investment paid to a Partner for any Fiscal Year
pursuant to an employment or other agreement with the
Partnership shall be treated as an expense of the Partnership in
computing Profits or Losses for such Year.
(s) "Partner" or "Partners" mean each and every General Partner, Limited
Partner, Substitute General Partner, Substitute Limited Partner, Additional
Limited Partner, Additional General Partner, Successor General Partner,
Successor Limited Partner and Special Limited Partner.
(t) "Partnership" means the Limited Partnership formed hereby, as said
Limited Partnership may from time to time be constituted.
(u) "Person" means any individual, partnership (other than this
Partnership), corporation, trust or other entity.
(v) "Positive Capital Account" means, as to a Partner at any point in
time, the amount, if any, by which (1) the sum of the aggregate Capital
Contributions of such Partner, the aggregate Profits and gains allocated prior
to such point in time to such Partner exceeds (2) the sum of aggregate Losses,
losses and distributions allocated prior to such point in time to such Partner.
(w) "Prime Rate" means the rate of interest published in the Wall Street
Journal as the base rate on corporate loans at large U.S. money center
commercial banks.
(x) "Reserves" means all Partnership reserves established for reasonable
Partnership purposes, including, but not limited to, accrued or deferred
expenses and other working capital needs, improvements, contingent liabilities,
taxes and purchases.
(y) "Territory" means that geographic territory described in the
Development Option Agreement.
[SIGNATURE BLOCKS ON FOLLOWING PAGE]
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<PAGE>
IN WITNESS WHEREOF, the General Partner and the Limited Partners have
executed this Limited Partnership Agreement effective as of the filing of the
Certificate of Limited Partnership. The execution by the undersigned constitutes
an affirmation under penalties of perjury that the facts stated herein are true.
HOPS OF SOUTH FLORIDA, INC.,
a Florida corporation
By: /s/ DAVID L. MASON
----------------------------
David L. Mason, President
"GENERAL PARTNER"
HOPS PARTNERS, INC.,
a Florida corporation
By: /s/ DAVID L. MASON
---------------------------
David L. Mason, President
"HPI"
TOOMY CLN, INC.,
a Florida corporation
By: /s/ KEVIN TOOMY
---------------------------
Kevin Toomy, President
"TC"
KEVIN TORREY
/s/ KEVIN TORREY
------------------------------
Kevin Torrey, individually
"LIMITED PARTNERS"
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<PAGE>
EXHIBIT 2(A)
GENERAL PARTNER:
=========================================================================
Capital
NAME AND ADDRESS Contribution % of Profits % of Losses
- -------------------------------------------------------------------------
Hops of South Florida, Inc. $10.00 1.0% 1.0%
3030 N. Rocky Point Drive West
Suite 650
Tampa, Florida 33607
=========================================================================
LIMITED PARTNERS:
=========================================================================
Capital
NAMES AND ADDRESSES Contribution % of Profits % of Losses
- -------------------------------------------------------------------------
Hops Partners, Inc. $490.00 74.0% 74.0%
3030 N. Rocky Point Drive West
Suite 650
Tampa, Florida 33607
- -------------------------------------------------------------------------
Toomy CLN, Inc. $390.00 15.0% 15.0%
7701 Newport Lane
Parkland, Florida 33067
- -------------------------------------------------------------------------
Kevin Torrey $100.00 10.0% 10.0%
627 Tropical Breeze Way
Tampa, Florida 33602
=========================================================================
EXHIBIT 10.6
HOPS OF THE ROCKIES
DEVELOPMENT OPTION AGREEMENT
- --------------------------------------------------------------------------------
THIS HOPS OF THE ROCKIES DEVELOPMENT OPTION AGREEMENT
("Agreement") is made effective as of this 1st day of January, 1996, by and
between HOPS GRILL & BAR, INC., a corporation organized and existing under the
laws of the State of Florida (hereinafter referred to as "Hops"), ROCKY MOUNTAIN
RESTAURANT PARTNERS, INC., a corporation organized and existing under the laws
of the State of Florida (hereinafter referred to as "RMRP"), and the
SHAREHOLDERS OF RMRP set forth on EXHIBIT A hereto (the "RMRP Principals").
W I T N E S S E T H:
WHEREAS, the principals of Hops own all of the issued and outstanding
shares of common stock of Hops of the Rockies, Inc., a corporation organized and
existing under the laws of the State of Florida ("HRI");
WHEREAS, as of the date hereof, all of the capital stock of RMRP is
owned by the RMRP Principals in the amounts shown on EXHIBIT A attached hereto,
subject to the limited transfer rights permitted under Section 9(h) hereof;
WHEREAS, HRI, RMRP, Hops Partners, Inc., a Florida corporation
(hereinafter referred to as "HPI"), and Joseph F. Timberlake III, the proposed
Territory Area Manager (hereinafter referred to as "Manager"), are parties to
that certain Limited Partnership Agreement of even date herewith (the
"Partnership Agreement") whereby HRI, RMRP, HPI, and Manager formed Hops of the
Rockies, Ltd., a Florida limited partnership (the "Partnership"), for the
purpose of developing and operating, directly or indirectly, up to three (3)
Hops Grill & Bar restaurants (including, but not necessarily limited to, the
Initial Restaurant (as defined herein)) in the Territory (as defined herein)
pursuant to the terms and conditions contained therein; and
WHEREAS, Hops has agreed to grant to RMRP the option to participate in
the development and operation of the Initial Restaurant and up to two (2)
Additional Restaurant(s) (as defined herein), if any, in the Territory (as
defined herein) pursuant to the terms and conditions contained herein.
<PAGE>
NOW, THEREFORE, in consideration of the mutual promises and agreements
contained herein, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto, intending to be legally bound thereby, agree as follows:
DEFINITIONS
The following definitions shall apply to the following terms as used
in this Agreement:
(1) "Additional Restaurants" means up to two (2) restaurants
(in addition to the Initial Restaurant) to be developed and operated in the
Territory prior to the expiration or termination of RMRP's rights hereunder.
(2) "Hops" means Hops Grill & Bar, Inc., a corporation organized
and existing under the laws of the State of Florida, which is the owner of all
rights under the unique "Hops Grill & Bar" System of restaurant development,
theme and operation.
(3) "Hops Offer" means the notice and information served upon
RMRP by Hops pursuant to Section 2(b).
(4) "Initial Restaurant" means the first restaurant to be
developed and operated, directly or indirectly, by the Partnership as described
in Section 1 hereof.
(5) "New Partnership" shall have the meaning set forth in Section
3(c)(i).
(6) "Operating Agreement" means the agreement(s) to be entered
into by the Partnership (or one or more Second-Tier Partnerships) governing the
development and operation of each restaurant to be developed and operated,
directly or indirectly, by the Partnership within the Territory pursuant to this
Agreement.
(7) "Option Fee" means the fee payable by RMRP to Hops pursuant
to Section 2(e) hereof, for the right to participate in the development and
operation of Additional Restaurants.
(8) "Option Period" shall have the meaning as set forth in Section
2(d).
(9) "Partnership" means the Florida limited partnership formed by
HRI, RMRP, HPI, and Manager pursuant to the Partnership Agreement and the laws
of the State of Florida and known as Hops of the Rockies, Ltd.
(10) "Partnership Agreement" means the agreement pursuant to
which HRI, RMRP, HPI, and Manager formed the Partnership under the laws of the
State of Florida for the purpose of owning and operating, directly or
indirectly, up to three (3) "Hops Grill & Bar" restaurants within the Territory.
(11) "Second-Tier Partnership" means a limited partnership that may
be formed at the sole discretion of Hops and HRI for the purpose of developing
or operating the Initial
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<PAGE>
Restaurant or any Additional Restaurant(s) pursuant to this Agreement whereby
(i) HRI will be a general partner who will have a one percent (1.0%) equity
interest in such partnership, (ii) the manager of the Initial Restaurant or any
Additional Restaurant(s) may be a limited partner which may have up to a ten
percent (10.0%) equity interest in such partnership, and (iii) the Partnership
(or a New Partnership in the case of a Special Acceptance as described in
Section 3(c) hereof) will be a limited partner in such partnership that will own
the remaining equity interest in such partnership.
(12) "Special Acceptance" shall have the meaning set forth in
Section 3(c) hereof.
(13) "System" means a unique system owned by Hops, and associated
with "Hops Grill & Bar" restaurants, which specializes in the sale of high
quality, moderately priced, American food with a microbrewery and includes
proprietary rights in certain valuable trade names, service marks and
trademarks, including the service mark "Hops Grill & Bar," designs and color
schemes for restaurant premises, signs, equipment, procedures and formulae for
preparing food and beverage products, specifications for certain food and
beverage products, inventory methods, operating methods, financial control
concepts, training methods and teaching techniques. (14) "Territory" means the
state of Colorado.
1. INITIAL RESTAURANT.
(a) On the date hereof, HRI, RMRP, HPI, and Manager have
executed the Partnership Agreement for the purpose of the development and
operation, direct or indirect, of the Initial Restaurant. It is hereby
contemplated by the parties, subject to Section 1(b) below, that the Initial
Restaurant will be located in the Cherry Creek area of Denver, Colorado and will
be owned indirectly by the Partnership through a Second-Tier Partnership known
as "Hops of Cherry Creek, Ltd." which will initially be owned as follows: HRI
will own a 1.0% interest as the sole general partner; HRI will own a 0.1%
interest as a limited partner; and the Partnership will own a 98.9% interest as
a limited partner. The parties hereby acknowledge that at the sole discretion of
Hops and HRI, up to a ten percent (10.0%) limited partnership interest in Hops
of Cherry Creek, Ltd. may be owned by a manager of the Cherry Creek restaurant
at a future date.
(b) The decision as to the actual location of the Initial
Restaurant shall be made by Hops and HRI in their sole discretion (provided that
Hops and HRI shall, in good faith, consult with RMRP during such search and
prior to committing to any location for the Initial Restaurant). If Hops and HRI
are unable to locate and secure a site for the Initial
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<PAGE>
Restaurant within one (1) year of the date of this Agreement, (i) this Agreement
shall become null and void and of no further force or effect, except that RMRP
and its principals shall continue to be bound by the provisions of Section 6
hereof, and (ii) Hops shall promptly refund to RMRP the fee paid with respect to
the Initial Restaurant as set forth in Section 1(c) below, without interest.
(c) Upon the execution of this Agreement, RMRP shall pay to Hops
a fee in the amount of Thirty-Thousand Dollars (U.S.$30,000) for the right to
participate with HRI, through the Partnership (and the Second-Tier Partnership),
in the development and operation of the Initial Restaurant. Such fee, once paid,
shall be non-refundable, except as provided in Section 1(b) above.
(d) Attached hereto as EXHIBIT 1(D) is the form of the Operating
Agreement to which the Partnership (or a Second-Tier Partnership, if
appropriate) shall be subject with respect to the Initial Restaurant and each
Additional Restaurant. The Operating Agreement for each restaurant developed
directly or indirectly by the Partnership shall govern the terms of the
development and operation of each such restaurant and shall set forth the fees
and expenses owing by the Partnership (or the Second-Tier Partnership, if
appropriate) to Hops or its affiliates, successors or assigns.
2. ADDITIONAL RESTAURANTS; GRANT OF OPTION.
(a) [REMOVED AND RESERVED.]
(b) RMRP RIGHT OF FIRST REFUSAL. If, during the Option Period as
described in Section 2(d), Hops desires, directly or indirectly, to develop
Additional Restaurant(s) in the Territory, Hops shall first serve written notice
(hereinafter called the "Hops Offer") to that effect upon RMRP, stating the
proposed location of the Additional Restaurant(s) to be developed, reasonable
demographic information regarding the location, and the estimated capital (both
equity and debt) required to develop and operate such Additional Restaurant(s).
RMRP shall have the option to participate in the development and operation of
any such Additional Restaurant(s) upon the terms set forth in Section 3 hereof
by giving written notice to Hops of the acceptance by RMRP of the Hops Offer and
making payment to Hops of the Option Fee described in Section 2(e) hereof,
within fifteen (15) days after the date of the Hops Offer.
(c) RIGHT OF HOPS TO DEVELOP. In the event that RMRP fails to
timely accept a Hops Offer (or effect a Special Acceptance as that term is
defined in Section 3(c) hereof) or fails to timely negotiate and execute the
agreements necessary to develop and operate such
-4-
<PAGE>
Additional Restaurant(s) as provided in Section 4 hereof, Hops shall be free to
develop and operate the Additional Restaurant(s) described in the Hops Offer (i)
on its own, directly or indirectly through one or more subsidiaries or related
entities, or (ii) with any unrelated third party upon such terms as Hops shall,
in its sole discretion, elect.
(d) OPTION PERIOD. For purposes of this Section 2, the Option
Period shall commence upon the effective date of this Agreement and shall expire
upon the earlier of:
(i) the date that is three (3) years from the effective
date of this Agreement;
(ii) the date upon which RMRP accepts the Hops Offer for
the second Additional Restaurant; or
(iii) the date upon which RMRP shall allow any Hops
Offer to expire without acceptance (or without
Special Acceptance as that term is defined in Section
3(c) hereof) or RMRP shall fail to timely negotiate
and execute the agreements necessary to develop and
operate any Additional Restaurant(s) as provided in
Section 4 hereof;
(iv) the date upon which HRI or Hops (or any affiliate or
successor of Hops) shall acquire all or any portion
of the Partnership interest of RMRP;
(v) the date upon which HRI or Hops (or any affiliate or
successor of Hops) shall acquire the direct or
indirect interest of RMRP in any Additional
Restaurant(s); or
(vi) the date of the termination of this Agreement as
provided in Section 5 hereof.
(e) OPTION FEE. RMRP shall pay an Option Fee to Hops with respect
to each Additional Restaurant in which RMRP shall participate pursuant to
Section 2(b) hereof in the following amounts:
(i) U.S. $20,000 for the first Additional Restaurant; and
(ii) U.S. $15,000 for the second Additional Restaurant.
The Option Fee with respect to any Additional Restaurant in which RMRP shall
participate pursuant to Section 2(b) hereof, shall be paid by RMRP with the
acceptance of the Hops Offer as provided in Section 2(b) hereof. All Option
Fees, once paid, shall be non-refundable.
(f) LIMITATION. Anything herein to the contrary notwithstanding,
the option granted to RMRP hereunder shall extend only to a maximum of two (2)
Additional Restaurants (in addition to the Initial Restaurant), if any, to be
developed in the Territory during the Option Period hereof, and except as may
otherwise be agreed by Hops in its sole
-5-
<PAGE>
discretion in a future writing, RMRP shall have no rights with respect to any
restaurants other than those specifically provided for herein.
3. EXTENT OF PARTICIPATION.
(a) Except as otherwise specifically set forth in Section 3(c)
below, in the event that RMRP timely accepts a Hops Offer to participate in the
development and operation of the Additional Restaurant(s) pursuant to the
provisions of Section 2(b) hereof, RMRP shall be entitled to participate in the
development and operation of the Additional Restaurant(s) only through the
Partnership (and any associated Second-Tier Partnership designated by Hops or
HRI) unless otherwise approved by Hops, in its sole discretion, upon the terms
provided for in this Agreement and the Partnership Agreement and RMRP shall:
(i) make the additional capital contributions and
loan or guarantee commitments, pro rata with HRI and
HPI (or Hops or an affiliate or successor of Hops),
necessary to fund the development and operation of
any such Additional Restaurant(s); and
(ii) execute the then current agreements requiring
execution by RMRP for the Additional Restaurant(s).
(b) Hops' participation in any Additional Restaurant(s) may, in
the discretion of HRI or Hops, be through HRI, Hops or HRI any affiliate or
successor of Hops.
(c) In the event that RMRP receives any Hops Offer to
participate in the development and operation of any Additional Restaurant(s)
wherein the initial required additional capital contribution to the Partnership
by RMRP would be in excess of Three Hundred Ninety Thousand Dollars
(U.S.$390,000) in order for RMRP to retain its then current percentage interest
in the profits and losses of the Partnership, then (and only in such event) RMRP
shall have the right to accept such offer (hereinafter referred to as an
"Special Acceptance") on the following alternative terms:
(i) RMRP may agree to contribute initial capital in the
amount of (but not less than) Three Hundred Ninety
Thousand Dollars (U.S.$390,000) to a newly formed
Florida limited partnership (the "New Partnership")
with one or more Hops related entity(ies) and receive
its pro-rata interest in the profits and losses of
the New Partnership (which pro-rata interest shall be
determined by dividing the initial required capital
contribution of RMRP, by the initial required capital
contributions of all (including RMRP) partners to the
New Partnership) which pro rata
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<PAGE>
interest shall be less than RMRP's percentage
interest in the profits and losses in the
Partnership.
(ii) In the event of a Special Acceptance by RMRP, the New
Partnership shall be formed by and among RMRP and one
or more Hops related entity(ies) (or other parties
chosen by Hops in its sole discretion) by means of a
partnership agreement which shall contain terms which
are substantially similar to the terms of the
Partnership Agreement for the Partnership. The
formation of the New Partnership and the ultimate
terms of the partnership agreement for the New
Partnership shall be in the sole discretion and
control of Hops or the Hops related entity(ies) that
will participate in the New Partnership provided that
(A) the New Partnership shall be formed for the
purpose of developing and operating one Hops Grill &
Bar Restaurant (either directly or through a Second-
Tier Partnership), and (B) the terms of the
partnership agreement for the New Partnership shall
not be substantially less favorable to RMRP than the
terms of the Partnership Agreement for the
Partnership. The interest of RMRP in the New
Partnership shall solely as a limited partner and
Hops shall have the right to designate the sole
general partner(s) and other limited partner(s) of
the New Partnership. Despite the limitation upon the
amount of the initial required capital contribution
by RMRP to the New Partnership, in the partnership
agreement for the New Partnership, RMRP will agree to
be subject to both calls for additional capital and
loans for the New Partnership in a manner
substantially similar to that set forth in the
Partnership Agreement for the Partnership.
(iii) Any Special Acceptance by RMRP hereunder shall be
considered an acceptance of a Hops Offer for purposes
of this Agreement and any Additional Restaurant
developed and operated by a New Partnership shall be
considered as one of the two Additional Restaurants
in which RMRP may participate under this Agreement.
Except as specifically set forth herein, all other
provisions of this Agreement relative to the
acceptance of a Hops Offer hereunder shall continue
to apply (including, but not limited to, the payment
of an applicable Option Fee and the execution of
required documents). Any Additional Restaurants
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<PAGE>
developed and operated by a New Partnership may, in
Hops discretion, be developed and operated through a
second-tier partnership the ownership of which may
include up to a ten percent (10%) ownership for a
restaurant manager.
(iv) In the event of a Special Acceptance, RMRP shall be
responsible to reimburse to Hops all out of pocket
expenses associated therewith that would not have
been required as the result of an acceptance of a
Hops Offer pursuant to Section 2(b) above.
4. ADDITIONAL RESTAURANT AGREEMENTS.
(a) As soon as possible (but in any event within thirty (30) days)
after acceptance by RMRP of any Hops Offer pursuant to Section 2(b) above, RMRP
shall, in good faith, negotiate and enter into, any amendment to the Partnership
Agreement reasonably requested by Hops or HRI to effectuate the development and
operation of any such Additional Restaurant(s).
(b) In addition to the provisions of Section 4(a) above, in the event
of a Special Acceptance of a Hops Offer as provided in Section 3(c), RMRP shall
also, as soon as possible (but in any event within thirty (30) days execute the
partnership agreement for the New Partnership and any other documents reasonably
requested by Hops as the result of the Special Acceptance.
5. TERMINATION.
(a) Hops shall have the right to terminate this Agreement immediately
upon written notice to RMRP stating the reason for such termination, and RMRP
shall no longer have any rights created by this Agreement in the event of:
(i) the filing by RMRP or any RMRP Principal of a
petition in bankruptcy or an arrangement for the
benefit for reorganization; the filing against RMRP
or any RMRP Principal of a petition in bankruptcy, an
arrangement for the benefit of creditors, or petition
for reorganization, not dismissed within sixty (60)
days of the filing thereof; the making of an
arrangement by RMRP or any RMRP Principal for the
benefit of creditors; or the appointment of a
receiver or trustee for RMRP or any RMRP Principal,
which receiver or trustee shall not have been
dismissed within sixty (60) days of such appointment;
or
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<PAGE>
(ii) the breach by RMRP or any RMRP Principal of this
Agreement, the Partnership Agreement or of any other
agreement with HRI, Hops or any affiliate or
successor thereof.
(b) The obligations and limitations of RMRP and the RMRP Principals
pursuant to Section 6 and Section 9(h) below shall survive any termination of
this Agreement.
6. CONFIDENTIALITY; RESTRICTIONS UPON COMPETITION.
(a) CONFIDENTIALITY.
(i) CONFIDENTIAL INFORMATION. For purposes of this
Agreement, the term "Confidential Information" shall
mean any and all information disclosed or made known
to RMRP or the RMRP Principals by Hops (or its
affiliates or successors) or obtained by RMRP or the
RMRP Principals, directly or indirectly, as a
consequence of or through RMRP's association,
dealings, discussions or relationship with Hops (or
its affiliates or successors), which information is
not generally known in the industry in which Hops is
or may become engaged, concerning Hops or Hops'
products, services, operations, processes,
techniques, research, engineering, development,
programming, techniques of application, properties,
constructions, inventions, discoveries, concepts,
ideas, designs, methods, formulas, plans,
organization, accounting, intellectual property,
marketing, selling, purchasing, merchandising,
contracting, leasing, renting, computer programming,
recording, manufacturing, business plan(s),
strategies, negotiations, advertising and/or
promotional concepts or materials, copy, logos,
customers, distributors, suppliers, agents,
employees, representatives, marketing contacts,
prospects, references, business associates or
otherwise associated persons or entities and any and
all other information which may be considered as the
proprietary or intellectual property or trade secret
of Hops under applicable law whether or not such
information was intentionally or unintentionally
disclosed or made known to RMRP or the RMRP
Principals and whether or not such information is
written or complete and as it may exist from time to
time.
(ii) USE AND DISCLOSURE OF INFORMATION. RMRP and the RMRP
Principals recognize and acknowledge that all and
each item of Hops' Confidential
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Information is a valuable, special, and unique asset
of Hops and the System. RMRP and the RMRP Principals
further recognize and agree that such Confidential
Information must remain confidential in order to
maintain its value to both Hops and to all of the
restaurant operators operating under the System, both
now and in the future. Accordingly, RMRP and the RMRP
Principals will not, directly or indirectly, during
or after the term of this Agreement, compete by use
of, disclose, disseminate, publish or use, or permit
the competition through use of, disclosure,
dissemination, publishing or use of the Confidential
Information, or any part thereof, to or for itself or
any other person, group, firm, corporation,
association, or any other entity for any reason or
purpose whatsoever, except as may be required in the
good faith operation of the Initial Restaurant or
Additional Restaurants. Upon termination of this
Agreement and the Operating Agreements relating to
the Initial Restaurant and each Additional
Restaurant, RMRP and each of the RMRP Principals
shall immediately return to Hops all System manuals
and all other documents, records, notebooks, computer
disks or tape (or other computer storage media) and
similar repositories containing Confidential
Information, including all copies thereof, then in
the possession, control or influence of RMRP or the
RMRP Principals, whether prepared by Hops (or its
affiliates), RMRP or the RMRP Principals or their
respective employees or affiliates or others.
(iii) BREACH OR THREATENED BREACH. In the event of a breach
or threatened breach by RMRP or the RMRP Principals
of the provisions of this Agreement, Hops shall be
entitled to an injunction (without the posting of
bond), restraining RMRP and each of the RMRP
Principals from using any of the Confidential
Information or from rendering any services to any
person, firm, corporation, association, or other
entity to whom any of the Confidential Information
has been disclosed. Nothing herein shall be construed
as prohibiting Hops from pursuing any other remedies
available to it for such breach or threatened breach,
including the recovery of damages from RMRP, the RMRP
Principals and/or any party or parties to whom such
disclosure has been made or who has (have) been in
any way involved in such breach or threatened breach
or
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who has (have) encouraged or solicited such breach or
threatened breach or who has (have) benefitted from
such breach or threatened breach. This agreement by
RMRP and each of the RMRP Principals shall be
construed as an agreement independent of any other
provision of any agreement, and the existence of any
claim or cause of action of RMRP, RMRP Principals or
any other person or entity, whether predicated on
this Agreement or otherwise, shall not constitute a
defense to the enforcement of this Agreement by Hops
or any other person, firm, corporation or entity.
(b) RESTRICTIONS UPON COMPETITION.
(i) [REMOVED AND RESERVED]
(ii) During the term of this Agreement and each Operating
Agreement and for a period of five (5) years
following the termination of the last such Operating
Agreement, RMRP and the RMRP Principals shall not
independently or as a group, directly or indirectly,
within any state of the United States (or similar
jurisdiction within any foreign country) in which
Hops or its affiliates operates or licenses or
otherwise authorizes others to operate restaurants
under the System (the "Restricted Territory"), enter
into or engage in any business in competition with
the business of Hops or its affiliates (or any
operator of restaurants under the Hops System), as it
now exists or may exist in the future, either as an
individual on his own account, or as a partner, joint
venturer, employee, agent, salesman, contractor,
officer, director, stockholder or otherwise. For
purposes of this Section 6(b)(ii), a business shall
be deemed competitive with the business of Hops if it
utilizes, directly or indirectly, a menu, theme,
design, motif, concept, method of operation or other
distinctive characteristic of the Hops System as it
shall exist from time to time. While not limiting the
generality of the preceding sentence, any restaurant
or bar operating its own microbrewery (or affiliated
with an entity which operates a microbrewery) shall
be deemed to be a direct competitor of Hops. This
covenant on the part of RMRP and each of the RMRP
Principals is made by RMRP and each of the RMRP
Principals to induce Hops to enter into this
Agreement with RMRP and to grant RMRP and each of
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the RMRP Principals access to Hops' Confidential
Information and RMRP and each of the RMRP Principals
hereby acknowledges the sufficiency of the
consideration received by him and it for this
covenant. This covenant on the part of RMRP and each
of the RMRP Principals shall be construed as an
agreement independent of any other provision in this
Agreement or any other Agreement between RMRP or the
RMRP Principals and Hops (or any affiliate or
successor of Hops); and the existence of any claim or
cause of action of RMRP or any of the RMRP Principals
against Hops (or any affiliate or successor of Hops),
whether predicated on this Agreement or otherwise,
shall not constitute a defense to the enforcement by
Hops of this covenant. It is agreed by the parties
hereto, however, that if any portion of this covenant
is held to be unreasonable, arbitrary or against
public policy, the covenant herein shall be
considered divisible both as to time and geographical
area; and each month of the specified period shall be
deemed a separate period of time, and each state,
county or other political subdivision within the
Restricted Territory shall be deemed a separate
geographical area so that the lesser period of time
or geographical area shall remain effective so long
as the same is not unreasonable, arbitrary, or
against public policy. The parties hereto agree that,
in the event any court determines the specified time
period or the specified geographical area covered by
this covenant to be unreasonable, arbitrary, or
against public policy, a lesser time period or
geographical area which is determined to be
reasonable, non-arbitrary and not against public
policy may be enforced against RMRP and each of the
RMRP Principals. It is further agreed by the parties
hereto that in the event of a breach or violation or
threatened breach or violation by RMRP or any of the
RMRP Principals of the provisions of this covenant,
Hops shall be entitled to an injunction (without the
provision of bond by Hops) restraining RMRP or any
such RMRP Principal from, directly or indirectly,
engaging in business in competition with Hops in
breach or violation of this covenant, and restraining
RMRP or any such RMRP Principal from any direct or
indirect association with any person, firm,
corporation, association, partnership, venture or
other entity engaging
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in business in competition with Hops or its
affiliates in the Restricted Territory, whether
directly or indirectly. Nothing herein shall be
construed as prohibiting Hops from pursuing any other
remedies available to it by law or by this Agreement
for breach, violation or threatened breach or
violation of the provisions of this covenant,
including, by way of illustration and not by way of
limitation, the recovery of damages from RMRP or the
RMRP Principals or any other person, firm,
corporation or entity. The provisions of this
covenant shall survive the termination of this
Agreement for the purpose of providing Hops with the
protection of the covenants of RMRP and each of the
RMRP Principals provided herein.
(iii) RMRP and each of the RMRP Principals hereby
acknowledge that this covenant is a reasonable and
necessary requirement of Hops for the protection of
the legitimate and valid business interests of Hops
and other restaurant operators under the System. RMRP
and each of the RMRP Principals hereby agree that
this covenant is a reasonable and necessary restraint
of trade and does not violate the Sherman Antitrust
Act, the Florida Antitrust Act or the common law. The
parties hereto specifically acknowledge and agree,
for all purposes, that the specified time period and
the specified geographical area set forth in this
covenant is both reasonable and necessary for the
protection of Hops' interests.
(iv) Should an action have to be brought by Hops against
RMRP or any of the RMRP Principals to enforce this
covenant, the period of restriction shall be deemed
to begin running on the date of entry of an order
granting Hops preliminary injunctive relief and shall
continue uninterrupted for the next succeeding five
(5) year period. RMRP and each of the RMRP Principals
acknowledge and agree that the intent and purpose of
this covenant is to preclude RMRP and each of the
RMRP Principals from competing with Hops for a full
five (5) year period and that such purpose and effect
would be frustrated by measuring the period of
restriction from the date of termination of the last
Operating Agreement where RMRP and each of the RMRP
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Principals failed to honor this covenant until
directed to do so by court order.
(v) The restrictions contained in Section 6(a) above
shall not apply to ownership of less than one percent
(1.0%) of the shares of a company whose shares are
listed and traded on a national securities exchange,
if such shares are owned for investment only, and are
not owned by an officer, director, employee or
consultant of such publicly traded company.
7. DISPUTE RESOLUTION.
(a) In the event there should arise any misunderstanding or
disagreement between the parties as to the compliance with the terms and
conditions of this Agreement, or as to whether either party has grounds
hereunder entitling it to terminate this Agreement, or any other dispute related
to this Agreement including arbitrability of the dispute, it is mutually agreed
that such differences, if they cannot be satisfactorily resolved between the
parties within thirty (30) days after either party seeking arbitration delivers
notice of same to the other party, shall be submitted to a single arbitrator, if
the parties agree upon one; otherwise, to a board of three arbitrators, of whom
one shall be selected by each party within twenty (20) days after such 30-day
period, and a third arbitrator shall be selected by these two selected
arbitrators. If one of the parties fails to timely select an arbitrator, the
arbitrator that was timely selected shall be the sole arbitrator. If neither
party timely selects an arbitrator, the first arbitrator selected thereafter
shall be the sole arbitrator, no others being appointed. Where each of the
parties timely selects an arbitrator, said arbitrators will have ten (10) days
from the end of the twenty (20) day period to select the third arbitrator. In
the event the arbitrators are unable to timely agree on the third arbitrator,
either party may petition any official of the American Arbitration Association
for appointment of the third arbitrator and the parties agree to accept any
arbitrator appointed by such official subject to the limitations hereof.
Arbitrators must be reasonably independent of the parties and their principals.
Persons who are hereby expressly disqualified to serve as arbitrators are
principals of the parties, relatives of said principals, employees of the
parties or said principals, persons not residing within 100 miles of Tampa,
Florida, attorneys, accountants and other business persons having professional
or business relationships with the parties or said principals.
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(b) Arbitration shall proceed in accordance with the rules of the
American Arbitration Association. The arbitration shall be conducted in Tampa,
Florida. The arbitrators shall have all the powers permitted arbitrators under
the laws of the State of Florida. The decision and award of such single
arbitrator, if only one is used, or any two of such board if three are used, as
the case may be, shall be final and binding upon the parties, their heirs, legal
representatives, successors and assigns respectively, and shall have the same
force and effect as though such decision had been handed down by a court of
final jurisdiction. The cost of arbitrator(s) is to be shared equally by the
parties. Each party shall be responsible for and shall pay for the expenses of
presenting its respective case, including depositions, attorney's fees and costs
and witness fees which expenses shall not be subject to award by the
arbitrator(s), nor shall such expenses be subject to award by any court or other
judicial authority. The parties shall deposit, at the beginning of the
arbitration process, with the arbitrator(s) an amount equal to the estimated
costs (including arbitrators' time charges) of the total arbitration.
Arbitrators' time charges shall be at the same rate for all arbitrators. Each of
the parties hereto covenants to abide by any arbitration decision.
(c) In the event that it becomes necessary for any party to this
Agreement to enforce a decision of arbitration through legal proceedings, the
parties hereby agree that the Circuit Court for the Thirteenth Judicial Circuit
in and for Hillsborough County, Florida, Tampa Division, and the United States
District Court for the Middle District of Florida, Tampa Division, shall have
exclusive jurisdiction to hear and determine any such matters. Each party hereby
expressly submits and consents in advance to such jurisdiction and venue in any
action or proceeding whether commenced by or brought against them in either of
such Courts. In any such court proceeding the prevailing party shall be entitled
to reimbursement of all costs and expenses, which may be reasonably incurred or
paid in connection therewith, including without limitation, attorney's fees and
costs at the trial court and appellate court levels.
8. REPRESENTATIONS AND WARRANTIES. RMRP and each of the RMRP Principals
hereby jointly and severally acknowledge, represent, warrant and agree as
follows:
(a) RMRP and each of the RMRP Principals hereby acknowledge that all
documents, records and books pertaining to the Partnership, the Initial
Restaurant and the proposed Additional Restaurants have been made available for
inspection by them, their attorney, their accountant and/or their other
advisors. RMRP and each of the RMRP Principals or their respective advisors have
had a reasonable opportunity to ask questions
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of and receive answers from representatives of Hops and HRI concerning the
Partnership, the Initial Restaurant and the proposed Additional Restaurants, and
to obtain additional information, to the extent possessed or obtainable without
unreasonable effort or expense, necessary to verify the accuracy of the
information contained in all documents and materials that have been made
available to him and/or his advisors. All such questions have been answered to
the full satisfaction of RMRP and each of the RMRP Principals. No oral
representations have been made or oral information furnished to RMRP or the RMRP
Principals or their respective advisors in connection with his review of the
documents, records and books pertaining to the Partnership, the Initial
Restaurant and the proposed Additional Restaurants that were in any way
inconsistent with such documents, records and books.
(b) RMRP has been advised by Hops and HRI that the Partnership was
formed for the purpose of developing and operating, directly or indirectly, up
to three (3) "Hops Grill & Bar" restaurants in the Territory; provided, however,
that the decision as to the actual development and the timing of the actual
development of the Initial Restaurant and the Additional Restaurants will rest
solely with Hops and HRI and may be influenced by numerous factors beyond the
control of Hops, HRI, and RMRP or the RMRP Principals, some of which may not
relate to the Partnership or its restaurant operations and accordingly, the
Initial Restaurant and the Additional Restaurants may not be built in accordance
with the original schedule, if any, developed by Hops and HRI and, it is
possible that, in a worst case, all or a portion of the Initial Restaurant and
the Additional Restaurants may not be constructed. Additionally, once
constructed, any decision regarding the continued operation of some or all of
the Initial Restaurant or the Additional Restaurants, if any, will rest solely
with HRI and may be influenced by factors unrelated to the business of the
Partnership.
(c) RMRP and each of the RMRP Principals is aware that HRI is an
affiliate of Hops and that as a part of its business operations, Hops will be
actively involved in the development and operation of restaurants other than
those to be owned and operated, directly or indirectly, by the Partnership and
that RMRP shall not have any right in or to any portion of the business
operations or opportunities of Hops or its affiliates or successors other than
those specifically granted to RMRP herein. RMRP and each of the RMRP Principals
acknowledges that some of the restaurants that may be developed, directly or
indirectly, by Hops (other than the Initial Restaurant or the Additional
Restaurants to be developed hereunder) may directly or indirectly compete with
the restaurants to be developed and operated hereunder and may even be located
within the Territory.
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(d) RMRP and each of the RMRP Principals (i) has adequate means of
providing for his or its current needs and possible personal contingencies, (ii)
has no need for liquidity with respect to his or its interest in the
Partnership, (iii) is able to bear the substantial economic risk of holding his
or its interest in the Partnership for an indefinite period, (iv) can afford a
complete loss of his or its contributions to and obligations with respect to the
Partnership, and (v) does not have an overall commitment to assets that are not
readily marketable that is disproportionate to his or its net worth, and RMRP's
purchase of its interest in the Partnership will not cause such overall
commitment to become excessive.
(e) Each of the RMRP Principals hereby represent and warrant that they
are "Accredited Investors" as that terms is defined in Rule 501 of Regulation D
promulgated by the Securities and Exchange Commission under the Securities Act
of 1933, as amended. RMRP and each of the RMRP Principals understands that
neither the offering nor the sale of RMRP's interest in the Partnership has been
registered under the Act or any state securities laws in part, in reliance upon
the representations and warranties of RMRP and each of the RMRP Principals. RMRP
and each of the RMRP Principals further understands that RMRP's interest in the
Partnership will have to be held indefinitely unless (i) the sale or other
transfer thereof is registered under the Act, or (ii) an exemption from such
registration is available. RMRP further understands that (i) HPI has the right
to purchase its interest in the Partnership in the circumstances and on the
terms specified in the Partnership Agreement, and (ii) the transferability of
its interest in the Partnership is subject to the requirements of this Agreement
and the Partnership Agreement.
(f) RMRP's interest in the Partnership is being purchased solely for
its own account and not for the account of any other person and not for
distribution, assignment or resale to others and no other person has a direct or
indirect beneficial interest in RMRP's interest in the Partnership.
(g) RMRP and each of the RMRP Principals hereby confirms to Hops, HRI
and the Partnership that neither the entry of performance of this Agreement or
the Agreements for the Partnership or any Second-Tier Partnership will cause
RMRP or any of the RMRP Principals to breach any existing agreement or
obligation of RMRP or any of the RMRP Principals with any other person or
entity.
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9. MISCELLANEOUS.
(a) Any notice or other communication required or which may be given
hereunder shall be in writing and shall be delivered personally, telegraphed or
telexed, or sent express mail, postage prepaid, and shall be deemed given when
so delivered personally, telegraphed or telexed, or if mailed, two days after
the date of mailing, as follows:
Hops:
3030 North Rocky Point Drive West
Suite 650
Tampa, Florida 33607
Attention: David L. Mason
RMRP or RMRP Principals:
5521 West Cypress Street
Tampa, Florida 33607
(b) BINDING AGREEMENT. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their successors and assigns; provided,
except as provided in Section 9(h) hereof that this Agreement may not be
assigned by any party without the consent of the other party to this Agreement.
(c) AMENDMENT. This Agreement may be amended only by an instrument in
writing executed by all of the parties to this Agreement.
(d) ENTIRE AGREEMENT. This Agreement, including the exhibits and other
documents referred to herein which form a part hereof, contains the entire
understanding of the parties with respect to the transactions contemplated
hereby and supersede all prior arrangements or understandings with respect
thereto. There are no restrictions, agreements, promises, warranties, covenants,
or undertakings other than those expressly set forth herein or therein.
(e) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
each of which shall be deemed an original.
(f) GOVERNING LAW. This Agreement shall be governed by the laws of the
State of Florida (regardless of the laws that might be applicable under
principles of conflicts of law) as to all matters including, but not limited to,
matters of validity, construction, effect and performance.
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(g) SEPARABILITY. If any section, subsection or other provision of this
Agreement, or the application of such section, subsection or provision, is held
invalid, then the remainder of this Agreement and the application of such
section, subsection or provision to person or circumstance other than those with
respect to which it is held invalid, shall not be affected thereby.
(h) ASSIGNMENT. Except as provided in this Section 9(h), neither this
Agreement nor the rights hereunder may be assigned by RMRP. RMRP hereby agrees
that the RMRP Principals may provide for the transfer of their equity interests
in RMRP among the RMRP Principals; PROVIDED, HOWEVER, that one or more of the
RMRP Principals shall, at all times, retain a minimum of one hundred percent
(100%) of the equity interest in and absolute voting and other control of RMRP,
unless otherwise consented to by Hops in writing (or its successor or assigns),
which consent may be unreasonably withheld. Additionally, the Bylaws of RMRP
shall reflect that the issuance and transfer of shares of stock (or other equity
interests in such corporation) is restricted by the terms of this Agreement and
the following legend shall appear conspicuously upon the face of each stock
certificate of (or certificate otherwise representing an interest in) such
corporation: "The transfer of this stock (or interest) is subject to the terms
and conditions of a Development Option Agreement dated effective as of January
1, 1996 by and between RMRP, RMRP Principals, and Hops and the Bylaws of the
corporation." RMRP hereby acknowledges that the purpose of the aforesaid
transfer restrictions and procedures is to protect the trademarks, trade secrets
and operating procedures of Hops. RMRP and each of the RMRP Principals hereby
acknowledges that non-compliance with the transfer restrictions and procedures
set forth in this Section 9(h) shall constitute a breach of this Agreement by
RMRP.
[SIGNATURE BLOCKS ON FOLLOWING PAGE]
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IN WITNESS WHEREOF, the undersigned have entered into this Agreement as
of the date first above written.
WITNESS: HOPS:
HOPS GRILL & BAR, INC.
/s/ TERENCE TERENZI By: /s/ DAVID L. MASON
- ----------------------------- ------------------------------------
/s/ R. ALAN HIGBEE David L. Mason, President
- -----------------------------
As to Hops
RMRP:
ROCKY MOUNTAIN RESTAURANT
PARTNERS, INC.
/s/ CURT P. CREELY By: /s/ L. LOWERY BALDWIN
- ----------------------------- -----------------------------------
L. Lowry Baldwin, President
As to RMRP
RMRP PRINCIPALS:
/s/ CURT P. CREELY /s/ L. LOWEY BALDWIN
- ----------------------------- ---------------------------------------
L. Lowry Baldwin, Individually
/s/ CURT P. CREELY /s/ CHARLES M. DAVIS, JR.
- ----------------------------- ---------------------------------------
Charles M. Davis, Jr., Individually
/s/ CURT P. CREELY /s/ JOHN I. BALDWIN
- ----------------------------- ---------------------------------------
John I. Baldwin, Individually
/s/ ANGEL DELMONTE
---------------------------------------
Angel DelMonte, Individually
/s/ CARLOS J. ALFONSO
---------------------------------------
Carlos J. Alfonso, Individually
/s/ ALBERT E. ALFONSO
---------------------------------------
Albert E. Alfonso, Individually
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EXHIBIT A
"RMRP PRINCIPALS"
(LIST OF SHAREHOLDERS OF ROCKY MOUNTAIN RESTAURANT PARTNERS, INC.)
PERCENTAGE OF
NAME OWNERSHIP
---- -------------
L. Lowry Baldwin 37%
Charles M. Davis, Jr. 37%
John I. Baldwin 13%
Angel DelMonte 4.4%
Carlos J. Alfonso 4.3%
Albert E. Alfonso 4.3%
EXHIBIT 10.7
LIMITED PARTNERSHIP AGREEMENT
OF
HOPS OF THE ROCKIES, LTD.
(FIRST TIER)
THIS LIMITED PARTNERSHIP AGREEMENT ("Agreement") is entered into and
effective as of the filing of the Certificate of Limited Partnership of Hops of
the Rockies, Ltd., with the Secretary of State of the State of Florida by and
among: HOPS OF THE ROCKIES, INC., a Florida corporation, as General Partner
(hereinafter the "General Partner"), and HOPS PARTNERS, INC., a Florida
corporation (hereinafter "HPI"), ROCKY MOUNTAIN RESTAURANT PARTNERS, INC., a
Florida corporation (hereinafter "RMRP"), and JOSEPH F. TIMBERLAKE III, an
individual (hereinafter "Manager"), as Limited Partners (HPI, RMRP, and Manager
are hereinafter referred to individually as a "Limited Partner" and collectively
as the "Limited Partners"), and the SHAREHOLDERS OF RMRP identified on the
signature page of this Agreement (the "RMRP Principals"). The General Partner
and the Limited Partners may sometimes be hereinafter referred to as the
"Partners."
W I T N E S S E T H:
WHEREAS, the Partners desire to form a limited partnership under the
laws of the State of Florida for the purpose of owning and operating, directly
or indirectly, up to three (3) restaurants under the Hops System (as described
herein) in the "Territory" described in the Hops of the Rockies Development
Option Agreement among Hops Grill & Bar, Inc. ("Hops"), RMRP and the
shareholders of RMRP of even date herewith (the "Development Option Agreement").
NOW, THEREFORE, in consideration of the mutual promises and agreements
herein contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound thereby, agree as set forth herein.
SECTION 1. ORGANIZATION OF THE LIMITED PARTNERSHIP.
(a) FORMATION. The Partners hereby form a limited partnership
(hereinafter the "Partnership") under the Florida Revised Uniform Limited
Partnership Act, which Act, except as otherwise provided herein, shall govern
the rights and obligations of the parties hereto.
(b) NAME. The Partnership name shall be, and the business of the
Partnership shall be conducted under the name, "Hops of the Rockies, Ltd."
(c) PRINCIPAL ADDRESS. The principal office address of the Partnership
in Florida, unless changed by the General Partner upon notice to the Limited
Partners, shall be c/o Hops of the Rockies, Inc., 3030 North Rocky Point Drive
West, Suite 650, Tampa, Florida 33607.
(d) PURPOSE AND CHARACTER OF THE BUSINESS OF THE PARTNERSHIP. The
purpose and character of the business of the Partnership shall be:
<PAGE>
(i) to own the majority equity ownership, directly or
indirectly, of one or more restaurants that feature a
microbrewery under the Hops System (together with any and
all other directly or indirectly related business) within
the Territory and to exercise majority equity control of
each such restaurant (hereinafter the "Business"); and
(ii) to undertake and carry on all activities necessary or
advisable in connection with the operations and management
of the Business, all upon such terms and conditions as the
General Partner may deem to be in the best interest of the
Partnership subject to the limitations provided herein.
(e) TERM. The Partnership shall commence as of the date of the filing
of the Certificate of Limited Partnership after the execution of the Partnership
Agreement by all the Partners and shall continue for a period ending on the
earliest to occur of the following:
(i) December 31, 2045;
(ii) The date on which substantially all of the property owned by
the Partnership is sold or otherwise disposed of and the
proceeds distributed in accordance with the provisions
hereof;
(iii) The date on which the Partnership is dissolved pursuant to
the provisions hereof; or
(iv) The date on which the Partnership is dissolved by operation
of law or judicial decree.
SECTION 2. CAPITAL OF THE PARTNERSHIP.
(a) GENERAL PARTNER.
(i) The General Partner and its address are set forth in Exhibit
2(a) hereto.
(ii) The General Partner has made or shall immediately make
Capital Contributions to the Partnership as set forth
opposite its name on Exhibit 2(a) hereto. The General
Partner shall NOT have the right to withdraw or reduce its
contribution to capital except upon dissolution or as
otherwise provided in this Agreement or by law.
(b) LIMITED PARTNERS.
(i) The Limited Partners and their addresses are set forth in
Exhibit 2(a) hereto.
(ii) The Limited Partners shall immediately make, or have already
made, Capital Contributions to the Partnership in the
amounts set forth opposite their respective names in Exhibit
2(a) hereto. The Limited Partners shall NOT have the right
to withdraw or reduce their respective
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contributions to capital except upon dissolution or as
otherwise provided in this Agreement or by law.
(c) CAPITAL ACCOUNTS.
(i) CAPITAL ACCOUNT BALANCES. The initial balance in each
Partner's Capital Account shall be equal to the Capital
Contributions made by such Partner.
(ii) Each Partner's Capital Account shall be increased by:
(A) the amount of cash and the Book Value of any property
subsequently CONTRIBUTED to the Partnership by such
Partner (net of liabilities secured by such contributed
property which the Partnership is considered to assume
or take subject to under Code Section 752); and
(B) such Partner's allocated share of Profits; and
(C) any items of income or gain of the Partnership
specially allocated to such Partner.
(iii) Each Partner's Capital Account shall be decreased by:
(A) the amount of cash and the Book Value of any property
DISTRIBUTED to such Partner (net of liabilities secured
by such distributed property which the distributee
Partner is considered to assume or take subject to
under Code Section 752), and
(B) such Partner's share of Losses, and
(C) any items of deduction, loss or deduction specially
allocated to such Partner.
(d) REPAYMENT OF CAPITAL ACCOUNTS AND INTEREST THEREON.
(i) Each Partner shall NOT accrue interest on its Capital
Account.
(ii) Under circumstances involving a return of any Capital
Contribution, no Partner shall have the right to receive
property other than cash, except as may be otherwise
specified by the General Partner.
SECTION 3. PROFITS, LOSSES.
(a) SHARING OF LOSSES. The Partners shall share Losses as follows:
(i) First, to each of the Partners proportionately to the extent
of their respective Positive Capital Account(s), if any,
until such are reduced to zero;
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(ii) Second, to each of the Partners based on their percentage
sharing of losses as described on Exhibit 2(a) hereto (or as
such percentages are changed pursuant to the terms hereof).
(b) SHARING OF PROFITS. The Partners shall share Profits as follows:
(i) First, to the General Partner and Limited Partners in
proportion to their respective Negative Capital Account(s),
if any, until such are equal to zero.
(ii) Second, to each of the Partners based upon their percentage
sharing of profits as described on Exhibit 2(a) (or as such
percentages are changed pursuant to the terms hereof).
SECTION 4. REQUIRED LOANS.
(a) REQUIRED LOANS.
(i) In addition to the initial Capital Contributions of the
Partners as provided in Section 2 above, during the period
commencing with the date of this Agreement and ending on the
twentieth (20th) anniversary of such date, each of the
Partners, except Manager, agrees to loan or cause to be
loaned to the Partnership, on an as needed basis, amounts
required for the operation and business activities of the
Partnership ("Required Loans"); provided, the total
principal amount of all such Required Loans shall not exceed
in the aggregate U.S. $200,000 per restaurant owned, in the
majority, directly or indirectly by the Partnership. All
Required Loans shall be apportioned between the Partners,
except Manager (whose apportioned share of the Required
Loans shall be provided by HPI), on a pro rata basis, based
upon their then-current percentage sharing of Profits.
(ii) The Required Loans shall be in the nature of revolving lines
of credit to the Partnership to be advanced against a
non-negotiable promissory note of the Partnership to each
respective Partner. Each such advance shall bear interest
from the date advanced until repaid at the Prime Rate and
all principal and any accrued but unpaid interest not paid
pursuant to Section 6(a)(ii)(B) hereof, shall become finally
due and payable, if not sooner paid pursuant to Section
6(a)(ii)(B) hereof, at the end of the twentieth (20th) year
of the term of this Agreement. Upon the expiration of the
twentieth (20th) anniversary of the term of this Agreement
(whether or not the Agreement is renewed), none of the
Partners shall have further obligations to make further
Required Loans to the Partnership. Accrued interest upon
outstanding advances under the Required Loans, if any, shall
be due and payable on a quarterly basis with both principal
and interest to be prepaid from Cash Flow from Operations.
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(iii) The aforesaid Required Loans shall be made to the
Partnership upon calls made by the General Partner. Upon the
issuance of a call for Required Loans each Partner, except
Manager (whose apportioned share of the Required Loans shall
be provided by HPI), shall proportionately make such
Required Loans within five (5) business days after receipt
of the notice of such call.
(b) [REMOVED AND RESERVED.]
SECTION 5. ADDITIONAL CAPITAL CONTRIBUTIONS AND LOANS.
(a) ADDITIONAL RESTAURANTS. If the Partnership shall develop and
operate more than one restaurant as contemplated by the Development Option
Agreement, the Partners, except Manager (whose additional capital contributions
shall be governed by the terms of the Employment Agreement by and among the
Partnership, the General Partner and Manager), shall proportionately contribute
such additional capital to the Partnership as shall be deemed necessary by the
General Partner, consistent with the terms of the Development Option Agreement,
when requested to do so by the General Partner. In the event RMRP shall elect
not to participate in any "Additional Restaurant" (as that term is defined in
the Development Option Agreement) pursuant to the terms of the Development
Option Agreement, such election shall not be considered to be a default under
this Agreement and such Additional Restaurant (and future Additional
Restaurants) will be developed outside of the Partnership as described in the
Development Option Agreement.
(b) ADDITIONAL FUNDING.
(i) If additional funds, over and above: (x) the initial Capital
Contributions of the Partners, (y) Capital Contributions
required for additional restaurants as described in Section
5(a) above, and (z) any other required Capital Contributions
or any Required Loans from any Partner should become
necessary, then the General Partner shall take the following
actions:
(A) Review the need for funding and verify that additional
funds are definitely required;
(B) Utilize any existing and available contingency
financing line to fund the requirement;
(C) Review the project requirements and determine if
aspects of the project can be revised, reduced,
modified, etc.; and
(D) Consider the existing financing and ascertain
feasibility of expanding the available financing,
refinancing, etc. to fund the requirement;
(ii) Upon the accomplishment of the foregoing and if such actions
do not, in the judgment of the General Partner, result in
elimination of the need for additional funding, then the
General Partner may, in its sole
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discretion, demand that the Partners, except for Manager
(whose proportionate share of a Special Contribution (as
defined herein) shall be provided by HPI or the General
Partner), in proportion with their percentage sharing of
Profits, contribute additional capital (a "Special
Contribution") or make additional loans ("Additional Loans")
to the Partnership. Such demand shall be in the form of
verbal or written notice ("Notice") to the Partners
specifying the amount of additional funds that are needed
and whether such additional funds should be contributed to
the Partnership as a Special Contribution or Additional
Loans. No creditor of the Partnership shall have any right
to force the General Partner to send a Notice.
(iii) Upon receipt of the Notice, each Partner, except Manager
(whose proportionate share of a Special Contribution (as
defined herein) shall be provided by HPI or the General
Partner), in proportion with its then percentage sharing of
Profits, SHALL as expeditiously as possible and without a
delay which will harm the Partnership (and in any event
within ten (10) days of the Notice), make such Special
Contribution or Additional Loan as required by the Notice in
proportion to each Partner's percentage sharing of Profits.
With the consent of the General Partner, the Special
Contributions or Additional Loans may be in a series made as
and when the funds become necessary, i.e. monthly to fund
operating shortfalls.
(iv) In the event that any Additional Loan is made to the
Partnership, the provisions of Section 4(a) above will
govern the interest rate of such loan and such Additional
Loan(s) shall be repaid to the Partner(s) from the
distributions of the Partnership in accordance with the
priorities set forth in Section 6 hereof.
(v) In addition to the above, any Partner may, at any time, at
the request of the General Partner make voluntary Additional
Loans to the Partnership which will, for all purposes, be
treated as Additional Loans made pursuant to a Notice given
by the General Partner pursuant to Section 5(b)(ii) above.
(c) DEFAULT IN PAYMENT TO PARTNERSHIP BY PARTNER.
(i) If at any time any Partner shall breach this Agreement by
failing to make its respective Required Loans, Additional
Loans or Special Contributions pursuant to the call
provisions of Section 4 or Section 5 (hereinafter referred
to as a "Non-Contributing Partner"), such Non-Contributing
Partner shall be considered in breach of this Agreement and
(without otherwise limiting any other remedies which the
other Partners may have against such Non-Contributing
Partner) the other Partners, except Manager, shall have the
right (but not the obligation) to make an excess
contribution ("Excess Contribution") to the Partnership to
cover such unpaid Required Loans, Additional Loans or
Special Contributions of the Non-Contributing Partner.
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(ii) In the event that a Partner makes an Excess Contribution,
such Excess Contribution shall be deemed to be a loan
("Excess Loan") to the Non-Contributing Partner by virtue
of whose breach of this Agreement such Excess Contribution
was required. The Excess Loan shall bear interest at a rate
equal to the lesser of (a) the maximum rate permitted under
applicable law or (b) the greater of (i) the Prime Rate plus
two percent (2%) or (ii) ten percent (10%) per annum, and
shall be due and payable upon demand and shall be secured by
a lien and security interest upon any distributions to be
made to the Non-Contributing Partner pursuant to this
Limited Partnership Agreement. The Excess Loan shall be an
obligation of such Non-Contributing Partner and, if not
sooner paid by such Non-Contributing Partner, shall be due
and payable out of the first available distributions to be
made to the Non-Contributing Partner by the Partnership,
with the application of payments thereof to principal and/or
interest being at the sole discretion of the payee thereof.
To the extent of any payments of Excess Loans directly by
the Partnership to any Partner who made an Excess
Contribution, such Partner who made the Excess Contribution
shall subrogate all rights which such Partner had against
the Non-Contributing Partner to the Partnership. Any
interest on Excess Loans paid by the Partnership shall be
charged solely to the capital account of the
Non-Contributing Partner who occasioned any such Excess
Loan.
(iii) Without limiting any other remedies set forth herein or at
law, if any Excess Loan is not repaid in full by such
Non-Contributing Partner within one hundred twenty (120)
days after the same has been advanced on its behalf, then
the proportionate share of Partnership Profits and Losses of
such Non-Contributing Partner shall (at the option of the
Partner who is owed any such Excess Loan) be reduced and the
proportionate share of Partnership Profits and Losses of the
Partner making any such Excess Loan shall be increased as
follows: The unpaid balance (including principal and accrued
interest) of any such Excess Loan shall be divided by a sum
equal to (a) the aggregate amount of all Capital
Contributions theretofore made to the Partnership by the
Partners (excluding any such contributions deemed to have
been made on account of any such Excess Loan), plus (b) the
unpaid balance of accrued interest and principal of any such
Excess Loan, less (c) all withdrawals of capital to all
Partners, in the aggregate. The quotient thus obtained shall
be multiplied by one hundred percent (100%). The resulting
percentage amount will then be subtracted from such
Non-Contributing Partner's then existing proportionate share
of Partnership Profits and Losses (provided same shall not
be reduced below zero) and an equivalent amount shall be
added to the respective proportionate share of Partnership
Profits and Losses of the Partner who made any such Excess
Loan. Immediately following such adjustment in the
proportionate share of Partnership Profits and Losses of the
Partners, it shall be deemed that the unpaid balance
(including principal and accrued interest) of any such
Excess Loan shall have been converted into an additional
Capital Contribution by the Partner making such Excess Loan
and a Capital Contribution
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withdrawal by the Non-Contributing Partner and the Capital
Accounts of the Partners shall be adjusted accordingly, and
the Non-Contributing Partner shall have no further liability
to repay such Excess Loan.
SECTION 6. DISTRIBUTIONS.
(a) CASH FLOW FROM OPERATIONS DISTRIBUTIONS.
(i) CASH FLOW FROM OPERATIONS TAX EFFECT. Notwithstanding
anything herein to the contrary, in the event that any
Partner receives an allocation of income, gain, etc. as
shown on the K-1 form or other federal income tax reporting
forms of similar nature prepared by or on behalf of the
Partnership which requires such Partner or its respective
partners or shareholders or ultimate owners to make a
payment in cash to the United States Internal Revenue
Service by reason of the items of allocation from the
Partnership, then the Partnership shall distribute cash, to
or on behalf of such Partner, at least equal to the actual
tax obligation (E.G., the required IRS cash payment) of such
Partner by reason of his/its status as a Partner of the
Partnership, less amounts distributed to such Partners
pursuant to this Section 6 during the past twelve months, if
any, and such distribution shall occur prior to the time
when the returns with the required cash payment are due. Any
such payments by the Partnership required by this Section
6(a)(i) will be treated as a distribution of Cash Flow from
Operations as provided in Section 6(a)(ii) below and shall
reduce any amount otherwise payable. If there is no current
entitlement then the taxes payment would be an advance
against future distributions of Cash Flow from Operations.
(ii) DISTRIBUTION OF CASH FLOW FROM OPERATIONS. Distributions of
Cash Flow from Operations may be made from time to time in
the discretion of the General Partner, in the following
order of priority:
(A) First, the General Partner shall have the right to
distribute monthly to Manager up to ten percent (10%)
of the monthly net profits of the Partnership (as
described in the Employment Agreement between Manager,
the Partnership, the General Partner and HPI) as
determined by the internal accountants of the
Partnership, with such distributions to be an advance
against the proportional distributions to which Manager
is otherwise entitled from time to time;
(B) Second, before any further distribution of Cash Flow
from Operations, the Partnership shall pay in full any
Additional Loans, Excess Loans and Required Loans as
defined herein;
(C) Third, Cash Flow from Operations shall then be
distributed to the General Partner and Limited Partners
proportional in relation to their net Positive Capital
Accounts until reduced to zero;
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(D) Fourth, Cash Flow from Operations shall then be
distributed to the Partners based upon their then
percentage sharing of profits as described on Exhibit
2(a) (or as such percentages are changed pursuant to
the terms hereof).
(b) DISTRIBUTION OF CAPITAL. The General Partner may at anytime
proportionately return to the Partners all or any portion of their respective
Capital Contributions, subject to the limitations provided in the Act.
SECTION 7. CERTAIN RIGHTS AND LIMITATIONS OF THE LIMITED PARTNERS.
(a) NO PARTICIPATION IN THE MANAGEMENT OF PARTNERSHIP BUSINESS.
(i) Except as specifically provided herein, the Limited
Partners, AS LIMITED PARTNERS, shall not take part in, or
interfere in any manner with, the conduct or control of the
Partnership business and the Limited Partners shall not have
any right or authority to act for or bind the Partnership,
AND THE LIMITED PARTNERS SHALL THEREFORE HAVE NO PERSONAL
LIABILITY FOR THE OBLIGATIONS OR LIABILITIES OF THE
PARTNERSHIP SOLEY BY REASON OF THEIR STATUS AS LIMITED
PARTNERS OF THE PARTNERSHIP. Any individual Limited Partner
(or employee, partner, shareholder, officer or director of a
Limited Partner) may be an employee, officer and/or director
of the General Partner and accomplish any duties as such
employee, executive or director in his representative
corporate capacity and not as a limited partner or as an
individual.
(ii) During the term of this Agreement, RMRP hereby agrees that
neither RMRP, any RMRP Principal (as that term is defined in
the Development Option Agreement) nor any affiliate of RMRP
shall in any way engage in or own an interest in any other
business venture of any nature which might be competitive
with the business of the Partnership. The Partnership and/or
the General Partner may engage any Limited Partner or
persons or firms associated with them for specific purposes
and may otherwise deal with such Limited Partner or persons
in firms associated with them on terms and for compensation
to be agreed upon by any such Limited Partner (or persons or
firms associated with them, as the case may be) and the
Partnership or the General Partner, as the case may be.
(iii) EACH Partner, except Manager, MUST CONSENT to the following
matters (which are specifically excluded from the powers of
the General Partner):
(A) the dissolution and winding-up of the Partnership;
(B) a change in the basic nature of the Business of the
Partnership;
(C) the admission, removal or retention of a new General
Partner;
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(D) an amendment to this Partnership Agreement.
All other matters are under the exclusive discretion of
the General Partner.
(b) EXERCISE OF RIGHTS, POWERS AND DUTIES. If a vote of the
Partnership is required in the exercise of rights, powers and duties hereunder,
each of the General Partner and the Limited Partners shall have one (1) vote for
each percentage of interest in Profits owned by such Partner on all issues,
questions, matters and decisions with respect to the Partnership to the extent
not resolved by the provisions of this Agreement, and to such extent such
matters shall be resolved by the vote of a majority in interest of the Partners,
and if the matter cannot be resolved by vote, the matter shall be submitted to
arbitration as provided herein.
SECTION 8. RIGHTS, POWERS AND DUTIES OF THE GENERAL PARTNER.
(a) RIGHTS AND POWERS OF THE GENERAL PARTNER.
(i) Except as otherwise provided herein, the General Partner
shall have the full and exclusive right, power and authority
to manage and control the business and affairs of the
Partnership and to make all decisions regarding the business
of the Partnership, and the General Partner shall have all
of the rights, powers and obligations of a general partner
of a limited partnership under the Act.
(ii) In addition to any other rights and powers which it may
possess, and except as otherwise limited by this Agreement,
the General Partner shall have specific rights and powers
required or appropriate to the management of the Partnership
business which are as follows:
(A) To do all acts and things in the ordinary course of
business related to the business of the Partnership;
(B) To manage, develop, promote, improve, maintain and
service Partnership business;
(C) To acquire and to enter into any contract or policy of
liability and/or other insurance which the General
Partner deems necessary and proper for the protection
of the Partners and the Partnership and for the
conservation of its assets or for any purpose
convenient or beneficial to the Partnership;
(D) To employ from time to time persons, firms or
corporations for the operation and management of the
Partnership business, including, but not limited to,
attorneys, accountants, advisors, supervisors, managers
and personnel, consultants and engineers, on reasonable
terms and for reasonable compensation;
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(E) To compromise, arbitrate, or otherwise adjust claims in
favor of or against the Partnership and to commence or
defend litigation with respect to the Partnership or
any assets of the Partnership;
(F) To make (or elect not to make) elections under the tax
laws of the United States or any other country or any
state as to the treatment of Partnership income, gain,
loss, deduction and credit, and as to all other
relevant matters; and
(G) To perform any and all other acts or activities
customary or incidental to the Partnership purposes and
the foregoing powers and to execute any and all
instruments to effectuate the Partnership purposes and
foregoing powers.
(iii) The General Partner shall have all the rights and powers and
be subject to all the liabilities of a partner in a
partnership without limited partners.
(iv) The General Partner shall have the right, in its sole
discretion, to cause the Partnership to invest in one or
more restaurants pursuant to the terms in the Development
Option Agreement. The General Partner shall have the right
to provide the restaurant manager(s) with equity without
payment of substantial capital or loans other than service
contributions to the extent permitted by the Development
Option Agreement.
(b) TRANSACTIONS WITH GENERAL PARTNER.
(i) The Partnership may enter into reasonable arm's-length
transactions, contracts, agreements or arrangements with any
Partner and/or any affiliate of any Partner.
(ii) The Partnership may purchase materials, goods, and supplies,
and may purchase or rent equipment from any Partner and/or
any affiliate of any Partner if approved in advance by the
General Partner. If a Partner and/or affiliate of any
Partner sells, rents or furnishes materials, goods,
supplies, or equipment for the benefit or use, directly or
indirectly, of the Partnership, then the charges, rents and
prices therefor shall be fair and competitive.
(iii) Nothing herein shall preclude reimbursement for reasonable
and necessary out-of-pocket Partnership business expenses
paid by a Partner which are not otherwise provided for in
this Agreement so long as such reimbursements are approved
in advance by the General Partner.
(c) DUTIES AND OBLIGATIONS OF THE GENERAL PARTNER.
(i) With the assistance of such accounting firm as may be
selected by the General Partner, the General Partner shall
prepare, or cause to be prepared, and shall file on or
before the due date (or any extension
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thereof) any United States federal, state or local tax
returns required to be filed by the Partnership. The General
Partner shall cause the Partnership to pay any taxes payable
by the Partnership.
(ii) The General Partner shall manage the Partnership to the best
of its ability and conduct the operations contemplated under
this Agreement in a careful and prudent manner in accordance
with good and traditional business practice.
(iii) The General Partner shall be responsible for and shall have
the authority to conduct all general administrative matters
of the Partnership which shall include, but shall not be
limited to, the coordination of:
(A) all legal and accounting matters on behalf of the
Partnership, including the maintenance of the general
accounting systems of the Partnership and coordinating
the functions of the accountants and lawyers that will
service the Partnership;
(B) all payroll matters on behalf of the Partnership;
(C) all accounts payable matters on behalf of the
Partnership (except those that
must be handled on a local level, which shall be the
responsibility of RMRP);
(D) all banking and financial matters of the Partnership;
(E) all financial reporting to Hops pursuant to the terms
of any Operating Agreement utilizing restaurant and
other operating data to be provided by RMRP as the
operator of the restaurants; and
(F) the compliance by the Partnership of all administrative
aspects of any Operating Agreement.
All costs and expenses payable to third parties relating to
administrative matters of the Partnership shall be the sole
responsibility of the Partnership. [BY WAY OF EXAMPLE, BUT
NOT IN LIMITATION, OF THE ABOVE, THE GENERAL PARTNER WILL
UNDERTAKE (I) ALL OF THE INTERNAL ACCOUNTING AND BOOKKEEPING
OF THE PARTNERSHIP, INCLUDING THE DAILY MAINTENANCE OF THE
PARTNERSHIP'S BOOKS AND RECORDS AND (II) WILL COORDINATE
WITH THE PARTNERSHIP'S ACCOUNTANTS, THE PREPARATION OF THE
PARTNERSHIP'S TAX RETURNS AND THE AUDIT OF THE PARTNERSHIP'S
BOOKS AND RECORDS; AND THE GENERAL PARTNER SHALL RECEIVE NO
COMPENSATION FOR SUCH INTERNAL ACCOUNTING AND BOOKKEEPING OR
FOR THE TIME SPENT BY THE GENERAL PARTNER IN COORDINATING
WITH THE PARTNERSHIP'S ACCOUNTANTS, HOWEVER, THE PARTNERSHIP
SHALL BE SOLELY RESPONSIBLE FOR ALL FEES AND EXPENSES OWING
TO THE PARTNERSHIP'S ACCOUNTANTS FOR THE PREPARATION OF SUCH
TAX RETURNS AND THE CONDUCT OF THE AUDIT.]
(iv) As consideration for the performance of the duties set forth
herein, the General Partner shall be entitled to receive
from the Partnership a monthly operating fee equal to six
percent (6%) of each calendar month's gross sales of the
Partnership. Such fee:
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(A) shall be paid on or before the tenth day of the next
full month immediately following the month to which the
fee relates. Any such fee which is not paid when due
shall bear interest from and after the due dates
thereof at the rate of twelve percent (12%) per annum
or the highest rate permitted by applicable law,
whichever is less; and
(B) shall be in addition to any fee, charge or expense that
shall be owing to the General Partner or Hops (or any
affiliate or successor of Hops) pursuant to the terms
of this Agreement, the Development Option Agreement or
any Operating Agreement related to any restaurant to be
owned or operated by the Partnership.
For purposes of this Section 8(c)(iv) the term "gross sales"
shall mean all receipts (cash, cash equivalents or credit)
or revenues from sales from all business conducted directly
or indirectly by the Partnership and from all services
performed directly or indirectly by the Partnership.
SECTION 9. LIMITED PARTNER SPECIAL PROVISIONS.
(a) DEVELOPMENT OPPORTUNITY. The Partners acknowledge that RMRP
has certain development options on up to three (3) restaurants in the state of
Colorado pursuant to the Development Option Agreement of even date herewith
which shall govern certain of the Partners with respect to the matters set forth
therein. To the extent required by any lender to the Partnership, HPI and RMRP
and the RMRP Principals shall guarantee such financing on a pro rata basis. Any
other third-party financing of the Partnership shall also be so guaranteed.
(b) WITHDRAWAL OF OR DISTRIBUTIONS IN REDUCTION OF CAPITAL
CONTRIBUTIONS.
(i) No Limited Partner shall have the right to withdraw or
reduce its Capital Contribution to the Partnership, except
as a result of the dissolution of the Partnership or as
provided in this Agreement.
(ii) No Limited Partner shall have the right to demand or receive
property other than cash in return for its Capital
Contribution. Any withdrawal or reduction of Partnership
capital actually received by a Partner shall be made in
accordance with this Agreement; provided, however, that no
part of the capital shall be withdrawn unless all
liabilities of the Partnership (except liabilities to
Partners) have been paid, or unless the Partnership has
assets sufficient to secure payment of the same.
(iii) The Limited Partners understand that pursuant to the Act if
the Partnership distributes cash (or other assets), which
causes a reduction of their respective Capital Accounts in
the Partnership below the stated capital of the Partnership
specified in the Affidavit of Capital Contributions, for one
(1) year such Limited Partner may be liable to
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the Partnership for any sum returned to it, but not in
excess of the sum distributed to it which reduced the
Capital Account below the stated capital, with interest, to
discharge Partnership liabilities to all creditors who
extended credit, or whose claims arose, before such return
of capital to such Limited Partner.
(c) NO RIGHT OF PARTITION OR RIGHT TO COMPEL SALE. The Limited Partners
shall not have the right to require the partition of Partnership property or to
compel any sale or appraisal of Partnership assets except as provided in this
Agreement, notwithstanding any provision of law to the contrary.
(d) RIGHT TO LIST OF PARTNERS ON REQUEST. Any Limited Partner shall be
entitled, upon request, to have mailed to it a list of the names, addresses, and
ownership of record of each Partner of the Partnership.
(e) RIGHT TO INFORMATION. Each Limited Partner shall be entitled to (at
such Limited Partner's expense):
(i) inspect the Partnership books kept at the place selected by
the General Partner, during reasonable business hours, upon
reasonable notice, and copy any of them at such Limited
Partner's expense; and
(ii) have, on demand, true and full information of all things
materially affecting the Partnership and a formal accounting
of Partnership affairs whenever circumstances render it just
and reasonable.
(f) ACTS AND EXERCISE OF RIGHTS UNDER THIS AGREEMENT. No act granted
to, or right exercised by, a Limited Partner under this Agreement shall impose
any personal liability on any Limited Partner.
(g) WITHDRAWAL OF A LIMITED PARTNER. No Limited Partner may withdraw
from the Partnership.
(h) STATUS OF RMRP AND THE RMRP PRINCIPALS. Except as otherwise
specifically set forth herein, neither RMRP nor any of the RMRP Principals shall
have any approval or consent rights with respect to the business or operations
of the Partnership (or any Second-Tier Partnership). All business and
operational decisions directly or indirectly affecting the Partnership shall be
solely within the control of the General Partner.
SECTION 10. GENERAL PARTNER SPECIAL PROVISION.
WITHDRAWAL OF A GENERAL PARTNER AND SALE, ASSIGNMENT AND ENCUMBRANCE OF
A GENERAL PARTNER'S INTEREST. The General Partner shall not withdraw from the
Partnership, or resign as the General Partner, without the prior written consent
of the Limited Partners.
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SECTION 11. DISPOSITION OF A PARTNER'S PARTNERSHIP INTEREST
(a) The Partners acknowledge that HPI or the General Partner has
a right to purchase the Partnership Interest of Manager pursuant to an
Employment Agreement of even date herewith (the "Employment Agreement") and the
Partners hereby consent to such purchase and agree to abide by the terms of the
purchase right in the Employment Agreement. The Partners acknowledge and agree
that the limitations on the Manager's Partnership Interest are specified in the
Employment Agreement and the Agreement between Manager, the Partnership and the
General Partner under which his partnership interest was purchased (the
"Purchase Agreement") and included herein by this reference and shall govern
this Agreement. The Partners hereby agree that in the event that HPI or the
General Partner purchases the Partnership Interest of Manager pursuant to the
Purchase Agreement, HPI, in its sole discretion, may select an individual to
assume the responsibilities of Manager and to allocate a Partnership Interest to
such individual, and the Partners hereby agree to execute and deliver any and
all instruments and documents, including any amendment to this Agreement deemed
necessary or appropriate by HPI or the General Partner, to effectuate such
transactions.
(b) (i) At no time during the term of this Agreement shall RMRP,
directly or indirectly, sell, assign, transfer, mortgage,
encumber, pledge or otherwise similarly deal with or dispose
of all or any portion of its interest in the Partnership,
without first obtaining the written consent of the General
Partner, or, in the absence of such written consent, without
first complying with the terms of this Section 11. Any
attempted sale, assignment, transfer, mortgage, pledge,
grant, hypothecation or other disposition of any interest in
the Partnership by RMRP, in violation of the provisions of
this Section 11, shall be null and void and of no force or
effect. For purposes of this Agreement, the transfer or
distribution, directly or indirectly, of an equity interest
or other rights in or the issuance of additional securities
in RMRP, other than pursuant to the provisions of this
Section 11 shall be deemed a disposition of the Partnership
interest of RMRP and the General Partner shall be entitled
to purchase the Partnership interest of RMRP in accordance
with the terms of Section 11(c) hereof.
(ii) Each of the RMRP Principals hereby acknowledges that the
other Partners have consented to the participation of the
RMRP Principals through RMRP as a convenience to the RMRP
Principals. The Partners hereby agree that the RMRP
Principals may provide for the transfer of their equity
interests in RMRP among the RMRP Principals; PROVIDED,
HOWEVER, that one or more of the current RMRP Principals
shall, at all times, retain a minimum of one hundred percent
(100%) of the equity interest in and absolute voting control
of RMRP, unless otherwise consented to by the General
Partner in writing, which consent may be unreasonably
withheld. If consented to by the General Partner, as a
condition to such consent, the General Partner may require
any, any person or entity to which such issuance of or
transfer of an equity interest in RMRP is made to execute
reasonable confidentiality and transfer agreements as are
deemed necessary by the General Partner to assure the
compliance by such transferees with the spirit of this
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Agreement and any agreements related to this Agreement
and/or the Hops System. Additionally, the Bylaws of RMRP
shall reflect that the issuance and transfer of shares of
stock (or other equity interests in RMRP) is restricted by
the terms of this Agreement. The following legend shall
appear conspicuously upon the face of each stock certificate
of (or certificate otherwise representing an interest in)
RMRP: "The transfer of this stock (or interest) is subject
to the terms and conditions of a Partnership Agreement dated
January 12, 1996 by and between this corporation and Hops of
the Rockies, Inc. and others and the Bylaws of the
corporation." RMRP hereby acknowledges that the purpose of
the aforesaid transfer restrictions and procedures is to
protect the trademarks, trade secrets and operating
procedures of Hops and affiliates and the partnership
interests of General Partner contained herein. RMRP hereby
acknowledges that non-compliance with such transfer
restrictions and procedures shall constitute an absolute
breach of this Agreement by RMRP. Upon the execution of this
Agreement and periodically thereafter at the reasonable
request of the General Partner, RMRP shall provide the
General Partner with a photocopy of its current Bylaws and
all issued and outstanding stock certificates to demonstrate
compliance with this Agreement.
(c) (i) RMRP shall not transfer any Interest in the Partnership
for a period beginning upon the date hereof and ending three
(3) years after the date of the opening of the initial
restaurant directly or indirectly by the Partnership,
without the express prior written consent of the General
Partner which may be withheld in the discretion of the
General Partner. If following the period described in the
immediately preceding sentence, RMRP desires, directly or
indirectly, to sell, assign, transfer or in any way dispose
of all or any portion of the Partnership Interest of RMRP to
any third party in a BONA FIDE transaction, RMRP shall first
serve notice (hereinafter called an "Offer to Sell") to that
effect upon the General Partner. The Offer to Sell shall set
forth the amount of Partnership Interest of RMRP desired to
be sold or otherwise disposed of, the price, terms and
conditions of such proposed sale and the name and address of
the proposed third party purchaser (and in the case of a
proposed purchaser that is not a natural person, the
principals of such proposed purchaser), and shall offer to
sell such Partnership interest to HPI at the price and on
the terms of sale described in the Offer to Sell.
(ii) The General Partner shall have the absolute right to
prohibit the sale of the Partnership Interest identified in
the Offer to Sell if the General Partner, in its reasonable
determination, shall disapprove of the purchaser identified
in the Offer to Sell. In making such determination, the
General Partner may consider, among other things, the
reputation, financial position and restaurant operating
experience of the proposed purchaser, as well as concerns as
to the protection of the trade secrets and proprietary
information of the Hops System that result from the
competitive nature of any other business operations directly
or indirectly related to the potential purchaser. RMRP shall
promptly provide the General Partner with any information
regarding
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the potential purchaser, reasonably requested by the General
Partner, in order to evaluate the potential purchaser,
including, but not limited to financial statements and a
detailed business history of such potential purchaser. The
General Partner will notify RMRP in writing of its approval
or disapproval of any such potential purchaser within sixty
(60) days after receipt by the General Partner of the Offer
to Sell.
(iii) Whether or not the potential purchaser is approved by the
General Partner as provided in Section 11(c), HPI shall have
the first right to purchase all of the Partnership Interest
so offered by giving notice of acceptance to RMRP within one
hundred twenty (120) days after receipt by the General
Partner of the said Offer to Sell.
(iv) In the event the General Partner shall not have disapproved
of the purchaser identified in the Offer to Sell as set
forth in Section 11(c)(ii) above and HPI fails or refuses to
purchase the Partnership Interest of RMRP as provided in
Section 11(c)(iii) above, RMRP shall be free to sell the
Partnership Interest so identified in the Offer to Sell to
the person or entity identified in the Offer to Sell on the
price and terms set forth in the Offer to Sell; provided,
however, that RMRP shall not transfer or otherwise dispose
of such Partnership Interest to any person or entity other
than the third party identified in the Offer to Sell or for
a price less than or on terms more favorable than those set
forth in the Offer to Sell without first reoffering such
Partnership Interest to HPI as set forth in Section
11(c)(i). If RMRP does not consummate the sale of its
Partnership Interest so identified in its Offer to Sell
within ninety (90) days after the expiration of the period
for HPI's acceptance of such Offer to Sell, the provisions
of this Article 11 shall reattach to such Interest and such
Interest shall not be sold without reoffer to HPI.
(v) The provisions of this Section 11(c) to the contrary
notwithstanding, RMRP shall make no transfer of its
Partnership Interest as provided in this Section 11(c)
unless the person or entity acquiring such Interest shall
execute and deliver to the General Partner (or HPI) such
documentation as the General Partner (or HPI) may reasonably
require to assure the confidentiality of the trade secrets
and proprietary information associated with the Hops System
and to make the purchaser a party to this Agreement
(specifically including but not limited to the transfer
restrictions as they previously related to RMRP and the
purchase option of HPI set forth in Section 11(i) hereof)
and all other agreements related to the restaurants operated
by entities owned by the Partnership to which RMRP was (or
is) a party.
(d) (i) If RMRP or any of the RMRP Principals shall breach this
Agreement, or if the Development Option Agreement shall be
terminated or breached other than by Hops (or any affiliate
thereof), RMRP shall be deemed to have made an Offer to Sell
(which shall be deemed received by the General Partner only
when the General Partner has actual knowledge of such
breach) all of the Partnership Interest owned by RMRP to HPI
for the price and upon the terms specified in this Section
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11(d). HPI shall have the right to purchase the Partnership
Interest of RMRP so offered by giving notice of acceptance
to RMRP within one hundred twenty (120) days after the
deemed receipt by the General Partner of the Offer to Sell.
In the event that HPI fails or refuses to purchase all of
the Partnership Interest of RMRP, the remaining provisions
of this Agreement shall continue to apply to the Partnership
Interest of RMRP.
(ii) DETERMINATION OF PURCHASE PRICE AND TERMS. In the event that
the Partnership Interest of RMRP is to be purchased pursuant
to the foregoing provisions of this Section 11(d), the
following provisions shall apply:
(A) PRICE. The purchase price of the Partnership Interest
of RMRP shall be determined pursuant to Section
11(f)(ii) hereof.
(B) TIME AND METHOD OF PAYMENT. Upon the closing of any
sale pursuant to this Section 11(d), HPI shall pay the
purchase price for the Partnership Interest of RMRP
purchased pursuant to this Section 11(d) as follows:
(1) PAYMENT UPON CLOSING. At the option of HPI, all of
the purchase price or an amount equal to twenty
percent (20%) of the purchase price shall then be
paid in cash.
(2) PROMISSORY NOTE. Any part of the purchase price
which is not paid in cash shall be evidenced by a
negotiable promissory note of HPI payable to and
delivered to RMRP. The promissory note shall bear
interest at the Prime Rate and shall be payable
over a period of sixty (60) months with interest
only on a quarterly basis payable during the first
twelve (12) months and thereafter sixteen (16)
equal quarterly payments of principal (totaling all
of the principal due thereunder) and interest
payable during the following forty-eight (48)
months. The promissory note of HPI shall provide
that more or the entire principal sum remaining
unpaid at any time may be paid at any time with
interest to date of payment only. The promissory
note shall also provide for acceleration of the
maturity of the unpaid principal and accrued
interest at the option of HPI upon default in the
payment of any installment of principal or interest
for fifteen (15) days or more.
(e) [REMOVED AND RESERVED.]
(f) (i) For purposes of this Section 11, the following terms shall
have the following meanings:
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(A) "LPP" means RMRP's percentage sharing of the
Profits of the Partnership as described on Exhibit
2(a) hereof (or as such percentage is changed
pursuant to the terms of this Agreement);
(B) "BV" means the Book Value of the Partnership as
defined in Section 22(b) hereof as of the end of
the month immediately preceding the event (or the
last to occur of the events) which shall cause the
purchase of RMRP's Partnership Interest pursuant to
this Section 11; and
(C) "CF" means the Partnership's Cash Flow from
Operations (as defined in Section 22(e) hereof) for
the most recent 12 months of operations of the
Partnership.
(ii) The purchase price for the Partnership Interest of RMRP to
be purchased pursuant to Section 11(d) above shall be the
lesser of:
(A) LPP x BV; or
(B) LPP x 5 x CF.
(iii) The purchase price for the Partnership Interest of RMRP to
be purchased pursuant to Section 11(c) shall be:
LPP x 5 x CF.
(iv) The purchase price for the Partnership Interest of RMRP
that may purchased pursuant to Section 11(i) only shall be
its "fair market value" which shall be calculated by
determining the fair market value of the Partnership and
multiplying such value by RMRP's then current percentage
sharing of the Profits of the Partnership. The fair market
value of RMRP's Partnership Interest may be determined upon
the mutual agreement of HPI and RMRP at any time during the
period of thirty (30) days after RMRP's receipt of the Call
Notice (as defined below). In the event that HPI and RMRP
are unable to agree upon the fair market value of RMRP's
Partnership Interest during such thirty (30) day period,
then, at the request of HPI, the fair market value of RMRP's
Partnership Interest shall be determined by an appraisal to
be made by an independent appraiser jointly selected by HPI
and RMRP. If HPI and RMRP cannot agree upon an appraiser,
then within forty (40) days of the Call Notice each party
shall select an independent appraiser and within fifty (50)
days of the Call Notice, the two appraisers selected by HPI
and RMRP shall select a third independent appraiser, and the
appraisal shall be made by the third appraiser. HPI and RMRP
shall work together, in good faith, to obtain a final
appraisal, if necessary, within seventy (70) days of the
date of the Call Notice. If an appraisal shall become
necessary pursuant to this Section 11(f)(iv), HPI and RMRP
shall work in good faith with the appraiser performing the
appraisal to obtain a final appraisal within seventy (70)
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days of the Call Notice (or such longer period of time as
the appraiser may advise the parties is required). The
results of such appraisal shall be binding upon RMRP and
each of the RMRP Principals. Notwithstanding any other
provision of this Section 11 to the contrary, if an
appraisal occurs pursuant to this Section 11(f)(iv), HPI
shall have thirty (30) days following the announcement of
the appraisers' decision within which to elect whether or
not to purchase RMRP's Partnership Interest as described in
the Call Notice (as defined below). In the event HPI elects
not to purchase the Partnership Interests of RMRP, the Call
Notice originally issued by HPI shall be deemed null and
void and all provisions of this Section 11 shall continue to
apply to RMRP and its Partnership Interest. In the event of
such an appraisal, each party shall bear its own legal and
other costs and shall split the appraisal fees.
(g) [REMOVED AND RESERVED.]
(h) [REMOVED AND RESERVED.]
(i) In the event that the Partnership, directly or indirectly, opens to
the public the Initial Restaurant (as defined in the Development Option
Agreement) and two (2) or more Additional Restaurants (as defined in the
Development Option Agreement), HPI shall have the right, but not the obligation,
at any time and from time to time after the date upon which the second
Additional Restaurant is opened to the general public, upon notice (the "Call
Notice") in accordance with Section 17 hereof to RMRP, to acquire all or any
part of RMRP's Partnership Interest at the purchase price set forth in Section
11(f)(iv) with the terms of purchase to be as otherwise specified in Section
11(d)(ii)(B) hereof. The Call Notice shall set forth (A) the amount of RMRP's
Partnership Interest to be purchased by HPI pursuant to this Section 11(i) and
(B) the date upon which the closing of such purchase shall take place. The
closing of such purchase(s), if any, pursuant to this Section 11(i) shall occur
on a date set forth by HPI which date shall be on or before the date which is
ninety (90) days after the determination of a final purchase price pursuant to
Section 11(f)(iv) whether by the agreement of HPI and RMRP or appraisal.
(j) (i) With respect to the purchase of the Partnership interest
of RMRP pursuant to the terms of Sections 11(d) and 11(i)
hereof, in the event that Hops Grill & Bar, Inc. (the
current owner of the Hops System, as that term is defined in
Section 22(k) hereof) or any affiliate of Hops Grill & Bar,
Inc. or any other entity that has been formed to perpetuate
the development of restaurants under the Hops System
(hereinafter referred to collectively as "Public Hops") has
completed its initial public offering pursuant to a
registration statement filed with and declared effective by
the United States Securities and Exchange Commission, then
at the SOLE DISCRETION of HPI (or its successors or
assigns), HPI (or its successors or assigns) may make
payment of the purchase price for the purchase of RMRP's
partnership under Sections 11(d) and 11(i) hereof by
delivery of stock of Public Hops valued as set forth in
Section 11(j)(ii) hereof.
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(ii) For purposes of determining the number of shares of stock to
be delivered by HPI (or its successors or assigns) to RMRP
pursuant to a purchase of RMRP's Partnership interest to be
paid in Public Hops stock pursuant to Section 11(j)(i), HPI
(or its successors or assigns) shall deliver to RMRP at the
closing of such purchase, the number of shares of Public
Hops common stock determined by dividing (x) the applicable
purchase price as set forth in Section 11(f) hereof by (y)
the mean of the daily averages of the reported high and low
sale prices of Public Hops common stock on its primary
market during each of the preceding five trading days ending
on the day fifth trading day prior to the closing of the
purchase.
(iii) In the event that HPI (or its successors or assigns) elects
to purchase RMRP's Partnership Interest in exchange for
Public Hops common stock pursuant to Section 11(j)(i)
hereof, HPI (or its successors or assigns) shall cause
Public Hops to enter into, effective as of the date of such
closing, a registration rights agreement with RMRP in
substantially the form of the Registration Rights Agreement
attached to this Partnership Agreement as Exhibit 11(j)(iii)
hereto.
(k) (i) If HPI proposes to transfer any of its Partnership
Interest in a "Qualifying Transaction" (as that term is
defined in Section 11(k)(ii) below), then HPI shall permit
RMRP, or cause RMRP to be permitted, to sell, and at HPI's
request RMRP shall sell, for the same proportionate
consideration and otherwise on the same terms and conditions
obtained by HPI in such Qualifying Transaction such portion
of RMRP's current Partnership Interest as is determined by
multiplying RMRP's current percentage share of Profits and
Losses in the Partnership by a fraction, the numerator of
which is shall be the percentage share of Profits and Losses
in the Partnership being sold by HPI in such Qualifying
Transaction and the denominator of which shall be the total
percentage share of Profits and Losses in the Partnership
then held by HPI.
(ii) For purposes of this Section 11(k), the term Qualifying
Transaction shall mean the sale or other transfer for
consideration, at the conclusion of which Hops (whether
through HPI, the General Partner, or any affiliate or
successor of Hops) shall no longer, directly or indirectly
(such as through HPI or the General Partner or any affiliate
or successor of Hops), have at least a 50.01% Interest in
the Profits or Losses of the Partnership. Under no
circumstances shall any transfer of any Interest in the
Partnership by HPI to Hops or any affiliate or successor of
Hops be considered a Qualifying Transaction.
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SECTION 12. DISSOLUTION, LIQUIDATION AND TERMINATION OF THE PARTNERSHIP.
(a) DISSOLUTION OF THE PARTNERSHIP.
(i) The Partnership shall automatically dissolve upon the first
to occur of any of the following events:
(A) The withdrawal, as defined in the Act, of a General
Partner, unless:
(1) the remaining General Partner(s), if any, elect in
writing within ninety (90) days after such event to
reconstitute the Partnership, to continue as the
General Partner(s) and to continue the Partnership
and its business as provided hereinafter; or
(2) if there is no remaining General Partner, within
ninety (90) days after such event, a majority of
the Limited Partners by Interest agree in writing
to reconstitute the Partnership and to elect a
successor general partner, as of the date of the
withdrawal of the General Partner or Partners, to
continue the business of the Partnership, and such
successor general partner agrees in writing to
accept such election as provided hereinafter.
(B) The sale or other disposition, not including an
exchange, of all of the assets of the Partnership
(except under circumstances where all or a portion of
the purchase price is payable after the closing of the
sale or other disposition);
(C) The expiration of the term of the Partnership as set
forth herein;
(D) The execution by those Partners owning at least
fifty-one percent (51%) of the Interest of the
Partnership of an instrument dissolving the
Partnership; or
(E) The occurrence of any other event that would cause the
mandatory dissolution of the Partnership under the Act.
(b) CONTINUATION OF THE PARTNERSHIP.
(i) Notwithstanding anything contained herein to the contrary,
(A) the dissolution and commencement of winding up of a
General Partner that itself is a separate partnership, or
(B) in the case of a General Partner that is a corporation,
the filing of a certificate of dissolution or its equivalent
for such corporation or the revocation and nonreinstatement
of its character, shall not constitute the "withdrawal" of
any such General Partner for purposes of the Act and shall
not consequently cause the dissolution of the Partnership.
In any such event, however, the Interest in the Partnership
of any General Partner with respect to
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which any such event has occurred shall, upon election of a
majority in interest of the Limited Partners, be converted
to that of a Limited Partner, and such Partner shall have
none of the powers of a General Partner under this Agreement
or applicable law, and shall have only the rights and powers
of a Limited Partner in the Partnership with the same rights
of a Limited Partner to share in any Partnership profits,
losses, gains and distributions in accordance with its
Interest.
(ii) Upon the occurrence of the Partnership having no General
Partners, the Limited Partners may, within ninety (90) days
after the occurrence of such event, continue the Partnership
and the Partnership shall continue as a limited partnership
pursuant to this Agreement; provided, however, that the
Limited Partners then shall elect a substitute General
Partner who agrees to act as General Partner and continue
the Partnership. If a substitute General Partner is so
selected and accepts, such substitute General Partner shall
acquire an Interest in the Partnership which will entitle
the substitute General Partner to hold in the aggregate at
least a one percent (1%) Interest, which one percent shall
be transferred by and come from the Interest of the former
General Partner without compensation to the former General
Partner for same. Subject to other written agreements and
exceptions agreed to by the Limited Partners, the substitute
General Partner shall assume from and after the date of
substitution and upon becoming a party of this Partnership
Agreement, all the rights, powers and obligations of the
General Partner under this Partnership Agreement. In the
event a substitute General Partner can not be appointed and
admitted within a reasonable time after the special meeting
called pursuant to this Section, and there is no General
Partner remaining, the Partnership shall be dissolved and
liquidated as provided herein.
(iii) Upon the occurrence of the expiration of the term of the
Partnership, the Partners by majority vote in Interest may
within thirty (30) days after the occurrence of such event,
elect to continue the Partnership. Upon such election, the
Partnership Agreement shall be amended to reflect the new
expiration date of the term of the Partnership as selected
by the Partners and an amended Certificate of Limited
Partnership shall be filed by the General Partner to reflect
same.
(c) ADDITIONAL GENERAL PARTNER. In the event a General Partner's
interest is converted to that of a Limited Partner, a majority of the Limited
Partners may admit an additional General Partner to the Partnership.
(d) DEATH, ETC. OF A LIMITED PARTNER. The death, disability,
dissolution, or adjudication as bankrupt of a Limited Partner shall not dissolve
the Partnership, but the rights of a Limited Partner to share in the Profits and
Losses of the Partnership and to receive distributions of Partnership funds
shall, upon the happening of such an event, devolve upon the Limited Partner's
estate, legal representative or successors in interest, as the case may be,
subject to this Agreement and any other agreement of the Partners, and the
Partnership shall continue as a limited partnership.
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(e) PROVISIONS CUMULATIVE; WAIVER. All provisions of this Agreement
relative to the dissolution, liquidation and termination of the Partnership
shall be cumulative, that is, the exercise or use of one of the provision hereof
shall not preclude the exercise or use of any other provision hereof. Each
Partner expressly waives any right which it might otherwise have to dissolve the
Partnership except as set forth in this Section 12. Nothing contained in this
Section 12 is intended to grant any Partner the right to dissolve the
Partnership at will (by retirement, dissolution, resignation, withdrawal or
otherwise), or to exonerate any Partner from liability to the Partnership and
the remaining Partners if such Partner acts in contravention hereof.
(f) LIQUIDATION.
(i) Upon dissolution of the Partnership, its liabilities shall
be paid in the order provided herein. The General Partner
shall cause the Partnership's property to be sold in such
manner as to obtain the best prices for such property, and
shall cause the cancellation of the Partnership's
Certificate of Limited Partnership. Pending such sales, the
General Partner shall have the right to continue to operate
and otherwise to deal with the Partnership property. In the
event there is no General Partner remaining, the other
Partners by majority vote in Interest shall elect, in
accordance with the provisions hereof, a person to perform
the functions of the General Partner in liquidating the
assets of the Partnership and winding up its affairs. Gain
or loss realized on the sale(s) or other disposition(s) of
the Partnership's assets will be credited to (in the case of
gain) or charged against (in the case of loss) each
Partner's Capital Account to the extent allocable to it
hereunder.
(ii) In settling accounts after dissolution, the assets of the
Partnership shall be paid out in the following priority
order after the allocation of the Partnership Profits and
Losses pursuant to Section 3(a) and 3(b):
(A) to secured parties in repayment of indebtedness owed;
(B) to unsecured third party creditors, in the order of
priority as provided by law;
(C) to the holders of the indebtedness owed for any Partner
financing proportionally until paid in full;
(D) to reserves as specified by the General Partner;
provided, however, that at the expiration of such
period of time as a majority in Interest of the
Partners shall deem advisable, the balance of such
reserves remaining after the payment of such
contingencies shall be distributed in the manner
hereinafter set forth in this Section;
(E) to each Partner (proportional to their respective Net
Capital Investment) the accounts of their respective
Net Capital Investment;
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(F) to distribute all remaining cash proportionately to the
Partners based on their relative positive Capital
Accounts;
(G) to each Partner in accordance with their then sharing
of Profits.
(g) TERMINATION OF PARTNERSHIP.
(i) Upon dissolution and liquidation of the Partnership, the
Partnership shall be terminated as rapidly as business
circumstances will permit.
(ii) After payment of all expenses of liquidation and of all
debts and liabilities of the Partnership in such order or
priority as provided herein, and all resulting items of
Partnership income, gain, loss or deduction are credited or
debited to the capital accounts of the Partners the
Partnership shall be terminated formally for state and
federal purposes.
(h) FINAL ACCOUNTING. Each of the Partners shall be furnished an
audited statement setting forth the assets and liabilities of the Partnership as
of the date of the winding-up of the Partnership's affairs. Upon compliance by
the winding-up General Partner or the dissolution trustee, as the case may be,
the Partners shall cease to be partners and the General Partner or trustee shall
execute and cause to be filed a certificate of cancellation of the Certificate
of Limited Partnership of the Partnership and any and all other documents
necessary with respect to such termination and cancellation.
SECTION 13. REPORTING. The General Partner shall keep all records in accordance
with the provisions of Section 704(b) of the Code and provide monthly updates
regarding actual project costs compared with budget estimates, operations status
reports delineating actual results compared with economic pro forma estimates,
business estimates necessary to achieve break even, and a marketing plan
outlining business prospects.
SECTION 14. POWERS AND COMPLIANCE.
(a) POWERS. The Partnership shall be empowered to do any and all
acts and things necessary, appropriate, incidental to, or convenient for, the
furtherance and accomplishment of the purposes stated in Section 1(d) hereof,
including, but not limited to, the following:
(i) To develop, convey, buy, own, improve, rent, lease, sell,
operate and generally deal in all kinds of property
(personal and real) in any manner or way whatsoever;
(ii) To borrow money and issue evidences of indebtedness and to
secure the same by mortgage, pledge or other lien or
security interest in furtherance of the business and all
purposes of the Partnership;
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(iii) To carry on any other activities and enter into, perform and
carry out contracts of any kind necessary to, in connection
with, or incidental to the accomplishment of the purposes of
the Partnership, specifically including, but not limited to,
the execution and delivery of leases, mortgage documents,
other real property instruments, the execution of contracts
with brokers, contractors, engineers, and architects, and
other related documents;
(iv) To repay in whole or in part, refinance, recast, increase,
modify or extend any mortgages affecting the assets of the
Partnership, and in connection therewith to execute any
extensions, renewals or modifications of such mortgages;
(v) To employ managers, agents and representatives for the
purpose of accomplishing the business of the Partnership and
to pay compensation therefor; and
(vi) To do any and all other acts and things which may be
necessary, incidental to, or convenient to, the conduct and
continuance of the Partnership Business as contemplated
under this Agreement.
(b) CERTIFICATE OF LIMITED PARTNERSHIP. The General Partner may
file this Limited Partnership Agreement and Certificate of Limited Partnership
as the Certificate of Limited Partnership of the Partnership with the Office of
the Secretary of State of the State of Florida, or the General Partner may at
its sole option file a separate Certificate of Limited Partnership disclosing
only the information about this Limited Partnership which is required to be
disclosed by the Florida Statutes. The General Partner shall also file as
appropriate the Affidavit of Capital Contributions certifying the capital
contributions of the Limited Partners.
(c) COMPLIANCE WITH LAW. The General Partner shall from time to
time execute or cause to be executed all such certificates and other documents
and do or cause to be done all such filings, recordings, publications and other
acts necessary (or, in the judgment of the General Partner, appropriate) to
comply with the applicable laws of any jurisdiction in which the Partnership
shall conduct its business.
(d) STATUTORY AGENT. The statutory agent for service of process on the
Partnership is Fowler, White, Gillen, Boggs, Villareal and Banker, P.A.
(Attention: R. Alan Higbee, Esq.), whose address is 501 East Kennedy Boulevard,
Suite 1700, Tampa, Florida 33602. The statutory agent for service of process may
be changed at any time by act of the General Partner.
SECTION 15. AMENDMENTS.
(a) PROPOSAL AND ADOPTION OF AMENDMENTS GENERALLY.
(i) Any amendment to this Agreement may be proposed by any
Partner.
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(ii) Amendments to this Agreement shall be adopted only if the
General Partners and the Limited Partners, except Manager,
have approved the Amendment.
(iii) The General Partner, without the necessity of signatures of
other Partners, except as required hereunder, shall, as soon
as possible after the adoption and execution of any
amendment to this Agreement, make any filings or
publications required or desirable to reflect such
amendment, including any required filing or recordation of
any certificate of limited partnership or other instrument
or similar document.
SECTION 16. MEETINGS, CONSENTS AND VOTING.
(a) MEETINGS. The General Partner may call a meeting of the Partners at
the principal place of business of the Partnership in Florida.
(b) CONSENTS AND ACTS. Any consent or act of a Partner required by this
Agreement may be given as follows:
(i) by a written consent, given by the Partner, to the act or
thing or consent.
(ii) by the affirmative vote by the Partner to the doing of the
act or thing for which the consent is solicited at any
meeting of the Partners.
(c) VOTING. Each Partner shall be entitled to one vote per percentage
point of Partnership Interest (proportioned for fractions of a percent).
Decisions of the Partnership, except as specifically otherwise provided for in
this Partnership Agreement, shall be accomplished by majority vote of the
Interest of the Partners. Any vote of a Partner may be cast by another Partner
or Person pursuant to a written proxy in favor of such other Partner or Person.
SECTION 17. NOTICE; NOTIFICATION.
(a) MANNER OF NOTICE AND CHANGE OF ADDRESS. Any Notice required or
desired to be made in connection with this Agreement shall be made in
conformance with the definition of same contained herein. Any Partner may, by
Notice to the other Partners, specify any other address for the receipt of
notices, notifications, requests, consents, approvals, waivers or other
communications in connection with this Agreement.
(b) NOTIFICATION TO THE PARTNERSHIP OR THE GENERAL PARTNER. Any Notice
to the Partnership or the General Partner shall be sent to the principal office
of the Partnership, as set forth in this Agreement, or as same may be changed by
Notice of the General Partner.
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SECTION 18. BOOKS AND RECORDS; ACCOUNTING; TAX ELECTIONS; ETC.
(a) CAPITAL TRANSFERS.
(i) Except for any Negative Capital Account or other adverse tax
status of a Partner which shall always remain with the
transferring Partner in a partner to partner transfer until
the Interest of the transferring Partner no longer exists,
if any Partnership Interest or part thereof is transferred
in accordance with the terms of this Agreement, the
transferee shall succeed to the Capital Account of the
transferor to the extent it relates to the transferred
Partnership Interest.
(ii) In the event any assets of the Partnership are distributed
in-kind, the Capital Accounts of the Partners shall be
adjusted prior to any such distribution to reflect how any
resulting Profit and Loss, based on the Book Value of such
asset at the time of distribution, would have been
allocated.
(b) TAX INFORMATION AND ELECTIONS. The General Partner shall use its
best efforts to furnish to the Partners within ninety (90) days of the end of
each Fiscal Year all information necessary to permit the Partners to prepare all
federal, state and local tax returns they are required to file for the Fiscal
Year. The Partnership shall elect to use such methods of depreciation as the
General Partner determines. In the event of a transfer of all or part of the
Interest of any Partner in the Partnership, the Partnership may elect pursuant
to Code Section 754 to adjust the basis of the assets of the Partnership upon
written request of the transferee, unless such election will have a materially
unfavorable effect upon the Partners other than the transferee Partner.
(c) CODE SECTION 754 ELECTION. In the event of a distribution of
property made in the manner provided in Section 734 of the Code, or in the event
of a transfer of any Partnership Interest permitted by this Agreement made in
the manner provided in Section 743 of the Code, the Partners, by majority vote
in Interest, may elect to file an election under Section 754 of the Code in
accordance with the procedures set forth in the applicable regulations
promulgated thereunder.
(d) TAX RETURNS AND AUDIT. The tax returns of the Partnership shall be
prepared by, and the Partnership shall be audited by, the accounting firm
selected by the General Partner.
(e) ALLOCATION IN EVENT OF TRANSFER. Each item of income, gain, loss,
deduction or credit allocable to a Partner's Interest that is transferred in
whole or in part during any year shall, if permitted by law, be allocated
according to the varying ownership Interests of the Partners during the year. In
applying this rule, the General Partner shall choose one of the following two
methods:
(i) prorate the Limited Partnership items over the Limited
Partnership's year by assigning the appropriate portion of
each such item to each day in the period to which it is
attributable; or
(ii) elect to utilize the precise method of an interim closing of
the Limited Partnership's books. If the General Partner
chooses the latter method,
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<PAGE>
then any period subject to this method shall be treated as a
fiscal year for purposes hereof.
(f) TAX MATTERS PARTNER. The General Partner and its chief executive
shall be the "Tax Matters Partner" for purposes of the Tax Treatment of
Partnership Items Act of 1982, and shall have the authority to exercise all
functions provided for in said Act, or in regulations promulgated thereunder by
Treasury, including, but not limited to, the extent permitted by such
regulations, the authority to delegate the function of Tax Matters Partner to
any other person. In the event the General Partner resigns as Tax Matters
Partner or its entire Partnership Interest is disposed of or terminated or
changed to a limited partnership interest, a majority in Interest of the
Partners other than the General Partner shall designate another General Partner
who shall become the Tax Matters Partner.
(g) TAX BASIS. An individual tax basis record shall be maintained for
each Partner. The tax basis record of each Partner shall be established and
shall be adjusted as of the close of each taxable year of the Partnership (or,
when appropriate, as of the close of the taxable year of the Partnership for
such Partner) in accordance with United States federal income tax law and
procedure as the same may exist from time to time.
(h) COMPLIANCE WITH CODE SECTION 704(B). The manner in which Capital
Accounts are to be maintained pursuant to Section 2 is intended to comply with
the requirements of Code Sec. 704(b), as amended, and the Treasury Regulations
promulgated thereunder (or corresponding sections of later statutes and
regulations).
(i) COMPLIANCE WITH TIMING REQUIREMENTS OF REGULATIONS. In the event
the Partnership is "liquidated" within the meaning of Treasury Regulation
Section 1.704-1(b)(2)(ii)(g) (or corresponding sections of later regulations)
distributions shall be made to the General Partner and the Limited Partners as
set forth in Section 12 who have Positive Capital Accounts in compliance with
Treasury Regulation Section 1.704-1(b)(2)(ii)(b)(2) (or corresponding sections
of later regulations).
(j) BASIS ALLOCATIONS. The basis (or cost) of any Partnership Code
Section 38 property shall be allocated among the General Partner and the Limited
Partners in accordance with Treasury Regulation Section 1.46-3(f)(2)(i). All tax
credits shall be allocated among the General Partner and the Limited Partners in
accordance with applicable law.
(k) ADDITIONAL LIMITED PARTNERS. In the event additional Partners are
admitted to the Partnership pursuant to the provisions hereof on different dates
during any fiscal year, the Profits (or Losses) allocated to the Partners for
each such fiscal year shall be allocated among the Partners in proportion to the
Partnership Interest each holds from time to time during such fiscal year in
accordance with Code Section 706, using any convention permitted by law and
selected by the General Partner.
(l) ALLOCATION TIMING. For purposes of determining the Profits, Losses
or any other items allocable to any period, Profits, Losses, and any such other
items shall be determined on a daily, monthly, or other basis, as determined by
the General Partner using any permissible method under Code Section 706 and the
Treasury Regulations thereunder.
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(m) COMPLIANCE WITH TIMING REQUIREMENTS OF REGULATIONS. In the event
the Partnership is "liquidated" within the meaning of Treasury Regulation
Section 1.704-1(b)(2)(ii)(g):
(i) distributions shall be made to the General Partner and the
Limited Partners who have Positive Capital Accounts in
compliance with Treasury Regulation Section
1.704-1(b)(2)(ii)(b)(2), and
(ii) if any Partner's Capital Account has a deficit balance
(after giving effect to all contributions, distributions,
and allocations for all taxable years, including the year
during which such liquidation occurs), such Partner shall
not contribute to the capital of the Partnership the amount
necessary to restore such deficit balance to zero in
compliance with Treasury Regulation Section
1.704-1(b)(2)(ii)(b)(3).
(n) QUALIFIED INCOME OFFSET. In the event any Partner unexpectedly
receives any adjustments, allocations or distributions described in Treasury
Regulation Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) or
1.704-1(b)(2)(ii)(d)(6) ("Unexpected Adjustments"), items of Partnership income
and gain shall be specially allocated to such Partner in an amount and manner
sufficient to eliminate the deficit balances in such Partner's capital account
created by such Unexpected Adjustments as quickly as possible. Any special
allocations of items of income or gain pursuant to this Section shall be taken
into account in computing subsequent credits of Profits or Minimum Gain so that
the net amount of any items so allocated and the Profits or Losses or Minimum
Gain, to the extent possible, be equal to the net amount that would have been
allocated to each such Partner if such Unexpected Adjustments had not occurred.
(o) ACCOUNTING.
(i) The fiscal year of the Partnership shall end on the last day
of December of each year.
(ii) The books of account of the Partnership shall be kept and
maintained at all times at the principal place of business
of the Partnership or at another place or places approved by
the General Partner. The books of account shall be
maintained according to generally accepted accounting
principles, consistently applied, and shall show all items
of income and expense.
SECTION 19. INDEMNITIES.
(a) The General Partner and its affiliates or agents, employees,
directors or officers shall not be liable, responsible or accountable in damages
or otherwise to the Partnership or any of the Partners for any act or omission
performed or omitted in good faith on behalf of the Partnership and in a manner
reasonably believed by it or them to be within the scope of the authority
granted to a General Partner by this Agreement and in the best interests of the
Partnership, including, but not limited to, errors of judgment, except for bad
faith or willful misconduct. For purpose of this provision, any action or
omission taken on advice of counsel for the Partnership shall be deemed as
having been taken in good faith; provided,
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however, that the absence of such advice shall not be deemed to constitute
evidence of other than good faith.
(b) The Limited Partners and their affiliates or agents,
employees, directors or officers shall not be liable, responsible or accountable
in damages or otherwise to the Partnership or any of the Partners for any act or
omission performed or omitted in good faith on behalf of the Partnership and in
a manner reasonably believed by it or them to be in the best interests of the
Partnership, including, but not limited to, errors of judgment. For purposes of
this provision, any action or omission taken on advice of counsel shall be
deemed in the best interest of the Partnership.
(c) The Partnership, or its receiver, custodian or trustee, shall (from
the assets of the Partnership, no Limited Partner being obligated to contribute
to the Partnership for such purpose) indemnify, save harmless and pay all
judgments and claims against any Partner, or its affiliates or agents,
employees, directors or officers, from and with respect to any liability or
damage (including all liabilities under federal and state securities laws)
incurred by reason of any action, inaction or decision performed or made in
connection with the business of the Partnership, including, but not limited to,
errors of judgment, provided that such actions, inactions or decisions were
reasonably believed by the Partner, or its affiliates or agents, employees,
directors or officers, to be in the best interests of the Partnership and,
provided further that, with regard to General Partners, such actions, inactions,
or decisions were reasonably believed by the General Partner, or its affiliates
or agents, employees, director or officers, to be within the scope of its or
their authority under this Agreement. This indemnification shall include the
payment of all attorneys' fees and other expenses incurred by the Partner, or
its affiliates or agents, employees, directors and officers, in connection with
the defense of any such claim made against it or them, including, without
limitation, any claim asserted by any Limited Partner individually, as a class
action or as a Partnership derivative action.
SECTION 20. ARBITRATION.
(a) In the event there should arise any misunderstanding or
disagreement between any of the parties as to the compliance with the terms and
conditions of this Agreement, or as to whether either party has grounds
hereunder entitling it to terminate this Agreement, or any other dispute related
to this Agreement including arbitrability of the dispute, it is mutually agreed
that such differences, if they cannot be satisfactorily resolved between the
parties within thirty (30) days after either party seeking arbitration delivers
notice of same to the other party, shall be submitted to a single arbitrator, if
the parties agree upon one; otherwise, to a board of three arbitrators, of whom
one shall be selected by each party within twenty (20) days after such 30-day
period, and a third arbitrator shall be selected by these two selected
arbitrators. If one of the parties fails to timely select an arbitrator, the
arbitrator that was timely selected shall be the sole arbitrator. If neither
party timely selects an arbitrator, the first arbitrator selected thereafter
shall be the sole arbitrator, no others being appointed. Where each of the
parties timely selects an arbitrator, said arbitrators will have ten (10) days
from the end of the twenty (20) day period to select the third arbitrator. In
the event the arbitrators are unable to timely agree on the third arbitrator,
either party may petition any official of the American Arbitration Association
for appointment of the third arbitrator and the parties agree to accept any
arbitrator appointed by such official subject to the limitations hereof.
Arbitrators must be reasonably independent of the parties and their
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principals. Persons who are hereby expressly disqualified to serve as
arbitrators are principals of the parties, relatives of said principals,
employees of the parties or said principals, persons not residing within 100
miles of Tampa, Florida, attorneys, accountants and other business persons
having professional or business relationships with the parties or said
principals.
(b) Arbitration shall proceed in accordance with the rules of the
American Arbitration Association. The arbitration shall be conducted in Tampa,
Florida. The arbitrators shall have all the powers permitted arbitrators under
the laws of the State of Florida. The decision and award of such single
arbitrator, if only one is used, or any two of such board if three are used, as
the case may be, shall be final and binding upon the parties, their heirs, legal
representatives, successors and assigns respectively, and shall have the same
force and effect as though such decision had been handed down by a court of
final jurisdiction. The cost of arbitrator(s) is to be shared equally by the
parties. Each party shall be responsible for and shall pay for the expenses of
presenting its respective case, including depositions, attorney's fees and costs
and witness fees which expenses shall not be subject to award by the
arbitrator(s), nor shall such expenses be subject to award by any court or other
judicial authority. The parties shall deposit, at the beginning of the
arbitration process, with the arbitrator(s) an amount equal to the estimated
costs (including arbitrators' time charges) of the total arbitration.
Arbitrators' time charges shall be at the same rate for all arbitrators. Each of
the parties hereto covenants to abide by any arbitration decision.
(c) In the event that it becomes necessary for any party to this
Agreement to enforce a decision of arbitration through legal proceedings, the
parties hereby agree that the Circuit Court for the Thirteenth Judicial Circuit
in and for Hillsborough County, Florida, Tampa Division, and the United States
District Court for the Middle District of Florida, Tampa Division, shall have
exclusive jurisdiction to hear and determine any such matters. Each party hereby
expressly submits and consents in advance to such jurisdiction and venue in any
action or proceeding whether commenced by or brought against them in either of
such Courts. In any such court proceeding the prevailing party shall be entitled
to reimbursement of all costs and expenses, which may be reasonably incurred or
paid in connection therewith, including without limitation, attorney's fees and
costs at the trial court and appellate court levels.
SECTION 21. MISCELLANEOUS PROVISIONS.
(a) BINDING PROVISIONS. The covenants and agreements contained herein
shall be binding upon and shall inure to the benefit of the heirs, personal
representatives, permitted successors and permitted assigns of the respective
parties hereto.
(b) APPLICABLE LAW. This Agreement shall be construed and interpreted
in accor- dance with the laws of the State of Florida. Venue shall be in
Hillsborough County, Florida for both arbitration and legal proceedings.
(c) SEPARABILITY OF PROVISIONS. If any provision or provisions
hereof are determined to be invalid and contrary to any existing or future law,
such invalidity shall not impair the operation of, or affect those portions of,
this Agreement that are valid.
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<PAGE>
(d) ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
among the parties. This Agreement supersedes any prior agreement or
understanding among the parties and may not be modified or amended in any manner
other than as set forth herein.
(e) SECTION TITLES. Section titles are for convenience of reference
only and shall not control or alter the meaning of this Agreement as set forth
in the text.
(f) WAIVER OF APPRAISAL. If any individual Partner, if any,
shall die, any inventory and appraisement of the property of the Partnership
right provided for under Florida law, or any similar provision of law which may
be enacted in substitution therefor, is hereby waived by all Partners and the
Interest of such Partner in the Partnership shall be settled and disposed of as
provided in this Partnership Agreement.
(g) FURTHER ACTION. Each Partner shall execute and deliver all
documents, provide all information and take or forebear from all such action as
may be necessary or appropriate to achieve the purposes of this Partnership
Agreement.
(h) REFERENCE TO STATUTORY OR REGULATORY PROVISIONS. All reference to
statutory or regulatory provisions shall be deemed to include reference to
corresponding provisions of subsequent law or regulation.
(i) TRIAL BY JURY WAIVER. The Partners waive trial by jury to the
extent permitted by law.
(j) LEGAL REPRESENTATION. The General Partner shall select an
attorney or attorneys to represent the Partnership. Individual attorneys for
each Partner are not prohibited from representing, and are entitled to
represent, the Partnership and each Partner, from time to time, subject to
itemization of all charges and strict allocation of those legal services
provided to the Partnership and those legal services provided to a Partner.
Itemized billings shall be available for review by any Partner. In the event
that any dispute arises between or among the Partners, each Partner hereby
agrees that any law firm that has rendered or is rendering legal services to the
Partnership or HPI (or any affiliate of the Partnership or HPI) may continue
such representation of the Partnership or HPI (or any affiliate of the
Partnership or HPI), and may represent the Partnership or HPI (or any affiliate
of the Partnership or HPI) in such dispute, and each Partner hereby waives any
actual or potential future conflict of interest that may arise as a result of
such law firm's representation of the Partnership or HPI (or any affiliate of
the Partnership or HPI) in connection with any such dispute.
SECTION 22. DEFINED TERMS. The defined terms used in this Agreement shall,
unless the context otherwise requires, have the meanings specified in this
Section. The singular shall include the plural and the masculine gender shall
include the feminine and neuter and vice versa, as the context requires.
(a) "Act" means the Florida Revised Uniform Limited Partnership Act,
as amended.
(b) "Book Value" means, with respect to any asset of the Partnership,
the adjusted basis of the asset for Federal income tax purposes, except as
follows:
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(i) The initial Book Value of any asset contributed by a Partner
to the Partnership shall be the gross fair market value of
such asset, as determined by the contributing Partner and
the Partnership;
(ii) The Book Values of all Partnership assets shall be adjusted
to equal their respective gross fair market values, as
determined by accountants, appraisers or valuation
consultants designated by the General Partner in accordance
with Code Section 704 and 7701(g) as of the following times:
(A) Acquisition of an additional interest in the
Partnership by any new or existing Partner in exchange
for more than a de minimus capital contribution if, at
the time of such acquisition, the Partnership assets
have appreciated by more than a de minimus amount since
acquisition of such Partnership assets;
(B) The liquidation of a Partner's interest in the
Partnership, other than on dissolution of the
Partnership, in exchange for more than a de minimus
distribution of money by the partnership if, at the
time of distribution, the Partnership assets have
appreciated by more than a de minimus amount;
(C) Distribution, other than on dissolution of the
Partnership, by the Partnership to a Partner of more
than a de minimus amount of Partnership assets other
than money, if the Partners reasonably determine that
such adjustment is necessary or appropriate to reflect
the relative economic interests of the Partners; or
(D) The termination of the Partnership for Federal income
tax purposes pursuant to Code Section 708(b)(1),
constituting a liquidation of the Partnership within
the meaning of Treasury Regulation Section
1.704-1(b)(2)(ii)(g).
(iii) The Book Value of any Partnership asset distributed to any
Partner shall be the gross fair market value, determined as
described above, of such asset on the date of distribution;
and
(iv) If the Book Value of an asset has been determined or
adjusted pursuant to Section 22(b)(i) or Section 22(b)(ii)
above, such Book Value shall thereafter be adjusted by the
Depreciation taken into account with respect to such asset
for purposes of computing Profits and Losses.
(c) "by the Partners" means by vote of a majority in total Interest of
the Partners.
(d) "Capital Account", as to any Partner, means such partner's capital
account as provided in Section 2 hereof.
(e) "Cash Flow from Operations" means the excess of cash revenues of
the Partnership over cash payments by the Partnership made in the ordinary
course of business, including,
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but not limited to cash receipts and payments generated by the operations of the
business of the Partnership, but determined as follows:
(i) Depreciation and amortization shall not be considered as a
deduction.
(ii) Principal debt reduction of any liability shall be
considered as a deduction.
(iii) Amounts paid for capital expenditures shall be considered as
a deduction, unless paid for by funds provided from
insurance or unless provided for by a Capital Contribution.
(iv) Any amount of compensation, fringe benefit or return on net
capital investment paid a Partner, who is acting in a
capacity other than as a Partner, pursuant to an employment
or other agreement with the Partnership shall be treated as
an expense of the Partnership in determining Cash Flow from
Operations.
(v) Any amounts set aside by the Partners for the restoration or
creation of reserves in amounts determined by the Partners,
to provide for working capital, payment of indebtedness,
expenses or contingencies of the Partnership, or in
connection with the property of the Partnership shall be
excluded.
(vi) Amounts paid to Manager pursuant to Section 6(a)(ii)(A)
hereof shall be considered as a deduction to the extent
considered as an advance against future distributions to
Manager.
(vii) Cash Flow from Operations shall not include net cash
proceeds received by the Partnership from (1) sales and
other dispositions of Partnership assets, proceeds of
mortgage financing and refinancing, proceeds of condemnation
awards, insurance proceeds, and other similar items
attributable to capital; or (2) all principal and interest
payments with respect to any note or other obligation
received by the Partnership in connection with sales and
other dispositions of Partnership assets; or (3) sales of
easements, rights of way or similar interests; in any such
case less any portion which is reinvested, used to pay
Partnership expenses, debt payments and fees or is used to
establish reserves, all as determined by the General
Partner.
(f) "Certificate of Limited Partnership" means the Certificate of
Limited Partnership as originally filed with the Secretary of State of the State
of Florida and as amended from time to time.
(g) "Code" means the United States Internal Revenue Code of 1986, as
amended (or any corresponding provision of succeeding law).
(h) "Development Option Agreement" means the Hops of the Rockies
Development Option Agreement setting forth the rights with respect to the
development of restaurants under the Hops System within the Territory.
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<PAGE>
(i) "Fiscal Year" means, with respect to the Partnership, the calendar
year.
(j) "General Partner" means Hops of the Rockies, Inc., or any successor
General Partner or other general partner.
(k) "Hops System" means the unique system of restaurant development,
theme and operation developed and owned by Hops which is, in part, characterized
by (1) the maintenance of uniform high quality standards in connection with the
preparation and sale of Hops-approved food and beverage products, (2) the
uniform high standards of appearance of the individual restaurant units, (3) the
use of distinctive trademarks, service marks, building designs and advertising
signs representing a uniformly high quality of product and services, and (4) the
undertaking by Hops and its affiliates of the obligation to maintain and enhance
the goodwill and public acceptance of the system (and of Hops' trade names,
service marks, trademarks) by strict adherence to the high standards required by
Hops.
(l) "Interest," "Limited Partnership Interest," "General Partnership
Interest" and "Partnership Interest" means the entire ownership interest (which
may, either for its Capital Account or its interest in Profits, Losses,
distributable cash flow, etc., be expressed as a percentage) of a Partner at any
particular time, including the rights and obligations of such Partner under this
Agreement and the Act.
(m) "Limited Partner" means RMRP, HPI, Manager, and any Person who is a
Limited Partner at the time of reference thereto, in such Person's capacity as a
Limited Partner in the Partnership.
(n) "Negative Capital Account" means, as to a Partner at a point in
time, the amount, if any, by which (a) the sum of the aggregate Losses and
distributions allocated to such Partner prior to such point in time exceeds (b)
the sum of the aggregate Capital Contributions of such Partner, the aggregate
operating Profits and gains allocated prior to such point in time to such
Partner.
(o) "Net Capital Investment" means the contributions made pursuant to
Section 2 reduced by distributions of capital.
(p) "Notice" means a writing, containing the information required by
this Agreement or otherwise desired to be communicated to any Person in
connection with this Partnership, sent by courier, telecopier, hand delivery or
registered or certified mail, return receipt requested, postage prepaid, to such
Person at the address of such Person specified in Exhibit 2(a) hereto if such
Person is a Partner or as changed by such Partner by Notice hereunder, and if
such Person is not a Partner, then at the last known address for such Person;
provided, however, that any communication containing the information sent to the
Person and actually received by the Person shall constitute Notice for all
purposes of this Agreement as of the date of receipt by the Person. Each such
notice shall be deemed delivered:
(i) on the date delivered to the said address if by hand
delivery,
(ii) on the date upon which it is transmitted by telecopier, if
sent by telecopier, to the proper telephone fax number of
the recipient, and
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<PAGE>
(iii) on the date upon which the return receipt is signed or
delivery is refused or the notice is designated by the
postal authorities as not deliverable, as the case may be,
if mailed by registered certified mail.
(q) "Partner" or "Partners" mean each and every General Partner,
Limited Partner, Substitute General Partner, Substitute Limited Partner,
Additional Limited Partner, Additional General Partner, Successor General
Partner, Successor Limited Partner and Special Limited Partner.
(r) "Partnership" means the Limited Partnership formed hereby, as said
Limited Partnership may from time to time be constituted.
(s) "Person" means any individual, partnership (other than this
Partnership), corporation, trust or other entity.
(t) "Positive Capital Account" means, as to a Partner at any point in
time, the amount, if any, by which (1) the sum of the aggregate Capital
Contributions of such Partner, the aggregate Profits and gains allocated prior
to such point in time to such Partner exceeds (2) the sum of aggregate Losses,
losses and distributions allocated prior to such point in time to such Partner.
(u) "Prime Rate" means the rate of interest published in THE WALL
STREET JOURNAL as the base rate on corporate loans posted by at least 75% of the
nations 30 largest banks.
(v) "Profits or Losses" for any Fiscal Year or other period shall mean
the taxable income or loss of the Partnership for such year as determined for
Federal income tax purposes, in accordance with Code Section 703(a) (for this
purpose, all items of income, gain, loss or deduction required to be separately
stated pursuant to Code Section 703(a)(1) shall be included in taxable income or
loss) with the following adjustments:
(i) Any income of the Partnership that is exempt from Federal
income tax shall be added to such taxable income or loss;
(ii) Gain or loss resulting from any disposition of Partnership
property with respect to which gain or loss is recognized
for Federal income tax purposes shall be computed with
reference to the Book Value of the property disposed of;
(iii) In lieu of the depreciation, amortization and other cost
recovery deduction taken into account in computing such
taxable income or loss, Depreciation shall be taken into
account for such fiscal year.
(iv) Any expenditure of the Partnership described in Code Section
705(a)(2)(B) or treated as Code Section 705(a)(2)(B)
expenditures pursuant to Treasury Regulation Section
1.704-1(b)(2)(iv) and not otherwise taken into account in
computing Profits and Losses shall be subtracted from such
taxable income or loss;
(v) In the event the Book Value of any Partnership asset is
adjusted pursuant to the provisions hereof, the amount of
such adjustment shall
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<PAGE>
be taken into account as gain or loss from the disposition
of such asset for purposes of computing Profits or Losses;
(vi) Notwithstanding the foregoing, any items which are specially
allocated shall not be taken into account in computing
Profits or Losses; and
(vii) Any amount of compensation, fringe benefit or return on net
capital investment paid to a Partner for any Fiscal Year
pursuant to an employment or other agreement with the
Partnership shall be treated as an expense of the
Partnership in computing Profits or Losses for such Year.
(w) "Reserves" means all Partnership reserves established for
reasonable Partnership purposes, including, but not limited to, accrued or
deferred expenses and other working capital needs, improvements, contingent
liabilities, taxes and purchases.
(x) "Territory" means that geographic territory described in the
Development Option Agreement.
[SIGNATURE ON FOLLOWING PAGES]
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<PAGE>
IN WITNESS WHEREOF, the General Partner and the Limited Partners have
executed this Limited Partnership Agreement effective as of the filing of the
Certificate of Limited Partnership. The execution by the undersigned constitutes
an affirmation under penalties of perjury that the facts stated herein are true.
HOPS OF THE ROCKIES, INC.,
a Florida corporation
By: /s/ DAVID L. MASON
-------------------------------
David L. Mason, President
"GENERAL PARTNER"
HOPS PARTNERS, INC.,
a Florida corporation
By: /s/ DAVID L. MASON
-------------------------------
David L. Mason, President
"HPI"
ROCKY MOUNTAIN RESTAURANT PARTNERS,
INC., a Florida corporation
By: /s/ L. LOWERY BALDWIN
------------------------------
L. Lowry Baldwin, President
"RMRP"
JOSEPH F. TIMBERLAKE III
/s/ JOSEPH F. TIMBERLAKE
-----------------------------
Joseph F. Timberlake III, individually
"LIMITED PARTNERS"
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RMRP PRINCIPALS:
/s/ CURT P. CREELY /s/ L. LOWRY BALDWIN
- ----------------------------- ---------------------------------------
/s/ CURT P. CREELY L. Lowry Baldwin, Individually
- -----------------------------
/s/ CURT P. CREELY /s/ CHARLES M. DAVIS, JR.
- ----------------------------- -------------------------------------
/s/ CURT P. CREELY Charles M. Davis, Jr., Individually
- -----------------------------
/s/ CURT P. CREELY /s/ JOHN I. BALDWIN
- ----------------------------- -------------------------------------
/s/ CURT P. CREELY John I. Baldwin, Individually
- -----------------------------
/s/ ANGEL DELMONTE
- ----------------------------- -------------------------------------
Angel DelMonte, Individually
- -----------------------------
- ------------------------------ /s/ CARLOS J. ALFONSO
-----------------------------------
- ------------------------------ Carlos J. Alfonso, Individually
- ------------------------------ /s/ ALBERT E. ALFONSO
-----------------------------------
- ------------------------------ Albert E. Alfonso, Individually
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<PAGE>
EXHIBIT 2(A)
GENERAL PARTNER:
================================================================================
CAPITAL
NAME AND ADDRESS CONTRIBUTION % OF PROFITS % OF LOSSES
- -------------------------------------------------------------------------------
Hops of the Rockies, Inc. $1.00 1.0% 1.0%
3030 N. Rocky Point Drive West
Suite 650
Tampa, Florida 33607
================================================================================
LIMITED PARTNERS:
================================================================================
CAPITAL
NAMES AND ADDRESSES CONTRIBUTION % OF PROFITS % OF LOSSES
- --------------------------------------------------------------------------------
Hops Partners, Inc. $50.00 50.0% 50.0%
3030 N. Rocky Point Drive West
Suite 650
Tampa, Florida 33607
- --------------------------------------------------------------------------------
Rocky Mountain Restaurant Partners,
Inc. $39.00 39.0% 39.0%
5521 West Cypress Street
Tampa, Florida 33607
- --------------------------------------------------------------------------------
Joseph F. Timberlake III $10.00 10.0% 10.0%
642 Gaylord
Denver, Colorado 80206
================================================================================
EXHIBIT 10.8
THIRD AMENDED AND RESTATED
JOINT VENTURE AGREEMENT
OF
THE HOPS NORTHEAST FLORIDA JOINT VENTURE NO. I
A FLORIDA GENERAL PARTNERSHIP
THIS THIRD AMENDED AND RESTATED JOINT VENTURE AGREEMENT is made and
entered into effective as of the 13th day of March, 1996, by and among HOPS OF
NORTHEAST FLORIDA, INC., a corporation organized and existing under the laws of
the State of Florida (hereinafter referred to as "HNEF"), FITCH, INC., a
corporation organized and existing under the laws of the State of Florida
(hereinafter referred to as "FI"), and HNEF AREA MANAGER II, LTD., a limited
partnership, owned primarily by Joe Barrett, organized and existing under the
laws of the State of Florida (hereinafter referred to as "BARLTD") (HNEF, FI,
and BARLTD are sometimes herein individually referred to as a "Venturer" and
collectively referred to as the "Venturers").
W I T N E S S E T H:
WHEREAS, the parties hereto, along with HNEF Area Manager, Ltd., a Florida
limited partnership owned primarily by Bert Costa ("COSLTD"), have previously
entered into that certain Second Amended and Restated Joint Venture Agreement,
dated September 1, 1995 (the "Joint Venture Agreement") of The Hops of Northeast
Florida Joint Venture No. 1 (the "Joint Venture");
WHEREAS, pursuant to that certain Joint Venture Interest Redemption
Agreement, dated March 13, 1996, between COSTLD and the Joint Venture, the Joint
Venture redeemed COSTLD's entire interest in the Joint Venture; and
WHEREAS, the parties hereto desire to amend and restate the Joint Venture
Agreement to reflect the fact that COSTLD is no longer a partner in the Joint
Venture.
NOW, THEREFORE, in consideration of the mutual promises and agreements
herein contained and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto, intending to be
legally bound thereby, agree as set forth herein.
DEFINITIONS
The following definitions shall apply to the following terms as used in
this Agreement:
(1) "Additional Loan(s)" means a loan(s) made to the Joint Venture
pursuant to Section 4(k)
<PAGE>
(2) "Agreement" means this Third Amended and Restated Joint Venture
Agreement of March 13, 1995, as amended or modified from time to time in
accordance with Section 18(c) hereof.
(3) "Available Cash" means, at the time of determination, all cash, demand
and time deposits, and marketable securities of the Joint Venture (other than
Capital Contributions to the Joint Venture by the Venturers), including, without
limitation, all cash receipts from conduct of the Joint Venture's business,
insurance proceeds, proceeds from the sale, exchange, condemnation or other
disposition of all or any part of the Joint Venture's property, less the sum of
all funds, reserves and other amounts as the Board of Managers shall deem
reasonable in order to provide for the Joint Venture's business, including,
without limitation, reserves for operating expenses, replacements, capital
improvements and additions relating to the business of the Joint Venture.
(4) "Balance of Required Loans" means the unpaid principal and accrued
interest thereon from time to time due and owing by a Venturer on account of
Required Loans to the Joint Venture pursuant to Section 4(h) hereof.
(5) "Barrett" means Joe Barrett.
(6) "Barrett Employment Agreement" means the Employment Agreement among
Barrett, BARLTD, HNEF, FI and other parties whereby Barrett will be employed to
serve as the Area Manager of three restaurants developed or to be developed
under the Development Option Agreement.
(7) "Barrett Purchase Agreement" means the Agreement between Barrett,
BARLTD, and other parties of even date herewith, which governs the purchase by
Barrett of his interest in BARLTD and certain other matters.
(8) "Board of Managers" means the management committee established by
Section 7(a) hereof.
(9) "Capital Contributions" means all cash sums which the Venturers may
have from time to time contributed to the capital of the Joint Venture pursuant
to Sections 4(g) and 4(i) (together with any other contributions of cash or
property to the Joint Venture by the Venturers as authorized herein).
(10) "Code" means the Internal Revenue Code of 1986, as amended and in
effect on the effective date hereof and, to the extent applicable, as
subsequently amended.
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(11) "Development Option Agreement" means the Northeast Florida
Development Option Agreement between Hops and Fitch setting forth the rights of
Fitch with respect to the development of restaurants under the Hops System
within the Territory.
(12) "Distributive Share" means the percentages set forth in Article 3 as
in effect from time to time.
(13) "Excess Contribution" means any contribution made by a Venturer to
the Joint Venture pursuant to Section 4(j) hereof which is occasioned by a
Non-Contributing Venturer's failure to make Required Loans or Special
Contributions as required herein.
(14) "Excess Loan" means the loan deemed to have been made to a
Non-Contributing Venturer as a result of an Excess Contribution pursuant to
Section 4(j) hereof.
(15) "FI" means Fitch, Inc., a Florida corporation which is wholly-owned
by Fitch.
(16) "Fitch" means Jack Camp Fitch the 100% owner of FI.
(17) "BARLTD" means HNEF Area Manager II, Ltd., a limited partnership
organized and existing under the laws of the State of Florida.
(18) "HNEF" means Hops of Northeast Florida, Inc., a Florida corporation.
(19) "Hops" means Hops Grill & Bar, Inc., a corporation organized and
existing under the laws of the State of Florida which is the developer and owner
of all rights under the Hops System.
(20) "Hops System" means the unique system of restaurant development,
theme and operation developed and owned by Hops which is, in part, characterized
by (1) the maintenance of uniform high quality standards in connection with the
preparation and sale of Hops-approved food and beverage products, (2) the
uniform high standards of appearance of the individual restaurant units, (3) the
use of distinctive trademarks, service marks, building designs and advertising
signs representing a uniformly high quality of product and services, and (4) the
undertaking by Hops and its affiliates of the obligation to maintain and enhance
the goodwill and public acceptance of the system (and of Hops' trade names,
service marks, trademarks) by strict adherence to the high standards required by
Hops.
(21) "Initial Capital Contributions" shall have the meaning set forth in
Section 4(g) hereof.
(22) "Initial Restaurant" shall mean the first restaurant developed and
opened by the Joint Venture as contemplated herein.
(23) "Joint Venture" means the Joint Venture formed by the Venturers
pursuant to this Agreement and the laws of the State of Florida.
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(24) "COSLTD" means HNEF Area Manager, Ltd., a limited partnership
organized and existing under the laws of the State of Florida.
(25) "Non-Contributing Venturer" means a Venturer or assignee who breaches
this Agreement by failing to make any Required Loan or Special Contribution
pursuant to Section 4(j).
(26) "Operating Agreements" mean the agreements to be entered into between
entities to be formed by Hops and Fitch (or their permitted assigns) governing
the development and operation of each restaurant to be opened jointly by Hops
and Fitch (or their permitted assigns) within the Territory pursuant to the
Development Option Agreement.
(27) "Prime Rate" shall be the prime rate of interest as published from
time to time in THE WALL STREET JOURNAL or if THE WALL STREET JOURNAL shall
cease to exist or cease to publish a "Prime Rate"; a mutually agreeable
substitute therefore.
(28) "Required Loans" means all amounts agreed to be loaned to the Joint
Venture pursuant to Section 4(h) hereof.
(29) "Special Contribution(s)" means the capital contributions of the
Venturers described in Section 4(i) hereof.
(30) "Territory" means that geographic territory described in the
Development Option Agreement within which, subject to the terms and conditions
set forth in the Development Option Agreement, Hops and Fitch (through the Joint
Venture or one or more other entities) may develop, own, and operate certain
restaurants under the Hops System.
ARTICLE 1
FORMATION OF THE JOINT VENTURE
(a) The Venturers hereby enter into and form a joint venture (in the form
of a general partnership) under the laws of the State of Florida for the limited
purposes and upon the terms and conditions set forth herein. This Agreement and
the joint venture formed hereunder shall be governed by Florida's Revised
Uniform Partnership Act, as codified at Sections 620.81001 to 620.8908, Florida
Statutes.
(b) The name of the Joint Venture shall be "THE HOPS NORTHEAST FLORIDA
JOINT VENTURE NO. I." The Venturers shall execute all assumed or fictitious name
certificates and take all other action required by law to comply with the laws
of the State of Florida and the assumed name act, fictitious name act or similar
statute in effect in each jurisdiction or political subdivision in which the
Joint Venture proposes to do business.
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(c) Except as expressly provided herein to the contrary, the rights and
obligations of the Venturers and the administration, dissolution and termination
of the Joint Venture shall be governed by the laws of the State of Florida, to
the extent the same is not otherwise provided in this Agreement.
(d) The business and purpose of the Joint Venture shall be limited to the
ownership and/or operation of one or more restaurant-bar-microbreweries under
the Hops System (together with any and all other directly or indirectly related
businesses) within the Territory pursuant to the terms of this Agreement and the
Development Option Agreement. The Joint Venture will enter into an Operating
Agreement with Hops governing the establishment and operation of each restaurant
to be opened within the Territory. The Joint Venture may also engage in any
other lawful business to which a general partnership may engage under the laws
of the State of Florida, upon the unanimous approval of the Venturers.
(e) The principal office of the Joint Venture shall be at 3030 North Rocky
Point Drive West, Suite 650, Tampa, Florida 33607 unless and until relocated by
the Board of Managers, but the Joint Venture may have such other places of
business within the United States, as the Board of Managers may from time to
time determine to be necessary or appropriate to carry on the business of the
Joint Venture.
ARTICLE 2
TERM OF JOINT VENTURE
Subject to the provisions of Article 13 hereof providing for the early
dissolution and liquidation of the Joint Venture, the term of the Joint Venture
shall commence as of the date hereof and terminate on the date twenty (20) years
thereafter; provided, however, that the Joint Venture shall automatically be
renewed for successive one (1) year terms unless a Venturer serves notice upon
the other Venturers to terminate the Joint Venture at the expiration of the
first term of twenty (20) years, or thereafter, at the expiration of any
subsequent one (1) year renewal term, which notice must be given at least one
hundred eighty (180) days prior to the expiration of the initial or a renewal
term.
ARTICLE 3
DISTRIBUTIVE SHARES OF VENTURERS
Subject to adjustments pursuant to other provisions hereof, the
Distributive Shares of the Venturers in the Joint Venture are as follows:
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VENTURER DISTRIBUTIVE SHARE
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HNEF 45.9%
FI 44.1%
BARLTD 10%
ARTICLE 4
CAPITAL CONTRIBUTIONS AND REQUIRED LOANS
(a) A separate capital account shall be maintained by the Joint Venture
for each Venturer in accordance with Code Sec. 704(b), as amended (or
corresponding sections of later statutes) and Treasury Regulations promulgated
thereunder.
(b) There shall be credited to each Venturer's capital account (i) the
amount of money contributed by it to the Joint Venture, (ii) the fair market
value of property contributed by it to the Joint Venture (net of liabilities
secured by such contributed property that the Joint Venture is considered to
assume, or take subject to, under Code Sec. 752, as amended (or corresponding
sections of later statutes), and (iii) allocations to it of Joint Venture income
and gain (or items thereof), including income and gain exempt from tax and
income and gain, as computed for book purposes, in accordance with Treas. Reg.
Sec. 1.704-1(b)(2)(iv)(g), as amended, (or corresponding sections of later
regulations), all as set forth pursuant to this Agreement. No Venturer shall be
entitled to contribute property to the Joint Venture unless such contribution is
approved by the Board of Managers.
(c) Each Venturer's capital account shall be decreased by (i) the amount
of money distributed to it by the Joint Venture, (ii) the fair market value of
property distributed to it by the Joint Venture (net of liabilities secured by
such property that such Venturer is considered to assume or take subject to
pursuant to Code Sec. 752, as amended (or corresponding sections of later
statutes)), (iii) allocations to such Venturer of expenditures of the Joint
Venture described in Code Sec. 705(a)(2)(B), as amended (or corresponding
sections of later statutes) and (iv) allocations of Joint Venture loss and
deduction (or items thereof), including losses or deductions, computed for book
purposes, as described in Treas. Reg. Sec. 1.704-1(b)(2)(iv)(g), as amended, (or
corresponding sections of later regulations), all as set forth pursuant to this
Agreement.
(d) An individual tax basis record shall be maintained for each Venturer.
The tax basis record of each Venturer shall be established and shall be adjusted
as of the close of each taxable year of the Joint Venture (or, when appropriate,
as of the close of the taxable year
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of the Joint Venture for such Venturer) in accordance with United States federal
income tax law and procedure as the same may exist from time to time.
(e) The manner in which capital accounts are to be maintained pursuant to
Sections 4(a)-(d) is intended to comply with the requirements of Code Sec.
704(b) and the Treasury Regulations promulgated thereunder. If, in the opinion
of the Board of Managers, the manner in which capital accounts are to be
maintained pursuant to the preceding provisions of this Article 4 should be
modified in order to comply with the requirements of Code Sec. 704(b) and the
Treasury Regulations promulgated thereunder, then notwithstanding anything to
the contrary contained in the preceding provisions of this Article 4, the Board
of Managers may, in their sole and unrestricted discretion, alter the method in
which capital accounts are maintained, and the Board of Managers shall have the
right to amend this Agreement without action by the Venturers to reflect any
such change in the manner in which capital accounts are maintained; provided,
however, that any change in the manner of maintaining capital accounts shall not
materially alter the economic agreement between the Venturers.
(f) The respective capital accounts of the Venturers shall not bear
interest. The capital of the Joint Venture shall not be withdrawn except as
provided herein. Notwithstanding the foregoing and except as set forth in
Section 4(j) hereof, without the unanimous consent of the Board of Managers, no
Venturer shall be entitled to make further or additional Capital Contributions
other than as specified in Section 4(g) (as opposed to loans) to the Joint
Venture.
(g) AS THEIR INITIAL CAPITAL CONTRIBUTION, EACH VENTURER SHALL CONTRIBUTE
CAPITAL TO THE JOINT VENTURE, THE FOLLOWING AMOUNT:
VENTURER INITIAL CAPITAL CONTRIBUTION
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HNEF UP TO U.S. $408,000
FI UP TO U.S. $392,000
BARLTD UP TO U.S. $88,000*
* MAY BE CONTRIBUTED IN CASH, SERVICES, ASSUMPTION OF INDEBTEDNESS,
OR AS OTHERWISE DETERMINED BY THE BOARD OF MANAGERS.
The Venturers shall proportionately contribute their Initial Capital
Contribution to the Joint Venture immediately upon the demand of the Board of
Managers in such installments as shall be designated by the Board of Managers.
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(h) (i) In addition to the Initial Capital Contributions set forth in
Section 4(g) hereof, during the period commencing with the
date of this Agreement and ending on the twentieth
anniversary of such date, HNEF and FI agree to loan or cause
to be loaned to the Joint Venture, on an as needed basis,
amounts required for the operation and business activities of
the Joint Venture ("Required Loans"); provided, the principal
amount of such loans shall not exceed in the aggregate U.S.
$200,000, apportioned between HNEF and FI on a pro rata
basis, based upon their then current Distributive Share,
minus the then current outstanding balance of any Special
Contributions made by HNEF or FI pursuant to Section 4(i)
hereof prior to the date of each such loan.
(ii) The Required Loans of Section 4(h)(i) shall be in the nature
of revolving lines of credit to the Joint Venture to be
advanced against a promissory note of the Joint Venture to
HNEF and FI, respectively. Each such advance shall bear
interest from the date advanced until repaid at the Prime
Rate and all principal and any accrued but unpaid interest
not paid pursuant to Section 5(a) hereof, shall become
finally due and payable, if not sooner paid pursuant to
Section 5(a) hereof, at the end of the initial twenty (20)
year term of this Agreement. Upon the expiration of the
initial twenty (20) year term of this Agreement (whether or
not the Agreement is renewed), neither HNEF nor FI shall have
further obligations to make further Required Loans to the
Joint Venture. Accrued interest upon outstanding advances
under the Required Loans, if any, shall be due and payable on
a quarterly basis during the initial twenty (20) year term of
this Agreement with both principal and interest to be prepaid
from Available Cash as set forth in Section 5(a) below.
(iii) The aforesaid Required Loans shall be made to the Joint
Venture upon calls made by the Board of Managers in its
discretion. Upon the issuance of a call for Required Loans by
the Board of Managers, HNEF and FI shall proportionately make
such Required Loans within five (5) business days after
receipt of the notice of such call pursuant to the terms of
Article 14 hereof.
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(i) (i) In the event the Initial Capital Contributions, Required
Loans, other loans and receipts from the Joint Ventures'
business are insufficient to meet the cash needs of the Joint
Venture, then the Venturers can agree in writing to make
additional capital contributions to the Joint Venture in the
proportionate amount (measured by the relation of each
Venturers' Distributive Share to 100%) of the cash needed by
the Joint Venture and, upon the written concurrence of both
HNEF and FI, the Board of Managers shall be entitled to issue
a call for such mandatory additional contributions, which
demand shall specify the proportionate contribution required
by each Venturer ("Special Contributions").
(ii) Upon the issuance of a call for Special Contributions, each
Venturer shall proportionately make the Special Contributions
within fourteen (14) days after the receipt of notice of call
as provided in Article 14. Each call for Special
Contributions shall designate the purpose or purposes for
which the proceeds of the Special Contributions will be used.
The proceeds from all Special Contributions shall be used
solely for the purposes set out in the call.
(j) (i) If at any time a Venturer shall breach this Agreement by
failing to make its respective Required Loans or Special
Contributions pursuant to the call provisions of this Article
4 (hereinafter referred to as a "Non-Contributing Venturer"),
such Non-Contributing Venturer shall be considered in breach
of this Agreement and (without otherwise limiting any other
remedies which the other Venturers may have against such
Non-Contributing Venturer) the other Venturers shall have the
right, (but not the obligation) to make an excess
contribution ("Excess Contribution") to the Joint Venture to
cover such unpaid Required Loans or Special Contributions of
the Non-Contributing Venturer. In the event that both of the
other Venturers elect to make an Excess Contribution, then
such other Venturers shall have the right to do so in
proportion to each of their then current Distributive Share
(without regard to the Distributive Share of the
Non-Contributing Venturer.
(ii) In the event that a Venturer makes an Excess Contribution,
such Excess Contribution shall be deemed to be a loan
("Excess Loan") to the
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Non-Contributing Venturer by virtue of whose breach of this
Agreement such Excess Contribution was required. The Excess
Loan shall bear interest at a rate equal to the lesser of (a)
the maximum rate permitted under applicable law or (b) the
greater of (i) the Prime Rate plus two percent (2%) or (ii)
ten percent (10%) per annum, and shall be due and payable
upon demand and shall be secured by a lien and security
interest upon any amounts of Available Cash due the
Non-Contributing Venturer. The Excess Loan shall be an
obligation of such Non-Contributing Venturer and, if not
sooner paid by such Non-Contributing Venturer, shall be due
and payable out of the first Available Cash of the Joint
Venture pursuant to the priority set forth in Article 5
below, with the application of payments thereof to principal
and/or interest being at the sole discretion of the payee
thereof. To the extent of any payments of Excess Loans
directly by the Joint Venture out of Available Cash to any
Venturer(s) who made an Excess Contribution, such Venturer(s)
who made the Excess Contribution(s) shall subrogate all
rights which such Venturer(s) had against the
Non-Contributing Venturer to the Joint Venture. Any interest
on Excess Loans paid by the Joint Venture shall be charged
solely to the capital account of the Non-Contributing
Venturer who occasioned any such Excess Loan.
(iii) Without limiting any other remedies set forth herein or at
law, if any Excess Loan is not repaid in full by such
Non-Contributing Venturer within one hundred twenty (120)
days after the same has been advanced on its behalf, then the
Distributive Share of such Non-Contributing Venturer shall
(at the option of the Venturers who is/are owed any such
Excess Loan) be reduced and the Distributive Share of the
Venturer(s) making any such Excess Loan shall be increased as
follows: The unpaid balance (including principal and accrued
interest) of any such Excess Loan shall be divided by a sum
equal to (a) the aggregate amount of all Capital
Contributions theretofore made to the Joint Venture by the
Venturers (excluding any such contributions deemed to have
been made on account of any such Excess Loan), plus (b) the
unpaid balance of accrued interest and principal of any such
Excess
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Loan, less (c) all withdrawals of capital to all Venturers,
in the aggregate. The quotient thus obtained shall be
multiplied by one hundred percent (100%). The resulting
percentage amount will then be subtracted from such
Non-Contributing Venturer's then existing Distributive Share
(provided same shall not be reduced below zero) and an
equivalent amount shall be added to the respective
Distributive Share(s) of the Venturer(s) who made any such
Excess Loan (in proportion to the amount of Excess Loans made
to such Venturers). Immediately following such adjustment in
the Distributive Shares of the Venturers, it shall be deemed
that the unpaid balance (including principal and accrued
interest) of any such Excess Loan(s) shall have been
converted into an additional capital contribution by the
Venturer(s) making such Excess Loan(s) and a capital
contribution withdrawal by the Non-Contributing Venturer and
the capital accounts of the Venturers shall be adjusted
accordingly, and the Non-Contributing Venturer shall have no
further liability to repay such Excess Loan(s). Any
adjustment to the Distributive Shares made under this Section
4(j) shall act to adjust, in like manner, all Distributive
Shares as set forth in Article 3.
(k) Any Venturer may at any time at the request of the Joint Venture make
a loan in addition to those loans identified elsewhere herein ("Additional
Loan") to the Joint Venture to fund the operation and business activities of the
Joint Venture. No Venturer shall be obligated to make an Additional Loan. In the
event an Additional Loan is made to the Joint Venture, the provisions of Article
8 shall govern as to the type, interest rate and manner of repayment of such
Additional Loan.
ARTICLE 5
DISTRIBUTIONS
(a) Subject to the provisions of Article 13 below, Available Cash, if any,
shall be distributed quarterly on or before the last day of the first month
following the end of each calendar quarter (commencing on the last day of the
first month of the calendar quarter immediately following the calendar quarter
in which the Initial Restaurant is opened to the public) in the following
priority:
(i) To pay or provide for all amounts owing to Venturers for
Excess Loans;
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(ii) To pay or provide for all other amounts owing to Venturers
for Additional Loans; and
(iii) To pay or repay all amounts outstanding as Required Loans,
with the application first to accrued interest and the
balance to principal of loans made in accordance with Section
4(h).
If Available Cash is insufficient to repay all sums owing in respect to Required
Loans, Additional Loans or Excess Loans, Available Cash shall first be applied
pro rata to repay and retire the oldest loans first (with all Excess Loans to be
repaid prior to the payment of any Additional Loans and all Additional Loans
required to be repaid prior to the payment of any Required Loans) and, if any
funds thereafter remain available, such funds shall be applied in a similar
manner to the remaining loans in accordance with the order of the dates on which
they were made; however, as to loans made on the same date, each such loan shall
be repaid in the proportion that such loan bears to the total loans made on said
date. For purposes of priority under this Section 5(a), Required Loans and
Excess Loans made pursuant to the same call under Sections 4(h) or 4(i) shall be
deemed to have been made on the same date although they may have been advanced
on different dates. In addition, at any time when no Excess Loans, Additional
Loans or Required Loans are outstanding, the Board of Managers may make monthly
distributions to BARLTD of up to ten percent (10%) of the net income of the
Joint Venture, as determined by the internal accountants of the Joint Venture
for purpose of allowing BARLTD to satisfy any corresponding obligation to make
monthly distributions to Barrett pursuant to the terms of the Barrett Employment
Agreement. Any such distributions to BARLTD at a time when proportionate
distributions are not being made to other Venturers shall be considered to be an
advance against the distributions to which BARLTD is otherwise entitled from
time to time.
(b) During any time when no Excess Loans, Additional Loans or Required
Loans are outstanding, upon the order of the Board of Managers, acting in their
discretion, the Joint Venture may make distributions to the Venturers from
Available Cash in accordance with the Venturers' respective Distributive Shares.
The above notwithstanding, in the event that any Venturer receives an allocation
of income or other gain from the Joint Venture (as shown upon any K-1 or similar
form issued to such Venturer by the Joint Venture) which requires that such
Venturer (or its equity owners) make a payment in cash to the United States
Internal Revenue Service (the "IRS") by reason of the items of allocation from
the Joint Venture, taking into account all other income, credits and deduction
of such Venturer, then the Joint Venture shall distribute cash (to the extent of
Available Cash only) to each
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Venturer in proportion to their Distributive Shares, in an amount so as to
provide the Venturer having the greatest amount of tax liability as a result of
such allocations by the Joint Venture (less amounts distributed to such
Venturers under this Section 5(b) during the preceding twelve months, if any),
an amount of cash sufficient to pay such tax liability. Any distribution
required by the immediately preceding sentence shall be made prior to the date
of the required filing of a tax return, by any Venturer, with the IRS showing
such tax as due and payable.
(c) If any Venturer does not withdraw the whole or any part of its share
of any cash distribution, such Venturer shall not be entitled to receive any
interest thereon, nor shall any such cash not withdrawn be deemed an increase in
such Venturer's Distributive Share of the Joint Venture without the express
written consent of all other Venturers.
ARTICLE 6
ALLOCATIONS OF INCOME, GAIN, LOSS
DEDUCTION AND CREDIT
Each item of income, gain, loss, deduction or credit for each fiscal year,
or portion of a fiscal year, of the Joint Venture shall be allocated among the
Venturers in accordance with their then respective Distributive Shares. Upon
dissolution and liquidation of the Joint Venture pursuant to Article 13 hereof,
gain from the sale, exchange, abandonment, foreclosure or other disposition of
all or any portion of the Joint Venture property or any interest therein shall
be allocated among the Venturers according to the Distributive Share of each.
ARTICLE 7
MANAGEMENT, OPERATION AND CONTROL OF THE JOINT VENTURE
(a) BOARD OF MANAGERS.
(i) Except as provided in Section 7(c) below, the overall
management and control of the Joint Venture shall be vested
in a Board of Managers. The Board of Managers shall be
responsible for making all policy decisions of the Joint
Venture, including (but not limited to) borrowing money,
purchasing assets, and making other capital investments on
behalf of the Joint Venture, negotiating and entering into
contracts or agreements on behalf of the Joint Venture,
selling or leasing assets of the Joint Venture, establishing
the fiscal policies of the Joint Venture,
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establishing the overall business plan and systems of
operation of the Joint Venture, hiring and terminating any
and all employees of the Joint Venture and establishing and
reviewing the salaries of any and all employees of the Joint
Venture.
(ii) Unless increased by the unanimous vote of the Venturers, the
Board of Managers shall consist of two (2) individuals. HNEF
shall have the right to appoint one (1) member of the Board
of Managers, and FI shall have the right to appoint one (1)
member to the Board of Managers. BARLTD shall not have the
right to appoint a member of the Board of Managers. Each
member of the Board of Managers shall serve at the pleasure
of the Venturer by which he was appointed, and each Venturer
may fill vacancies caused by the death, resignation or
removal of a member appointed by that Venturer. The initial
members of the Board of Managers shall be David Mason
(representing HNEF) and Fitch (representing FI).
(iii) Except as otherwise set forth herein, actions of the Board of
Managers shall be taken only by majority vote of its members
or the written consent of a majority of its members. Each
member of the Board of Managers shall be entitled to one (1)
vote.
(iv) The Board of Managers is granted the right, power and
authority, on behalf of the Joint Venture, to perform all
acts which, in the Board of Managers' sole discretion, are
necessary and/or desirable to carry out the duties and
responsibilities of operating and managing the Joint Venture
and its business. The Board of Managers shall have (but shall
not be limited to) the right, power and authority to incur
reasonable expenses; to employ and dismiss from employment
any and all employees, agents, or independent contractors; to
lease property, to borrow money or to incur indebtedness at a
price, rental, or amount, for cash, securities or other
property, and upon such terms as the Board of Managers deems
proper; to adjust, compromise, settle or refer to arbitration
any claim against or in favor of the Joint Venture or any
nominee; to institute, prosecute, defend or settle any legal
proceeding relating to the business or property of the Joint
Venture; to delegate all or any portion of its powers as set
forth in Subsection 7(a)(v) below and
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to execute, acknowledge and deliver any and all instruments
to effect any and all of the foregoing.
(v) In its sole discretion, the Board of Managers may designate
one or more of its members or one or more employees or agents
of the Joint Venture to manage the day-to-day operations of
the Joint Venture; provided, however, such member(s),
employee(s) or agent(s) shall at all times be subject to the
supervision and control of the Board of Managers.
(b) Except as provided in Section 7(c) below, no Venturer shall, unless
authorized by this Agreement or by majority of the Board of Managers, take any
action to bind or obligate the Joint Venture in any manner, including but not
limited to, any of the following:
(i) make, execute or deliver for the Joint Venture any agreement,
contract, note, bond, mortgage, deed of trust, guaranty,
indemnity bond, surety bond or accommodation paper or
accommodation endorsement;
(ii) borrow money in the Joint Venture's name or use the Joint
Venture's property as collateral;
(iii) assign, transfer, pledge or release any claims or debts owing
by or to the Joint Venture;
(iv) cause the Joint Venture to purchase all or any part of the
Joint Venture interest of any Venturer;
(v) assign the Joint Venture's property in trust for creditors or
on the assignee's promise to pay the debts of the Joint
Venture;
(vi) dispose of the goodwill of the Joint Venture;
(vii) do any other act which will make it impossible to carry on the
ordinary business of the Joint Venture;
(viii) confess a judgment against the Joint Venture;
(ix) pledge or transfer or allow or cause to become encumbered in
any manner a Venturer's interest in the Joint Venture, except
as permitted in Article 12 hereof;
(x) do any other act for which unanimity is required by the other
provisions of this Agreement or applicable law; or
(xi) alter the purpose of the Joint Venture.
(c) CONTROL BY VENTURERS. As provided in Section 7(a) above, the overall
management and control of the Joint Venture shall normally be vested in the
Board of Managers. Anything contained to the contrary herein notwithstanding,
however, since the
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Board of Managers is to consist of two persons, if the Board of Managers is
unable to agree upon any issue or matter relating directly or indirectly in any
way to the Joint Venture, such issue or matter, shall be decided by the
Venturers as provided in Section 7(d) hereof. Any decision made by the Venturers
pursuant to this Section 7(c) shall be binding in all respects upon the Board of
Managers and the Joint Venture and may be relied upon in all respects by third
parties. The Venturers and the Board of Managers hereby agree to, at all times,
abide by and to cause the Joint Venture to abide by the terms of any decision of
the Venturers pursuant to Sections 7(c) and 7(d) hereof.
(d) ACTION BY THE VENTURERS.
(i) In the exercise of rights, powers and duties hereunder
(specifically including, but in no way limited to the rights
and powers set forth in Section 7(c) above), the Venturers
shall have one (1) vote for each percentage of Distributive
Share owned by such Venturer with any fractional percentage of
ownership rounded to the closest whole percentage point (i.e.
at the time of execution hereof, HNEF shall have 46 votes, FI
shall have 44 votes, and BARLTD shall have 10 votes) on all
issues, questions, matters and decisions with respect to the
Joint Venture to the extent not otherwise resolved by the
other provisions of this Agreement.
(ii) Actions to be taken by the Venturers herein may be taken
either by majority vote or majority written consent of the
Venturers.
(e) SPECIAL DUTIES OF HNEF. Unless otherwise determined by the Board of
Managers, HNEF shall be responsible for and shall have the authority to conduct
all general administrative matters of the Joint Venture which shall include, but
shall not be limited to, the coordination of:
(i) all legal and accounting matters on behalf of the Joint
Venture, including the maintenance of the general accounting
systems of the Joint Venture and coordinating the functions of
the accountants and lawyers that will service the Joint
Venture;
(ii) all payroll matters on behalf of the Joint Venture;
(iii) all accounts payable on behalf of the Joint Venture (except
those that must be handled on a local level which shall be the
responsibility of FI);
(iv) all banking and financial matters of the Joint Venture;
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(v) all financial reporting to Hops pursuant to the terms of any
Operating Agreement utilizing restaurant and other operating
data to be provided by FI as the operator of the restaurants;
and
(vi) the compliance by the Joint Venture of all administrative
aspects of any Operating Agreement.
Except for the administrative fee payable to Hops as part of each Operating
Agreement, HNEF shall receive no direct compensation for such administration and
coordination; however, all costs and expenses payable to third parties relating
to administrative matters of the Joint Venture shall be the sole responsibility
of the Joint Venture. [BY WAY OF EXAMPLE, BUT NOT IN LIMITATION, OF THE ABOVE,
(A) HNEF WILL UNDERTAKE (I) ALL OF THE INTERNAL ACCOUNTING AND BOOKKEEPING OF
THE JOINT VENTURE, INCLUDING THE DAILY MAINTENANCE OF THE JOINT VENTURE'S BOOKS
AND RECORDS AND (II) WILL COORDINATE WITH THE JOINT VENTURE'S ACCOUNTANTS, THE
PREPARATION OF THE JOINT VENTURE'S TAX RETURNS AND THE AUDIT OF THE JOINT
VENTURE'S BOOKS AND RECORDS; AND (B) HNEF SHALL RECEIVE NO COMPENSATION FOR SUCH
INTERNAL ACCOUNTING AND BOOKKEEPING OR FOR THE TIME SPENT BY HNEF IN
COORDINATING WITH THE JOINT VENTURE'S ACCOUNTANTS, HOWEVER, THE JOINT VENTURE
SHALL BE SOLELY RESPONSIBLE FOR ALL FEES AND EXPENSES OWING TO THE JOINT
VENTURE'S ACCOUNTANTS FOR THE PREPARATION OF SUCH TAX RETURNS AND THE CONDUCT OF
THE AUDIT.]
Unless otherwise instructed by the Board of Managers, HNEF shall undertake
its duties pursuant to this Section 7(e) in a manner so as to assure compliance
with the administrative provisions of all Operating Agreements to which the
Joint Venture is a party. The failure by HNEF to cause the Joint Venture to
comply with the administrative provisions of any such Operating Agreement
(unless such non-compliance is waived by Hops) shall be considered a breach of
this Agreement by HNEF.
(f) SPECIAL DUTIES OF FI. Unless otherwise determined by the Board of
Managers, acting in their sole discretion, FI shall be responsible for and shall
have the authority to conduct all of the operational matters of each restaurant
to be owned and operated by the Joint Venture, which duties shall include, but
shall not be limited to:
(i) the provision or employment of all direct restaurant
management as required by the Operating Agreement relating to
such restaurant or as otherwise necessary for the operation of
any restaurant to be owned and operated by the Joint Venture;
(ii) the employment, termination and supervision of all restaurant
employees; and
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(iii) the compliance by the Joint Venture of all operating aspects
of any Operating Agreement.
FI shall receive no direct compensation for the conduct of such operational
matters; however, all expenses related to the operation of each restaurant to be
owned and operated by the Joint Venture shall be the sole responsibility of the
Joint Venture. [BY WAY OF EXAMPLE, BUT NOT LIMITATION, OF THE ABOVE, (A) FI
SHALL BE RESPONSIBLE FOR THE RECRUITING, HIRING AND ULTIMATE SUPERVISION OF ALL
EMPLOYEES OF EACH RESTAURANT TO BE OPERATED BY THE JOINT VENTURE; AND (B) FI
SHALL RECEIVE NO COMPENSATION FOR ITS RECRUITING, HIRING AND SUPERVISION
ACTIVITIES, HOWEVER, THE JOINT VENTURE SHALL BE SOLELY RESPONSIBLE FOR THE
ACTUAL COMPENSATION (INCLUDING WAGES AND BENEFITS) OF THE EMPLOYEES OF SUCH
RESTAURANTS.]
Unless otherwise instructed by the Board of Managers, FI shall undertake
its duties pursuant to this Section 7(f) in a manner so as to assure compliance
with the operating provisions of all Operating Agreements to which the Joint
Venture is a party. The failure by FI to cause the Joint Venture to comply with
the operating provisions of any such Operating Agreement (unless such
non-compliance is waived by Hops) shall be considered a breach of this Agreement
by FI. FI shall be solely responsible for the cost of any FI management
personnel not directly related to the management of a restaurant owned by the
Joint Venture, if any.
(g) OTHER BUSINESS OF HNEF. The parties hereto acknowledge and agree that
HNEF and its designated member of the Board of Managers are engaged in other
business activities unrelated to the business of the Joint Venture, and will
continue to do so and will devote only such time as is reasonably necessary to
the business of the Joint Venture. The parties further acknowledge and agree
that certain of the business activities of HNEF (and Hops) will relate to the
operation of other restaurants under the Hops System or other systems and
accordingly, certain of such activities may conflict with the best interests of
FI or the Joint Venture or compete with the business of the Joint Venture.
(h) EXCLUSIVE BUSINESS OF FI/FITCH. The parties hereto acknowledge and
agree that FI and Fitch shall exclusively devote their time and efforts to the
operation of the restaurants to be owned and operated under the Joint Venture
for a period of two (2) years from the date of the opening of the Initial
Restaurant to the general public. Thereafter, FI and Fitch may have other
business interests and will be required to devote only such time to the Joint
Venture as is reasonably necessary to the business of the Joint Venture.
(i) SPECIAL DUTIES OF BARLTD. Unless otherwise determined by the Board of
Managers acting in their sole discretion, BARLTD in its role as the Area Manager
of the
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Hops Grill & Bar restaurants in the Territory, shall serve in a managerial
capacity under the direction of the Board of Managers, with respect to the Hops
Grill & Bar restaurant owned and operated by the Joint Venture and at the
specific request of the Board of Managers has employed Barrett for that purpose.
If, for any reason, BARLTD shall become unable to retain the services of
Barrett, at the request of the Board of Managers, BARLTD shall attempt to locate
and employ a satisfactory substitute manager, but shall have no liability to the
Joint Venture for the failure to further perform the special duties set forth
herein or for the failure to locate a suitable substitute manager to perform
such services. The Joint Venture shall reimburse BARLTD for its reasonable
expenses in connection with the services to be performed by BARLTD hereunder and
under the Barrett Employment Agreement, including but not limited to the
compensation to be paid to Barrett thereunder.
(j) BANK ACCOUNTS. The Joint Venture will maintain such bank accounts as
the Board of Managers may deem necessary, for the deposit of Joint Venture funds
and for the proper segregation thereof into such separate accounts as may be
deemed appropriate. All withdrawals from any such bank account shall be made by
such persons as are approved in writing by a majority of the Board of Managers.
Joint Venture funds shall not be commingled with those of any other person or
entity.
ARTICLE 8
LOANS TO JOINT VENTURE; FEES TO VENTURERS
(a) VENTURER LOANS. If any Venturer shall advance any money to the Joint
Venture except as part of such Venturer's Capital Contributions required by
Section 4(g) hereof, or as provided in Section 4(i), the amount of any such
advance shall not increase the Capital Contribution of such Venturer to the
Joint Venture or entitle such Venturer to any increase in such Venturer's
Distributive Share (except to the limited extent expressly provided in Section
4(j)(iii)), but the amount of any such advance shall be deemed to be a loan to
the Joint Venture and an obligation of the Joint Venture to such Venturer. No
Venturer shall be personally obligated to repay or contribute additional capital
to repay any such advance and such advance shall be payable or collectible only
out of Joint Venture assets existing from time to time; provided, however,
nothing contained in this Section 8(a) shall limit the liability of the
Venturers to repay the Balance of Required Loans or to limit the full personal
liability of any Venturer necessitating an Excess Loan to repay such loan.
(b) INTEREST. Loans to the Joint Venture pursuant to Section 8(a) above
(excluding Excess Loans) shall be payable in accordance with Section 5(a) and
shall bear interest at the
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Prime Rate unless otherwise agreed to by the Venturer making the loan and the
Board of Managers.
(c) FEES TO VENTURERS. Except for distributions made in accordance with
Article 5 of this Agreement and the fees and other payments set forth in the
Development Option Agreement, or the Operating Agreement for any restaurant to
be operated by the Joint Venture, the Venturers shall not be entitled to
receive, directly or indirectly, any fees or other payments from the Joint
Venture without the prior written consent of HNEF and FI. This provision is not
intended to preclude any Venturer (or its affiliates) from serving as a vendor
or service provider to the Joint Venture when approved by the Board of Managers
and such products or services are provided to the Joint Venture on terms that
are no less favorable to the Joint Venture than those available from independent
third party providers.
ARTICLE 9
BOOKS, RECORDS AND TAX MATTERS
(a) Proper and complete records and books of account for the Joint Venture
shall be kept or caused to be kept by the Board of Managers. All transactions
and other matters relative to the Joint Venture's business, as are usually
entered into records and books of account maintained by persons engaged in
businesses of like character, shall be entered fully and accurately into the
Joint Venture's records and books of account.
(b) Each Venturer and/or such Venturer's duly authorized representative,
at such Venturer's expense, shall have the right, power and authority to
examine, inspect, copy and verify, at any and all reasonable times, the books,
records and accounts of the Joint Venture.
(c) The books and records of the Joint Venture shall be at all times
maintained at the principal office of the Joint Venture set forth in Section
1(e) above, or at such other place as the Board of Managers may determine from
time to time.
(d) The Joint Venture shall be treated as a general partnership for
federal and state tax purposes. The Board of Managers shall cause the Joint
Venture to prepare and file on or before the annual due date a United States
Partnership Return of Income and any necessary state tax returns.
(e) Unless otherwise agreed by the Board of Managers, the Board of
Managers shall cause an audit of the books and records of the Joint Venture to
occur at least annually. Such audit shall be conducted by independent certified
public accountants which are mutually acceptable to the Venturers.
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ARTICLE 10
FISCAL YEAR AND BASIS FOR ACCOUNTING
(a) Unless changed by the Board of Managers, the fiscal year of the Joint
Venture shall end on December 31 of each year.
(b) The Joint Venture shall operate and keep its books and records on such
basis as the Board of Managers shall elect.
ARTICLE 11
LIABILITY OF VENTURERS
(a) No Venturer, nor any officer, director, shareholder, trustee, partner,
agent, associate or beneficiary of a Venturer, shall be liable, responsible or
accountable in damages or otherwise to the Joint Venture or the other Venturer,
for any action taken or failure to act (even if such action or failure to act
constituted the simple negligence of the Venturer, or such officer, director,
shareholder, trustee, partner, agent, associate or beneficiary of such Venturer)
on behalf of the Joint Venture within the scope of the authority conferred on
the Venturer by this Agreement, unless such act or omission constitutes a breach
of the terms of this Agreement or such act or omission was performed or omitted
fraudulently or constituted gross negligence or willful malfeasance.
(b) The Joint Venture shall indemnify and hold harmless each member of the
Board of Managers and each Venturer, and each officer, director, shareholder,
trustee, partner, agent, associate or beneficiary thereof, from and against any
loss, expense, damage or injury suffered or sustained by it by reason of any
acts, omissions or alleged acts or omissions (even if such action or failure to
act constituted the simple negligence of such Venturer, or such officer,
director, shareholder, trustee, partner, agent, associate or beneficiary of such
Venturer) arising out of its activities on behalf of the Joint Venture or in
furtherance of the interests of the Joint Venture, including, but not limited
to, any judgment, award, settlement, reasonable attorney's fees and other costs
or expenses incurred in connection with the defense of any actual or threatened
action, proceeding or claim, if the acts, omissions or alleged acts or omissions
upon which such actual or threatened action, proceeding or claims are based (i)
were for a purpose reasonably believed to be in the best interests of the Joint
Venture, (ii) were within the scope of authority conferred on such indemnified
party by this Agreement, (iii) were not performed or omitted fraudulently or as
a result of the gross negligence or willful malfeasance of such indemnified
party, and (iv) did not constitute a breach of the terms of this Agreement.
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ARTICLE 12
DISPOSITION OF A VENTURER'S JOINT VENTURE INTEREST
(a) (i) At no time during the term of this Agreement shall FI,
directly or indirectly, sell, assign, transfer, mortgage,
encumber, pledge or otherwise similarly deal with or dispose
of all or any portion of its interest in the Joint Venture,
without first obtaining the written consent of HNEF, or, in
the absence of such written consent, without first complying
with the terms of this Article 12. Any attempted sale,
assignment, transfer, mortgage, pledge, grant, hypothecation
or other disposition of any interest in the Joint Venture by
FI, in violation of the foregoing provisions of this Section
12(a), shall be null and void and of no force or effect. For
purposes of this Agreement, the transfer or distribution,
directly or indirectly, of an equity interest or other
rights in or the issuance of additional securities in FI,
other than pursuant to the provisions of the last paragraph
of this Section 12(a)(ii) below, shall be deemed a
disposition of the Joint Venture interest of FI, and HNEF
shall be entitled to purchase the Joint Venture interest of
FI in accordance with the terms of Section 12(c) hereof.
(ii) Provided that Fitch shall, at all times, retain a minimum
of 51% of the equity interest in and absolute voting and
other control of FI, Fitch (or FI) may sell or otherwise
assign up to 49% of the equity of FI to persons who have
received the prior written approval of HNEF (which approval
shall not be unreasonably delayed or withheld). Any such
transferee of an interest in FI may be required, as a
condition to the consent of HNEF, to execute reasonable
confidentiality and transfer agreements as are deemed
necessary by HNEF to assure the compliance by such
transferees with the spirit of this Agreement. Additionally,
the Bylaws of FI shall reflect that the issuance and
transfer of shares of stock (or other equity interests in
FI) are restricted by the terms of this Agreement. The
following legend shall appear conspicuously upon the face of
each stock certificate of (or certificate otherwise
representing an interest in) FI: "The transfer of this stock
(or interest) is subject to the terms and conditions of a
Joint Venture Agreement dated September 1, 1995 by and
between FI and HNEF and the Bylaws of the corporation."
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FI hereby acknowledges that the purpose of the aforesaid
transfer restrictions and procedures is to protect the
trademarks, trade secrets and operating procedures of Hops and
the partnership interests of HNEF contained herein. FI hereby
acknowledges that non-compliance with such transfer
restrictions and procedures shall constitute a breach of this
Agreement by FI. Upon the execution of this Agreement and
periodically thereafter at the reasonable request of HNEF, FI
shall provide HNEF with a photocopy of its current Bylaws and
all issued and outstanding stock certificates to demonstrate
compliance with this Agreement.
(b) (i) FI shall not transfer any interest in the Joint Venture
for a period beginning upon the date hereof and ending two (2)
years after the date of the opening of the Initial Restaurant
to the general public, without the express prior written
consent of HNEF. If following the period described in the
immediately preceding sentence, FI desires, directly or
indirectly, to sell, assign, transfer or in any way dispose of
all or any portion of the Joint Venture interest of FI to any
third party, FI shall first serve notice (hereinafter called
an "Offer to Sell") to that effect upon HNEF. The Offer to
Sell shall set forth the amount of Joint Venture interest of
FI desired to be sold or otherwise disposed of, the price,
terms and conditions of such proposed sale and the name and
address of the proposed third party purchaser (and in the case
of a proposed purchaser that is not a natural person, the
principals of such proposed purchaser), and shall offer to
sell such Joint Venture interest to HNEF at the price and on
the terms of sale described in the Offer to Sell.
(ii) HNEF shall have the absolute right to prohibit the sale of the
Joint Venture interest identified in the Offer to Sell if
HNEF, in its reasonable determination, shall disapprove of the
purchaser identified in the Offer to Sell. In making such
determination, HNEF may consider, among other things, the
reputation, financial position and restaurant operating
experience of the proposed purchaser, as well as concerns as
to the protection of the trade secrets and proprietary
information of the Hops System that result from the
competitive nature
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of any other business operations directly or indirectly
related to the potential purchaser. FI shall promptly provide
HNEF with any information regarding the potential purchaser,
reasonably requested by HNEF, in order to evaluate the
potential purchaser, including, but not limited to financial
statements and a detailed business history of such potential
purchaser. HNEF will notify FI in writing of its approval or
disapproval of any such potential purchaser within sixty (60)
days after receipt by HNEF of the Offer to Sell.
(iii) Whether or not the potential purchaser is approved by HNEF as
provided in Section 12(c) above, HNEF shall have the first
right to purchase all of the Joint Venture interest so offered
by giving notice of acceptance to FI within one hundred twenty
(120) days after receipt by HNEF of the said Offer to Sell.
(iv) In the event HNEF shall not have disapproved of the purchaser
identified in the Offer to Sell as set forth in Section
12(b)(ii) above and HNEF fails or refuses to purchase the
Joint Venture interest of FI as provided in Section 12(b)(iii)
above, FI shall be free to sell the Joint Venture interest so
identified in the Offer to Sell to the person or entity
identified in the Offer to Sell on the price and terms set
forth in the Offer to Sell; provided, however, that FI shall
not transfer or otherwise dispose of such Joint Venture
interest to any person or entity other than the third party
identified in the Offer to Sell or for a price less than or on
terms more favorable than those set forth in the Offer to Sell
without first reoffering such Joint Venture interest to HNEF
as set forth in Section 12(b)(i). If FI does not consummate
the sale of its Joint Venture interest so identified in its
Offer to Sell within ninety (90) days after the expiration of
the period for HNEF's acceptance of such Offer to Sell, the
provisions of this Article 12 shall reattach to such interest
and such interest shall not be sold without reoffer to HNEF.
(v) The provisions of this Section 12(b) to the contrary
notwithstanding, FI shall make no transfer of its Joint
Venture interest as provided in this Section 12(b) unless the
person or entity acquiring such interest shall execute and
deliver to HNEF (or Hops) such documentation as HNEF (or Hops)
may reasonably require to assure the confidentiality of the
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trade secrets and proprietary information associated with the
Hops System and to make the purchaser a party to this
Agreement (including the transfer restrictions as they
previously related to FI) and all other agreements related to
the restaurants operated by the Joint Venture to which FI was
(or is) a party.
(c) (i) If FI or Fitch shall breach this Agreement as provided in
Section 15 hereof, FI shall be deemed to have made an Offer to
Sell (which shall be deemed received by HNEF only when HNEF
has actual knowledge of such breach) all of the Joint Venture
interest owned by FI to HNEF for the price and upon the terms
specified in this Section 12(c). HNEF shall have the right to
purchase the Joint Venture interest of FI so offered by giving
notice of acceptance to FI within one hundred twenty (120)
days after the deemed receipt by HNEF of the Offer to Sell. In
the event that HNEF fails or refuses to purchase all of the
Joint Venture interest of FI, the remaining provisions of this
Agreement shall continue to apply to the Joint Venture
interest of FI.
(ii) DETERMINATION OF PURCHASE PRICE AND TERMS. In the event that
the Joint Venture interest of FI is to be purchased pursuant
to the foregoing provisions of this Section 12(c), the
following provisions shall apply:
(A) PRICE. The purchase price of the Joint Venture interest of
FI shall be determined pursuant to Section 12(e)(i)
hereof.
(B) TIME AND METHOD OF PAYMENT. Upon the closing of any sale
pursuant to this Section 12(c), HNEF shall pay the
purchase price for the Joint Venture interest of FI
purchased pursuant to this Section 12(c) as follows:
1) PAYMENT UPON CLOSING. At the option of HNEF, all of the
purchase price or an amount equal to the greater of:
a) twenty percent (20%) of the purchase price; or
b) $50,000, shall then be paid in cash.
2) PROMISSORY NOTE. Any part of the purchase price which
is not paid in cash shall be evidenced by a negotiable
promissory note of HNEF payable to and delivered to FI.
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The promissory note shall bear interest at the Prime
Rate and shall be payable over a period of sixty (60)
months with interest only on a quarterly basis payable
during the first twelve (12) months and thereafter
sixteen (16) equal quarterly payments of principal
(totaling all of the principal due thereunder) and
interest payable during the following forty-eight (48)
months. The promissory note of HNEF shall provide that
more or the entire principal sum remaining unpaid at
any time may be paid at any time with interest to date
of payment only. The promissory note shall also provide
for acceleration of the maturity of the unpaid
principal and accrued interest at the option of FI upon
default in the payment of any installment of principal
or interest for fifteen (15) days or more.
(d) (i) In the event that Fitch shall die, become permanently
disabled or otherwise involuntarily cease to be in operational
control of FI (such occurrences hereinafter referred to as a
"Buyout Event" or "Buyout Events"), FI shall sell and HNEF
shall purchase all of the Joint Venture interest of FI for the
price set forth in Section 12(e)(ii) hereof and upon the terms
set forth in this Section 12(d). FI shall notify HNEF
immediately of the occurrence of a Buyout Event. The failure
of FI to notify HNEF of a Buyout Event within twenty (20) days
of its occurrence shall constitute a breach of this Agreement
by FI. The purchase of the Joint Venture interest of FI by
HNEF, pursuant to this Section 12(d), shall take place within
one hundred eighty (180) days of the date upon which HNEF
receives notice of the Buyout Event (or if HNEF is not
provided with such notice, such closing shall take place on
the date which HNEF shall demand).
(ii) DETERMINATION OF PURCHASE PRICE AND TERMS. In the event that
the Joint Venture interest of FI is to be purchased pursuant
to the foregoing provisions of this Section 12(d), the
following provisions shall apply:
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(A) PRICE. The purchase price of the Joint Venture interest
of FI shall be determined pursuant to Section 12(e)(ii)
hereof.
(B) MANNER OF PAYMENT. The purchase price of the Joint
Venture interest of FI to be purchased pursuant to the
provisions of this Section 12(d) shall be paid as
follows:
1) PAYMENT UPON CLOSING. At the option of HNEF, all
of the purchase price or an amount equal to the
greater of:
a) twenty percent (20%) of the purchase price;
b) Fifty Thousand Dollars (U.S. $50,000); or
c) one hundred percent (100%) (but not to
exceed the entire purchase price) of al
proceeds from life insurance policies, if
any, on the life of Fitch payable to HNEF by
reason of the death of Fitch,
shall then be paid in cash.
2) PROMISSORY NOTE. Any part of the purchase price
which is not then paid in cash shall be evidenced
by a negotiable promissory note of HNEF payable to
and delivered to FI. The promissory note shall
bear interest at the Prime Rate and shall be
payable over a period of sixty (60) months with
interest only on a quarterly basis payable during
the first twelve (12) months and thereafter
sixteen (16) equal quarterly payments of principal
(totaling all of the principal due thereunder) and
interest payable during the following forty-eight
(48) months. The promissory note of HNEF shall
provide that more or the entire principal sum
remaining unpaid at any time may be paid at any
time with interest to date of payment only. The
promissory note shall also provide for
acceleration of the maturity of the unpaid
principal and accrued interest at the option of FI
upon default in the payment of any installment of
principal or interest for fifteen (15) days or
more.
(e) (i) The purchase price for the Joint Venture interest of FI to
be purchased pursuant to Section 12(c) above shall be its
"book value." The book
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value of the Joint Venture interest of FI shall be the book
value of the assets of the Joint Venture, less its
liabilities, multiplied by FI's Distributive Share as defined
in Article 3 hereof (and subject to adjustments pursuant to
the other provisions hereof).
(ii) The purchase price for the Joint Venture interest of FI to be
purchased pursuant to Section 12(d) above shall be its "fair
market value." The fair market value of the Joint Venture
interest of FI shall be determined by an appraisal to be made
by an appraiser jointly selected by HNEF and FI. If HNEF and
FI cannot agree upon an appraiser, then each party shall
select an appraiser and the two appraisers selected by the
Venturers shall select a third appraiser, and the appraisal
shall be made by the third appraiser. The appraisal of the
third appraiser shall be binding upon the parties hereto
unless patently erroneous. In the event of such an appraisal,
each party shall bear its own legal and other costs and shall
split the appraisal fees.
(f) In the event that the Joint Venture shall elect to obtain
insurance on the life of Fitch to fund the purchase of the
Joint Venture interest of FI pursuant to Section 12(d) or for
other reasonable business reasons, Fitch shall cooperate fully
with the Joint Venture in obtaining such insurance including
Fitch's submission to reasonable medical examinations.
ARTICLE 13
DISSOLUTION AND LIQUIDATION
(a) The Joint Venture shall be dissolved upon the first of the following
to occur:
(i) The expiration or non-renewal of the term of the Joint Venture
pursuant to Article 2 hereof;
(ii) The decision of the Board of Managers to dissolve the Joint
Venture;
(iii) The bankruptcy of the Joint Venture;
(iv) The bankruptcy of HNEF;
(v) The liquidation or dissolution of HNEF;
(vi) The bankruptcy, liquidation or dissolution of FI if HNEF shall
fail or refuse to exercise its purchase option pursuant to
Article 12 hereof;
(vii) The judgment of a court of proper jurisdiction under the laws
of the State of Florida ordering dissolution and liquidation
of the Joint Venture under applicable Florida statutory or
common law; or
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(viii) Any event that makes it unlawful for the business of the Joint
Venture to be carried on or for its Venturers to carry on such
business in the Joint Venture.
Each Venturer agrees that dissolution of the Joint Venture by any cause not
hereinabove set forth or referred to in this Section 13(a), whether voluntary or
involuntary, shall be wrongful and in contravention of this Agreement. For
purposes of this Agreement, the "bankruptcy" of a Venturer shall be deemed to
have occurred upon the happening of any of the following:
(i) The filing of an application by the Venturer for, or a consent
to, the appointment of a trustee in bankruptcy or receiver of
such Venturer's interest in the Joint Venture or of all or
substantially all of such Venturer's assets;
(ii) The filing by the Venturer of a voluntary petition in
bankruptcy or the filing of a pleading in any court of record
admitting in writing such Venturer's inability to pay such
Venturer's debts as they come due;
(iii) The making by the Venturer of a general assignment for the
benefit of creditors;
(iv) The filing by the Venturer of an answer admitting the material
allegations of, or such Venturer's consenting to, or
defaulting in answering a bankruptcy petition filed against
such Venturer in any bankruptcy proceeding; or
(v) The entry of an order, judgment or decree by any court of
competent jurisdiction adjudicating the Venturer bankrupt or
appointing a trustee in bankruptcy or receiver of such
Venturer's interest in the Joint Venture or all or
substantially all of such Venturer's assets, and such order,
judgment or decree continuing unstayed and in effect for a
period of ninety (90) days after such entry.
(b) Upon dissolution of the Joint Venture, it shall be wound up and
liquidated as rapidly as business circumstances will permit. The assets shall be
applied to the following uses in the following order:
(i) To pay or provide for all amounts owing by the Joint Venture
to creditors other than Venturers, and for expenses of winding
up;
(ii) To pay the balance of Excess Loans;
(iii) To pay or provide for the Balance of Required Loans;
(iv) To pay or provide for the balance of Additional Loans;
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(v) To pay or provide for all other amounts owing by the Joint
Venture to the Venturers other than for capital and profits;
(vi) To pay each Venturer the credit balance, if any, in such
Venturer's closing capital account as adjusted to the date of
such distribution.
If funds are insufficient to repay all sums owing in respect of each category of
payment specified in the foregoing subsections, then the available funds shall
be applied to discharge all the sums owing as many of said categories as is
possible (commencing with and pursuing the order of priority aforesaid) until
the first category is reached as to which sufficient funds are not available for
complete satisfaction. As to such category, the remaining funds shall be
distributed proportionately in accordance with the ratio of the respective
claims in such category, unless the category involved is Section 13(b)(ii), in
which event, such loans shall be repaid in the order of priority provided in
Section 5(a) under circumstances where Available Cash is insufficient to repay
such loans.
(c) In the event the Joint Venture is "liquidated" within the meaning of
Treasury Regulation Section 1.704-1, (i) distributions shall be made to each
Venturer who has a positive capital account in compliance with Treasury
Regulation Section 1.704(b), and (ii) if any Venturer's capital account has a
deficit balance (after giving effect to all contributions, distributions, and
allocations for all taxable years, including the year during which such
liquidation occurs), such Venturer shall contribute to the capital of the Joint
Venture the amount necessary to restore such deficit balance to zero in
compliance with Treasury Regulation Section 1.704(b).
(d) Except as set forth in Section 13(e) below, the orderly dissolution
and liquidation of the Joint Venture and the winding up of its business shall be
the responsibility of the Board of Managers.
(e) If dissolution occurs because of the bankruptcy of a Venturer or any
act of a Venturer in contravention of this Agreement or deemed to be in
contravention of this Agreement by the terms hereof, then the Venturer who did
not cause such dissolution shall have the authority to wind up and liquidate the
business of the Joint Venture. In such event, the Venturer with the authority
hereunder to wind up the business and conduct the liquidation of the Joint
Venture shall have all powers conferred upon the Board of Managers, under the
terms of this Agreement to the extent necessary or desirable in the good faith
judgment of such liquidating Venturer, to complete the liquidation of the Joint
Venture as provided for herein, including, but without limiting the generality
of the foregoing, the following specific powers:
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(i) The power to continue to manage and operate any business of
the Joint Venture during the period of such liquidation,
including the power to make and enter into sales agreements
and leases or rental contracts covering properties of the
Joint Venture which may extend beyond the period of
liquidation.
(ii) The power to make sales and, incident thereto, to make deeds,
bills of sale, assignments and transfers of assets and
properties of the Joint Venture.
(iii) The power to borrow funds as may, in the good faith judgment
of the liquidating Venturer, be reasonably required to pay
debts and obligations for which the Joint Venture is liable
and operating expenses of the Joint Venture, and to grant
deeds of trust, mortgages, security agreements, pledges and
collateral assignments upon and encumbering any of the Joint
Venture properties as security for repayment of such loans or
as security for payment of any other indebtedness of the Joint
Venture.
(iv) The power to settle, compromise or adjust any claims asserted
to be owing by or to the Joint Venture, and the right to file,
prosecute or defend lawsuits and legal proceedings in
connection with any such matters.
(v) The power to make deeds, bills of sale, assignments and
transfers to the respective Venturers and their successors in
interest incident to final distribution of the remaining
properties of the Joint Venture (if any) as provided for
herein.
(vi) The power to distribute Joint Venture property in kind at a
value agreed upon by the liquidating Venturer and the party
receiving such property.
If, under the above provisions, properties of the Joint Venture are distributed
in kind to the respective Venturers and/or to their successors in interest
subject to liens or mortgages securing indebtedness of the Joint Venture, and if
thereafter one or more of such Venturers or their successor(s) in interest shall
pay more of such secured indebtedness than the pro rata share thereof
attributable to the undivided interest in such properties thus distributed to or
acquired by such Venturer, that Venturer shall be subrogated to and entitled to
enforce such liens or mortgages as against the interest of the other Venturer or
their successor(s) in
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interest who has not paid its full pro rata share of such secured indebtedness
to secure repayment to the Venturer to the extent of the deficiency in the
proportionate payments attributable to their undivided interests which should
have been made by the other Venturer or their successor(s) in interest.
ARTICLE 14
REPRESENTATIONS AND WARRANTIES
(a) REPRESENTATIONS AND WARRANTIES OF HNEF. HNEF hereby represents and
warrants to FI as follows:
(i) DUE INCORPORATION AND QUALIFICATION. HNEF is a corporation
duly incorporated, validly existing and in good standing under
the laws of its state of incorporation; is qualified to do
business in all jurisdictions where the failure to so qualify
would have a material adverse effect upon HNEF or its business
or assets; and has the corporate power and authority to own,
lease and operate all of its properties and assets and to
carry on its business as now conducted.
(ii) AUTHORITY TO EXECUTE AND PERFORM AGREEMENTS. (A) HNEF has full
corporate power and authority required to enter into, execute
and deliver this Agreement and any other agreement
contemplated hereby and to perform fully HNEF's obligations
hereunder and thereunder. (B) The execution and delivery by
HNEF of this Agreement and any other agreement contemplated
hereby and the transactions contemplated hereby and thereby
have been duly authorized by all requisite corporate and, if
necessary, stockholder action. (C) No other corporate
proceedings on the part of HNEF are necessary to authorize
this Agreement and any other agreement contemplated hereby or
to consummate the transactions contemplated hereby and
thereby. (D) This Agreement has been duly executed and
delivered by HNEF and constitutes the valid and binding
obligation of HNEF, enforceable against HNEF in accordance
with its terms. (E) The execution and delivery of this
Agreement and any agreement contemplated hereby, the
consummation of the transactions contemplated hereby and
thereby, and the performance by HNEF of this Agreement in
accordance with its terms and conditions will not 1) conflict
with or result in the breach or
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violation of any of the terms or conditions of the Articles of
Incorporation or Bylaws of HNEF; 2) violate any statute,
regulation, order, judgment or decree of any court or
governmental or regulatory body applicable to HNEF or any of
its properties or assets; or 3) require notice to or the
consent of any party to or result in a violation or breach of,
constitute (with or without due notice or lapse of time or
both) a default under, or give any party the right to
terminate or accelerate the performance of the obligations of
HNEF with respect to the terms, provisions or conditions of
any indenture, agreement or other instrument to which HNEF is
a party or by which HNEF or any of its properties or assets
are bound.
(iii) CONSENTS AND APPROVALS. No filing with, and no permit,
authorization, consent or approval of, any public body or
public authority is necessary for the consummation by HNEF of
the transactions contemplated by this Agreement and any other
agreements contemplated hereby, except for the failure to
obtain filings, permits, authorizations, consents or
approvals, which would not adversely affect the business or
assets of HNEF or the ability of HNEF to perform any of its
obligations under this Agreement or any other agreement
contemplated hereby and which would not prevent or delay in
any respect the consummation of the transactions contemplated
hereby or thereby.
(iv) COMPLIANCE WITH LAWS. HNEF is in material compliance with all
provisions of law, statutes, ordinances, rules, regulations,
judgments, writs, injunctions, decrees and standards
promulgated by the government of the United States of America
or by any state or municipality thereof or by any court,
agency, instrumentality, regulatory authority or commission of
any of the foregoing, including, but not limited to,
compliance with all labor laws, all environmental laws, all
laws relating to the promotion of occupational safety, all
laws relating to healthcare and all laws relating to the
promotion of occupational safety, all laws relating to
healthcare and all laws relating to discrimination in
employment or employment practices.
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(v) NO BROKER. No broker, finder, agent or similar intermediary
has acted for or on behalf of HNEF in connection with this
Agreement or the transactions contemplated hereby, and no
broker, finder, agent or similar intermediary is entitled to
any broker's, finder's or similar fee or other commission in
connection therewith based on any agreement, arrangement or
understanding with HNEF or any action taken by HNEF.
(b) REPRESENTATIONS AND WARRANTIES OF FI. FI hereby represents and
warrants to HNEF as follows:
(i) DUE INCORPORATION AND QUALIFICATION. FI is a corporation duly
incorporated, validly existing and in good standing under the
laws of its state of incorporation; is qualified to do
business in all jurisdictions where the failure to so qualify
would have a material adverse effect upon FI or its business
or assets; and has the corporate power and authority to own,
lease and operate all of its properties and assets and to
carry on its business as now conducted.
(ii) AUTHORITY TO EXECUTE AND PERFORM AGREEMENTS. (A) FI has full
corporate power and authority required to enter into, execute
and deliver this Agreement and any other agreement
contemplated hereby and to perform fully FI's obligations
hereunder and thereunder. (B) The execution and delivery by FI
of this Agreement and any other agreement contemplated hereby
and the transactions contemplated hereby and thereby have been
duly authorized by all requisite corporate and, if necessary,
stockholder action. (C) No other corporate proceedings on the
part of FI are necessary to authorize this Agreement and any
other agreement contemplated hereby or to consummate the
transactions contemplated hereby and thereby. (D) This
Agreement has been duly executed and delivered by FI and
constitutes the valid and binding obligation of FI,
enforceable against FI in accordance with its terms. (E) The
execution and delivery of this Agreement and any agreement
contemplated hereby, the consummation of the transactions
contemplated hereby and thereby, and the performance by FI of
this Agreement in accordance with its terms and conditions
will not 1) conflict with or result in the breach or violation
of any of the terms or
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conditions of the Articles of Incorporation or Bylaws of FI;
2) violate any statute, regulation, order, judgment or decree
of any court or governmental or regulatory body applicable to
FI or any of its properties or assets; or 3) require notice to
or the consent of any party to or result in a violation or
breach of, constitute (with or without due notice or lapse of
time or both) a default under, or give any party the right to
terminate or accelerate the performance of the obligations of
FI with respect to the terms, provisions or conditions of any
indenture, agreement or other instrument to which FI is a
party or by which FI or any of its properties or assets are
bound.
(iii) CONSENTS AND APPROVALS. No filing with, and no permit,
authorization, consent or approval of, any public body or
public authority is necessary for the consummation by FI of
the transactions contemplated by this Agreement and any other
agreements contemplated hereby, except for the failure to
obtain filings, permits, authorizations, consents or
approvals, which would not adversely affect the business or
assets of FI or the ability of FI to perform any of its
obligations under this Agreement or any other agreement
contemplated hereby and which would not prevent or delay in
any respect the consummation of the transactions contemplated
hereby or thereby.
(iv) COMPLIANCE WITH LAWS. FI is in material compliance with all
provisions of law, statutes, ordinances, rules, regulations,
judgments, writs, injunctions, decrees and standards
promulgated by the government of the United States of America
or by any state or municipality thereof or by any court,
agency, instrumentality, regulatory authority or commission of
any of the foregoing, including, but not limited to,
compliance with all labor laws, all environmental laws, all
laws relating to the promotion of occupational safety, all
laws relating to healthcare and all laws relating to the
promotion of occupational safety, all laws relating to
healthcare and all laws relating to discrimination in
employment or employment practices.
(v) NO BROKER. No broker, finder, agent or similar intermediary
has acted for or on behalf of FI in connection with this
Agreement or the transactions contemplated hereby, and no
broker, finder, agent or
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similar intermediary is entitled to any broker's, finder's or
similar fee or other commission in connection therewith based
on any agreement, arrangement or understanding with FI or any
action taken by FI.
ARTICLE 15
BREACHES AND REMEDIES
(a) BREACH BY FI. FI shall be in breach of this Agreement upon the
occurrence of any of the following:
(i) If FI shall fail to comply with or violate any agreement or
covenant contained in this Agreement (specifically including,
but not limited to, the violation of any transfer restriction
contained in Section 12 hereof), which failure to comply shall
continue for a period of thirty (30) days after notice from
HNEF specifying such failure.
(ii) The breach by FI or Fitch (or any permitted assignee of Fitch
under the Development Option Agreement) of any other joint
venture or similar agreement relating, directly or indirectly,
to the operation of a restaurant under the Hops System, which
failure to comply shall continue for a period of thirty (30)
days after notice from HNEF or Hops.
(iii) The breach by FI of the Development Option Agreement or any
Operating Agreement for any restaurant, which failure to
comply shall continue for a period of thirty (30) days after
notice from HNEF or Hops.
(iv) If any material representation or warranty of FI contained
herein shall be untrue.
(v) Either FI or Fitch shall make an assignment for the benefit of
creditors, or shall admit in writing its (or his) inability to
pay its (or his) debts as they become due, or shall file a
voluntary petition in bankruptcy, or shall be adjudicated as
bankrupt or insolvent, or shall file any petition or answer
seeking for itself (or himself) any reorganization,
arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any present or future
statute, law or regulation pertinent to such circumstances, or
shall file any answer admitting or not contesting the material
allegations of a petition filed against either
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FI or Fitch in any such proceedings, or shall seek or consent
to or acquiesce in the appointment of any trustee, receiver,
or liquidator of either FI or Fitch or of all or any
substantial part of either of their properties; or FI or its
directors or majority shareholders shall take any action
initiating the dissolution or liquidation of FI or FI shall be
involuntarily dissolved by authorities in the jurisdiction of
its incorporation and shall not be reinstated within thirty
(30) days of notice from HNEF hereunder.
(vi) Twenty (20) days shall have expired after the commencement of
an action against FI or Fitch seeking reorganization,
arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any present or future
statute, law or regulation without such action being dismissed
or all orders or proceedings thereunder affecting the
operations or the business of FI or Fitch being stayed; or a
stay of any such order or proceedings shall thereafter be set
aside and the action setting it aside shall not be timely
appealed.
(vii) Twenty (20) days shall have expired after the appointment,
without the consent or acquiescence of FI or Fitch, of any
trustee, receiver or liquidator of all or any substantial part
of the properties of FI or Fitch without such appointment
being vacated.
(b) BREACH BY HNEF. HNEF shall be in breach of this Agreement upon the
occurrence of any of the following:
(i) If HNEF shall fail to comply with or violate any agreement or
covenant contained in this Agreement, which failure to comply
shall continue for a period of thirty (30) days after notice
from FI specifying such failure.
(ii) The breach by HNEF of the Development Option Agreement or any
Operating Agreement for any restaurant.
(iii) If any material representation or warranty of HNEF contained
herein shall be untrue.
(iv) If HNEF shall make an assignment for the benefit of creditors,
or shall admit in writing its inability to pay its debts as
they become due, or shall file a voluntary petition in
bankruptcy, or shall be adjudicated as bankrupt or insolvent,
or shall file any petition or answer seeking for itself any
reorganization, arrangement, composition, readjustment,
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liquidation, dissolution or similar relief under any present
or future statute, law or regulation pertinent to such
circumstances, or shall file any answer admitting or not
contesting the material allegations of a petition filed
against HNEF in any such proceedings, or shall seek or consent
to or acquiesce in the appointment of any trustee, receiver,
or liquidator of HNEF or of all or any substantial part of
either of its properties; or HNEF or its directors or majority
shareholders shall take any action initiating the dissolution
or liquidation of HNEF or HNEF shall be involuntarily
dissolved by authorities in the jurisdiction of its
incorporation and shall not be reinstated within thirty (30)
days of notice from FI hereunder.
(v) Twenty (20) days shall have expired after the commencement of
an action against HNEF seeking reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar
relief under any present or future statute, law or regulation
without such action being dismissed or all orders or
proceedings thereunder affecting the operations or the
business of HNEF being stayed; or a stay of any such order or
proceedings shall thereafter be set aside and the action
setting it aside shall not be timely appealed. (vi) Twenty
(20) days shall have expired after the appointment, without
the consent or acquiescence of HNEF, of any trustee, receiver
or liquidator of all or any substantial part of the properties
of HNEF without such appointment being vacated.
(c) CERTAIN REMEDIES.
(i) REMEDIES AVAILABLE TO HNEF. Upon any breach of this Agreement
by FI, HNEF may:
(A) exercise its right to purchase the Joint Venture
interest of FI as provided in Section 12(c) hereof; and
(B) seek any and all other remedies available under
applicable law or equity, including, but not limited to,
money damages.
(ii) REMEDIES AVAILABLE TO FI. Upon any breach of this Agreement by
HNEF, FI may seek any and all other remedies available under
applicable law or equity, including, but not limited to, money
damages.
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(iii) CUMULATION OF REMEDIES. None of the rights, remedies,
privileges, or powers of the parties expressly provided for
herein shall be exclusive, but each of them shall be
cumulative with and in addition to every other right, remedy,
privilege, and power now or hereafter existing in favor of
such parties, whether at law or in equity, by statute or
otherwise.
ARTICLE 16
NOTICE
All notices or requests provided for or permitted to be given pursuant to
this Agreement must be in writing and shall only be effective if given or served
(i) by United States mail, addressed to the person or entity to be notified,
postpaid, and certified with return receipt requested or (ii) by hand delivering
such notice to the person or entity at the address of such party against written
receipt thereof. All notices given or served pursuant hereto shall be deemed
given and effective upon receipt by the person to be notified or delivery at the
address of such party. All notices to any of the Venturers shall be addressed to
them at their respective addresses set forth below their names on the signature
page hereof. By giving to the other Venturers at least ten (10) days written
notice thereof in the manner hereinabove provided, each Venturer and its
respective successors and assigns shall have the right to change its addresses
for purposes of notice.
ARTICLE 17
DISPUTE RESOLUTION
(a) In the event there should arise any misunderstanding or disagreement
between the Venturers as to the compliance with the terms and conditions of this
Agreement, or as to whether any Venturer has grounds hereunder entitling it to
terminate this Agreement, or any other dispute related to this Agreement
including arbitrability of the dispute, it is mutually agreed that such
differences, if they cannot be satisfactorily resolved between the Venturers
within thirty (30) days after the Venturer seeking arbitration delivers notice
of same to the other Venturers, shall be submitted to a single arbitrator, if
the Venturers agree upon one; otherwise, to a board of three arbitrators, of
whom one shall be selected by HNEF and one of whom shall be selected by FI
within twenty (20) days after such 30-day period, and a third arbitrator shall
be selected by these two selected arbitrators. If one of the Venturers fails to
timely select an arbitrator, the arbitrator that was timely selected shall be
the sole
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arbitrator. If neither HNEF nor FI timely selects an arbitrator, the first
arbitrator selected thereafter shall be the sole arbitrator, no others being
appointed. Where each of HNEF and FI timely selects an arbitrator, said
arbitrators will have ten (10) days from the end of the twenty (20) day period
to select the third arbitrator. In the event the arbitrators are unable to
timely agree on the third arbitrator, either HNEF or FI may petition any
official of the American Arbitration Association for appointment of the third
arbitrator, and the parties agree to accept any arbitrator appointed by such
official subject to the limitations hereof. Arbitrators must be reasonably
independent of the parties and their principals. Persons who are hereby
expressly disqualified to serve as arbitrators are principals of the parties,
relatives of said principals, employees of the parties or said principals,
persons not residing within 100 miles of Tampa, Florida, attorneys, accountants
and other business persons having professional or business relationships with
the parties or said principals.
(b) Arbitration shall proceed in accordance with the rules of the American
Arbitration Association. The arbitration shall be conducted in Tampa, Florida.
The arbitrators shall have all the powers permitted arbitrators under the laws
of the State of Florida. The decision and award of such single arbitrator, if
only one is used, or any two of such board if three are used, as the case may
be, shall be final and binding upon the Venturers, their heirs, legal
representatives, successors and assigns respectively, and shall have the same
force and effect as though such decision had been handed down by a court of
final jurisdiction. The cost of arbitrator(s) shall be shared equally by the
Venturers involved in such dispute. Each Venturer shall be responsible for and
shall pay for the expenses of presenting its respective case, including
depositions, attorney's fees and costs and witness fees which expenses shall not
be subject to award by the arbitrator(s), nor shall such expenses be subject to
award by any court or other judicial authority. The parties shall deposit, at
the beginning of the arbitration process, with the arbitrators an amount equal
to the estimated costs (including arbitrators' time charges) of the total
arbitration. Arbitrators' time charges shall be at the same rate for all
arbitrators. Each of the Venturers hereto covenants to abide by any arbitration
decision.
(c) In the event that it becomes necessary for any party to this Agreement
to enforce a decision of arbitration through legal proceedings, the Venturers
hereby agree that the Circuit Court for the Thirteenth Judicial Circuit in and
for Hillsborough County, Florida, Tampa Division, and the United States District
Court for the Middle District of Florida, Tampa Division, shall have exclusive
jurisdiction to hear and determine any such matters. Each Venturer hereby
expressly submits and consents in advance to such jurisdiction and
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venue in any action or proceeding whether commenced by or brought against them
in either of such Courts. In any such court proceeding the prevailing party
shall be entitled to reimbursement of all costs and expenses, including
attorney's fees which may be reasonably incurred or paid in connection
therewith, including without limitation, attorney's fees and costs at the trial
court and appellate court levels.
ARTICLE 18
MISCELLANEOUS
(a) This Agreement shall be governed, interpreted and construed under the
laws of the State of Florida.
(b) This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto, and their respective heirs, executors, legal
representatives, successors and assigns; however, this Section 18(b) does not
constitute a consent to any assignment, transfer or other disposition of a Joint
Venture interest or to the substitution of any assignee or transferee as a
substituted Venturer herein other than pursuant to and in accordance with the
other provisions of this Agreement.
(c) This Agreement may be amended only by written instrument signed by all
Venturers.
(d) This Agreement may be executed in counterparts, each of which shall be
deemed an original.
(e) This Agreement contains the entire agreement of the parties hereto.
All prior written or oral agreements between the parties as to the formation of
the Joint Venture and the rules governing its operation are revoked and
superseded by this Agreement.
(f) The captions used in this Agreement are for convenience only and shall
not be construed in interpreting this Agreement. Wherever from the context it
appears appropriate, each term stated in either the singular or the plural shall
include the singular and the plural, and pronouns stated in the masculine, the
feminine or the neuter gender shall include the masculine, feminine and neuter.
The term "person" means any natural person, corporation, partnership, trust or
other entity.
(g) All references to Articles within this Agreement shall be deemed to be
a cumulative reference to all sections within that Article and all references to
sections within this Agreement shall be deemed to be cumulative references to
all subsections within that section.
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(h) In the event of a transfer (which is not void under Section 12(b)
hereof) of all or part of the interest of a Venturer in the Joint Venture by
sale or exchange or dissolution of a Venturer, the Joint Venture at the request
of the transferring Venturer or other successor in interest, shall cause the
Venturer to elect, pursuant to Section 754 of the Code, or corresponding
provision of subsequent law, to adjust the basis of the Joint Venture property
as provided by Sections 734 or 743 of the Code. All other elections required or
permitted to be made by the Joint Venture under the Code shall be made by a
majority vote of the Board of Managers as they deem appropriate. Each of the
Venturers will upon request supply the information necessary to properly give
effect to any such election.
(i) All remedies shall be cumulative and not alternative.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and in the year first above written.
WITNESSES: HOPS OF NORTHEAST FLORIDA, INC.
/s/ TERENCE TERENZI By: /s/ DAVID L. MASON
- ----------------------------- ------------------------------
David L. Mason, President
- -----------------------------
As to HNEF Address: 3030 North Rocky Point Drive West
Suite 650
Tampa, Florida 33607
"HNEF"
FITCH, INC.
/s/ TERENCE TERENZI By: /s/ JACK CAMP FITCH
- ------------------------------ ------------------------------
Jack Camp Fitch, President
- ------------------------------
As to FI Address: 8028 Acorn Ridge Road
Jacksonville, Florida 32256
"FI"
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HNEF AREA MANAGER II, LTD.
By: Hops of Northeast Florida, Inc.,
its General Partner
/s/ TERENCE TERENZI By: /s/ DAVID L. MASON
- ----------------------------- ------------------------------
David L. Mason, President
- -----------------------------
As to BARLTD Address: 3030 North Rocky Point Drive
Suite 650
Tampa, Florida 33607
"BARLTD"
STATE OF FLORIDA
COUNTY OF HILLSBOROUGH
Before me personally appeared David L. Mason, President of HOPS OF
NORTHEAST FLORIDA, INC., a corporation existing under the laws of Florida, to me
known to be the person described in and who executed the foregoing and
acknowledged the execution thereof to be his one act and deed as such officer as
the act and deed of said corporation for the uses and purposes therein
mentioned.
Witness my signature and official seal this 2ND day of APRIL, 1996.
/s/ ROBERT E. GASPERETTI
--------------------------------
Notary Public
/s/ ROBERT E. GASPERETTI
--------------------------------
Printed Name:
My Commission Expires: May 10, 1998
Commission No.: CC 371597
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<PAGE>
STATE OF FLORIDA
COUNTY OF HILLSBOROUGH
Before me personally appeared Jack Camp Fitch, President of FITCH, INC., a
corporation existing under the laws of Florida, to me known to be the person
described in and who executed the foregoing and acknowledged the execution
thereof to be his one act and deed as such officer as the act and deed of said
corporation for the uses and purposes therein mentioned.
Witness my signature and official seal this 2ND day of APRIL, 1996.
/s/ ROBERT E. GASPERETTI
--------------------------------
Notary Public
/s/ ROBERT E. GASPERETTI
--------------------------------
Printed Name:
My Commission Expires: May 10, 1998
Commission No.: CC 371597
STATE OF FLORIDA
COUNTY OF HILLSBOROUGH
Before me personally appeared David L. Mason, President of HOPS OF
NORTHEAST FLORIDA, INC. which is the General Partner of HNEF AREA MANAGER II,
LTD., a limited partnership organized and existing under the laws of Florida, to
me known to be the person described in and who executed the foregoing and
acknowledged the execution thereof to be his one act and deed as such officer as
the act and deed of said corporation for the uses and purposes therein
mentioned.
Witness my signature and official seal this 2ND day of APRIL, 1996.
/s/ ROBERT E. GASPERETTI
-------------------------------
Notary Public
/s/ ROBERT E. GASPERETTI
-------------------------------
Printed Name:
My Commission Expires: May 10, 1998
Commission No.: CC 371597
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EXHIBIT 10.9
SECOND AMENDED AND RESTATED
JOINT VENTURE AGREEMENT
OF
THE HOPS NORTHEAST FLORIDA JOINT VENTURE NO. II
A FLORIDA GENERAL PARTNERSHIP
THIS SECOND AMENDED AND RESTATED JOINT VENTURE AGREEMENT, is made and entered
effective as of the 1st day of September, 1995, by and among HOPS OF NORTHEAST
FLORIDA, INC., a corporation organized and existing under the laws of the State
of Florida (hereinafter referred to as "HNEF"), FITCH, INC., a corporation
organized and existing under the laws of the State of Florida (hereinafter
referred to as "FI"), and HNEF AREA MANAGER II, LTD., a limited partnership,
owned primarily by Joe Barrett, organized and existing under the laws of the
State of Florida (hereinafter referred to as "BARLTD") (HNEF, FI, and BARLTD are
sometimes herein individually referred to as a "Venturer" and collectively
referred to as the "Venturers").
W I T N E S S E T H:
WHEREAS, pursuant to that certain First Amended and Restated Joint Venture
Agreement of the Hops Northeast Florida Joint Venture No. II dated January 1,
1995 (the "First Amendment"), by and among HNEF, FI, and HNEF Area Manager,
Ltd., a Florida limited partnership ("COSLTD"), HNEF, FI, and COSLTD formed a
joint venture (in the form of a general partnership) under the laws of the State
of Florida for the purpose of owning and operating one or more restaurants under
the Hops System (as described herein) in the "Territory" described in the
Northeast Florida Development Option Agreement dated February 15, 1993, by and
between Hops Grill & Bar, Inc. and Fitch ("Fitch"), as amended by that certain
First Amendment to Northeast Florida Development Option Agreement dated November
10, 1993, by and between Hops and Fitch (the "Development Option Agreement");
WHEREAS, COSLTD no longer holds its interest or Distributive Share in
the Joint Venture;
WHEREAS, HNEF and FI desire to admit BARLTD to the Joint Venture, with
BARLTD to hold a 10% Distributive Share in the Joint Venture, subject to the
terms and conditions set forth herein;
<PAGE>
WHEREAS, BARLTD desires to be admitted to the Joint Venture and to hold a
10% Distributive Share in the Joint Venture, subject to the terms and conditions
set forth herein;
WHEREAS, the Venturers desire to amend and restate the First Amendment in
order to reduce to writing their understandings and agreements with respect to
the matters set forth herein.
NOW, THEREFORE, in consideration of the mutual promises and agreements
herein contained and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto, intending to be
legally bound thereby, agree as set forth herein.
DEFINITIONS
The following definitions shall apply to the following terms as used in
this Agreement:
(1) "Additional Loan(s)" means a loan(s) made to the Joint Venture
pursuant to Section 4(k).
(2) "Agreement" means this Second Amended and Restated Joint Venture
Agreement of September 1, 1995, as amended or modified from time to time in
accordance with Section 18(c) hereof.
(3) "Available Cash" means, at the time of determination, all cash, demand
and time deposits, and marketable securities of the Joint Venture (other than
Capital Contributions to the Joint Venture by the Venturers), including, without
limitation, all cash receipts from conduct of the Joint Venture's business,
insurance proceeds, proceeds from the sale, exchange, condemnation or other
disposition of all or any part of the Joint Venture's property, less the sum of
all funds, reserves and other amounts as the Board of Managers shall deem
reasonable in order to provide for the Joint Venture's business, including,
without limitation, reserves for operating expenses, replacements, capital
improvements and additions relating to the business of the Joint Venture.
(4) "Balance of Required Loans" means the unpaid principal and accrued
interest thereon from time to time due and owing by a Venturer on account of
Required Loans to the Joint Venture pursuant to Section 4(h) hereof.
(5) "Barrett" means Joe Barrett.
(6) "Barrett Employment Agreement" means the Employment Agreement among
Barrett, BARLTD, HNEF, FI and other parties whereby Barrett will be employed to
serve
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<PAGE>
as the Area Manager of three restaurants developed or to be developed under the
Development Option Agreement.
(7) "Barrett Purchase Agreement" means the Agreement between Barrett,
BARLTD, and other parties of even date herewith, which governs the purchase by
Barrett of his interest in BARLTD and certain other matters.
(8) "Board of Managers" means the management committee established by
Section 7(a) hereof.
(9) "Capital Contributions" means all cash sums which the Venturers may
have from time to time contributed to the capital of the Joint Venture pursuant
to Sections 4(g) and 4(i) (together with any other contributions of cash or
property to the Joint Venture by the Venturers as authorized herein).
(10) "Code" means the Internal Revenue Code of 1986, as amended and in
effect on the effective date hereof and, to the extent applicable, as
subsequently amended.
(11) "Development Option Agreement" means the Northeast Florida
Development Option Agreement between Hops and Fitch setting forth the rights of
Fitch with respect to the development of restaurants under the Hops System
within the Territory.
(12) "Distributive Share" means the percentages set forth in Article 3 as
in effect from time to time.
(13) "Excess Contribution" means any contribution made by a Venturer to
the Joint Venture pursuant to Section 4(j) hereof which is occasioned by a
Non-Contributing Venturer's failure to make Required Loans or Special
Contributions as required herein.
(14) "Excess Loan" means the loan deemed to have been made to a
Non-Contributing Venturer as a result of an Excess Contribution pursuant to
Section 4(j) hereof.
(15) "FI" means Fitch, Inc., a Florida corporation which is wholly-owned
by Fitch.
(16) "Fitch" means Jack Camp Fitch the 100% owner of FI.
(17) "BARLTD" means HNEF Area Manager II, Ltd., a limited partnership
organized and existing under the laws of the State of Florida.
(18) "HNEF" means Hops of Northeast Florida, Inc., a Florida corporation.
(19) "Hops" means Hops Grill & Bar, Inc., a corporation organized and
existing under the laws of the State of Florida which is the developer and owner
of all rights under the Hops System.
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<PAGE>
(20) "Hops System" means the unique system of restaurant development,
theme and operation developed and owned by Hops which is, in part, characterized
by (1) the maintenance of uniform high quality standards in connection with the
preparation and sale of Hops-approved food and beverage products, (2) the
uniform high standards of appearance of the individual restaurant units, (3) the
use of distinctive trademarks, service marks, building designs and advertising
signs representing a uniformly high quality of product and services, and (4) the
undertaking by Hops and its affiliates of the obligation to maintain and enhance
the goodwill and public acceptance of the system (and of Hops' trade names,
service marks, trademarks) by strict adherence to the high standards required by
Hops.
(21) "Initial Capital Contributions" shall have the meaning set forth in
Section 4(g) hereof.
(22) "Initial Restaurant" shall mean the first restaurant developed and
opened by the Joint Venture as contemplated herein.
(23) "Joint Venture" means the Joint Venture formed by the Venturers
pursuant to this Agreement and the laws of the State of Florida.
(24) "COSLTD" means HNEF Area Manager, Ltd., a limited partnership
organized and existing under the laws of the State of Florida.
(25) "Non-Contributing Venturer" means a Venturer or assignee who breaches
this Agreement by failing to make any Required Loan or Special Contribution
pursuant to Section 4(j).
(26) "Operating Agreements" mean the agreements to be entered into between
entities to be formed by Hops and Fitch (or their permitted assigns) governing
the development and operation of each restaurant to be opened jointly by Hops
and Fitch (or their permitted assigns) within the Territory pursuant to the
Development Option Agreement.
(27) "Prime Rate" shall be the prime rate of interest as published from
time to time in THE WALL STREET JOURNAL or if THE WALL STREET JOURNAL shall
cease to exist or cease to publish a "Prime Rate"; a mutually agreeable
substitute therefore.
(28) "Required Loans" means all amounts agreed to be loaned to the Joint
Venture pursuant to Section 4(h) hereof.
(29) "Special Contribution(s)" means the capital contributions of the
Venturers described in Section 4(i) hereof.
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<PAGE>
(30) "Territory" means that geographic territory described in the
Development Option Agreement within which, subject to the terms and conditions
set forth in the Development Option Agreement, Hops and Fitch (through the Joint
Venture or one or more other entities) may develop, own, and operate certain
restaurants under the Hops System.
ARTICLE 1
FORMATION OF THE JOINT VENTURE
(a) The Venturers hereby enter into and form a joint venture (in the form
of a general partnership) under the laws of the State of Florida for the limited
purposes and upon the terms and conditions set forth herein.
(b) The name of the Joint Venture shall be "THE HOPS NORTHEAST FLORIDA
JOINT VENTURE NO. II." The Venturers shall execute all assumed or fictitious
name certificates and take all other action required by law to comply with the
laws of the State of Florida and the assumed name act, fictitious name act or
similar statute in effect in each jurisdiction or political subdivision in which
the Joint Venture proposes to do business.
(c) Except as expressly provided herein to the contrary, the rights and
obligations of the Venturers and the administration, dissolution and termination
of the Joint Venture shall be governed by the laws of the State of Florida, to
the extent the same is not otherwise provided in this Agreement.
(d) The business and purpose of the Joint Venture shall be limited to the
ownership and/or operation of one or more restaurant-bar-microbreweries under
the Hops System (together with any and all other directly or indirectly related
businesses) within the Territory pursuant to the terms of this Agreement and the
Development Option Agreement. The Joint Venture will enter into an Operating
Agreement with Hops governing the establishment and operation of each restaurant
to be opened within the Territory. The Joint Venture may also engage in any
other lawful business to which a general partnership may engage under the laws
of the State of Florida, upon the unanimous approval of the Venturers.
(e) The principal office of the Joint Venture shall be at 3030 North Rocky
Point Drive West, Suite 650, Tampa, Florida 33607 unless and until relocated by
the Board of Managers, but the Joint Venture may have such other places of
business within the United
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<PAGE>
States, as the Board of Managers may from time to time determine to be necessary
or appropriate to carry on the business of the Joint Venture.
ARTICLE 2
TERM OF JOINT VENTURE
Subject to the provisions of Article 13 hereof providing for the early
dissolution and liquidation of the Joint Venture, the term of the Joint Venture
shall commence as of the date hereof and terminate on the date twenty (20) years
thereafter; provided, however, that the Joint Venture shall automatically be
renewed for successive one (1) year terms unless a Venturer serves notice upon
the other Venturers to terminate the Joint Venture at the expiration of the
first term of twenty (20) years, or thereafter, at the expiration of any
subsequent one (1) year renewal term, which notice must be given at least one
hundred eighty (180) days prior to the expiration of the initial or a renewal
term.
ARTICLE 3
DISTRIBUTIVE SHARES OF VENTURERS
Subject to adjustments pursuant to other provisions hereof, the
Distributive Shares of the Venturers in the Joint Venture are as follows:
VENTURER DISTRIBUTIVE SHARE
-------- ------------------
HNEF 45.9%
FI 44.1%
BARLTD 10.0%
ARTICLE 4
CAPITAL CONTRIBUTIONS AND REQUIRED LOANS
(a) A separate capital account shall be maintained by the Joint Venture
for each Venturer in accordance with Code Sec. 704(b), as amended (or
corresponding sections of later statutes) and Treasury Regulations promulgated
thereunder.
(b) There shall be credited to each Venturer's capital account (i) the
amount of money contributed by it to the Joint Venture, (ii) the fair market
value of property contributed by it to the Joint Venture (net of liabilities
secured by such contributed property that the Joint Venture is considered to
assume, or take subject to, under Code Sec. 752, as
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<PAGE>
amended (or corresponding sections of later statutes), and (iii) allocations to
it of Joint Venture income and gain (or items thereof), including income and
gain exempt from tax and income and gain, as computed for book purposes, in
accordance with Treas. Reg. Sec. 1.704- 1(b)(2)(iv)(g), as amended, (or
corresponding sections of later regulations), all as set forth pursuant to this
Agreement. No Venturer shall be entitled to contribute property to the Joint
Venture unless such contribution is approved by the Board of Managers.
(c) Each Venturer's capital account shall be decreased by (i) the amount
of money distributed to it by the Joint Venture, (ii) the fair market value of
property distributed to it by the Joint Venture (net of liabilities secured by
such property that such Venturer is considered to assume or take subject to
pursuant to Code Sec. 752, as amended (or corresponding sections of later
statutes)), (iii) allocations to such Venturer of expenditures of the Joint
Venture described in Code Sec. 705(a)(2)(B), as amended (or corresponding
sections of later statutes) and (iv) allocations of Joint Venture loss and
deduction (or items thereof), including losses or deductions, computed for book
purposes, as described in Treas. Reg. Sec. 1.704-1(b)(2)(iv)(g), as amended, (or
corresponding sections of later regulations), all as set forth pursuant to this
Agreement.
(d) An individual tax basis record shall be maintained for each Venturer.
The tax basis record of each Venturer shall be established and shall be adjusted
as of the close of each taxable year of the Joint Venture (or, when appropriate,
as of the close of the taxable year of the Joint Venture for such Venturer) in
accordance with United States federal income tax law and procedure as the same
may exist from time to time.
(e) The manner in which capital accounts are to be maintained pursuant to
Sections 4(a)-(d) is intended to comply with the requirements of Code Sec.
704(b) and the Treasury Regulations promulgated thereunder. If, in the opinion
of the Board of Managers, the manner in which capital accounts are to be
maintained pursuant to the preceding provisions of this Article 4 should be
modified in order to comply with the requirements of Code Sec. 704(b) and the
Treasury Regulations promulgated thereunder, then notwithstanding anything to
the contrary contained in the preceding provisions of this Article 4, the Board
of Managers may, in their sole and unrestricted discretion, alter the method in
which capital accounts are maintained, and the Board of Managers shall have the
right to amend this Agreement without action by the Venturers to reflect any
such change in the manner in which capital accounts are maintained; provided,
however, that any change in the
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<PAGE>
manner of maintaining capital accounts shall not materially alter the economic
agreement between the Venturers.
(f) The respective capital accounts of the Venturers shall not bear
interest. The capital of the Joint Venture shall not be withdrawn except as
provided herein. Notwithstanding the foregoing and except as set forth in
Section 4(j) hereof, without the unanimous consent of the Board of Managers, no
Venturer shall be entitled to make further or additional Capital Contributions
other than as specified in Section 4(g) (as opposed to loans) to the Joint
Venture.
(g) [AS THEIR INITIAL CAPITAL CONTRIBUTION, EACH VENTURER SHALL
CONTRIBUTE, IN CASH, TO THE JOINT VENTURE, THE FOLLOWING AMOUNT:
VENTURER INITIAL CAPITAL CONTRIBUTION
-------- ----------------------------
HNEF UP TO U.S. $_______
FI UP TO U.S. $_______
BARLTD UP TO U.S. $______*
* MAY BE CONTRIBUTED IN CASH, SERVICES, ASSUMPTION OF INDEBTEDNESS, OR AS
OTHERWISE DETERMINED BY THE BOARD OF MANAGERS.]
The Venturers shall proportionately contribute their Initial Capital
Contribution to the Joint Venture immediately upon the demand of the Board of
Managers in such installments as shall be designated by the Board of Managers.
(h) (i) In addition to the Initial Capital Contributions set forth
in Section 4(g) hereof, during the period commencing with the
date of this Agreement and ending on the twentieth anniversary
of such date, HNEF and FI agree to loan or cause to be loaned
to the Joint Venture, on an as needed basis, amounts required
for the operation and business activities of the Joint Venture
("Required Loans"); provided, the principal amount of such
loans shall not exceed in the aggregate U.S. $200,000,
apportioned between HNEF and FI on a pro rata basis, based
upon their then current Distributive Share, minus the then
current outstanding balance of any Special Contributions made
by HNEF or FI pursuant to Section 4(i) hereof prior to the
date of each such loan.
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<PAGE>
(ii) The Required Loans of Section 4(h)(i) shall be in the nature
of revolving lines of credit to the Joint Venture to be
advanced against a promissory note of the Joint Venture to
HNEF and FI, respectively. Each such advance shall bear
interest from the date advanced until repaid at the Prime Rate
and all principal and any accrued but unpaid interest not paid
pursuant to Section 5(a) hereof, shall become finally due and
payable, if not sooner paid pursuant to Section 5(a) hereof,
at the end of the initial twenty (20) year term of this
Agreement. Upon the expiration of the initial twenty (20) year
term of this Agreement (whether or not the Agreement is
renewed), neither HNEF nor FI shall have further obligations
to make further Required Loans to the Joint Venture. Accrued
interest upon outstanding advances under the Required Loans,
if any, shall be due and payable on a quarterly basis during
the initial twenty (20) year term of this Agreement with both
principal and interest to be prepaid from Available Cash as
set forth in Section 5(a) below.
(iii) The aforesaid Required Loans shall be made to the Joint
Venture upon calls made by the Board of Managers in its
discretion. Upon the issuance of a call for Required Loans by
the Board of Managers, HNEF and FI shall proportionately make
such Required Loans within five (5) business days after
receipt of the notice of such call pursuant to the terms of
Article 14 hereof.
(i) (i) In the event the Initial Capital Contributions, Required
Loans, other loans and receipts from the Joint Ventures'
business are insufficient to meet the cash needs of the Joint
Venture, then the Venturers can agree in writing to make
additional capital contributions to the Joint Venture in the
proportionate amount (measured by the relation of each
Venturers' Distributive Share to 100%) of the cash needed by
the Joint Venture and, upon the written concurrence of both
HNEF and FI, the Board of Managers shall be entitled to issue
a call for such mandatory additional contributions, which
demand shall specify the proportionate contribution required
by each Venturer ("Special Contributions").
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<PAGE>
(ii) Upon the issuance of a call for Special Contributions, each
Venturer shall proportionately make the Special Contributions
within fourteen (14) days after the receipt of notice of call
as provided in Article 14. Each call for Special Contributions
shall designate the purpose or purposes for which the proceeds
of the Special Contributions will be used. The proceeds from
all Special Contributions shall be used solely for the
purposes set out in the call.
(j) (i) If at any time a Venturer shall breach this Agreement by
failing to make its respective Required Loans or Special
Contributions pursuant to the call provisions of this Article
4 (hereinafter referred to as a "Non-Contributing Venturer"),
such Non-Contributing Venturer shall be considered in breach
of this Agreement and (without otherwise limiting any other
remedies which the other Venturers may have against such
Non-Contributing Venturer) the other Venturers shall have the
right, (but not the obligation) to make an excess contribution
("Excess Contribution") to the Joint Venture to cover such
unpaid Required Loans or Special Contributions of the
Non-Contributing Venturer. In the event that both of the other
Venturers elect to make an Excess Contribution, then such
other Venturers shall have the right to do so in proportion to
each of their then current Distributive Share (without regard
to the Distributive Share of the Non-Contributing Venturer.
(ii) In the event that a Venturer makes an Excess Contribution,
such Excess Contribution shall be deemed to be a loan ("Excess
Loan") to the Non-Contributing Venturer by virtue of whose
breach of this Agreement such Excess Contribution was
required. The Excess Loan shall bear interest at a rate equal
to the lesser of (a) the maximum rate permitted under
applicable law or (b) the greater of (i) the Prime Rate plus
two percent (2%) or (ii) ten percent (10%) per annum, and
shall be due and payable upon demand and shall be secured by a
lien and security interest upon any amounts of Available Cash
due the Non- Contributing Venturer. The Excess Loan shall be
an obligation of such
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<PAGE>
Non-Contributing Venturer and, if not sooner paid by such
Non-Contributing Venturer, shall be due and payable out of the
first Available Cash of the Joint Venture pursuant to the
priority set forth in Article 5 below, with the application of
payments thereof to principal and/or interest being at the
sole discretion of the payee thereof. To the extent of any
payments of Excess Loans directly by the Joint Venture out of
Available Cash to any Venturer(s) who made an Excess
Contribution, such Venturer(s) who made the Excess
Contribution(s) shall subrogate all rights which such
Venturer(s) had against the Non-Contributing Venturer to the
Joint Venture. Any interest on Excess Loans paid by the Joint
Venture shall be charged solely to the capital account of the
Non-Contributing Venturer who occasioned any such Excess Loan.
(iii) Without limiting any other remedies set forth herein or at
law, if any Excess Loan is not repaid in full by such
Non-Contributing Venturer within one hundred twenty (120) days
after the same has been advanced on its behalf, then the
Distributive Share of such Non-Contributing Venturer shall (at
the option of the Venturers who is/are owed any such Excess
Loan) be reduced and the Distributive Share of the Venturer(s)
making any such Excess Loan shall be increased as follows: The
unpaid balance (including principal and accrued interest) of
any such Excess Loan shall be divided by a sum equal to (a)
the aggregate amount of all Capital Contributions theretofore
made to the Joint Venture by the Venturers (excluding any such
contributions deemed to have been made on account of any such
Excess Loan), plus (b) the unpaid balance of accrued interest
and principal of any such Excess Loan, less (c) all
withdrawals of capital to all Venturers, in the aggregate. The
quotient thus obtained shall be multiplied by one hundred
percent (100%). The resulting percentage amount will then be
subtracted from such Non-Contributing Venturer's then existing
Distributive Share (provided same shall not be reduced below
zero) and an equivalent amount shall be added to the
respective Distributive
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<PAGE>
Share(s) of the Venturer(s) who made any such Excess Loan (in
proportion to the amount of Excess Loans made to such
Venturers). Immediately following such adjustment in the
Distributive Shares of the Venturers, it shall be deemed that
the unpaid balance (including principal and accrued interest)
of any such Excess Loan(s) shall have been converted into an
additional capital contribution by the Venturer(s) making such
Excess Loan(s) and a capital contribution withdrawal by the
Non-Contributing Venturer and the capital accounts of the
Venturers shall be adjusted accordingly, and the
Non-Contributing Venturer shall have no further liability to
repay such Excess Loan(s). Any adjustment to the Distributive
Shares made under this Section 4(j) shall act to adjust, in
like manner, all Distributive Shares as set forth in Article
3.
(k) Any Venturer may at any time at the request of the Joint Venture make
a loan in addition to those loans identified elsewhere herein ("Additional
Loan") to the Joint Venture to fund the operation and business activities of the
Joint Venture. No Venturer shall be obligated to make an Additional Loan. In the
event an Additional Loan is made to the Joint Venture, the provisions of Article
8 shall govern as to the type, interest rate and manner of repayment of such
Additional Loan.
ARTICLE 5
DISTRIBUTIONS
(a) Subject to the provisions of Article 13 below, Available Cash, if any,
shall be distributed quarterly on or before the last day of the first month
following the end of each calendar quarter (commencing on the last day of the
first month of the calendar quarter immediately following the calendar quarter
in which the Initial Restaurant is opened to the public) in the following
priority:
(i) To pay or provide for all amounts owing to Venturers for
Excess Loans;
(ii) To pay or provide for all other amounts owing to Venturers for
Additional Loans; and
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<PAGE>
(iii) To pay or repay all amounts outstanding as Required Loans,
with the application first to accrued interest and the balance
to principal of loans made in accordance with Section 4(h).
If Available Cash is insufficient to repay all sums owing in respect to Required
Loans, Additional Loans or Excess Loans, Available Cash shall first be applied
pro rata to repay and retire the oldest loans first (with all Excess Loans to be
repaid prior to the payment of any Additional Loans and all Additional Loans
required to be repaid prior to the payment of any Required Loans) and, if any
funds thereafter remain available, such funds shall be applied in a similar
manner to the remaining loans in accordance with the order of the dates on which
they were made; however, as to loans made on the same date, each such loan shall
be repaid in the proportion that such loan bears to the total loans made on said
date. For purposes of priority under this Section 5(a), Required Loans and
Excess Loans made pursuant to the same call under Sections 4(h) or 4(i) shall be
deemed to have been made on the same date although they may have been advanced
on different dates. In addition, at any time when no Excess Loans, Additional
Loans or Required Loans are outstanding, the Board of Managers may make monthly
distributions to BARLTD of up to nine percent (9%) of the net income of the
Joint Venture, each as determined by the internal accountants of the Joint
Venture for purpose of allowing BARLTD to satisfy any corresponding obligation
to make monthly distributions Barrett pursuant to the terms of the Barrett
Employment Agreement. Any such distributions to BARLTD at a time when
proportionate distributions are not being made to other Venturers shall be
considered to be an advance against the distributions to which BARLTD are
otherwise entitled from time to time.
(b) During any time when no Excess Loans, Additional Loans or Required
Loans are outstanding, upon the order of the Board of Managers, acting in their
discretion, the Joint Venture may make distributions to the Venturers from
Available Cash in accordance with the Venturers' respective Distributive Shares.
The above notwithstanding, in the event that any Venturer receives an allocation
of income or other gain from the Joint Venture (as shown upon any K-1 or similar
form issued to such Venturer by the Joint Venture) which requires that such
Venturer (or its equity owners) make a payment in cash to the United States
Internal Revenue Service (the "IRS") by reason of the items of allocation from
the Joint Venture, taking into account all other income, credits and deduction
of such Venturer, then the Joint Venture shall distribute cash (to the extent of
Available Cash only) to each
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Venturer in proportion to their Distributive Shares, in an amount so as to
provide the Venturer having the greatest amount of tax liability as a result of
such allocations by the Joint Venture (less amounts distributed to such
Venturers under this Section 5(b) during the preceding twelve months, if any),
an amount of cash sufficient to pay such tax liability. Any distribution
required by the immediately preceding sentence shall be made prior to the date
of the required filing of a tax return, by any Venturer, with the IRS showing
such tax as due and payable.
(c) If any Venturer does not withdraw the whole or any part of its
share of any cash distribution, such Venturer shall not be entitled to receive
any interest thereon, nor shall any such cash not withdrawn be deemed an
increase in such Venturer's Distributive Share of the Joint Venture without the
express written consent of all other Venturers.
ARTICLE 6
ALLOCATIONS OF INCOME, GAIN, LOSS
DEDUCTION AND CREDIT
Each item of income, gain, loss, deduction or credit for each fiscal
year, or portion of a fiscal year, of the Joint Venture shall be allocated among
the Venturers in accordance with their then respective Distributive Shares. Upon
dissolution and liquidation of the Joint Venture pursuant to Article 13 hereof,
gain from the sale, exchange, abandonment, foreclosure or other disposition of
all or any portion of the Joint Venture property or any interest therein shall
be allocated among the Venturers according to the Distributive Share of each.
ARTICLE 7
MANAGEMENT, OPERATION AND CONTROL OF THE JOINT VENTURE
(a) BOARD OF MANAGERS.
(i) Except as provided in Section 7(c) below, the overall
management and control of the Joint Venture shall be vested in
a Board of Managers. The Board of Managers shall be
responsible for making all policy decisions of the Joint
Venture, including (but not limited to) borrowing money,
purchasing assets, and making other capital investments on
behalf of the Joint Venture, negotiating and entering into
contracts or
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agreements on behalf of the Joint Venture, selling or leasing
assets of the Joint Venture, establishing the fiscal policies
of the Joint Venture, establishing the overall business plan
and systems of operation of the Joint Venture, hiring and
terminating any and all employees of the Joint Venture and
establishing and reviewing the salaries of any and all
employees of the Joint Venture.
(ii) Unless increased by the unanimous vote of the Venturers, the
Board of Managers shall consist of two (2) individuals. HNEF
shall have the right to appoint one (1) member of the Board of
Managers, and FI shall have the right to appoint one (1)
member to the Board of Managers. BARLTD shall not have the
right to appoint a member of the Board of Managers. Each
member of the Board of Managers shall serve at the pleasure of
the Venturer by which he was appointed, and each Venturer may
fill vacancies caused by the death, resignation or removal of
a member appointed by that Venturer. The initial members of
the Board of Managers shall be David Mason (representing HNEF)
and Fitch (representing FI).
(iii) Except as otherwise set forth herein, actions of the Board of
Managers shall be taken only by majority vote of its members
or the written consent of a majority of its members. Each
member of the Board of Managers shall be entitled to one (1)
vote.
(iv) The Board of Managers is granted the right, power and
authority, on behalf of the Joint Venture, to perform all acts
which, in the Board of Managers' sole discretion, are
necessary and/or desirable to carry out the duties and
responsibilities of operating and managing the Joint Venture
and its business. The Board of Managers shall have (but shall
not be limited to) the right, power and authority to incur
reasonable expenses; to employ and dismiss from employment any
and all employees, agents, or independent contractors; to
lease property, to borrow money or to incur indebtedness at a
price, rental, or amount, for cash, securities or other
property, and upon such terms as the Board of Managers deems
proper; to adjust, compromise, settle or refer to
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arbitration any claim against or in favor of the Joint Venture
or any nominee; to institute, prosecute, defend or settle any
legal proceeding relating to the business or property of the
Joint Venture; to delegate all or any portion of its powers as
set forth in Subsection 7(a)(v) below and to execute,
acknowledge and deliver any and all instruments to effect any
and all of the foregoing.
(v) In its sole discretion, the Board of Managers may designate
one or more of its members or one or more employees or agents
of the Joint Venture to manage the day-to-day operations of
the Joint Venture; provided, however, such member(s),
employee(s) or agent(s) shall at all times be subject to the
supervision and control of the Board of Managers.
(b) Except as provided in Section 7(c) below, no Venturer shall, unless
authorized by this Agreement or by majority of the Board of Managers, take any
action to bind or obligate the Joint Venture in any manner, including but not
limited to, any of the following:
(i) make, execute or deliver for the Joint Venture any
agreement, contract, note, bond, mortgage, deed of trust,
guaranty, indemnity bond, surety bond or accommodation paper
or accommodation endorsement;
(ii) borrow money in the Joint Venture's name or use the Joint
Venture's property as collateral;
(iii) assign, transfer, pledge or release any claims or debts
owing by or to the Joint Venture;
(iv) cause the Joint Venture to purchase all or any part of the
Joint Venture interest of any Venturer;
(v) assign the Joint Venture's property in trust for creditors
or on the assignee's promise to pay the debts of the Joint
Venture;
(vi) dispose of the goodwill of the Joint Venture;
(vii) do any other act which will make it impossible to carry on
the ordinary business of the Joint Venture;
(viii) confess a judgment against the Joint Venture;
(ix) pledge or transfer or allow or cause to become encumbered in
any manner a Venturer's interest in the Joint Venture,
except as permitted in Article 12 hereof;
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(x) do any other act for which unanimity is required by the other
provisions of this Agreement or applicable law; or
(xi) alter the purpose of the Joint Venture.
(c) CONTROL BY VENTURERS. As provided in Section 7(a) above, the overall
management and control of the Joint Venture shall normally be vested in the
Board of Managers. Anything contained to the contrary herein notwithstanding,
however, since the Board of Managers is to consist of two persons, if the Board
of Managers is unable to agree upon any issue or matter relating directly or
indirectly in any way to the Joint Venture, such issue or matter, shall be
decided by the Venturers as provided in Section 7(d) hereof. Any decision made
by the Venturers pursuant to this Section 7(c) shall be binding in all respects
upon the Board of Managers and the Joint Venture and may be relied upon in all
respects by third parties. The Venturers and the Board of Managers hereby agree
to, at all times, abide by and to cause the Joint Venture to abide by the terms
of any decision of the Venturers pursuant to Sections 7(c) and 7(d) hereof.
(d) ACTION BY THE VENTURERS.
(i) In the exercise of rights, powers and duties hereunder
(specifically including, but in no way limited to the rights
and powers set forth in Section 7(c) above), the Venturers
shall have one (1) vote for each percentage of Distributive
Share owned by such Venturer with any fractional percentage of
ownership rounded to the closest whole percentage point (i.e.
at the time of execution hereof, HNEF shall have 46 votes, FI
shall have 44 votes, and BARLTD shall have 10 votes) on all
issues, questions, matters and decisions with respect to the
Joint Venture to the extent not otherwise resolved by the
other provisions of this Agreement.
(ii) Actions to be taken by the Venturers herein may be taken
either by majority vote or majority written consent of the
Venturers.
(e) SPECIAL DUTIES OF HNEF. Unless otherwise determined by the Board of
Managers, HNEF shall be responsible for and shall have the authority to conduct
all general administrative matters of the Joint Venture which shall include, but
shall not be limited to, the coordination of:
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(i) all legal and accounting matters on behalf of the Joint
Venture, including the maintenance of the general accounting
systems of the Joint Venture and coordinating the functions of
the accountants and lawyers that will service the Joint
Venture;
(ii) all payroll matters on behalf of the Joint Venture;
(iii) all accounts payable on behalf of the Joint Venture (except
those that must be handled on a local level which shall be the
responsibility of FI);
(iv) all banking and financial matters of the Joint Venture;
(v) all financial reporting to Hops pursuant to the terms of any
Operating Agreement utilizing restaurant and other operating
data to be provided by FI as the operator of the restaurants;
and
(vi) the compliance by the Joint Venture of all administrative
aspects of any Operating Agreement.
Except for the administrative fee payable to Hops as part of each Operating
Agreement, HNEF shall receive no direct compensation for such administration and
coordination; however, all costs and expenses payable to third parties relating
to administrative matters of the Joint Venture shall be the sole responsibility
of the Joint Venture. [BY WAY OF EXAMPLE, BUT NOT IN LIMITATION, OF THE ABOVE,
(A) HNEF WILL UNDERTAKE (I) ALL OF THE INTERNAL ACCOUNTING AND BOOKKEEPING OF
THE JOINT VENTURE, INCLUDING THE DAILY MAINTENANCE OF THE JOINT VENTURE'S BOOKS
AND RECORDS AND (II) WILL COORDINATE WITH THE JOINT VENTURE'S ACCOUNTANTS, THE
PREPARATION OF THE JOINT VENTURE'S TAX RETURNS AND THE AUDIT OF THE JOINT
VENTURE'S BOOKS AND RECORDS; AND (B) HNEF SHALL RECEIVE NO COMPENSATION FOR SUCH
INTERNAL ACCOUNTING AND BOOKKEEPING OR FOR THE TIME SPENT BY HNEF IN
COORDINATING WITH THE JOINT VENTURE'S ACCOUNTANTS, HOWEVER, THE JOINT VENTURE
SHALL BE SOLELY RESPONSIBLE FOR ALL FEES AND EXPENSES OWING TO THE JOINT
VENTURE'S ACCOUNTANTS FOR THE PREPARATION OF SUCH TAX RETURNS AND THE CONDUCT OF
THE AUDIT.]
Unless otherwise instructed by the Board of Managers, HNEF shall undertake its
duties pursuant to this Section 7(e) in a manner so as to assure compliance with
the administrative provisions of all Operating Agreements to which the Joint
Venture is a party. The failure by HNEF to cause the Joint Venture to comply
with the administrative provisions of any such Operating Agreement (unless such
non-compliance is waived by Hops) shall be considered a breach of this Agreement
by HNEF.
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(f) SPECIAL DUTIES OF FI. Unless otherwise determined by the Board of
Managers, acting in their sole discretion, FI shall be responsible for and shall
have the authority to conduct all of the operational matters of each restaurant
to be owned and operated by the Joint Venture, which duties shall include, but
shall not be limited to:
(i) the provision or employment of all direct restaurant
management as required by the Operating Agreement relating to
such restaurant or as otherwise necessary for the operation of
any restaurant to be owned and operated by the Joint Venture;
(ii) the employment, termination and supervision of all restaurant
employees; and
(iii) the compliance by the Joint Venture of all operating aspects
of any Operating Agreement.
FI shall receive no direct compensation for the conduct of such operational
matters; however, all expenses related to the operation of each restaurant to be
owned and operated by the Joint Venture shall be the sole responsibility of the
Joint Venture. [BY WAY OF EXAMPLE, BUT NOT LIMITATION, OF THE ABOVE, (A) FI
SHALL BE RESPONSIBLE FOR THE RECRUITING, HIRING AND ULTIMATE SUPERVISION OF ALL
EMPLOYEES OF EACH RESTAURANT TO BE OPERATED BY THE JOINT VENTURE; AND (B) FI
SHALL RECEIVE NO COMPENSATION FOR ITS RECRUITING, HIRING AND SUPERVISION
ACTIVITIES, HOWEVER, THE JOINT VENTURE SHALL BE SOLELY RESPONSIBLE FOR THE
ACTUAL COMPENSATION (INCLUDING WAGES AND BENEFITS) OF THE EMPLOYEES OF SUCH
RESTAURANTS.]
Unless otherwise instructed by the Board of Managers, FI shall undertake its
duties pursuant to this Section 7(f) in a manner so as to assure compliance with
the operating provisions of all Operating Agreements to which the Joint Venture
is a party. The failure by FI to cause the Joint Venture to comply with the
operating provisions of any such Operating Agreement (unless such non-compliance
is waived by Hops) shall be considered a breach of this Agreement by FI. FI
shall be solely responsible for the cost of any FI management personnel not
directly related to the management of a restaurant owned by the Joint Venture,
if any.
(g) OTHER BUSINESS OF HNEF. The parties hereto acknowledge and agree that
HNEF and its designated member of the Board of Managers are engaged in other
business activities unrelated to the business of the Joint Venture, and will
continue to do so and will devote only such time as is reasonably necessary to
the business of the Joint Venture. The
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parties further acknowledge and agree that certain of the business activities of
HNEF (and Hops) will relate to the operation of other restaurants under the Hops
System or other systems and accordingly, certain of such activities may conflict
with the best interests of FI or the Joint Venture or compete with the business
of the Joint Venture.
(h) EXCLUSIVE BUSINESS OF FI/FITCH. The parties hereto acknowledge and
agree that FI and Fitch shall exclusively devote their time and efforts to the
operation of the restaurants to be owned and operated under the Joint Venture
for a period of two (2) years from the date of the opening of the Initial
Restaurant to the general public. Thereafter, FI and Fitch may have other
business interests and will be required to devote only such time to the Joint
Venture as is reasonably necessary to the business of the Joint Venture.
(i) SPECIAL DUTIES OF BARLTD. Unless otherwise determined by the Board of
Managers acting in their sole discretion, BARLTD in its role as the Area Manager
of the Hops Grill & Bar restaurants in the Territory, shall serve in a
managerial capacity under the direction of the Board of Managers, with respect
to the Hops Grill & Bar restaurant owned and operated by the Joint Venture and
at the specific request of the Board of Managers has employed Barrett for that
purpose. If, for any reason, BARLTD shall become unable to retain the services
of Barrett, at the request of the Board of Managers, BARLTD shall attempt to
locate and employ a satisfactory substitute manager, but shall have no liability
to the Joint Venture for the failure to further perform the special duties set
forth herein or for the failure to locate a suitable substitute manager to
perform such services. The Joint Venture shall reimburse BARLTD for its
reasonable expenses in connection with the services to be performed by BARLTD
hereunder and under the Barrett Employment Agreement, including but not limited
to the compensation to be paid to Barrett thereunder.
(j) BANK ACCOUNTS. The Joint Venture will maintain such bank accounts as
the Board of Managers may deem necessary, for the deposit of Joint Venture funds
and for the proper segregation thereof into such separate accounts as may be
deemed appropriate. All withdrawals from any such bank account shall be made by
such persons as are approved in writing by a majority of the Board of Managers.
Joint Venture funds shall not be commingled with those of any other person or
entity.
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ARTICLE 8
LOANS TO JOINT VENTURE; FEES TO VENTURERS
(a) VENTURER LOANS. If any Venturer shall advance any money to the Joint
Venture except as part of such Venturer's Capital Contributions required by
Section 4(g) hereof, or as provided in Section 4(i), the amount of any such
advance shall not increase the Capital Contribution of such Venturer to the
Joint Venture or entitle such Venturer to any increase in such Venturer's
Distributive Share (except to the limited extent expressly provided in Section
4(j)(iii)), but the amount of any such advance shall be deemed to be a loan to
the Joint Venture and an obligation of the Joint Venture to such Venturer. No
Venturer shall be personally obligated to repay or contribute additional capital
to repay any such advance and such advance shall be payable or collectible only
out of Joint Venture assets existing from time to time; provided, however,
nothing contained in this Section 8(a) shall limit the liability of the
Venturers to repay the Balance of Required Loans or to limit the full personal
liability of any Venturer necessitating an Excess Loan to repay such loan.
(b) INTEREST. Loans to the Joint Venture pursuant to Section 8(a) above
(excluding Excess Loans) shall be payable in accordance with Section 5(a) and
shall bear interest at the Prime Rate unless otherwise agreed to by the Venturer
making the loan and the Board of Managers.
(c) FEES TO VENTURERS. Except for distributions made in accordance with
Article 5 of this Agreement and the fees and other payments set forth in the
Development Option Agreement, or the Operating Agreement for any restaurant to
be operated by the Joint Venture, the Venturers shall not be entitled to
receive, directly or indirectly, any fees or other payments from the Joint
Venture without the prior written consent of HNEF and FI. This provision is not
intended to preclude any Venturer (or its affiliates) from serving as a vendor
or service provider to the Joint Venture when approved by the Board of Managers
and such products or services are provided to the Joint Venture on terms that
are no less favorable to the Joint Venture than those available from independent
third party providers.
ARTICLE 9
BOOKS, RECORDS AND TAX MATTERS
(a) Proper and complete records and books of account for the Joint Venture
shall be kept or caused to be kept by the Board of Managers. All transactions
and other matters
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relative to the Joint Venture's business, as are usually entered into records
and books of account maintained by persons engaged in businesses of like
character, shall be entered fully and accurately into the Joint Venture's
records and books of account.
(b) Each Venturer and/or such Venturer's duly authorized representative,
at such Venturer's expense, shall have the right, power and authority to
examine, inspect, copy and verify, at any and all reasonable times, the books,
records and accounts of the Joint Venture.
(c) The books and records of the Joint Venture shall be at all times
maintained at the principal office of the Joint Venture set forth in Section
1(e) above, or at such other place as the Board of Managers may determine from
time to time.
(d) The Joint Venture shall be treated as a general partnership for
federal and state tax purposes. The Board of Managers shall cause the Joint
Venture to prepare and file on or before the annual due date a United States
Partnership Return of Income and any necessary state tax returns.
(e) Unless otherwise agreed by the Board of Managers, the Board of
Managers shall cause an audit of the books and records of the Joint Venture to
occur at least annually. Such audit shall be conducted by independent certified
public accountants which are mutually acceptable to the Venturers.
ARTICLE 10
FISCAL YEAR AND BASIS FOR ACCOUNTING
(a) Unless changed by the Board of Managers, the fiscal year of the Joint
Venture shall end on December 31 of each year.
(b) The Joint Venture shall operate and keep its books and records on such
basis as the Board of Managers shall elect.
ARTICLE 11
LIABILITY OF VENTURERS
(a) No Venturer, nor any officer, director, shareholder, trustee, partner,
agent, associate or beneficiary of a Venturer, shall be liable, responsible or
accountable in damages or otherwise to the Joint Venture or the other Venturer,
for any action taken or failure to act (even if such action or failure to act
constituted the simple negligence of the Venturer, or such officer, director,
shareholder, trustee, partner, agent, associate or beneficiary of such
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Venturer) on behalf of the Joint Venture within the scope of the authority
conferred on the Venturer by this Agreement, unless such act or omission
constitutes a breach of the terms of this Agreement or such act or omission was
performed or omitted fraudulently or constituted gross negligence or willful
malfeasance.
(b) The Joint Venture shall indemnify and hold harmless each member of the
Board of Managers and each Venturer, and each officer, director, shareholder,
trustee, partner, agent, associate or beneficiary thereof, from and against any
loss, expense, damage or injury suffered or sustained by it by reason of any
acts, omissions or alleged acts or omissions (even if such action or failure to
act constituted the simple negligence of such Venturer, or such officer,
director, shareholder, trustee, partner, agent, associate or beneficiary of such
Venturer) arising out of its activities on behalf of the Joint Venture or in
furtherance of the interests of the Joint Venture, including, but not limited
to, any judgment, award, settlement, reasonable attorney's fees and other costs
or expenses incurred in connection with the defense of any actual or threatened
action, proceeding or claim, if the acts, omissions or alleged acts or omissions
upon which such actual or threatened action, proceeding or claims are based (i)
were for a purpose reasonably believed to be in the best interests of the Joint
Venture, (ii) were within the scope of authority conferred on such indemnified
party by this Agreement, (iii) were not performed or omitted fraudulently or as
a result of the gross negligence or willful malfeasance of such indemnified
party, and (iv) did not constitute a breach of the terms of this Agreement.
ARTICLE 12
DISPOSITION OF A VENTURER'S JOINT VENTURE INTEREST
(a) (i) At no time during the term of this Agreement shall FI,
directly or indirectly, sell, assign, transfer, mortgage,
encumber, pledge or otherwise similarly deal with or dispose
of all or any portion of its interest in the Joint Venture,
without first obtaining the written consent of HNEF, or, in
the absence of such written consent, without first complying
with the terms of this Article 12. Any attempted sale,
assignment, transfer, mortgage, pledge, grant, hypothecation
or other disposition of any interest in the Joint Venture by
FI, in violation of the foregoing provisions of this Section
12(a), shall be null and void and of
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no force or effect. For purposes of this Agreement, the
transfer or distribution, directly or indirectly, of an equity
interest or other rights in or the issuance of additional
securities in FI, other than pursuant to the provisions of the
last paragraph of this Section 12(a)(ii) below, shall be
deemed a disposition of the Joint Venture interest of FI, and
HNEF shall be entitled to purchase the Joint Venture interest
of FI in accordance with the terms of Section 12(c) hereof.
(ii) Provided that Fitch shall, at all times, retain a minimum of
51% of the equity interest in and absolute voting and other
control of FI, Fitch (or FI) may sell or otherwise assign up
to 49% of the equity of FI to persons who have received the
prior written approval of HNEF (which approval shall not be
unreasonably delayed or withheld). Any such transferee of an
interest in FI may be required, as a condition to the consent
of HNEF, to execute reasonable confidentiality and transfer
agreements as are deemed necessary by HNEF to assure the
compliance by such transferees with the spirit of this
Agreement. Additionally, the Bylaws of FI shall reflect that
the issuance and transfer of shares of stock (or other equity
interests in FI) are restricted by the terms of this
Agreement. The following legend shall appear conspicuously
upon the face of each stock certificate of (or certificate
otherwise representing an interest in) FI: "The transfer of
this stock (or interest) is subject to the terms and
conditions of a Joint Venture Agreement dated September 1,
1995 by and between FI and HNEF and the Bylaws of the
corporation." FI hereby acknowledges that the purpose of the
aforesaid transfer restrictions and procedures is to protect
the trademarks, trade secrets and operating procedures of Hops
and the partnership interests of HNEF contained herein. FI
hereby acknowledges that non-compliance with such transfer
restrictions and procedures shall constitute a breach of this
Agreement by FI. Upon the execution of this Agreement and
periodically thereafter at the reasonable request of HNEF, FI
shall provide HNEF with a photocopy of its current Bylaws and
all issued
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and outstanding stock certificates to demonstrate compliance
with this Agreement.
(b) (i) FI shall not transfer any interest in the Joint Venture
for a period beginning upon the date hereof and ending two (2)
years after the date of the opening of the Initial Restaurant
to the general public, without the express prior written
consent of HNEF. If following the period described in the
immediately preceding sentence, FI desires, directly or
indirectly, to sell, assign, transfer or in any way dispose of
all or any portion of the Joint Venture interest of FI to any
third party, FI shall first serve notice (hereinafter called
an "Offer to Sell") to that effect upon HNEF. The Offer to
Sell shall set forth the amount of Joint Venture interest of
FI desired to be sold or otherwise disposed of, the price,
terms and conditions of such proposed sale and the name and
address of the proposed third party purchaser (and in the case
of a proposed purchaser that is not a natural person, the
principals of such proposed purchaser), and shall offer to
sell such Joint Venture interest to HNEF at the price and on
the terms of sale described in the Offer to Sell.
(ii) HNEF shall have the absolute right to prohibit the sale of the
Joint Venture interest identified in the Offer to Sell if
HNEF, in its reasonable determination, shall disapprove of the
purchaser identified in the Offer to Sell. In making such
determination, HNEF may consider, among other things, the
reputation, financial position and restaurant operating
experience of the proposed purchaser, as well as concerns as
to the protection of the trade secrets and proprietary
information of the Hops System that result from the
competitive nature of any other business operations directly
or indirectly related to the potential purchaser. FI shall
promptly provide HNEF with any information regarding the
potential purchaser, reasonably requested by HNEF, in order to
evaluate the potential purchaser, including, but not limited
to financial statements and a detailed business history of
such potential purchaser. HNEF will notify FI in writing of
its approval or
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disapproval of any such potential purchaser within sixty (60)
days after receipt by HNEF of the Offer to Sell.
(iii) Whether or not the potential purchaser is approved by HNEF as
provided in Section 12(c) above, HNEF shall have the first
right to purchase all of the Joint Venture interest so offered
by giving notice of acceptance to FI within one hundred twenty
(120) days after receipt by HNEF of the said Offer to Sell.
(iv) In the event HNEF shall not have disapproved of the purchaser
identified in the Offer to Sell as set forth in Section
12(b)(ii) above and HNEF fails or refuses to purchase the
Joint Venture interest of FI as provided in Section 12(b)(iii)
above, FI shall be free to sell the Joint Venture interest so
identified in the Offer to Sell to the person or entity
identified in the Offer to Sell on the price and terms set
forth in the Offer to Sell; provided, however, that FI shall
not transfer or otherwise dispose of such Joint Venture
interest to any person or entity other than the third party
identified in the Offer to Sell or for a price less than or on
terms more favorable than those set forth in the Offer to Sell
without first reoffering such Joint Venture interest to HNEF
as set forth in Section 12(b)(i). If FI does not consummate
the sale of its Joint Venture interest so identified in its
Offer to Sell within ninety (90) days after the expiration of
the period for HNEF's acceptance of such Offer to Sell, the
provisions of this Article 12 shall reattach to such interest
and such interest shall not be sold without reoffer to HNEF.
(v) The provisions of this Section 12(b) to the contrary
notwithstanding, FI shall make no transfer of its Joint
Venture interest as provided in this Section 12(b) unless the
person or entity acquiring such interest shall execute and
deliver to HNEF (or Hops) such documentation as HNEF (or Hops)
may reasonably require to assure the confidentiality of the
trade secrets and proprietary information associated with the
Hops System and to make the purchaser a party to this
Agreement (including the transfer restrictions as they
previously related to FI) and all other
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agreements related to the restaurants operated by the Joint
Venture to which FI was (or is) a party.
(c) (i) If FI or Fitch shall breach this Agreement as provided in
Section 15 hereof, FI shall be deemed to have made an Offer to
Sell (which shall be deemed received by HNEF only when HNEF
has actual knowledge of such breach) all of the Joint Venture
interest owned by FI to HNEF for the price and upon the terms
specified in this Section 12(c). HNEF shall have the right to
purchase the Joint Venture interest of FI so offered by giving
notice of acceptance to FI within one hundred twenty (120)
days after the deemed receipt by HNEF of the Offer to Sell. In
the event that HNEF fails or refuses to purchase all of the
Joint Venture interest of FI, the remaining provisions of this
Agreement shall continue to apply to the Joint Venture
interest of FI.
(ii) DETERMINATION OF PURCHASE PRICE AND TERMS. In the event that
the Joint Venture interest of FI is to be purchased pursuant
to the foregoing provisions of this Section 12(c), the
following provisions shall apply:
(A) PRICE. The purchase price of the Joint Venture interest of
FI shall be determined pursuant to Section 12(e)(i)
hereof.
(B) TIME AND METHOD OF PAYMENT. Upon the closing of any sale
pursuant to this Section 12(c), HNEF shall pay the
purchase price for the Joint Venture interest of FI
purchased pursuant to this Section 12(c) as follows:
1) PAYMENT UPON CLOSING. At the option of HNEF, all of
the purchase price or an amount equal to the greater
of:
a) twenty percent (20%) of the purchase price; or
b) $50,000,
shall then be paid in cash.
2) PROMISSORY NOTE. Any part of the purchase price which
is not paid in cash shall be evidenced by a negotiable
promissory note of HNEF payable to and delivered to
FI. The promissory note shall bear interest at the
Prime
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Rate and shall be payable over a period of sixty (60)
months with interest only on a quarterly basis payable
during the first twelve (12) months and thereafter
sixteen (16) equal quarterly payments of principal
(totaling all of the principal due thereunder) and
interest payable during the following forty-eight (48)
months. The promissory note of HNEF shall provide that
more or the entire principal sum remaining unpaid at
any time may be paid at any time with interest to date
of payment only. The promissory note shall also
provide for acceleration of the maturity of the unpaid
principal and accrued interest at the option of FI
upon default in the payment of any installment of
principal or interest for fifteen (15) days or more.
(d) (i) In the event that Fitch shall die, become permanently
disabled or otherwise involuntarily cease to be in operational
control of FI (such occurrences hereinafter referred to as a
"Buyout Event" or "Buyout Events"), FI shall sell and HNEF
shall purchase all of the Joint Venture interest of FI for the
price set forth in Section 12(e)(ii) hereof and upon the terms
set forth in this Section 12(d). FI shall notify HNEF
immediately of the occurrence of a Buyout Event. The failure
of FI to notify HNEF of a Buyout Event within twenty (20) days
of its occurrence shall constitute a breach of this Agreement
by FI. The purchase of the Joint Venture interest of FI by
HNEF, pursuant to this Section 12(d), shall take place within
one hundred eighty (180) days of the date upon which HNEF
receives notice of the Buyout Event (or if HNEF is not
provided with such notice, such closing shall take place on
the date which HNEF shall demand).
(ii) DETERMINATION OF PURCHASE PRICE AND TERMS. In the event that
the Joint Venture interest of FI is to be purchased pursuant
to the foregoing provisions of this Section 12(d), the
following provisions shall apply:
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(A) PRICE. The purchase price of the Joint Venture interest of
FI shall be determined pursuant to Section 12(e)(ii)
hereof.
(B) MANNER OF PAYMENT. The purchase price of the Joint Venture
interest of FI to be purchased pursuant to the provisions
of this Section 12(d) shall be paid as follows:
1) PAYMENT UPON CLOSING. At the option of HNEF, all of
the purchase price or an amount equal to the greater
of:
a) twenty percent (20%) of the purchase price;
b) Fifty Thousand Dollars (U.S. $50,000); or
c) one hundred percent (100%) (but not to exceed the
entire purchase price) of all proceeds from life
insurance policies, if any, on the life of Fitch
payable to HNEF by reason of the death of Fitch,
shall then be paid in cash.
2) PROMISSORY NOTE. Any part of the purchase price which
is not then paid in cash shall be evidenced by a
negotiable promissory note of HNEF payable to and
delivered to FI. The promissory note shall bear
interest at the Prime Rate and shall be payable over a
period of sixty (60) months with interest only on a
quarterly basis payable during the first twelve (12)
months and thereafter sixteen (16) equal quarterly
payments of principal (totaling all of the principal
due thereunder) and interest payable during the
following forty-eight (48) months. The promissory note
of HNEF shall provide that more or the entire
principal sum remaining unpaid at any time may be paid
at any time with interest to date of payment only. The
promissory note shall also provide for acceleration of
the maturity of the unpaid principal and accrued
interest at the option of FI upon default in the
payment of any installment of principal or interest
for fifteen (15) days or more.
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(e) (i) The purchase price for the Joint Venture interest of FI to
be purchased pursuant to Section 12(c) above shall be its
"book value." The book value of the Joint Venture interest of
FI shall be the book value of the assets of the Joint Venture,
less its liabilities, multiplied by FI's Distributive Share as
defined in Article 3 hereof (and subject to adjustments
pursuant to the other provisions hereof).
(ii) The purchase price for the Joint Venture interest of FI to be
purchased pursuant to Section 12(d) above shall be its "fair
market value." The fair market value of the Joint Venture
interest of FI shall be determined by an appraisal to be made
by an appraiser jointly selected by HNEF and FI. If HNEF and
FI cannot agree upon an appraiser, then each party shall
select an appraiser and the two appraisers selected by the
Venturers shall select a third appraiser, and the appraisal
shall be made by the third appraiser. The appraisal of the
third appraiser shall be binding upon the parties hereto
unless patently erroneous. In the event of such an appraisal,
each party shall bear its own legal and other costs and shall
split the appraisal fees.
(f) In the event that the Joint Venture shall elect to obtain insurance on
the life of Fitch to fund the purchase of the Joint Venture interest of FI
pursuant to Section 12(d) or for other reasonable business reasons, Fitch shall
cooperate fully with the Joint Venture in obtaining such insurance including
Fitch's submission to reasonable medical examinations.
ARTICLE 13
DISSOLUTION AND LIQUIDATION
(a) The Joint Venture shall be dissolved upon the first of the following
to occur:
(i) The expiration or non-renewal of the term of the Joint Venture
pursuant to Article 2 hereof;
(ii) The decision of the Board of Managers to dissolve the Joint
Venture;
(iii) The bankruptcy of the Joint Venture;
(iv) The bankruptcy of HNEF;
(v) The liquidation or dissolution of HNEF;
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(vi) The bankruptcy, liquidation or dissolution of FI if HNEF
shall fail or refuse to exercise its purchase option pursuant
to Article 12 hereof;
(vii) The judgment of a court of proper jurisdiction under the laws
of the State of Florida ordering dissolution and liquidation
of the Joint Venture under applicable Florida statutory or
common law; or
(viii) Any event that makes it unlawful for the business of the
Joint Venture to be carried on or for its Venturers to carry
on such business in the Joint Venture.
Each Venturer agrees that dissolution of the Joint Venture by any cause not
hereinabove set forth or referred to in this Section 13(a), whether voluntary or
involuntary, shall be wrongful and in contravention of this Agreement. For
purposes of this Agreement, the "bankruptcy" of a Venturer shall be deemed to
have occurred upon the happening of any of the following:
(i) The filing of an application by the Venturer for, or a
consent to, the appointment of a trustee in bankruptcy or
receiver of such Venturer's interest in the Joint Venture or
of all or substantially all of such Venturer's assets;
(ii) The filing by the Venturer of a voluntary petition in
bankruptcy or the filing of a pleading in any court of record
admitting in writing such Venturer's inability to pay such
Venturer's debts as they come due;
(iii) The making by the Venturer of a general assignment for the
benefit of creditors;
(iv) The filing by the Venturer of an answer admitting the
material allegations of, or such Venturer's consenting to, or
defaulting in answering a bankruptcy petition filed against
such Venturer in any bankruptcy proceeding; or
(v) The entry of an order, judgment or decree by any court of
competent jurisdiction adjudicating the Venturer bankrupt or
appointing a trustee in bankruptcy or receiver of such
Venturer's interest in the Joint Venture or all or
substantially all of such Venturer's assets, and such order,
judgment or decree continuing unstayed and in effect for a
period of ninety (90) days after such entry.
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(b) Upon dissolution of the Joint Venture, it shall be wound up and
liquidated as rapidly as business circumstances will permit. The assets shall be
applied to the following uses in the following order:
(i) To pay or provide for all amounts owing by the Joint Venture
to creditors other than Venturers, and for expenses of
winding up;
(ii) To pay the balance of Excess Loans;
(iii) To pay or provide for the Balance of Required Loans;
(iv) To pay or provide for the balance of Additional Loans;
(v) To pay or provide for all other amounts owing by the Joint
Venture to the Venturers other than for capital and profits;
(vi) To pay each Venturer the credit balance, if any, in such
Venturer's closing capital account as adjusted to the date of
such distribution.
If funds are insufficient to repay all sums owing in respect of each category of
payment specified in the foregoing subsections, then the available funds shall
be applied to discharge all the sums owing as many of said categories as is
possible (commencing with and pursuing the order of priority aforesaid) until
the first category is reached as to which sufficient funds are not available for
complete satisfaction. As to such category, the remaining funds shall be
distributed proportionately in accordance with the ratio of the respective
claims in such category, unless the category involved is Section 13(b)(ii), in
which event, such loans shall be repaid in the order of priority provided in
Section 5(a) under circumstances where Available Cash is insufficient to repay
such loans.
(c) In the event the Joint Venture is "liquidated" within the meaning of
Treasury Regulation Section 1.704-1, (i) distributions shall be made to each
Venturer who has a positive capital account in compliance with Treasury
Regulation Section 1.704(b), and (ii) if any Venturer's capital account has a
deficit balance (after giving effect to all contributions, distributions, and
allocations for all taxable years, including the year during which such
liquidation occurs), such Venturer shall contribute to the capital of the Joint
Venture the amount necessary to restore such deficit balance to zero in
compliance with Treasury Regulation Section 1.704(b).
(d) Except as set forth in Section 13(e) below, the orderly dissolution
and liquidation of the Joint Venture and the winding up of its business shall be
the responsibility of the Board of Managers.
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(e) If dissolution occurs because of the bankruptcy of a Venturer or any
act of a Venturer in contravention of this Agreement or deemed to be in
contravention of this Agreement by the terms hereof, then the Venturer who did
not cause such dissolution shall have the authority to wind up and liquidate the
business of the Joint Venture. In such event, the Venturer with the authority
hereunder to wind up the business and conduct the liquidation of the Joint
Venture shall have all powers conferred upon the Board of Managers, under the
terms of this Agreement to the extent necessary or desirable in the good faith
judgment of such liquidating Venturer, to complete the liquidation of the Joint
Venture as provided for herein, including, but without limiting the generality
of the foregoing, the following specific powers:
(i) The power to continue to manage and operate any business of
the Joint Venture during the period of such liquidation,
including the power to make and enter into sales agreements
and leases or rental contracts covering properties of the
Joint Venture which may extend beyond the period of
liquidation.
(ii) The power to make sales and, incident thereto, to make deeds,
bills of sale, assignments and transfers of assets and
properties of the Joint Venture.
(iii) The power to borrow funds as may, in the good faith judgment
of the liquidating Venturer, be reasonably required to pay
debts and obligations for which the Joint Venture is liable
and operating expenses of the Joint Venture, and to grant
deeds of trust, mortgages, security agreements, pledges and
collateral assignments upon and encumbering any of the Joint
Venture properties as security for repayment of such loans or
as security for payment of any other indebtedness of the Joint
Venture.
(iv) The power to settle, compromise or adjust any claims asserted
to be owing by or to the Joint Venture, and the right to file,
prosecute or defend lawsuits and legal proceedings in
connection with any such matters.
(v) The power to make deeds, bills of sale, assignments and
transfers to the respective Venturers and their successors in
interest incident to final
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distribution of the remaining properties of the Joint Venture
(if any) as provided for herein.
(vi) The power to distribute Joint Venture property in kind at a
value agreed upon by the liquidating Venturer and the party
receiving such property.
If, under the above provisions, properties of the Joint Venture are distributed
in kind to the respective Venturers and/or to their successors in interest
subject to liens or mortgages securing indebtedness of the Joint Venture, and if
thereafter one or more of such Venturers or their successor(s) in interest shall
pay more of such secured indebtedness than the pro rata share thereof
attributable to the undivided interest in such properties thus distributed to or
acquired by such Venturer, that Venturer shall be subrogated to and entitled to
enforce such liens or mortgages as against the interest of the other Venturer or
their successor(s) in interest who has not paid its full pro rata share of such
secured indebtedness to secure repayment to the Venturer to the extent of the
deficiency in the proportionate payments attributable to their undivided
interests which should have been made by the other Venturer or their
successor(s) in interest.
ARTICLE 14
REPRESENTATIONS AND WARRANTIES
(a) REPRESENTATIONS AND WARRANTIES OF HNEF. HNEF hereby represents and
warrants to FI as follows:
(i) DUE INCORPORATION AND QUALIFICATION. HNEF is a corporation
duly incorporated, validly existing and in good standing under
the laws of its state of incorporation; is qualified to do
business in all jurisdictions where the failure to so qualify
would have a material adverse effect upon HNEF or its business
or assets; and has the corporate power and authority to own,
lease and operate all of its properties and assets and to
carry on its business as now conducted.
(ii) AUTHORITY TO EXECUTE AND PERFORM AGREEMENTS. (A) HNEF has full
corporate power and authority required to enter into, execute
and deliver this Agreement and any other agreement
contemplated hereby and to perform fully HNEF's obligations
hereunder and thereunder. (B)
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The execution and delivery by HNEF of this Agreement and any
other agreement contemplated hereby and the transactions
contemplated hereby and thereby have been duly authorized by
all requisite corporate and, if necessary, stockholder action.
(C) No other corporate proceedings on the part of HNEF are
necessary to authorize this Agreement and any other agreement
contemplated hereby or to consummate the transactions
contemplated hereby and thereby. (D) This Agreement has been
duly executed and delivered by HNEF and constitutes the valid
and binding obligation of HNEF, enforceable against HNEF in
accordance with its terms. (E) The execution and delivery of
this Agreement and any agreement contemplated hereby, the
consummation of the transactions contemplated hereby and
thereby, and the performance by HNEF of this Agreement in
accordance with its terms and conditions will not 1) conflict
with or result in the breach or violation of any of the terms
or conditions of the Articles of Incorporation or Bylaws of
HNEF; 2) violate any statute, regulation, order, judgment or
decree of any court or governmental or regulatory body
applicable to HNEF or any of its properties or assets; or 3)
require notice to or the consent of any party to or result in
a violation or breach of, constitute (with or without due
notice or lapse of time or both) a default under, or give any
party the right to terminate or accelerate the performance of
the obligations of HNEF with respect to the terms, provisions
or conditions of any indenture, agreement or other instrument
to which HNEF is a party or by which HNEF or any of its
properties or assets are bound.
(iii) CONSENTS AND APPROVALS. No filing with, and no permit,
authorization, consent or approval of, any public body or
public authority is necessary for the consummation by HNEF of
the transactions contemplated by this Agreement and any other
agreements contemplated hereby, except for the failure to
obtain filings, permits, authorizations, consents or
approvals, which would not adversely affect the business or
assets of HNEF or the ability of HNEF to perform any
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of its obligations under this Agreement or any other agreement
contemplated hereby and which would not prevent or delay in
any respect the consummation of the transactions contemplated
hereby or thereby.
(iv) COMPLIANCE WITH LAWS. HNEF is in material compliance with all
provisions of law, statutes, ordinances, rules, regulations,
judgments, writs, injunctions, decrees and standards
promulgated by the government of the United States of America
or by any state or municipality thereof or by any court,
agency, instrumentality, regulatory authority or commission of
any of the foregoing, including, but not limited to,
compliance with all labor laws, all environmental laws, all
laws relating to the promotion of occupational safety, all
laws relating to healthcare and all laws relating to the
promotion of occupational safety, all laws relating to
healthcare and all laws relating to discrimination in
employment or employment practices.
(v) NO BROKER. No broker, finder, agent or similar intermediary
has acted for or on behalf of HNEF in connection with this
Agreement or the transactions contemplated hereby, and no
broker, finder, agent or similar intermediary is entitled to
any broker's, finder's or similar fee or other commission in
connection therewith based on any agreement, arrangement or
understanding with HNEF or any action taken by HNEF.
(b) REPRESENTATIONS AND WARRANTIES OF FI. FI hereby represents and
warrants to HNEF as follows:
(i) DUE INCORPORATION AND QUALIFICATION. FI is a corporation duly
incorporated, validly existing and in good standing under the
laws of its state of incorporation; is qualified to do
business in all jurisdictions where the failure to so qualify
would have a material adverse effect upon FI or its business
or assets; and has the corporate power and authority to own,
lease and operate all of its properties and assets and to
carry on its business as now conducted.
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(ii) AUTHORITY TO EXECUTE AND PERFORM AGREEMENTS. (A) FI has full
corporate power and authority required to enter into, execute
and deliver this Agreement and any other agreement
contemplated hereby and to perform fully FI's obligations
hereunder and thereunder. (B) The execution and delivery by FI
of this Agreement and any other agreement contemplated hereby
and the transactions contemplated hereby and thereby have been
duly authorized by all requisite corporate and, if necessary,
stockholder action. (C) No other corporate proceedings on the
part of FI are necessary to authorize this Agreement and any
other agreement contemplated hereby or to consummate the
transactions contemplated hereby and thereby. (D) This
Agreement has been duly executed and delivered by FI and
constitutes the valid and binding obligation of FI,
enforceable against FI in accordance with its terms. (E) The
execution and delivery of this Agreement and any agreement
contemplated hereby, the consummation of the transactions
contemplated hereby and thereby, and the performance by FI of
this Agreement in accordance with its terms and conditions
will not 1) conflict with or result in the breach or violation
of any of the terms or conditions of the Articles of
Incorporation or Bylaws of FI; 2) violate any statute,
regulation, order, judgment or decree of any court or
governmental or regulatory body applicable to FI or any of its
properties or assets; or 3) require notice to or the consent
of any party to or result in a violation or breach of,
constitute (with or without due notice or lapse of time or
both) a default under, or give any party the right to
terminate or accelerate the performance of the obligations of
FI with respect to the terms, provisions or conditions of any
indenture, agreement or other instrument to which FI is a
party or by which FI or any of its properties or assets are
bound.
(iii) CONSENTS AND APPROVALS. No filing with, and no permit,
authorization, consent or approval of, any public body or
public authority is necessary for the consummation by FI of
the transactions contemplated by this Agreement and any other
agreements
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contemplated hereby, except for the failure to obtain filings,
permits, authorizations, consents or approvals, which would
not adversely affect the business or assets of FI or the
ability of FI to perform any of its obligations under this
Agreement or any other agreement contemplated hereby and which
would not prevent or delay in any respect the consummation of
the transactions contemplated hereby or thereby.
(iv) COMPLIANCE WITH LAWS. FI is in material compliance with all
provisions of law, statutes, ordinances, rules, regulations,
judgments, writs, injunctions, decrees and standards
promulgated by the government of the United States of America
or by any state or municipality thereof or by any court,
agency, instrumentality, regulatory authority or commission of
any of the foregoing, including, but not limited to,
compliance with all labor laws, all environmental laws, all
laws relating to the promotion of occupational safety, all
laws relating to healthcare and all laws relating to the
promotion of occupational safety, all laws relating to
healthcare and all laws relating to discrimination in
employment or employment practices.
(v) NO BROKER. No broker, finder, agent or similar intermediary
has acted for or on behalf of FI in connection with this
Agreement or the transactions contemplated hereby, and no
broker, finder, agent or similar intermediary is entitled to
any broker's, finder's or similar fee or other commission in
connection therewith based on any agreement, arrangement or
understanding with FI or any action taken by FI.
ARTICLE 15
BREACHES AND REMEDIES
(a) BREACH BY FI. FI shall be in breach of this Agreement upon the
occurrence of any of the following:
(i) If FI shall fail to comply with or violate any agreement or
covenant contained in this Agreement (specifically including,
but not limited to, the violation of any transfer restriction
contained in Section 12 hereof),
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which failure to comply shall continue for a period of thirty
(30) days after notice from HNEF specifying such failure.
(ii) The breach by FI or Fitch (or any permitted assignee of Fitch
under the Development Option Agreement) of any other joint
venture or similar agreement relating, directly or indirectly,
to the operation of a restaurant under the Hops System, which
failure to comply shall continue for a period of thirty (30)
days after notice from HNEF or Hops.
(iii) The breach by FI of the Development Option Agreement or any
Operating Agreement for any restaurant, which failure to
comply shall continue for a period of thirty (30) days after
notice from HNEF or Hops.
(iv) If any material representation or warranty of FI contained
herein shall be untrue.
(v) Either FI or Fitch shall make an assignment for the benefit of
creditors, or shall admit in writing its (or his) inability to
pay its (or his) debts as they become due, or shall file a
voluntary petition in bankruptcy, or shall be adjudicated as
bankrupt or insolvent, or shall file any petition or answer
seeking for itself (or himself) any reorganization,
arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any present or future
statute, law or regulation pertinent to such circumstances, or
shall file any answer admitting or not contesting the material
allegations of a petition filed against either FI or Fitch in
any such proceedings, or shall seek or consent to or acquiesce
in the appointment of any trustee, receiver, or liquidator of
either FI or Fitch or of all or any substantial part of either
of their properties; or FI or its directors or majority
shareholders shall take any action initiating the dissolution
or liquidation of FI or FI shall be involuntarily dissolved by
authorities in the jurisdiction of its incorporation and shall
not be reinstated within thirty (30) days of notice from HNEF
hereunder.
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(vi) Twenty (20) days shall have expired after the commencement of
an action against FI or Fitch seeking reorganization,
arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any present or future
statute, law or regulation without such action being dismissed
or all orders or proceedings thereunder affecting the
operations or the business of FI or Fitch being stayed; or a
stay of any such order or proceedings shall thereafter be set
aside and the action setting it aside shall not be timely
appealed.
(vii) Twenty (20) days shall have expired after the appointment,
without the consent or acquiescence of FI or Fitch, of any
trustee, receiver or liquidator of all or any substantial part
of the properties of FI or Fitch without such appointment
being vacated.
(b) BREACH BY HNEF. HNEF shall be in breach of this Agreement upon the
occurrence of any of the following:
(i) If HNEF shall fail to comply with or violate any agreement or
covenant contained in this Agreement, which failure to comply
shall continue for a period of thirty (30) days after notice
from FI specifying such failure.
(ii) The breach by HNEF of the Development Option Agreement or any
Operating Agreement for any restaurant.
(iii) If any material representation or warranty of HNEF contained
herein shall be untrue.
(iv) If HNEF shall make an assignment for the benefit of creditors,
or shall admit in writing its inability to pay its debts as
they become due, or shall file a voluntary petition in
bankruptcy, or shall be adjudicated as bankrupt or insolvent,
or shall file any petition or answer seeking for itself any
reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any present
or future statute, law or regulation pertinent to such
circumstances, or shall file any answer admitting or not
contesting the material allegations of a petition filed
against HNEF in any such proceedings, or shall seek or consent
to or acquiesce in the appointment of any trustee, receiver,
or liquidator of HNEF or of all or any substantial part of
either of its
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properties; or HNEF or its directors or majority shareholders
shall take any action initiating the dissolution or
liquidation of HNEF or HNEF shall be involuntarily dissolved
by authorities in the jurisdiction of its incorporation and
shall not be reinstated within thirty (30) days of notice from
FI hereunder.
(v) Twenty (20) days shall have expired after the commencement of
an Taction against HNEF seeking reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar
relief under any present or future statute, law or regulation
without such action being dismissed or all orders or
proceedings thereunder affecting the operations or the
business of HNEF being stayed; or a stay of any such order or
proceedings shall thereafter be set aside and the action
setting it aside shall not be timely appealed.
(vi) Twenty (20) days shall have expired after the appointment,
without the consent or acquiescence of HNEF, of any trustee,
receiver or liquidator of all or any substantial part of the
properties of HNEF without such appointment being vacated.
(c) CERTAIN REMEDIES.
(i) REMEDIES AVAILABLE TO HNEF. Upon any breach of this Agreement
by FI, HNEF may:
(A) exercise its right to purchase the Joint Venture interest
of FI as provided in Section 12(c) hereof; and
(B) seek any and all other remedies available under applicable
law or equity, including, but not limited to, money
damages.
(ii) REMEDIES AVAILABLE TO FI. Upon any breach of this Agreement by
HNEF, FI may seek any and all other remedies available under
applicable law or equity, including, but not limited to, money
damages.
(iii) CUMULATION OF REMEDIES. None of the rights, remedies,
privileges, or powers of the parties expressly provided for
herein shall be exclusive, but each of them shall be
cumulative with and in addition to every other right, remedy,
privilege, and power now or hereafter existing in
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favor of such parties, whether at law or in equity, by statute
or otherwise.
ARTICLE 16
NOTICE
All notices or requests provided for or permitted to be given pursuant to
this Agreement must be in writing and shall only be effective if given or served
(i) by United States mail, addressed to the person or entity to be notified,
postpaid, and certified with return receipt requested or (ii) by hand delivering
such notice to the person or entity at the address of such party against written
receipt thereof. All notices given or served pursuant hereto shall be deemed
given and effective upon receipt by the person to be notified or delivery at the
address of such party. All notices to any of the Venturers shall be addressed to
them at their respective addresses set forth below their names on the signature
page hereof. By giving to the other Venturers at least ten (10) days written
notice thereof in the manner hereinabove provided, each Venturer and its
respective successors and assigns shall have the right to change its addresses
for purposes of notice.
ARTICLE 17
DISPUTE RESOLUTION
(a) In the event there should arise any misunderstanding or disagreement
between the Venturers as to the compliance with the terms and conditions of this
Agreement, or as to whether any Venturer has grounds hereunder entitling it to
terminate this Agreement, or any other dispute related to this Agreement
including arbitrability of the dispute, it is mutually agreed that such
differences, if they cannot be satisfactorily resolved between the Venturers
within thirty (30) days after the Venturer seeking arbitration delivers notice
of same to the other Venturers, shall be submitted to a single arbitrator, if
the Venturers agree upon one; otherwise, to a board of three arbitrators, of
whom one shall be selected by HNEF and one of whom shall be selected by FI
within twenty (20) days after such 30-day period, and a third arbitrator shall
be selected by these two selected arbitrators. If one of the Venturers fails to
timely select an arbitrator, the arbitrator that was timely selected shall be
the sole arbitrator. If neither HNEF nor FI timely selects an arbitrator, the
first arbitrator selected thereafter shall be the sole arbitrator, no others
being appointed. Where each of HNEF and
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FI timely selects an arbitrator, said arbitrators will have ten (10) days from
the end of the twenty (20) day period to select the third arbitrator. In the
event the arbitrators are unable to timely agree on the third arbitrator, either
HNEF or FI may petition any official of the American Arbitration Association for
appointment of the third arbitrator, and the parties agree to accept any
arbitrator appointed by such official subject to the limitations hereof.
Arbitrators must be reasonably independent of the parties and their principals.
Persons who are hereby expressly disqualified to serve as arbitrators are
principals of the parties, relatives of said principals, employees of the
parties or said principals, persons not residing within 100 miles of Tampa,
Florida, attorneys, accountants and other business persons having professional
or business relationships with the parties or said principals.
(b) Arbitration shall proceed in accordance with the rules of the American
Arbitration Association. The arbitration shall be conducted in Tampa, Florida.
The arbitrators shall have all the powers permitted arbitrators under the laws
of the State of Florida. The decision and award of such single arbitrator, if
only one is used, or any two of such board if three are used, as the case may
be, shall be final and binding upon the Venturers, their heirs, legal
representatives, successors and assigns respectively, and shall have the same
force and effect as though such decision had been handed down by a court of
final jurisdiction. The cost of arbitrator(s) shall be shared equally by the
Venturers involved in such dispute. Each Venturer shall be responsible for and
shall pay for the expenses of presenting its respective case, including
depositions, attorney's fees and costs and witness fees which expenses shall not
be subject to award by the arbitrator(s), nor shall such expenses be subject to
award by any court or other judicial authority. The parties shall deposit, at
the beginning of the arbitration process, with the arbitrators an amount equal
to the estimated costs (including arbitrators' time charges) of the total
arbitration. Arbitrators' time charges shall be at the same rate for all
arbitrators. Each of the Venturers hereto covenants to abide by any arbitration
decision.
(c) In the event that it becomes necessary for any party to this Agreement
to enforce a decision of arbitration through legal proceedings, the Venturers
hereby agree that the Circuit Court for the Thirteenth Judicial Circuit in and
for Hillsborough County, Florida, Tampa Division, and the United States District
Court for the Middle District of Florida, Tampa Division, shall have exclusive
jurisdiction to hear and determine any such matters. Each Venturer hereby
expressly submits and consents in advance to such jurisdiction and
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venue in any action or proceeding whether commenced by or brought against them
in either of such Courts. In any such court proceeding the prevailing party
shall be entitled to reimbursement of all costs and expenses, including
attorney's fees which may be reasonably incurred or paid in connection
therewith, including without limitation, attorney's fees and costs at the trial
court and appellate court levels.
ARTICLE 18
MISCELLANEOUS
(a) This Agreement shall be governed, interpreted and construed under the
laws of the State of Florida.
(b) This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto, and their respective heirs, executors, legal
representatives, successors and assigns; however, this Section 18(b) does not
constitute a consent to any assignment, transfer or other disposition of a Joint
Venture interest or to the substitution of any assignee or transferee as a
substituted Venturer herein other than pursuant to and in accordance with the
other provisions of this Agreement.
(c) This Agreement may be amended only by written instrument signed by all
Venturers.
(d) This Agreement may be executed in counterparts, each of which shall be
deemed an original.
(e) This Agreement contains the entire agreement of the parties hereto.
All prior written or oral agreements between the parties as to the formation of
the Joint Venture and the rules governing its operation are revoked and
superseded by this Agreement.
(f) The captions used in this Agreement are for convenience only and shall
not be construed in interpreting this Agreement. Wherever from the context it
appears appropriate, each term stated in either the singular or the plural shall
include the singular and the plural, and pronouns stated in the masculine, the
feminine or the neuter gender shall include the masculine, feminine and neuter.
The term "person" means any natural person, corporation, partnership, trust or
other entity.
(g) All references to Articles within this Agreement shall be deemed to be
a cumulative reference to all sections within that Article and all references to
sections within
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<PAGE>
this Agreement shall be deemed to be cumulative references to all subsections
within that section.
(h) In the event of a transfer (which is not void under Section 12(b)
hereof) of all or part of the interest of a Venturer in the Joint Venture by
sale or exchange or dissolution of a Venturer, the Joint Venture at the request
of the transferring Venturer or other successor in interest, shall cause the
Venturer to elect, pursuant to Section 754 of the Code, or corresponding
provision of subsequent law, to adjust the basis of the Joint Venture property
as provided by Sections 734 or 743 of the Code. All other elections required or
permitted to be made by the Joint Venture under the Code shall be made by a
majority vote of the Board of Managers as they deem appropriate. Each of the
Venturers will upon request supply the information necessary to properly give
effect to any such election.
(i) All remedies shall be cumulative and not alternative.
(j) (i) The parties hereto hereby acknowledge that this Second
Amendment and Restatement results from the reorganization
effective September 1, 1995 of the three current joint
ventures which own and operate "Hops Grill & Bar Restaurants"
in northeast Florida, known as "The Hops Northeast Florida
Joint Venture No.I, The Hops Northeast Florida Joint Venture
No. II, and The Hops Northeast Florida Joint Venture No. III,"
(collectively referred to as the Northeast Florida Joint
Ventures"). Pursuant to this reorganization, the parties to
this Second Amended and Restated Joint Venture Agreement,
together with others, have entered into the agreements set
forth on EXHIBIT A hereto (hereinafter referred to as the
"Reorganization Documents"). The parties to this Second
Amended and Restated Joint Venture Agreement do, for all
purposes, hereby acknowledge and consent to the actions taken
pursuant to the terms of the Reorganization Documents
(ii) The parties hereto further acknowledge that prior to the
execution of the Reorganization Documents, Joe Barrett, the
principal limited partner of BARLTD and the Area Manager of
the restaurants owned by the Northeast Florida Joint Ventures
was a valuable employee of one or more affiliates of Hops
Grill & Bar, Inc. and that Hops Grill & Bar, Inc. has
consented to the employment of Mr. Barrett as the Area
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<PAGE>
Manager of the Northeast Florida Joint Ventures with the
understanding that Mr. Barrett may be called upon from time to
time during the term of this Agreement to provide services to
Hops Grill & Bar, Inc. or one or more of its affiliates, which
services are beyond the scope of this Agreement. The parties
hereto acknowledge that Mr. Barrett may be called upon by Hops
Grill & Bar, Inc. or one or more of its affiliates to provide
services to one or more entities that are independent of the
Northeast Florida Joint Ventures, in the event that such
services are requested of and consented to by Mr. Barrett, the
parties hereto hereby consent to the provision of such
services by Mr. Barrett. In addition, in the event that Mr.
Barrett shall provide any such services to Hops Grill & Bar,
Inc. or its affiliates, the other parties to this Agreement
shall have no rights in, or with respect to, any other
business or venture for whom Mr. Barrett provides such
services as the result of the provision of such services by
Mr. Barrett.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and in the year first above written. WITNESSES: HOPS OF NORTHEAST
FLORIDA, INC.
/s/ TERENCE TERENZI By: /s/ DAVID L. MASON
- ------------------- ---------------------------------
David L. Mason, President
- -------------------
As to HNEF Address: 3030 North Rocky Point Drive West
Suite 650
Tampa, Florida 33607
"HNEF"
FITCH, INC.
/s/ TERENCE TERENZI By: /s/ J. CAMP FITCH
- ------------------- ---------------------------------
Jack Camp Fitch, President
- -------------------
As to FI Address: 8028 Acorn Ridge Road
Jacksonville, Florida 32256
"FI"
HNEF AREA MANAGER II, LTD.
By: Hops of Northeast Florida, Inc.,
its General Partner
/s/ TERENCE TERENZI By: /s/ DAVID L. MASON
- ------------------- ---------------------------------
David L. Mason, President
- -------------------
As to BARLTD Address: 3030 North Rocky Point Drive
Suite 650
Tampa, Florida 33607
"BARLTD"
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<PAGE>
STATE OF FLORIDA
COUNTY OF HILLSBOROUGH
Before me personally appeared David L. Mason, President of HOPS OF
NORTHEAST FLORIDA, INC., a corporation existing under the laws of Florida, to me
known to be the person described in and who executed the foregoing and
acknowledged the execution thereof to be his one act and deed as such officer as
the act and deed of said corporation for the uses and purposes therein
mentioned.
Witness my signature and official seal this 11TH day of JANUARY , 1996.
/s/ ROBERT E. GASPERETTI
------------------------
Notary Public
/s/ ROBERT E. GASPERETTI
-----------------------
Printed Name:
My Commission Expires: May 10, 1998
Commission No.: CC 371597
STATE OF FLORIDA
COUNTY OF HILLSBOROUGH
Before me personally appeared Jack Camp Fitch, President of FITCH, INC., a
corporation existing under the laws of Florida, to me known to be the person
described in and who executed the foregoing and acknowledged the execution
thereof to be his one act and deed as such officer as the act and deed of said
corporation for the uses and purposes therein mentioned.
Witness my signature and official seal this 11TH day of JANUARY, 1996.
/s/ ROBERT E. GASPERETTI
------------------------
Notary Public
/s/ ROBERT E. GASPERETTI
------------------------
Printed Name:
My Commission Expires: May 10, 1998
Commission No.: CC 371597
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<PAGE>
STATE OF FLORIDA
COUNTY OF HILLSBOROUGH
Before me personally appeared David L. Mason, President of HOPS OF
NORTHEAST FLORIDA, INC. which is the General Partner of HNEF AREA MANAGER II,
LTD., a limited partnership organized and existing under the laws of Florida, to
me known to be the person described in and who executed the foregoing and
acknowledged the execution thereof to be his one act and deed as such officer as
the act and deed of said corporation for the uses and purposes therein
mentioned.
Witness my signature and official seal this 11TH day of JANUARY, 1996.
/s/ ROBERT E. GASPERETTI
------------------------
Notary Public
/s/ ROBERT E. GASPERETTI
------------------------
Printed Name:
My Commission Expires: May 10, 1998
Commission No.: CC 371597
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EXHIBIT 10.10
SECOND AMENDED AND RESTATED
JOINT VENTURE AGREEMENT
OF
THE HOPS NORTHEAST FLORIDA JOINT VENTURE NO. III
A FLORIDA GENERAL PARTNERSHIP
- --------------------------------------------------------------------------------
THIS SECOND AMENDED AND RESTATED JOINT VENTURE AGREEMENT, is made and
entered effective as of the 1st day of September, 1995, by and among HOPS OF
NORTHEAST FLORIDA, INC., a corporation organized and existing under the laws of
the State of Florida (hereinafter referred to as "HNEF"), FITCH, INC., a
corporation organized and existing under the laws of the State of Florida
(hereinafter referred to as "FI"), and HNEF AREA MANAGER II, LTD., a limited
partnership, owned primarily by Joe Barrett, organized and existing under the
laws of the State of Florida (hereinafter referred to as "BARLTD") (HNEF, FI,
and BARLTD are sometimes herein individually referred to as a "Venturer" and
collectively referred to as the "Venturers").
W I T N E S S E T H:
WHEREAS, pursuant to that certain First Amended and Restated Joint
Venture Agreement of the Hops Northeast Florida Joint Venture No. III dated
January 1, 1995 (the "First Amendment"), by and among HNEF, FI, and HNEF Area
Manager, Ltd., a Florida limited partnership ("COSLTD"), HNEF, FI, and COSLTD
formed a joint venture (in the form of a general partnership) under the laws of
the State of Florida for the purpose of owning and operating one or more
restaurants under the Hops System (as described herein) in the "Territory"
described in the Northeast Florida Development Option Agreement dated February
15, 1993, by and between Hops Grill & Bar, Inc. and Fitch ("Fitch"), as amended
by that certain First Amendment to Northeast Florida Development Option
Agreement dated November 10, 1993, by and between Hops and Fitch (the
"Development Option Agreement");
WHEREAS, COSLTD no longer holds its interest or Distributive Share in
the Joint Venture; WHEREAS, HNEF and FI desire to admit BARLTD to the Joint
Venture, with BARLTD to hold a 10% Distributive Share in the Joint Venture,
subject to the terms and conditions set forth herein;
<PAGE>
WHEREAS, BARLTD desires to be admitted to the Joint Venture and to hold
a 10% Distributive Share in the Joint Venture, subject to the terms and
conditions set forth herein;
WHEREAS, the Venturers desire to amend and restate the First Amendment
in order to reduce to writing their understandings and agreements with respect
to the matters set forth herein.
NOW, THEREFORE, in consideration of the mutual promises and agreements
herein contained and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto, intending to be
legally bound thereby, agree as set forth herein.
DEFINITIONS
The following definitions shall apply to the following terms as used in
this Agreement:
(1) "Additional Loan(s)" means a loan(s) made to the Joint Venture
pursuant to Section 4(k).
(2) "Agreement" means this Second Amended and Restated Joint Venture
Agreement of September 1, 1995, as amended or modified from time to time in
accordance with Section 18(c) hereof.
(3) "Available Cash" means, at the time of determination, all cash,
demand and time deposits, and marketable securities of the Joint Venture (other
than Capital Contributions to the Joint Venture by the Venturers), including,
without limitation, all cash receipts from conduct of the Joint Venture's
business, insurance proceeds, proceeds from the sale, exchange, condemnation or
other disposition of all or any part of the Joint Venture's property, less the
sum of all funds, reserves and other amounts as the Board of Managers shall deem
reasonable in order to provide for the Joint Venture's business, including,
without limitation, reserves for operating expenses, replacements, capital
improvements and additions relating to the business of the Joint Venture.
(4) "Balance of Required Loans" means the unpaid principal and accrued
interest thereon from time to time due and owing by a Venturer on account of
Required Loans to the Joint Venture pursuant to Section 4(h) hereof.
(5) "Barrett" means Joe Barrett.
(6) "Barrett Employment Agreement" means the Employment Agreement
among Barrett, BARLTD, HNEF, FI and other parties whereby Barrett will be
employed to serve
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<PAGE>
as the Area Manager of three restaurants developed or to be developed under the
Development Option Agreement.
(7) "Barrett Purchase Agreement" means the Agreement between Barrett,
BARLTD, and other parties of even date herewith, which governs the purchase by
Barrett of his interest in BARLTD and certain other matters.
(8) "Board of Managers" means the management committee established by
Section 7(a) hereof.
(9) "Capital Contributions" means all cash sums which the Venturers
may have from time to time contributed to the capital of the Joint Venture
pursuant to Sections 4(g) and 4(i) (together with any other contributions of
cash or property to the Joint Venture by the Venturers as authorized herein).
(10) "Code" means the Internal Revenue Code of 1986, as amended and in
effect on the effective date hereof and, to the extent applicable, as
subsequently amended.
(11) "Development Option Agreement" means the Northeast Florida
Development Option Agreement between Hops and Fitch setting forth the rights of
Fitch with respect to the development of restaurants under the Hops System
within the Territory.
(12) "Distributive Share" means the percentages set forth in Article 3
as in effect from time to time.
(13) "Excess Contribution" means any contribution made by a Venturer to
the Joint Venture pursuant to Section 4(j) hereof which is
occasioned by a Non-Contributing Venturer's failure to make Required Loans or
Special Contributions as required herein.
(14) "Excess Loan" means the loan deemed to have been made to a
NonContributing Venturer as a result of an Excess Contribution pursuant to
Section 4(j) hereof.
(15) "FI" means Fitch, Inc., a Florida corporation which is
wholly-owned by Fitch.
(16) "Fitch" means Jack Camp Fitch the 100% owner of FI.
(17) "BARLTD" means HNEF Area Manager II, Ltd., a limited partnership
organized and existing under the laws of the State of Florida.
(18) "HNEF" means Hops of Northeast Florida, Inc., a Florida
corporation.
(19) "Hops" means Hops Grill & Bar, Inc., a corporation organized and
existing under the laws of the State of Florida which is the developer and owner
of all rights under the Hops System.
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<PAGE>
(20) "Hops System" means the unique system of restaurant development,
theme and operation developed and owned by Hops which is, in part, characterized
by (1) the maintenance of uniform high quality standards in connection with the
preparation and sale of Hops-approved food and beverage products, (2) the
uniform high standards of appearance of the individual restaurant units, (3) the
use of distinctive trademarks, service marks, building designs and advertising
signs representing a uniformly high quality of product and services, and (4) the
undertaking by Hops and its affiliates of the obligation to maintain and enhance
the goodwill and public acceptance of the system (and of Hops' trade names,
service marks, trademarks) by strict adherence to the high standards required by
Hops.
(21) "Initial Capital Contributions" shall have the meaning set forth
in Section 4(g) hereof
(22) "Initial Restaurant" shall mean the first restaurant developed and
opened by the Joint Venture as contemplated herein.
(23) "Joint Venture" means the Joint Venture formed by the Venturers
pursuant to this Agreement and the laws of the State of Florida.
(24) "COSLTD" means HNEF Area Manager, Ltd., a limited partnership
organized and existing under the laws of the State of Florida.
(25) "Non-Contributing Venturer" means a Venturer or assignee who
breaches this Agreement by failing to make any Required Loan or Special
Contribution pursuant to Section 4(j).
(26) "Operating Agreements" mean the agreements to be entered into
between entities to be formed by Hops and Fitch (or their permitted assigns)
governing the development and operation of each restaurant to be opened jointly
by Hops and Fitch (or their permitted assigns) within the Territory pursuant to
the Development Option Agreement.
(27) "Prime Rate" shall be the prime rate of interest as published
from time to time in THE WALL STREET JOURNAL or if THE WALL Street Journal shall
cease to exist or cease to publish a "Prime Rate"; a mutually agreeable
substitute therefore.
(28) "Required Loans" means all amounts agreed to be loaned to the
Joint Venture pursuant to Section 4(h) hereof.
(29) "Special Contribution(s)" means the capital contributions of the
Venturers described in Section 4(i) hereof.
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<PAGE>
(30) "Territory" means that geographic territory described in the
Development Option Agreement within which, subject to the terms and conditions
set forth in the Development Option Agreement, Hops and Fitch (through the Joint
Venture or one or more other entities) may develop, own, and operate certain
restaurants under the Hops System.
ARTICLE 1
FORMATION OF THE JOINT VENTURE
(a) The Venturers hereby enter into and form a joint venture (in the
form of a general partnership) under the laws of the State of Florida for
the limited purposes and upon the terms and conditions set forth herein.
(b) The name of the Joint Venture shall be "THE HOPS NORTHEAST FLORIDA
JOINT VENTURE NO. III." The Venturers shall execute all assumed or fictitious
name certificates and take all other action required by law to comply with the
laws of the State of Florida and the assumed name act, fictitious name act or
similar statute in effect in each jurisdiction or political subdivision in which
the Joint Venture proposes to do business.
(c) Except as expressly provided herein to the contrary, the rights
and obligations of the Venturers and the administration, dissolution and
termination of the Joint Venture shall be governed by the laws of the State of
Florida, to the extent the same is not otherwise provided in this Agreement.
(d) The business and purpose of the Joint Venture shall be limited to
the ownership and/or operation of one or more restaurant-bar-microbreweries
under the Hops System (together with any and all other directly or indirectly
related businesses) within the Territory pursuant to the terms of this Agreement
and the Development Option Agreement. The Joint Venture will enter into an
Operating Agreement with Hops governing the establishment and operation of each
restaurant to be opened within the Territory. The Joint Venture may also engage
in any other lawful business to which a general partnership may engage under the
laws of the State of Florida, upon the unanimous approval of the Venturers.
(e) The principal office of the Joint Venture shall be at 3030 North
Rocky Point Drive West, Suite 650, Tampa, Florida 33607 unless and until
relocated by the Board of Managers, but the Joint Venture may have such other
places of business within the United
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<PAGE>
States, as the Board of Managers may from time to time determine to be necessary
or appropriate to carry on the business of the Joint Venture.
ARTICLE 2
TERM OF JOINT VENTURE
Subject to the provisions of Article 13 hereof providing for the early
dissolution and liquidation of the Joint Venture, the term of the Joint Venture
shall commence as of the date hereof and terminate on the date twenty (20) years
thereafter; provided, however, that the Joint Venture shall automatically be
renewed for successive one (1) year terms unless a Venturer serves notice upon
the other Venturers to terminate the Joint Venture at the expiration of the
first term of twenty (20) years, or thereafter, at the expiration of any
subsequent one (1) year renewal term, which notice must be given at least one
hundred eighty (180) days prior to the expiration of the initial or a renewal
term.
ARTICLE 3
DISTRIBUTIVE SHARES OF VENTURERS
Subject to adjustments pursuant to other provisions hereof, the
Distributive Shares of the Venturers in the Joint Venture are as follows:
VENTURER DISTRIBUTIVE SHARE
-------- ------------------
HNEF 45.9%
FI 44.1%
BARLTD 10.0%
ARTICLE 4
CAPITAL CONTRIBUTIONS AND REQUIRED LOANS
(a) A separate capital account shall be maintained by the Joint
Venture for each Venturer in accordance with Code Sec. 704(b), as amended (or
corresponding sections of later statutes) and Treasury Regulations promulgated
thereunder.
(b) There shall be credited to each Venturer's capital account
(i) the amount of money contributed by it to the Joint Venture, (ii) the fair
market value of property contributed by it to the Joint Venture (net of
liabilities secured by such contributed property that the Joint Venture is
considered to assume, or take subject to, under Code Sec. 752, as
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<PAGE>
amended (or corresponding sections of later statutes), and (iii) allocations to
it of Joint Venture income and gain (or items thereof), including income and
gain exempt from tax and income and gain, as computed for book purposes, in
accordance with Treas. Reg. Sec. 1.704- 1(b)(2)(iv)(g), as amended, (or
corresponding sections of later regulations), all as set forth pursuant to this
Agreement. No Venturer shall be entitled to contribute property to the Joint
Venture unless such contribution is approved by the Board of Managers.
(c) Each Venturer's capital account shall be decreased by (i)
the amount of money distributed to it by the Joint Venture, (ii) the fair market
value of property distributed to it by the Joint Venture (net of liabilities
secured by such property that such Venturer is considered to assume or take
subject to pursuant to Code Sec. 752, as amended (or corresponding sections of
later statutes)), (iii) allocations to such Venturer of expenditures of the
Joint Venture described in Code Sec. 705(a)(2)(B), as amended (or corresponding
sections of later statutes) and (iv) allocations of Joint Venture loss and
deduction (or items thereof), including losses or deductions, computed for book
purposes, as described in Treas. Reg. Sec. 1.704-1(b)(2)(iv)(g), as amended, (or
corresponding sections of later regulations), all as set forth pursuant to this
Agreement.
(d) An individual tax basis record shall be maintained for each
Venturer. The tax basis record of each Venturer shall be established and shall
be adjusted as of the close of each taxable year of the Joint Venture (or, when
appropriate, as of the close of the taxable year of the Joint Venture for such
Venturer) in accordance with United States federal income tax law and procedure
as the same may exist from time to time.
(e) The manner in which capital accounts are to be maintained pursuant
to Sections 4(a)-(d) is intended to comply with the requirements of Code Sec.
704(b) and the Treasury Regulations promulgated thereunder. If, in the opinion
of the Board of Managers, the manner in which capital accounts are to be
maintained pursuant to the preceding provisions of this Article 4 should be
modified in order to comply with the requirements of Code Sec. 704(b) and the
Treasury Regulations promulgated thereunder, then notwithstanding anything to
the contrary contained in the preceding provisions of this Article 4, the Board
of Managers may, in their sole and unrestricted discretion, alter the method in
which capital accounts are maintained, and the Board of Managers shall have the
right to amend this Agreement without action by the Venturers to reflect any
such change in the manner in which capital accounts are maintained; provided,
however, that any change in the
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<PAGE>
manner of maintaining capital accounts shall not materially alter the economic
agreement between the Venturers.
(f) The respective capital accounts of the Venturers shall not bear
interest. The capital of the Joint Venture shall not be withdrawn except as
provided herein. Notwithstanding the foregoing and except as set forth in
Section 4(j) hereof, without the unanimous consent of the Board of Managers, no
Venturer shall be entitled to make further or additional Capital Contributions
other than as specified in Section 4(g) (as opposed to loans) to the Joint
Venture.
(g) [AS THEIR INITIAL CAPITAL CONTRIBUTION, EACH VENTURER SHALL
CONTRIBUTE, IN CASH, TO THE JOINT VENTURE, THE FOLLOWING AMOUNT:
VENTURER INITIAL CAPITAL CONTRIBUTION
-------- ----------------------------
HNEF UP TO U.S. $_______
FI UP TO U.S. $_______
BARLTD UP TO U.S. $______*
* MAY BE CONTRIBUTED IN CASH, SERVICES, ASSUMPTION OF INDEBTEDNESS, OR
AS OTHERWISE DETERMINED BY THE BOARD OF MANAGERS.]
The Venturers shall proportionately contribute their Initial Capital
Contribution to the Joint Venture immediately upon the demand of the Board of
Managers in such installments as shall be designated by the Board of Managers.
(h) (i) In addition to the Initial Capital Contributions set forth
in Section 4(g) hereof, during the period commencing with
the date of this Agreement and ending on the twentieth
anniversary of such date, HNEF and FI agree to loan or cause
to be loaned to the Joint Venture, on an as needed basis,
amounts required for the operation and business activities
of the Joint Venture ("Required Loans"); provided, the
principal amount of such loans shall not exceed in the
aggregate U.S. $200,000, apportioned between HNEF and FI on
a pro rata basis, based upon their then current Distributive
Share, minus the then current outstanding balance of any
Special Contributions made by HNEF or FI pursuant to Section
4(i) hereof prior to the date of each such loan.
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<PAGE>
(ii) The Required Loans of Section 4(h)(i) shall be in the nature
of revolving lines of credit to the Joint Venture to be
advanced against a promissory note of the Joint Venture to
HNEF and FI, respectively. Each such advance shall bear
interest from the date advanced until repaid at the Prime
Rate and all principal and any accrued but unpaid interest
not paid pursuant to Section 5(a) hereof, shall become
finally due and payable, if not sooner paid pursuant to
Section 5(a) hereof, at the end of the initial twenty (20)
year term of this Agreement. Upon the expiration of the
initial twenty (20) year term of this Agreement (whether or
not the Agreement is renewed), neither HNEF nor FI shall
have further obligations to make further Required Loans to
the Joint Venture. Accrued interest upon outstanding
advances under the Required Loans, if any, shall be due and
payable on a quarterly basis during the initial twenty (20)
year term of this Agreement with both principal and interest
to be prepaid from Available Cash as set forth in Section
5(a) below.
(iii) The aforesaid Required Loans shall be made to the Joint
Venture upon calls made by the Board of Managers in its
discretion. Upon the issuance of a call for Required Loans
by the Board of Managers, HNEF and FI shall proportionately
make such Required Loans within five (5) business days after
receipt of the notice of such call pursuant to the terms of
Article 14 hereof.
(i) (i) In the event the Initial Capital Contributions, Required
Loans, other loans and receipts from the Joint Ventures'
business are insufficient to meet the cash needs of the
Joint Venture, then the Venturers can agree in writing to
make additional capital contributions to the Joint Venture
in the proportionate amount (measured by the relation of
each Venturers' Distributive Share to 100%) of the cash
needed by the Joint Venture and, upon the written
concurrence of both HNEF and FI, the Board of Managers shall
be entitled to issue a call for such mandatory additional
contributions, which demand shall specify the proportionate
contribution required by each Venturer ("Special
Contributions").
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<PAGE>
(ii) Upon the issuance of a call for Special Contributions, each
Venturer shall proportionately make the Special
Contributions within fourteen (14) days after the receipt of
notice of call as provided in Article 14. Each call for
Special Contributions shall designate the purpose or
purposes for which the proceeds of the Special Contributions
will be used. The proceeds from all Special Contributions
shall be used solely for the purposes set out in the call.
(j) (i) If at any time a Venturer shall breach this Agreement by
failing to make its respective Required Loans or Special
Contributions pursuant to the call provisions of this
Article 4 (hereinafter referred to as a "Non-Contributing
Venturer"), such Non-Contributing Venturer shall be
considered in breach of this Agreement and (without
otherwise limiting any other remedies which the other
Venturers may have against such Non-Contributing Venturer)
the other Venturers shall have the right, (but not the
obligation) to make an excess contribution ("Excess
Contribution") to the Joint Venture to cover such unpaid
Required Loans or Special Contributions of the
Non-Contributing Venturer. In the event that both of the
other Venturers elect to make an Excess Contribution, then
such other Venturers shall have the right to do so in
proportion to each of their then current Distributive Share
(without regard to the Distributive Share of the
Non-Contributing Venturer.
(ii) In the event that a Venturer makes an Excess Contribution,
such Excess Contribution shall be deemed to be a loan
("Excess Loan") to the Non-Contributing Venturer by virtue
of whose breach of this Agreement such Excess Contribution
was required. The Excess Loan shall bear interest at a rate
equal to the lesser of (a) the maximum rate permitted under
applicable law or (b) the greater of (i) the Prime Rate plus
two percent (2%) or (ii) ten percent (10%) per annum, and
shall be due and payable upon demand and shall be secured by
a lien and security interest upon any amounts of Available
Cash due the Non- Contributing Venturer. The Excess Loan
shall be an obligation of such
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<PAGE>
Non-Contributing Venturer and, if not sooner paid by such
NonContributing Venturer, shall be due and payable out of
the first Available Cash of the Joint Venture pursuant to
the priority set forth in Article 5 below, with the
application of payments thereof to principal and/or interest
being at the sole discretion of the payee thereof. To the
extent of any payments of Excess Loans directly by the Joint
Venture out of Available Cash to any Venturer(s) who made an
Excess Contribution, such Venturer(s) who made the Excess
Contribution(s) shall subrogate all rights which such
Venturer(s) had against the NonContributing Venturer to the
Joint Venture. Any interest on Excess Loans paid by the
Joint Venture shall be charged solely to the capital account
of the Non-Contributing Venturer who occasioned any such
Excess Loan.
(iii) Without limiting any other remedies set forth herein or at
law, if any Excess Loan is not repaid in full by such
Non-Contributing Venturer within one hundred twenty (120)
days after the same has been advanced on its behalf, then
the Distributive Share of such Non-Contributing Venturer
shall (at the option of the Venturers who is/are owed any
such Excess Loan) be reduced and the Distributive Share of
the Venturer(s) making any such Excess Loan shall be
increased as follows: The unpaid balance (including
principal and accrued interest) of any such Excess Loan
shall be divided by a sum equal to (a) the aggregate amount
of all Capital Contributions theretofore made to the Joint
Venture by the Venturers (excluding any such contributions
deemed to have been made on account of any such Excess
Loan), plus (b) the unpaid balance of accrued interest and
principal of any such Excess Loan, less (c) all withdrawals
of capital to all Venturers, in the aggregate. The quotient
thus obtained shall be multiplied by one hundred percent
(100%). The resulting percentage amount will then be
subtracted from such Non-Contributing Venturer's then
existing Distributive Share (provided same shall not be
reduced below zero) and an equivalent amount shall be added
to the respective Distributive
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Share(s) of the Venturer(s) who made any such Excess Loan
(in proportion to the amount of Excess Loans made to such
Venturers). Immediately following such adjustment in the
Distributive Shares of the Venturers, it shall be deemed
that the unpaid balance (including principal and accrued
interest) of any such Excess Loan(s) shall have been
converted into an additional capital contribution by the
Venturer(s) making such Excess Loan(s) and a capital
contribution withdrawal by the Non-Contributing Venturer and
the capital accounts of the Venturers shall be adjusted
accordingly, and the NonContributing Venturer shall have no
further liability to repay such Excess Loan(s). Any
adjustment to the Distributive Shares made under this
Section 4(j) shall act to adjust, in like manner, all
Distributive Shares as set forth in Article 3.
(k) Any Venturer may at any time at the request of the Joint Venture
make a loan in addition to those loans identified elsewhere herein ("Additional
Loan") to the Joint Venture to fund the operation and business activities of the
Joint Venture. No Venturer shall be obligated to make an Additional Loan. In the
event an Additional Loan is made to the Joint Venture, the provisions of Article
8 shall govern as to the type, interest rate and manner of repayment of such
Additional Loan.
ARTICLE 5
DISTRIBUTIONS
(a) Subject to the provisions of Article 13 below, Available Cash, if
any, shall be distributed quarterly on or before the last day of the first month
following the end of each calendar quarter (commencing on the last day of the
first month of the calendar quarter immediately following the calendar quarter
in which the Initial Restaurant is opened to the public) in the following
priority:
(i) To pay or provide for all amounts owing to Venturers for
Excess Loans;
(ii) To pay or provide for all other amounts owing to Venturers
for Additional Loans; and
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(iii) To pay or repay all amounts outstanding as Required Loans,
with the application first to accrued interest and the
balance to principal of loans made in accordance with
Section 4(h).
If Available Cash is insufficient to repay all sums owing in respect to Required
Loans, Additional Loans or Excess Loans, Available Cash shall first be applied
pro rata to repay and retire the oldest loans first (with all Excess Loans to be
repaid prior to the payment of any Additional Loans and all Additional Loans
required to be repaid prior to the payment of any Required Loans) and, if any
funds thereafter remain available, such funds shall be applied in a similar
manner to the remaining loans in accordance with the order of the dates on which
they were made; however, as to loans made on the same date, each such loan shall
be repaid in the proportion that such loan bears to the total loans made on said
date. For purposes of priority under this Section 5(a), Required Loans and
Excess Loans made pursuant to the same call under Sections 4(h) or 4(i) shall be
deemed to have been made on the same date although they may have been advanced
on different dates. In addition, at any time when no Excess Loans, Additional
Loans or Required Loans are outstanding, the Board of Managers may make monthly
distributions to BARLTD of up to nine percent (9%) of the net income of the
Joint Venture, each as determined by the internal accountants of the Joint
Venture for purpose of allowing BARLTD to satisfy any corresponding obligation
to make monthly distributions Barrett pursuant to the terms of the Barrett
Employment Agreement. Any such distributions to BARLTD at a time when
proportionate distributions are not being made to other Venturers shall be
considered to be an advance against the distributions to which BARLTD are
otherwise entitled from time to time.
(b) During any time when no Excess Loans, Additional Loans or Required
Loans are outstanding, upon the order of the Board of Managers, acting in their
discretion, the Joint Venture may make distributions to the Venturers from
Available Cash in accordance with the Venturers' respective Distributive Shares.
The above notwithstanding, in the event that any Venturer receives an allocation
of income or other gain from the Joint Venture (as shown upon any K-1 or similar
form issued to such Venturer by the Joint Venture) which requires that such
Venturer (or its equity owners) make a payment in cash to the United States
Internal Revenue Service (the "IRS") by reason of the items of allocation from
the Joint Venture, taking into account all other income, credits and deduction
of such Venturer, then the Joint Venture shall distribute cash (to the extent of
Available Cash only) to each
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Venturer in proportion to their Distributive Shares, in an amount so as to
provide the Venturer having the greatest amount of tax liability as a result of
such allocations by the Joint Venture (less amounts distributed to such
Venturers under this Section 5(b) during the preceding twelve months, if any),
an amount of cash sufficient to pay such tax liability. Any distribution
required by the immediately preceding sentence shall be made prior to the date
of the required filing of a tax return, by any Venturer, with the IRS showing
such tax as due and payable.
(c) If any Venturer does not withdraw the whole or any part of its
share of any cash distribution, such Venturer shall not be entitled to receive
any interest thereon, nor shall any such cash not withdrawn be deemed an
increase in such Venturer's Distributive Share of the Joint Venture without the
express written consent of all other Venturers.
ARTICLE 6
ALLOCATIONS OF INCOME, GAIN, LOSS
DEDUCTION AND CREDIT
Each item of income, gain, loss, deduction or credit for each fiscal
year, or portion of a fiscal year, of the Joint Venture shall be allocated among
the Venturers in accordance with their then respective Distributive Shares. Upon
dissolution and liquidation of the Joint Venture pursuant to Article 13 hereof,
gain from the sale, exchange, abandonment, foreclosure or other disposition of
all or any portion of the Joint Venture property or any interest therein shall
be allocated among the Venturers according to the Distributive Share of each.
ARTICLE 7
MANAGEMENT, OPERATION AND CONTROL OF THE JOINT VENTURE
(a) BOARD OF MANAGERS.
(i) Except as provided in Section 7(c) below, the overall
management and control of the Joint Venture shall be vested
in a Board of Managers. The Board of Managers shall be
responsible for making all policy decisions of the Joint
Venture, including (but not limited to) borrowing money,
purchasing assets, and making other capital investments on
behalf of the Joint Venture, negotiating and entering into
contracts or
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agreements on behalf of the Joint Venture, selling or
leasing assets of the Joint Venture, establishing the fiscal
policies of the Joint Venture, establishing the overall
business plan and systems of operation of the Joint Venture,
hiring and terminating any and all employees of the Joint
Venture and establishing and reviewing the salaries of any
and all employees of the Joint Venture.
(ii) Unless increased by the unanimous vote of the Venturers, the
Board of Managers shall consist of two (2) individuals. HNEF
shall have the right to appoint one (1) member of the Board
of Managers, and FI shall have the right to appoint one (1)
member to the Board of Managers. BARLTD shall not have the
right to appoint a member of the Board of Managers. Each
member of the Board of Managers shall serve at the pleasure
of the Venturer by which he was appointed, and each Venturer
may fill vacancies caused by the death, resignation or
removal of a member appointed by that Venturer. The initial
members of the Board of Managers shall be David Mason
(representing HNEF) and Fitch (representing FI).
(iii) Except as otherwise set forth herein, actions of the Board
of Managers shall be taken only by majority vote of its
members or the written consent of a majority of its members.
Each member of the Board of Managers shall be entitled to
one (1) vote.
(iv) The Board of Managers is granted the right, power and
authority, on behalf of the Joint Venture, to perform all
acts which, in the Board of Managers' sole discretion, are
necessary and/or desirable to carry out the duties and
responsibilities of operating and managing the Joint Venture
and its business. The Board of Managers shall have (but
shall not be limited to) the right, power and authority to
incur reasonable expenses; to employ and dismiss from
employment any and all employees, agents, or independent
contractors; to lease property, to borrow money or to incur
indebtedness at a price, rental, or amount, for cash,
securities or other property, and upon such terms as the
Board of Managers deems proper; to adjust, compromise,
settle or refer to
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arbitration any claim against or in favor of the Joint
Venture or any nominee; to institute, prosecute, defend or
settle any legal proceeding relating to the business or
property of the Joint Venture; to delegate all or any
portion of its powers as set forth in Subsection 7(a)(v)
below and to execute, acknowledge and deliver any and all
instruments to effect any and all of the foregoing.
(v) In its sole discretion, the Board of Managers may designate
one or more of its members or one or more employees or
agents of the Joint Venture to manage the day-to-day
operations of the Joint Venture; provided, however, such
member(s), employee(s) or agent(s) shall at all times be
subject to the supervision and control of the Board of
Managers.
(b) Except as provided in Section 7(c) below, no Venturer shall,
unless authorized by this Agreement or by majority of the Board of Managers,
take any action to bind or obligate the Joint Venture in any manner, including
but not limited to, any of the following:
(i) make, execute or deliver for the Joint Venture any
agreement, contract, note, bond, mortgage, deed of trust,
guaranty, indemnity bond, surety bond or accommodation paper
or accommodation endorsement;
(ii) borrow money in the Joint Venture's name or use the Joint
Venture's property as collateral;
(iii) assign, transfer, pledge or release any claims or debts
owing by or to the Joint Venture;
(iv) cause the Joint Venture to purchase all or any part of the
Joint Venture interest of any Venturer;
(v) assign the Joint Venture's property in trust for creditors
or on the assignee's promise to pay the debts of the Joint
Venture; (vi) dispose of the goodwill of the Joint Venture;
(vii) do any other act which will make it impossible to carry on
the ordinary business of the Joint Venture;
(viii) confess a judgment against the Joint Venture;
(ix) pledge or transfer or allow or cause to become encumbered in
any manner a Venturer's interest in the Joint Venture,
except as permitted in Article 12 hereof;
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(x) do any other act for which unanimity is required by the
other provisions of this Agreement or applicable law; or
(xi) alter the purpose of the Joint Venture.
(c) CONTROL BY VENTURERS. As provided in Section 7(a) above, the
overall management and control of the Joint Venture shall normally be vested in
the Board of Managers. Anything contained to the contrary herein
notwithstanding, however, since the Board of Managers is to consist of two
persons, if the Board of Managers is unable to agree upon any issue or matter
relating directly or indirectly in any way to the Joint Venture, such issue or
matter, shall be decided by the Venturers as provided in Section 7(d) hereof.
Any decision made by the Venturers pursuant to this Section 7(c) shall be
binding in all respects upon the Board of Managers and the Joint Venture and may
be relied upon in all respects by third parties. The Venturers and the Board of
Managers hereby agree to, at all times, abide by and to cause the Joint Venture
to abide by the terms of any decision of the Venturers pursuant to Sections 7(c)
and 7(d) hereof.
(d) ACTION BY THE VENTURERS.
(i) In the exercise of rights, powers and duties hereunder
(specifically including, but in no way limited to the rights
and powers set forth in Section 7(c) above), the Venturers
shall have one (1) vote for each percentage of Distributive
Share owned by such Venturer with any fractional percentage
of ownership rounded to the closest whole percentage point
(i.e. at the time of execution hereof, HNEF shall have 46
votes, FI shall have 44 votes, and BARLTD shall have 10
votes) on all issues, questions, matters and decisions with
respect to the Joint Venture to the extent not otherwise
resolved by the other provisions of this Agreement.
(ii) Actions to be taken by the Venturers herein may be taken
either by majority vote or majority written consent of the
Venturers.
(e) SPECIAL DUTIES OF HNEF. Unless otherwise determined by the Board of
Managers, HNEF shall be responsible for and shall have the authority to conduct
all general administrative matters of the Joint Venture which shall include, but
shall not be limited to, the coordination of:
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(i) all legal and accounting matters on behalf of the Joint
Venture, including the maintenance of the general accounting
systems of the Joint Venture and coordinating the functions
of the accountants and lawyers that will service the Joint
Venture;
(ii) all payroll matters on behalf of the Joint Venture;
(iii) all accounts payable on behalf of the Joint Venture (except
those that must be handled on a local level which shall be
the responsibility of FI);
(iv) all banking and financial matters of the Joint Venture;
(v) all financial reporting to Hops pursuant to the terms of any
Operating Agreement utilizing restaurant and other operating
data to be provided by FI as the operator of the
restaurants; and
(vi) the compliance by the Joint Venture of all administrative
aspects of any Operating Agreement.
Except for the administrative fee payable to Hops as part of each Operating
Agreement, HNEF shall receive no direct compensation for such administration and
coordination; however, all costs and expenses payable to third parties relating
to administrative matters of the Joint Venture shall be the sole responsibility
of the Joint Venture. [BY WAY OF EXAMPLE, BUT NOT IN LIMITATION, OF THE ABOVE,
(A) HNEF WILL UNDERTAKE (I) ALL OF THE INTERNAL ACCOUNTING AND BOOKKEEPING OF
THE JOINT VENTURE, INCLUDING THE DAILY MAINTENANCE OF THE JOINT VENTURE'S BOOKS
AND RECORDS AND (II) WILL COORDINATE WITH THE JOINT VENTURE'S ACCOUNTANTS, THE
PREPARATION OF THE JOINT VENTURE'S TAX RETURNS AND THE AUDIT OF THE JOINT
VENTURE'S BOOKS AND RECORDS; AND (B) HNEF SHALL RECEIVE NO COMPENSATION FOR SUCH
INTERNAL ACCOUNTING AND BOOKKEEPING OR FOR THE TIME SPENT BY HNEF IN
COORDINATING WITH THE JOINT VENTURE'S ACCOUNTANTS, HOWEVER, THE JOINT VENTURE
SHALL BE SOLELY RESPONSIBLE FOR ALL FEES AND EXPENSES OWING TO THE JOINT
VENTURE'S ACCOUNTANTS FOR THE PREPARATION OF SUCH TAX RETURNS AND THE CONDUCT OF
THE AUDIT.]
Unless otherwise instructed by the Board of Managers, HNEF shall
undertake its duties pursuant to this Section 7(e) in a manner so as to assure
compliance with the administrative provisions of all Operating Agreements to
which the Joint Venture is a party. The failure by HNEF to cause the Joint
Venture to comply with the administrative provisions of any such Operating
Agreement (unless such non-compliance is waived by Hops) shall be considered a
breach of this Agreement by HNEF.
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(f) SPECIAL DUTIES OF FI. Unless otherwise determined by the Board of
Managers, acting in their sole discretion, FI shall be responsible for
and shall have the authority to conduct all of the operational matters of each
restaurant to be owned and operated by the Joint Venture, which duties shall
include, but shall not be limited to:
(i) the provision or employment of all direct restaurant
management as required by the Operating Agreement relating
to such restaurant or as otherwise necessary for the
operation of any restaurant to be owned and operated by the
Joint Venture;
(ii) the employment, termination and supervision of all
restaurant employees; and
(iii) the compliance by the Joint Venture of all operating aspects
of any Operating Agreement.
FI shall receive no direct compensation for the conduct of such operational
matters; however, all expenses related to the operation of each restaurant to be
owned and operated by the Joint Venture shall be the sole responsibility of the
Joint Venture. [BY WAY OF EXAMPLE, BUT NOT LIMITATION, OF THE ABOVE, (A) FI
SHALL BE RESPONSIBLE FOR THE RECRUITING, HIRING AND ULTIMATE SUPERVISION OF ALL
EMPLOYEES OF EACH RESTAURANT TO BE OPERATED BY THE JOINT VENTURE; AND (B) FI
SHALL RECEIVE NO COMPENSATION FOR ITS RECRUITING, HIRING AND SUPERVISION
ACTIVITIES, HOWEVER, THE JOINT VENTURE SHALL BE SOLELY RESPONSIBLE FOR THE
ACTUAL COMPENSATION (INCLUDING WAGES AND BENEFITS) OF THE EMPLOYEES OF SUCH
RESTAURANTS.]
Unless otherwise instructed by the Board of Managers, FI shall
undertake its duties pursuant to this Section 7(f) in a manner so as to assure
compliance with the operating provisions of all Operating Agreements to which
the Joint Venture is a party. The failure by FI to cause the Joint Venture to
comply with the operating provisions of any such Operating Agreement (unless
such non-compliance is waived by Hops) shall be considered a breach of this
Agreement by FI. FI shall be solely responsible for the cost of any FI
management personnel not directly related to the management of a restaurant
owned by the Joint Venture, if any.
(g) OTHER BUSINESS OF HNEF. The parties hereto acknowledge and agree
that HNEF and its designated member of the Board of Managers are engaged in
other business activities unrelated to the business of the Joint Venture, and
will continue to do so and will devote only such time as is reasonably necessary
to the business of the Joint Venture. The
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parties further acknowledge and agree that certain of the business activities of
HNEF (and Hops) will relate to the operation of other restaurants under the Hops
System or other systems and accordingly, certain of such activities may conflict
with the best interests of FI or the Joint Venture or compete with the business
of the Joint Venture.
(h) EXCLUSIVE BUSINESS OF FI/FITCH. The parties hereto acknowledge and
agree that FI and Fitch shall exclusively devote their time and efforts to the
operation of the restaurants to be owned and operated under the Joint Venture
for a period of two (2) years from the date of the opening of the Initial
Restaurant to the general public. Thereafter, FI and Fitch may have other
business interests and will be required to devote only such time to the Joint
Venture as is reasonably necessary to the business of the Joint Venture.
(i) SPECIAL DUTIES OF BARLTD. Unless otherwise determined by the Board
of Managers acting in their sole discretion, BARLTD in its role as the Area
Manager of the Hops Grill & Bar restaurants in the Territory, shall serve in a
managerial capacity under the direction of the Board of Managers, with respect
to the Hops Grill & Bar restaurant owned and operated by the Joint Venture and
at the specific request of the Board of Managers has employed Barrett for that
purpose. If, for any reason, BARLTD shall become unable to retain the services
of Barrett, at the request of the Board of Managers, BARLTD shall attempt to
locate and employ a satisfactory substitute manager, but shall have no liability
to the Joint Venture for the failure to further perform the special duties set
forth herein or for the failure to locate a suitable substitute manager to
perform such services. The Joint Venture shall reimburse BARLTD for its
reasonable expenses in connection with the services to be performed by BARLTD
hereunder and under the Barrett Employment Agreement, including but not limited
to the compensation to be paid to Barrett thereunder.
(j) BANK ACCOUNTS. The Joint Venture will maintain such bank accounts
as the Board of Managers may deem necessary, for the deposit of Joint Venture
funds and for the proper segregation thereof into such separate accounts as may
be deemed appropriate. All withdrawals from any such bank account shall be made
by such persons as are approved in writing by a majority of the Board of
Managers. Joint Venture funds shall not be commingled with those of any other
person or entity.
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ARTICLE 8
LOANS TO JOINT VENTURE; FEES TO VENTURERS
(a) VENTURER LOANS. If any Venturer shall advance any money to the
Joint Venture except as part of such Venturer's Capital Contributions required
by Section 4(g) hereof, or as provided in Section 4(i), the amount of any such
advance shall not increase the Capital Contribution of such Venturer to the
Joint Venture or entitle such Venturer to any increase in such Venturer's
Distributive Share (except to the limited extent expressly provided in Section
4(j)(iii)), but the amount of any such advance shall be deemed to be a loan to
the Joint Venture and an obligation of the Joint Venture to such Venturer. No
Venturer shall be personally obligated to repay or contribute additional capital
to repay any such advance and such advance shall be payable or collectible only
out of Joint Venture assets existing from time to time; provided, however,
nothing contained in this Section 8(a) shall limit the liability of the
Venturers to repay the Balance of Required Loans or to limit the full personal
liability of any Venturer necessitating an Excess Loan to repay such loan.
(b) INTEREST. Loans to the Joint Venture pursuant to Section 8(a) above
(excluding Excess Loans) shall be payable in accordance with Section 5(a) and
shall bear interest at the Prime Rate unless otherwise agreed to by the Venturer
making the loan and the Board of Managers.
(c) FEES TO VENTURERS. Except for distributions made in accordance with
Article 5 of this Agreement and the fees and other payments set forth in the
Development Option Agreement, or the Operating Agreement for any restaurant to
be operated by the Joint Venture, the Venturers shall not be entitled to
receive, directly or indirectly, any fees or other payments from the Joint
Venture without the prior written consent of HNEF and FI. This provision is not
intended to preclude any Venturer (or its affiliates) from serving as a vendor
or service provider to the Joint Venture when approved by the Board of Managers
and such products or services are provided to the Joint Venture on terms that
are no less favorable to the Joint Venture than those available from independent
third party providers.
ARTICLE 9
BOOKS, RECORDS AND TAX MATTERS
(a) Proper and complete records and books of account for the Joint
Venture shall be kept or caused to be kept by the Board of Managers. All
transactions and other matters
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relative to the Joint Venture's business, as are usually entered into records
and books of account maintained by persons engaged in businesses of like
character, shall be entered fully and accurately into the Joint Venture's
records and books of account.
(b) Each Venturer and/or such Venturer's duly authorized
representative, at such Venturer's expense, shall have the right, power and
authority to examine, inspect, copy and verify, at any and all reasonable times,
the books, records and accounts of the Joint Venture.
(c) The books and records of the Joint Venture shall be at all times
maintained at the principal office of the Joint Venture set forth in Section
1(e) above, or at such other place as the Board of Managers may determine from
time to time
(d) The Joint Venture shall be treated as a general partnership for
federal and state tax purposes. The Board of Managers shall cause the Joint
Venture to prepare and file on or before the annual due date a United States
Partnership Return of Income and any necessary state tax returns.
(e) Unless otherwise agreed by the Board of Managers, the Board of
Managers shall cause an audit of the books and records of the Joint Venture to
occur at least annually. Such audit shall be conducted by independent certified
public accountants which are mutually acceptable to the Venturers.
ARTICLE 10
FISCAL YEAR AND BASIS FOR ACCOUNTING
(a) Unless changed by the Board of Managers, the fiscal year of the
Joint Venture shall end on December 31 of each year.
(b) The Joint Venture shall operate and keep its books and records on
such basis as the Board of Managers shall elect.
ARTICLE 11
LIABILITY OF VENTURERS
(a) No Venturer, nor any officer, director, shareholder, trustee,
partner, agent, associate or beneficiary of a Venturer, shall be liable,
responsible or accountable in damages or otherwise to the Joint Venture or the
other Venturer, for any action taken or failure to act (even if such action or
failure to act constituted the simple negligence of the Venturer, or such
officer, director, shareholder, trustee, partner, agent, associate or
beneficiary of such
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Venturer) on behalf of the Joint Venture within the scope of the authority
conferred on the Venturer by this Agreement, unless such act or omission
constitutes a breach of the terms of this Agreement or such act or omission was
performed or omitted fraudulently or constituted gross negligence or willful
malfeasance.
(b) The Joint Venture shall indemnify and hold harmless each member of
the Board of Managers and each Venturer, and each officer, director,
shareholder, trustee, partner, agent, associate or beneficiary thereof, from and
against any loss, expense, damage or injury suffered or sustained by it by
reason of any acts, omissions or alleged acts or omissions (even if such action
or failure to act constituted the simple negligence of such Venturer, or such
officer, director, shareholder, trustee, partner, agent, associate or
beneficiary of such Venturer) arising out of its activities on behalf of the
Joint Venture or in furtherance of the interests of the Joint Venture,
including, but not limited to, any judgment, award, settlement, reasonable
attorney's fees and other costs or expenses incurred in connection with the
defense of any actual or threatened action, proceeding or claim, if the acts,
omissions or alleged acts or omissions upon which such actual or threatened
action, proceeding or claims are based (i) were for a purpose reasonably
believed to be in the best interests of the Joint Venture, (ii) were within the
scope of authority conferred on such indemnified party by this Agreement, (iii)
were not performed or omitted fraudulently or as a result of the gross
negligence or willful malfeasance of such indemnified party, and (iv) did not
constitute a breach of the terms of this Agreement.
ARTICLE 12
DISPOSITION OF A VENTURER'S JOINT VENTURE INTEREST
(a) (i) At no time during the term of this Agreement shall FI,
directly or indirectly, sell, assign, transfer, mortgage,
encumber, pledge or otherwise similarly deal with or dispose
of all or any portion of its interest in the Joint Venture,
without first obtaining the written consent of HNEF, or, in
the absence of such written consent, without first complying
with the terms of this Article 12. Any attempted sale,
assignment, transfer, mortgage, pledge, grant, hypothecation
or other disposition of any interest in the Joint Venture by
FI, in violation of the foregoing provisions of this Section
12(a), shall be null and void and of
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no force or effect. For purposes of this Agreement, the
transfer or distribution, directly or indirectly, of an
equity interest or other rights in or the issuance of
additional securities in FI, other than pursuant to the
provisions of the last paragraph of this Section 12(a)(ii)
below, shall be deemed a disposition of the Joint Venture
interest of FI, and HNEF shall be entitled to purchase the
Joint Venture interest of FI in accordance with the terms of
Section 12(c) hereof.
(ii) Provided that Fitch shall, at all times, retain a minimum o
51% of the equity interest in and absolute voting and other
control of FI, Fitch (or FI) may sell or otherwise assign up
to 49% of the equity of FI to persons who have received the
prior written approval of HNEF (which approval shall not be
unreasonably delayed or withheld). Any such transferee of an
interest in FI may be required, as a condition to the
consent of HNEF, to execute reasonable confidentiality and
transfer agreements as are deemed necessary by HNEF to
assure the compliance by such transferees with the spirit of
this Agreement. Additionally, the Bylaws of FI shall reflect
that the issuance and transfer of shares of stock (or other
equity interests in FI) are restricted by the terms of this
Agreement. The following legend shall appear conspicuously
upon the face of each stock certificate of (or certificate
otherwise representing an interest in) FI: "The transfer of
this stock (or interest) is subject to the terms and
conditions of a Joint Venture Agreement dated September 1,
1995 by and between FI and HNEF and the Bylaws of the
corporation." FI hereby acknowledges that the purpose of the
aforesaid transfer restrictions and procedures is to protect
the trademarks, trade secrets and operating procedures of
Hops and the partnership interests of HNEF contained herein.
FI hereby acknowledges that non-compliance with such
transfer restrictions and procedures shall constitute a
breach of this Agreement by FI. Upon the execution of this
Agreement and periodically thereafter at the reasonable
request of HNEF, FI shall provide HNEF with a photocopy of
its current Bylaws and all issued
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and outstanding stock certificates to demonstrate compliance
with this Agreement.
(b) (i) FI shall not transfer any interest in the Joint Venture for
a period beginning upon the date hereof and ending two (2)
years after the date of the opening of the Initial
Restaurant to the general public, without the express prior
written consent of HNEF. If following the period described
in the immediately preceding sentence, FI desires, directly
or indirectly, to sell, assign, transfer or in any way
dispose of all or any portion of the Joint Venture interest
of FI to any third party, FI shall first serve notice
(hereinafter called an "Offer to Sell") to that effect upon
HNEF. The Offer to Sell shall set forth the amount of Joint
Venture interest of FI desired to be sold or otherwise
disposed of, the price, terms and conditions of such
proposed sale and the name and address of the proposed third
party purchaser (and in the case of a proposed purchaser
that is not a natural person, the principals of such
proposed purchaser), and shall offer to sell such Joint
Venture interest to HNEF at the price and on the terms of
sale described in the Offer to Sell.
(ii) HNEF shall have the absolute right to prohibit the sale of
the Joint Venture interest identified in the Offer to Sell
if HNEF, in its reasonable determination, shall disapprove
of the purchaser identified in the Offer to Sell. In making
such determination, HNEF may consider, among other things,
the reputation, financial position and restaurant operating
experience of the proposed purchaser, as well as concerns as
to the protection of the trade secrets and proprietary
information of the Hops System that result from the
competitive nature of any other business operations directly
or indirectly related to the potential purchaser. FI shall
promptly provide HNEF with any information regarding the
potential purchaser, reasonably requested by HNEF, in order
to evaluate the potential purchaser, including, but not
limited to financial statements and a detailed business
history of such potential purchaser. HNEF will notify FI in
writing of its approval or
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disapproval of any such potential purchaser within sixty
(60) days after receipt by HNEF of the Offer to Sell.
(iii) Whether or not the potential purchaser is approved by HNEF
as provided in Section 12(c) above, HNEF shall have the
first right to purchase all of the Joint Venture interest so
offered by giving notice of acceptance to FI within one
hundred twenty (120) days after receipt by HNEF of the said
Offer to Sell.
(iv) In the event HNEF shall not have disapproved of the
identified in the Offer to Sell as set forth in Section
12(b)(ii) above and HNEF fails or refuses to purchase the
Joint Venture interest of FI as provided in Section
12(b)(iii) above, FI shall be free to sell the Joint Venture
interest so identified in the Offer to Sell to the person or
entity identified in the Offer to Sell on the price and
terms set forth in the Offer to Sell; provided, however,
that FI shall not transfer or otherwise dispose of such
Joint Venture interest to any person or entity other than
the third party identified in the Offer to Sell or for a
price less than or on terms more favorable than those set
forth in the Offer to Sell without first reoffering such
Joint Venture interest to HNEF as set forth in Section
12(b)(i). If FI does not consummate the sale of its Joint
Venture interest so identified in its Offer to Sell within
ninety (90) days after the expiration of the period for
HNEF's acceptance of such Offer to Sell, the provisions of
this Article 12 shall reattach to such interest and such
interest shall not be sold without reoffer to HNEF.
(v) The provisions of this Section 12(b) to the contrary
notwithstanding, FI shall make no transfer of its Joint
Venture interest as provided in this Section 12(b) unless
the person or entity acquiring such interest shall execute
and deliver to HNEF (or Hops) such documentation as HNEF (or
Hops) may reasonably require to assure the confidentiality
of the trade secrets and proprietary information associated
with the Hops System and to make the purchaser a party to
this Agreement (including the transfer restrictions as they
previously related to FI) and all other
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agreements related to the restaurants operated by the Joint
Venture to which FI was (or is) a party.
(c) (i) If FI or Fitch shall breach this Agreement as provided in
Section 15 hereof, FI shall be deemed to have made an Offer
to Sell (which shall be deemed received by HNEF only when
HNEF has actual knowledge of such breach) all of the Joint
Venture interest owned by FI to HNEF for the price and upon
the terms specified in this Section 12(c). HNEF shall have
the right to purchase the Joint Venture interest of FI so
offered by giving notice of acceptance to FI within one
hundred twenty (120) days after the deemed receipt by HNEF
of the Offer to Sell. In the event that HNEF fails or
refuses to purchase all of the Joint Venture interest of FI,
the remaining provisions of this Agreement shall continue to
apply to the Joint Venture interest of FI.
(ii) DETERMINATION OF PURCHASE PRICE AND TERMS. In the event
that the Joint Venture interest of FI is to be purchased
pursuant to the foregoing provisions of this Section 12(c),
the following provisions shall apply:
(A) PRICE. The purchase price of the Joint Venture interest
of FI shall be determined pursuant to Section 12(e)(i)
hereof.
(B) TIME AND METHOD OF PAYMENT. Upon the closing of any sale
pursuant to this Section 12(c), HNEF shall pay the
purchase price for the Joint Venture interest of FI
purchased pursuant to this Section 12(c) as follows:
1) PAYMENT UPON CLOSING. At the option of HNEF, all of
the purchase price or an amount equal to the greater
of:
a) twenty percent (20%) of the purchase price; or
b) $50,000,
shall then be paid in cash.
2) PROMISSORY NOTE. Any part of the purchase price which
is not paid in cash shall be evidenced by a
negotiable promissory note of HNEF payable to and
delivered to FI. The promissory note shall bear
interest at the Prime
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Rate and shall be payable over a period of sixty (60)
months with interest only on a quarterly basis
payable during the first twelve (12) months and
thereafter sixteen (16) equal quarterly payments of
principal (totaling all of the principal due
thereunder) and interest payable during the following
forty-eight (48) months. The promissory note of HNEF
shall provide that more or the entire principal sum
remaining unpaid at any time may be paid at any time
with interest to date of payment only. The promissory
note shall also provide for acceleration of the
maturity of the unpaid principal and accrued interest
at the option of FI upon default in the payment of
any installment of principal or interest for fifteen
(15) days or more.
(d) (i) In the event that Fitch shall die, become permanently
disabled or otherwise involuntarily cease to be in
operational control of FI (such occurrences hereinafter
referred to as a "Buyout Event" or "Buyout Events"), FI
shall sell and HNEF shall purchase all of the Joint Venture
interest of FI for the price set forth in Section 12(e)
hereof and upon the terms set forth in this Section 12(d).
FI shall notify HNEF immediately of the occurrence of a
Buyout Event. The failure of FI to notify HNEF of a Buyout
Event within twenty (20) days of its occurrence shall
constitute a breach of this Agreement by FI. The purchase of
the Joint Venture interest of FI by HNEF, pursuant to this
Section 12(d), shall take place within one hundred eighty
(180) days of the date upon which HNEF receives notice of
the Buyout Event (or if HNEF is not provided with such
notice, such closing shall take place on the date which HNEF
shall demand).
(ii) DETERMINATION OF PURCHASE PRICE AND TERMS. In the event that
the Joint Venture interest of FI is to be purchased pursuant
to the foregoing provisions of this Section 12(d), the
following provisions shall apply:
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(A) PRICE. The purchase price of the Joint Venture interest
of FI shall be determined pursuant to Section 12(e)(ii)
hereof.
(B) MANNER OF PAYMENT. The purchase price of the Joint
Venture interest of FI to be purchased pursuant to the
provisions of this Section 12(d) shall be paid as
follows:
1) PAYMENT UPON CLOSING. At the option of HNEF, all of
the purchase price or an amount equal to the greater
of
a) twenty percent (20%) of the purchase price;
b) Fifty Thousand Dollars (U.S. $50,000); or
c) one hundred percent (100%) (but not to exceed the
entire purchase price) of all proceeds from life
insurance policies, if any, on the life of Fitch
payable to HNEF by reason of the death of Fitch,
shall then be paid in cash.
2) PROMISSORY NOTE. Any part of the purchase price which
is not then paid in cash shall be evidenced by a
negotiable promissory note of HNEF payable to and
delivered to FI. The promissory note shall bear
interest at the Prime Rate and shall be payable over
a period of sixty (60) months with interest only on a
quarterly basis payable during the first twelve (12)
months and thereafter sixteen (16) equal quarterly
payments of principal (totaling all of the principal
due thereunder) and interest payable during the
following forty-eight (48) months. The promissory
note of HNEF shall provide that more or the entire
principal sum remaining unpaid at any time may be
paid at any time with interest to date of payment
only. The promissory note shall also provide for
acceleration of the maturity of the unpaid principal
and accrued interest at the option of FI upon default
in the payment of any installment of principal or
interest for fifteen (15) days or more.
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(e) (i) The purchase price for the Joint Venture interest of FI to
be purchased pursuant to Section 12(c) above shall be its
"book value." The book value of the Joint Venture interest
of FI shall be the book value of the assets of the Joint
Venture, less its liabilities, multiplied by FI's
Distributive Share as defined in Article 3 hereof (and
subject to adjustments pursuant to the other provisions
hereof).
(ii) The purchase price for the Joint Venture interest of FI to
be purchased pursuant to Section 12(d) above shall be its
"fair market value." The fair market value of the Joint
Venture interest of FI shall be determined by an appraisal
to be made by an appraiser jointly selected by HNEF and FI.
If HNEF and FI cannot agree upon an appraiser, then each
party shall select an appraiser and the two appraisers
selected by the Venturers shall select a third appraiser,
and the appraisal shall be made by the third appraiser. The
appraisal of the third appraiser shall be binding upon the
parties hereto unless patently erroneous. In the event of
such an appraisal, each party shall bear its own legal and
other costs and shall split the appraisal fees.
(f) In the event that the Joint Venture shall elect to obtain insurance
on the life of Fitch to fund the purchase of the Joint Venture interest of FI
pursuant to Section 12(d) or for other reasonable business reasons, Fitch shall
cooperate fully with the Joint Venture in obtaining such insurance including
Fitch's submission to reasonable medical examinations.
ARTICLE 13
DISSOLUTION AND LIQUIDATION
(a) The Joint Venture shall be dissolved upon the first of the
following to occur:
(i) The expiration or non-renewal of the term of the Joint
Venture pursuant to Article 2 hereof;
(ii) The decision of the Board of Managers to dissolve the Joint
Venture;
(iii) The bankruptcy of the Joint Venture;
(iv) The bankruptcy of HNEF;
(v) The liquidation or dissolution of HNEF;
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(vi) The bankruptcy, liquidation or dissolution of FI if HNEF
shall fail or refuse to exercise its purchase option
pursuant to Article 12 hereof;
(vii) The judgment of a court of proper jurisdiction under the
laws of the State of Florida ordering dissolution and
liquidation of the Joint Venture under applicable Florida
statutory or common law; or
(viii) Any event that makes it unlawful for the business of the
Joint Venture to be carried on or for its Venturers to carry
on such business in the Joint Venture.
Each Venturer agrees that dissolution of the Joint Venture by any cause not
hereinabove set forth or referred to in this Section 13(a), whether voluntary or
involuntary, shall be wrongful and in contravention of this Agreement. For
purposes of this Agreement, the "bankruptcy" of a Venturer shall be deemed to
have occurred upon the happening of any of the following:
(i) The filing of an application by the Venturer for, or a
consent to, the appointment of a trustee in bankruptcy or
receiver of such Venturer's interest in the Joint Venture or
of all or substantially all of such Venturer's assets;
(ii) The filing by the Venturer of a voluntary petition in
bankruptcy or the filing of a pleading in any court of
record admitting in writing such Venturer's inability to pay
such Venturer's debts as they come due;
(iii) The making by the Venturer of a general assignment for the
benefit of creditors;
(iv) The filing by the Venturer of an answer admitting the
material allegations of, or such Venturer's consenting to,
or defaulting in answering a bankruptcy petition filed
against such Venturer in any bankruptcy proceeding; or
(v) The entry of an order, judgment or decree by any court of
competent jurisdiction adjudicating the Venturer bankrupt or
appointing a trustee in bankruptcy or receiver of such
Venturer's interest in the Joint Venture or all or
substantially all of such Venturer's assets, and such order,
judgment or decree continuing unstayed and in effect for a
period of ninety (90) days after such entry.
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(b) Upon dissolution of the Joint Venture, it shall be wound up and
liquidated as rapidly as business circumstances will permit. The assets shall be
applied to the following uses in the following order:
(i) To pay or provide for all amounts owing by the Joint Venture
to creditors other than Venturers, and for expenses of
winding up;
(ii) To pay the balance of Excess Loans;
(iii) To pay or provide for the Balance of Required Loans;
(iv) To pay or provide for the balance of Additional Loans;
(v) To pay or provide for all other amounts owing by the Joint
Venture to the Venturers other than for capital and profits;
(vi) To pay each Venturer the credit balance, if any, in such
Venturer's closing capital account as adjusted to the date
of such distribution.
If funds are insufficient to repay all sums owing in respect of each category of
payment specified in the foregoing subsections, then the available funds shall
be applied to discharge all the sums owing as many of said categories as is
possible (commencing with and pursuing the order of priority aforesaid) until
the first category is reached as to which sufficient funds are not available for
complete satisfaction. As to such category, the remaining funds shall be
distributed proportionately in accordance with the ratio of the respective
claims in such category, unless the category involved is Section 13(b)(ii), in
which event, such loans shall be repaid in the order of priority provided in
Section 5(a) under circumstances where Available Cash is insufficient to repay
such loans.
(c) In the event the Joint Venture is "liquidated" within the meaning
of Treasury Regulation Section 1.704-1, (i) distributions shall be made to each
Venturer who has a positive capital account in compliance with Treasury
Regulation Section 1.704(b), and (ii) if any Venturer's capital account has a
deficit balance (after giving effect to all contributions, distributions, and
allocations for all taxable years, including the year during which such
liquidation occurs), such Venturer shall contribute to the capital of the Joint
Venture the amount necessary to restore such deficit balance to zero in
compliance with Treasury Regulation Section 1.704(b).
(d) Except as set forth in Section 13(e) below, the orderly dissolution
and liquidation of the Joint Venture and the winding up of its business shall be
the responsibility of the Board of Managers.
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(e) If dissolution occurs because of the bankruptcy of a Venturer or
any act of a Venturer in contravention of this Agreement or deemed
to be in contravention of this Agreement by the terms hereof, then the Venturer
who did not cause such dissolution shall have the authority to wind up and
liquidate the business of the Joint Venture. In such event, the Venturer with
the authority hereunder to wind up the business and conduct the liquidation of
the Joint Venture shall have all powers conferred upon the Board of Managers,
under the terms of this Agreement to the extent necessary or desirable in the
good faith judgment of such liquidating Venturer, to complete the liquidation of
the Joint Venture as provided for herein, including, but without limiting the
generality of the foregoing, the following specific powers:
(i) The power to continue to manage and operate any business of
the Joint Venture during the period of such liquidation,
including the power to make and enter into sales agreements
and leases or rental contracts covering properties of the
Joint Venture which may extend beyond the period of
liquidation.
(ii) The power to make sales and, incident thereto, to make
deeds, bills of sale, assignments and transfers of assets
and properties of the Joint Venture.
(iii) The power to borrow funds as may, in the good faith judgment
of the liquidating Venturer, be reasonably required to pay
debts and obligations for which the Joint Venture is liable
and operating expenses of the Joint Venture, and to grant
deeds of trust, mortgages, security agreements, pledges and
collateral assignments upon and encumbering any of the Joint
Venture properties as security for repayment of such loans
or as security for payment of any other indebtedness of the
Joint Venture.
(iv) The power to settle, compromise or adjust any claims
asserted to be owing by or to the Joint Venture, and the
right to file, prosecute or defend lawsuits and legal
proceedings in connection with any such matters.
(v) The power to make deeds, bills of sale, assignments and
transfers to the respective Venturers and their successors
in interest incident to final
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distribution of the remaining properties of the Joint
Venture (if any) as provided for herein.
(vi) The power to distribute Joint Venture property in kind at a
value agreed upon by the liquidating Venturer and the party
receiving such property.
If, under the above provisions, properties of the Joint Venture are distributed
in kind to the respective Venturers and/or to their successors in interest
subject to liens or mortgages securing indebtedness of the Joint Venture, and if
thereafter one or more of such Venturers or their successor(s) in interest shall
pay more of such secured indebtedness than the pro rata share thereof
attributable to the undivided interest in such properties thus distributed to or
acquired by such Venturer, that Venturer shall be subrogated to and entitled to
enforce such liens or mortgages as against the interest of the other Venturer or
their successor(s) in interest who has not paid its full pro rata share of such
secured indebtedness to secure repayment to the Venturer to the extent of the
deficiency in the proportionate payments attributable to their undivided
interests which should have been made by the other Venturer or their
successor(s) in interest.
ARTICLE 14
REPRESENTATIONS AND WARRANTIES
(a) REPRESENTATIONS AND WARRANTIES OF HNEF. HNEF hereby represents and
warrants to FI as follows:
(i) DUE INCORPORATION AND QUALIFICATION. HNEF is a corporation
duly incorporated, validly existing and in good standing
under the laws of its state of incorporation; is qualified
to do business in all jurisdictions where the failure to so
qualify would have a material adverse effect upon HNEF or
its business or assets; and has the corporate power and
authority to own, lease and operate all of its properties
and assets and to carry on its business as now conducted.
(ii) AUTHORITY TO EXECUTE AND PERFORM AGREEMENTS. (A) HNEF has
full corporate power and authority required to enter into,
execute and deliver this Agreement and any other agreement
contemplated hereby and to perform fully HNEF's obligations
hereunder and thereunder. (B)
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The execution and delivery by HNEF of this Agreement and any
other agreement contemplated hereby and the transactions
contemplated hereby and thereby have been duly authorized by
all requisite corporate and, if necessary, stockholder
action. (C) No other corporate proceedings on the part of
HNEF are necessary to authorize this Agreement and any other
agreement contemplated hereby or to consummate the
transactions contemplated hereby and thereby. (D) This
Agreement has been duly executed and delivered by HNEF and
constitutes the valid and binding obligation of HNEF,
enforceable against HNEF in accordance with its terms. (E)
The execution and delivery of this Agreement and any
agreement contemplated hereby, the consummation of the
transactions contemplated hereby and thereby, and the
performance by HNEF of this Agreement in accordance with its
terms and conditions will not 1) conflict with or result in
the breach or violation of any of the terms or conditions of
the Articles of Incorporation or Bylaws of HNEF; 2) violate
any statute, regulation, order, judgment or decree of any
court or governmental or regulatory body applicable to HNEF
or any of its properties or assets; or 3) require notice to
or the consent of any party to or result in a violation or
breach of, constitute (with or without due notice or lapse
of time or both) a default under, or give any party the
right to terminate or accelerate the performance of the
obligations of HNEF with respect to the terms, provisions or
conditions of any indenture, agreement or other instrument
to which HNEF is a party or by which HNEF or any of its
properties or assets are bound.
(iii) CONSENTS AND APPROVALS. No filing with, and no permit,
authorization, consent or approval of, any public body or
public authority is necessary for the consummation by HNEF
of the transactions contemplated by this Agreement and any
other agreements contemplated hereby, except for the failure
to obtain filings, permits, authorizations, consents or
approvals, which would not adversely affect the business or
assets of HNEF or the ability of HNEF to perform any
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of its obligations under this Agreement or any other
agreement contemplated hereby and which would not prevent or
delay in any respect the consummation of the transactions
contemplated hereby or thereby.
(iv) COMPLIANCE WITH LAWS. HNEF is in material compliance with
all provisions of law, statutes, ordinances, rules,
regulations, judgments, writs, injunctions, decrees and
standards promulgated by the government of the United States
of America or by any state or municipality thereof or by any
court, agency, instrumentality, regulatory authority or
commission of any of the foregoing, including, but not
limited to, compliance with all labor laws, all
environmental laws, all laws relating to the promotion of
occupational safety, all laws relating to healthcare and all
laws relating to the promotion of occupational safety, all
laws relating to healthcare and all laws relating to
discrimination in employment or employment practices.
(v) NO BROKER. No broker, finder, agent or similar intermediary
has acted for or on behalf of HNEF in connection with this
Agreement or the transactions contemplated hereby, and no
broker, finder, agent or similar intermediary is entitled to
any broker's, finder's or similar fee or other commission in
connection therewith based on any agreement, arrangement or
understanding with HNEF or any action taken by HNEF.
(b) REPRESENTATIONS AND WARRANTIES OF FI. FI hereby represents and
warrants to HNEF as follows:
(i) DUE INCORPORATION AND QUALIFICATION. FI is a corporation
duly incorporated, validly existing and in good standing
under the laws of its state of incorporation; is qualified
to do business in all jurisdictions where the failure to so
qualify would have a material adverse effect upon FI or its
business or assets; and has the corporate power and
authority to own, lease and operate all of its properties
and assets and to carry on its business as now conducted.
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(ii) AUTHORITY TO EXECUTE AND PERFORM AGREEMENTS. (A) FI has full
corporate power and authority required to enter into,
execute and deliver this Agreement and any other agreement
contemplated hereby and to perform fully FI's obligations
hereunder and thereunder. (B) The execution and delivery by
FI of this Agreement and any other agreement contemplated
hereby and the transactions contemplated hereby and thereby
have been duly authorized by all requisite corporate and, if
necessary, stockholder action. (C) No other corporate
proceedings on the part of FI are necessary to authorize
this Agreement and any other agreement contemplated hereby
or to consummate the transactions contemplated hereby and
thereby. (D) This Agreement has been duly executed and
delivered by FI and constitutes the valid and binding
obligation of FI, enforceable against FI in accordance with
its terms. (E) The execution and delivery of this Agreement
and any agreement contemplated hereby, the consummation of
the transactions contemplated hereby and thereby, and the
performance by FI of this Agreement in accordance with its
terms and conditions will not 1) conflict with or result in
the breach or violation of any of the terms or conditions of
the Articles of Incorporation or Bylaws of FI; 2) violate
any statute, regulation, order, judgment or decree of any
court or governmental or regulatory body applicable to FI or
any of its properties or assets; or 3) require notice to or
the consent of any party to or result in a violation or
breach of, constitute (with or without due notice or lapse
of time or both) a default under, or give any party the
right to terminate or accelerate the performance of the
obligations of FI with respect to the terms, provisions or
conditions of any indenture, agreement or other instrument
to which FI is a party or by which FI or any of its
properties or assets are bound.
(iii) CONSENTS AND APPROVALS. No filing with, and no permit,
authorization, consent or approval of, any public body or
public authority is necessary for the consummation by FI of
the transactions contemplated by this Agreement and any
other agreements
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contemplated hereby, except for the failure to obtain
filings, permits, authorizations, consents or approvals,
which would not adversely affect the business or assets of
FI or the ability of FI to perform any of its obligations
under this Agreement or any other agreement contemplated
hereby and which would not prevent or delay in any respect
the consummation of the transactions contemplated hereby or
thereby.
(iv) COMPLIANCE WITH LAWS. FI is in material compliance with all
provisions of law, statutes, ordinances, rules, regulations,
judgments, writs, injunctions, decrees and standards
promulgated by the government of the United States of
America or by any state or municipality thereof or by any
court, agency, instrumentality, regulatory authority or
commission of any of the foregoing, including, but not
limited to, compliance with all labor laws, all
environmental laws, all laws relating to the promotion of
occupational safety, all laws relating to healthcare and all
laws relating to the promotion of occupational safety, all
laws relating to healthcare and all laws relating to
discrimination in employment or employment practices.
(v) NO BROKER. No broker, finder, agent or similar intermediary
has acted for or on behalf of FI in connection with this
Agreement or the transactions contemplated hereby, and no
broker, finder, agent or similar intermediary is entitled to
any broker's, finder's or similar fee or other commission in
connection therewith based on any agreement, arrangement or
understanding with FI or any action taken by FI.
ARTICLE 15
BREACHES AND REMEDIES
(a) BREACH BY FI. FI shall be in breach of this Agreement upon the
occurrence of any of the following:
(i) If FI shall fail to comply with or violate any agreement or
covenant contained in this Agreement (specifically
including, but not limited to, the violation of any transfer
restriction contained in Section 12 hereof),
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which failure to comply shall continue for a period of
thirty (30) days after notice from HNEF specifying such
failure.
(ii) The breach by FI or Fitch (or any permitted assignee of
Fitch under the Development Option Agreement) of any other
joint venture or similar agreement relating, directly or
indirectly, to the operation of a restaurant under the Hops
System, which failure to comply shall continue for a period
of thirty (30) days after notice from HNEF or Hops.
(iii) The breach by FI of the Development Option Agreement or any
Operating Agreement for any restaurant, which failure to
comply shall continue for a period of thirty (30) days after
notice from HNEF or Hops.
(iv) If any material representation or warranty of FI contained
herein shall be untrue.
(v) Either FI or Fitch shall make an assignment for the benefit
of creditors, or shall admit in writing its (or his)
inability to pay its (or his) debts as they become due, or
shall file a voluntary petition in bankruptcy, or shall be
adjudicated as bankrupt or insolvent, or shall file any
petition or answer seeking for itself (or himself) any
reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any present
or future statute, law or regulation pertinent to such
circumstances, or shall file any answer admitting or not
contesting the material allegations of a petition filed
against either FI or Fitch in any such proceedings, or shall
seek or consent to or acquiesce in the appointment of any
trustee, receiver, or liquidator of either FI or Fitch or of
all or any substantial part of either of their properties;
or FI or its directors or majority shareholders shall take
any action initiating the dissolution or liquidation of FI
or FI shall be involuntarily dissolved by authorities in the
jurisdiction of its incorporation and shall not be
reinstated within thirty (30) days of notice from HNEF
hereunder.
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(vi) Twenty (20) days shall have expired after the commencement
of an action against FI or Fitch seeking reorganization,
arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any present or future
statute, law or regulation without such action being
dismissed or all orders or proceedings thereunder affecting
the operations or the business of FI or Fitch being stayed;
or a stay of any such order or proceedings shall thereafter
be set aside and the action setting it aside shall not be
timely appealed.
(vii) Twenty (20) days shall have expired after the appointment,
without the consent or acquiescence of FI or Fitch, of any
trustee, receiver or liquidator of all or any substantial
part of the properties of FI or Fitch without such
appointment being vacated.
(b) BREACH BY HNEF. HNEF shall be in breach of this Agreement upon the
occurrence of any of the following
(i) If HNEF shall fail to comply with or violate any agreement
or covenant contained in this Agreement, which failure to
comply shall continue for a period of thirty (30) days after
notice from FI specifying such failure.
(ii) The breach by HNEF of the Development Option Agreement or
any Operating Agreement for any restaurant.
(iii) If any material representation or warranty of HNEF contained
herein shall be untrue.
(iv) If HNEF shall make an assignment for the benefit of
creditors, or shall admit in writing its inability to pay
its debts as they become due, or shall file a voluntary
petition in bankruptcy, or shall be adjudicated as bankrupt
or insolvent, or shall file any petition or answer seeking
for itself any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief
under any present or future statute, law or regulation
pertinent to such circumstances, or shall file any answer
admitting or not contesting the material allegations of a
petition filed against HNEF in any such proceedings, or
shall seek or consent to or acquiesce in the appointment of
any trustee, receiver, or liquidator of HNEF or of all or
any substantial part of either of its
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properties; or HNEF or its directors or majority
shareholders shall take any action initiating the
dissolution or liquidation of HNEF or HNEF shall be
involuntarily dissolved by authorities in the jurisdiction
of its incorporation and shall not be reinstated within
thirty (30) days of notice from FI hereunder.
(v) Twenty (20) days shall have expired after the commencement
of an action against HNEF seeking reorganization,
arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any present or future
statute, law or regulation without such action being
dismissed or all orders or proceedings thereunder affecting
the operations or the business of HNEF being stayed; or a
stay of any such order or proceedings shall thereafter be
set aside and the action setting it aside shall not be
timely appealed.
(vi) Twenty (20) days shall have expired after the appointment,
without the consent or acquiescence of HNEF, of any trustee,
receiver or liquidator of all or any substantial part of the
properties of HNEF without such appointment being vacated.
(c) CERTAIN REMEDIES.
(i) REMEDIES AVAILABLE TO HNEF. Upon any breach of this
Agreement by FI, HNEF may:
(A) exercise its right to purchase the Joint Venture
interest of FI as provided in Section 12(c) hereof; and
(B) seek any and all other remedies available under
applicable law or equity, including, but not limited to,
money damages.
(ii) REMEDIES AVAILABLE TO FI. Upon any breach of this Agreement
by HNEF, FI may seek any and all other remedies available
under applicable law or equity, including, but not limited
to, money damages.
(iii) CUMULATION OF REMEDIES. None of the rights, remedies,
privileges, or powers of the parties expressly provided for
herein shall be exclusive, but each of them shall be
cumulative with and in addition to every other right,
remedy, privilege, and power now or hereafter existing in
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favor of such parties, whether at law or in equity, by
statute or otherwise.
ARTICLE 16
NOTICE
All notices or requests provided for or permitted to be given pursuant
to this Agreement must be in writing and shall only be effective if given or
served (i) by United States mail, addressed to the person or entity to be
notified, postpaid, and certified with return receipt requested or (ii) by hand
delivering such notice to the person or entity at the address of such party
against written receipt thereof. All notices given or served pursuant hereto
shall be deemed given and effective upon receipt by the person to be notified or
delivery at the address of such party. All notices to any of the Venturers shall
be addressed to them at their respective addresses set forth below their names
on the signature page hereof. By giving to the other Venturers at least ten (10)
days written notice thereof in the manner hereinabove provided, each Venturer
and its respective successors and assigns shall have the right to change its
addresses for purposes of notice.
ARTICLE 17
DISPUTE RESOLUTION
(a) In the event there should arise any misunderstanding or
disagreement between the Venturers as to the compliance with the terms and
conditions of this Agreement, or as to whether any Venturer has grounds
hereunder entitling it to terminate this Agreement, or any other dispute related
to this Agreement including arbitrability of the dispute, it is mutually agreed
that such differences, if they cannot be satisfactorily resolved between the
Venturers within thirty (30) days after the Venturer seeking arbitration
delivers notice of same to the other Venturers, shall be submitted to a single
arbitrator, if the Venturers agree upon one; otherwise, to a board of three
arbitrators, of whom one shall be selected by HNEF and one of whom shall be
selected by FI within twenty (20) days after such 30-day period, and a third
arbitrator shall be selected by these two selected arbitrators. If one of the
Venturers fails to timely select an arbitrator, the arbitrator that was timely
selected shall be the sole arbitrator. If neither HNEF nor FI timely selects an
arbitrator, the first arbitrator selected thereafter shall be the sole
arbitrator, no others being appointed. Where each of HNEF and
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FI timely selects an arbitrator, said arbitrators will have ten (10) days from
the end of the twenty (20) day period to select the third arbitrator. In the
event the arbitrators are unable to timely agree on the third arbitrator, either
HNEF or FI may petition any official of the American Arbitration Association for
appointment of the third arbitrator, and the parties agree to accept any
arbitrator appointed by such official subject to the limitations hereof.
Arbitrators must be reasonably independent of the parties and their principals.
Persons who are hereby expressly disqualified to serve as arbitrators are
principals of the parties, relatives of said principals, employees of the
parties or said principals, persons not residing within 100 miles of Tampa,
Florida, attorneys, accountants and other business persons having professional
or business relationships with the parties or said principals.
(b) Arbitration shall proceed in accordance with the rules of the
American Arbitration Association. The arbitration shall be conducted in Tampa,
Florida. The arbitrators shall have all the powers permitted arbitrators under
the laws of the State of Florida. The decision and award of such single
arbitrator, if only one is used, or any two of such board if three are used, as
the case may be, shall be final and binding upon the Venturers, their heirs,
legal representatives, successors and assigns respectively, and shall have the
same force and effect as though such decision had been handed down by a court of
final jurisdiction. The cost of arbitrator(s) shall be shared equally by the
Venturers involved in such dispute. Each Venturer shall be responsible for and
shall pay for the expenses of presenting its respective case, including
depositions, attorney's fees and costs and witness fees which expenses shall not
be subject to award by the arbitrator(s), nor shall such expenses be subject to
award by any court or other judicial authority. The parties shall deposit, at
the beginning of the arbitration process, with the arbitrators an amount equal
to the estimated costs (including arbitrators' time charges) of the total
arbitration. Arbitrators' time charges shall be at the same rate for all
arbitrators. Each of the Venturers hereto covenants to abide by any arbitration
decision.
(c) In the event that it becomes necessary for any party to this
Agreement to enforce a decision of arbitration through legal proceedings, the
Venturers hereby agree that the Circuit Court for the Thirteenth Judicial
Circuit in and for Hillsborough County, Florida, Tampa Division, and the United
States District Court for the Middle District of Florida, Tampa Division, shall
have exclusive jurisdiction to hear and determine any such matters. Each
Venturer hereby expressly submits and consents in advance to such jurisdiction
and
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venue in any action or proceeding whether commenced by or brought against them
in either of such Courts. In any such court proceeding the prevailing party
shall be entitled to reimbursement of all costs and expenses, including
attorney's fees which may be reasonably incurred or paid in connection
therewith, including without limitation, attorney's fees and costs at the trial
court and appellate court levels.
ARTICLE 18
MISCELLANEOUS
(a) This Agreement shall be governed, interpreted and construed under
the laws of the State of Florida.
(b) This Agreement shall be binding upon and shall inure to the benefit
of the parties hereto, and their respective heirs, executors, legal
representatives, successors and assigns; however, this Section 18(b) does not
constitute a consent to any assignment, transfer or other disposition of a Joint
Venture interest or to the substitution of any assignee or transferee as a
substituted Venturer herein other than pursuant to and in accordance with the
other provisions of this Agreement.
(c) This Agreement may be amended only by written instrument signed by
all Venturers.
(d) This Agreement may be executed in counterparts, each of which
shall be deemed an original.
(e) This Agreement contains the entire agreement of the parties hereto.
All prior written or oral agreements between the parties as to the formation of
the Joint Venture and the rules governing its operation are revoked and
superseded by this Agreement.
(f) The captions used in this Agreement are for convenience only and
shall not be construed in interpreting this Agreement. Wherever from the context
it appears appropriate, each term stated in either the singular or the plural
shall include the singular and the plural, and pronouns stated in the masculine,
the feminine or the neuter gender shall include the masculine, feminine and
neuter. The term "person" means any natural person, corporation, partnership,
trust or other entity.
(g) All references to Articles within this Agreement shall be deemed to
be a cumulative reference to all sections within that Article and all references
to sections within
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this Agreement shall be deemed to be cumulative references to all subsections
within that section.
(h) In the event of a transfer (which is not void under Section 12(b)
hereof) of all or part of the interest of a Venturer in the Joint Venture by
sale or exchange or dissolution of a Venturer, the Joint Venture at the request
of the transferring Venturer or other successor in interest, shall cause the
Venturer to elect, pursuant to Section 754 of the Code, or corresponding
provision of subsequent law, to adjust the basis of the Joint Venture property
as provided by Sections 734 or 743 of the Code. All other elections required or
permitted to be made by the Joint Venture under the Code shall be made by a
majority vote of the Board of Managers as they deem appropriate. Each of the
Venturers will upon request supply the information necessary to properly give
effect to any such election.
(i) All remedies shall be cumulative and not alternative.
(j) (i) The parties hereto hereby acknowledge that this Second
Amendment and Restatement results from the reorganization
effective September 1, 1995 of the three current joint
ventures which own and operate "Hops Grill & Bar
Restaurants" in northeast Florida, known as "The Hops
Northeast Florida Joint Venture No.I, The Hops Northeast
Florida Joint Venture No. II, and The Hops Northeast Florida
Joint Venture No. III," (collectively referred to as the
Northeast Florida Joint Ventures"). Pursuant to this
reorganization, the parties to this Second Amended and
Restated Joint Venture Agreement, together with others, have
entered into the agreements set forth on EXHIBIT A hereto
(hereinafter referred to as the "Reorganization Documents").
The parties to this Second Amended and Restated Joint
Venture Agreement do, for all purposes, hereby acknowledge
and consent to the actions taken pursuant to the terms of
the Reorganization Documents.
(i) The parties hereto further acknowledge that prior to the
execution of the Reorganization Documents, Joe Barrett, the
principal limited partner of BARLTD and the Area Manager of
the restaurants owned by the Northeast Florida Joint
Ventures was a valuable employee of one or more affiliates
of Hops Grill & Bar, Inc. and that Hops Grill & Bar, Inc.
has consented to the employment of Mr. Barrett as the Area
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Manager of the Northeast Florida Joint Ventures with the
understanding that Mr. Barrett may be called upon from time
to time during the term of this Agreement to provide
services to Hops Grill & Bar, Inc. or one or more of its
affiliates, which services are beyond the scope of this
Agreement. The parties hereto acknowledge that Mr. Barrett
may be called upon by Hops Grill & Bar, Inc. or one or more
of its affiliates to provide services to one or more
entities that are independent of the Northeast Florida Joint
Ventures, in the event that such services are requested of
and consented to by Mr. Barrett, the parties hereto hereby
consent to the provision of such services by Mr. Barrett. In
addition, in the event that Mr. Barrett shall provide any
such services to Hops Grill & Bar, Inc. or its affiliates,
the other parties to this Agreement shall have no rights in,
or with respect to, any other business or venture for whom
Mr. Barrett provides such services as the result of the
provision of such services by Mr. Barrett.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and in the year first above written.
WITNESSES: HOPS OF NORTHEAST FLORIDA, INC.
/s/ TERENCE TERENZI By: /s/ DAVID L. MASON
--------------- -----------------------------
Terence Terenzi David L. Mason, President
- ---------------------
As to HNEF Address: 3030 North Rocky Point Drive West
Suite 650
Tampa, Florida 33607
"HNEF"
FITCH, INC.
/s/ TERENCE TERENZI By: /s/ J. CAMP FITCH
--------------- ------------------------------
Terence Terenzi Jack Camp Fitch, President
- ---------------------
As to FI Address: 8028 Acorn Ridge Road
Jacksonville, Florida 32256
"FI"
HNEF AREA MANAGER II, LTD.
By: Hops of Northeast Florida, Inc.,
its General Partner
/s/ TERENCE TERENZI By: /s/ DAVID L. MASON
--------------- -----------------------------
Terence Terenzi David L. Mason, President
- ---------------------
As to BARLTD Address: 3030 North Rocky Point Drive
Suite 650
Tampa, Florida
33607
"BARLTD"
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STATE OF FLORIDA
COUNTY OF HILLSBOROUGH
Before me personally appeared David L. Mason, President of HOPS OF
NORTHEAST FLORIDA, INC., a corporation existing under the laws of Florida, to me
known to be the person described in and who executed the foregoing and
acknowledged the execution thereof to be his one act and deed as such officer as
the act and deed of said corporation for the uses and purposes therein
mentioned.
Witness my signature and official seal this 11TH day of JANUARY , 1996.
/s/ ROBERT E. GASPERETTI
------------------------
Robert E. Gasperetti
Notary Public
ROBERT E. GASPERETTI
------------------------
Printed Name:
My Commission Expires: May 10, 1998
Commission No.: CC 371597
STATE OF FLORIDA
COUNTY OF HILLSBOROUGH
Before me personally appeared Jack Camp Fitch, President of FITCH,
INC., a corporation existing under the laws of Florida, to me known to be the
person described in and who executed the foregoing and acknowledged the
execution thereof to be his one act and deed as such officer as the act and deed
of said corporation for the uses and purposes therein mentioned.
Witness my signature and official seal this 11TH day of JANUARY , 1996.
/s/ ROBERT E. GASPERETTI
------------------------
Robert E. Gasperetti
Notary Public
ROBERT E. GASPERETTI
------------------------
Printed Name:
My Commission Expires: May 10, 1998
Commission No.: CC 371597
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STATE OF FLORIDA
COUNTY OF HILLSBOROUGH
Before me personally appeared David L. Mason, President of HOPS OF
NORTHEAST FLORIDA, INC. which is the General Partner of HNEF AREA MANAGER II,
LTD., a limited partnership organized and existing under the laws of Florida, to
me known to be the person described in and who executed the foregoing and
acknowledged the execution thereof to be his one act and deed as such officer as
the act and deed of said corporation for the uses and purposes therein
mentioned.
Witness my signature and official seal this 11TH day of JANUARY , 1996.
/s/ ROBERT E. GASPERETTI
------------------------
Robert E. Gasperetti
Notary Public
ROBERT E. GASPERETTI
------------------------
Printed Name:
My Commission Expires: May 10, 1998
Commission No.: CC 371597
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EXHIBIT 21.1
LIST OF SUBSIDIARIES
Each of the following entities is organized under the laws of the state
of Florida and will become a subsidiary of the Company pursuant to the Share
Exchange Agreement referred to in Exhibit 2.1 to this Registration Statement.
Hops Grill & Brewery, Inc. (1)
Hops of Carrollwood, Inc. (1)
Hops of Palm Harbor, Inc. (1)
Hops of North Tampa, Inc. (1)
Hops of Port Richey, Inc. (1)
Hops of St. Petersburg, Inc. (1)
Hops of South Tampa, Inc. (1)
Hops of Northeast Florida, Inc.
Hops of the Rockies, Inc.
Hops of Southeast Florida, Inc.
Hops of South Florida, Inc.
Hops of Greater Orlando, Inc.
Hops of the Carolinas, Inc.
Hops of the Ohio Valley, Inc.
Hops of Southwest Florida, Inc.
Hops Partners, Inc.
Hops Partners II, Inc.
Hops Partners III, Inc.
Hops of Greater West Palm Beach, Inc.
Toomy LCN, Inc.
Hops Marketing, Inc.
Hops Properties, Inc.
Hops Restaurants, Inc.
Cypress Coast Construction Corp.
- ------------------------------------
(1) Does business under the name "Hops Grill & Bar."
EXHIBIT 23.1
The Shareholders of Hops Grill and Bar, Inc,:
We consent to the use of our reports included herein and to the reference to our
firm under the heading "Experts" in the prospectus.
/s/ KPMG Peat Marwick LLP
Tampa, Florida
October 15, 1996
