Joint Venture Agreement - RY-8 Inc. and OS Pacific Inc.
JOINT VENTURE AGREEMENT
Article I. Introduction
This Agreement is entered into as of ________________, 1999, among
RY-8, Inc., a Hawaii corporation (being a wholly owned subsidiary of Roy's
Holdings, Inc., a Hawaii corporation) ("Roy's") and OS Pacific, Inc., a Florida
corporation (being a wholly owned subsidiary of Outback Steakhouse, Inc., a
Delaware corporation) ("Outback") for the purpose of carrying on a joint
venture. The name of the joint venture shall be "Roy's/Outback Joint Venture."
Article II. Purpose of Joint Venture
The purpose of the joint venture shall be to develop, own and operate
throughout the world (excluding Hawaii, Japan, Guam and certain markets in the
United States where there are existing franchisees as of the date hereof to the
extent such franchisees have been granted exclusive territories) a chain of
casual, fine dining restaurants featuring Pacific Rim cuisine, the culinary
style and concept having been originally developed by Chef Roy Yamaguchi and
Hawaiian Pacific Restaurant Group, Inc. (a wholly owned subsidiary of Roy's
Holdings, Inc.), and which are commonly referred to as "Roy's," followed by a
geographic tag, e.g., Roy's at Pebble Beach, Roy's Scottsdale and Roy's Bonita
Springs (the "Restaurants" or "Restaurant").
Article III. Duties of Parties
3.1. General Duties
Each Joint Venturer will devote such time and efforts as may be
reasonably necessary to develop, own and operate as many Restaurants as are
viable and feasible in the shortest period of time, provided, however, that (i)
the quality of each new Restaurant and all existing Restaurants shall not be
impaired, and (ii) mutually agreed upon rates of return are achieved.
3.2. Exclusive and Primary Obligations
3.2.1 Exclusive Obligations
Each Joint Venturer agrees that neither one shall engage in any
activities that would conflict with the operations and business purpose of the
Joint Venture. Notwithstanding the foregoing, the preceding sentence shall not
be construed in any way to limit Outback's ability to expand its existing chain
of Outback Steakhouse restaurants, nor to limit Outback's ability to acquire,
invest in or otherwise be involved with other casual, fine dining concepts (or
any other restaurant concepts) as long as such concepts are not considered to
feature Pacific Rim or Euro-Asian cuisine and Outback's involvement with such
other concepts does not materially impair the growth and viability of the Joint
Venture. Similarly, said first sentence shall not be construed in any way to
limit Roy's ability to own and operate its existing Roy's restaurants in Hawaii
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and Denver (including reopening any existing restaurant that should close), nor
to limit its activities as franchisor in relation to the existing Roy's
franchises as of the date hereof and any renewals and extensions thereof. As to
any new franchisees and locations worldwide (except as aforesaid), only the
Joint Venture may grant the same. The rights and obligations of the Joint
Venturers under this Section 3.2.1 shall extend to their affiliated companies
("Affiliates"). "Affiliates" mean a parent company, brother-sister company,
subsidiary or other company in which the Joint Venturer's parent company or the
Joint Venturer owns or controls over 50% of the voting interests of said
company.
The parties acknowledge and agree that Roy Yamaguchi ("RY"), in his
individual capacity, is free to pursue other business opportunities other than
restaurant concepts, such as writing books, personal appearances (TV and other
media) and any product endorsements which do not impair the image of the
Restaurants. Any restaurant concept that RY wishes to be involved with must
first be presented to the Joint Venture and only if the Joint Venture declines
to become involved, then RY may pursue such opportunity, provided his
involvement does not materially impair the growth and viability of the Joint
Venture, as determined by the Joint Venture in its reasonable discretion.
Notwithstanding the foregoing, RY agrees to exert his time, efforts and skill in
such reasonable amounts as may be necessary to maximize the success and growth
of the Joint Venture and the Restaurants.
3.2.2 Roy's Primary Duties and Obligations
Roy's shall be primarily responsible for consulting with the President
regarding the training, development and supervision of all Joint Venture
executive level and Restaurant managerial level employees relating to the
quality and integrity of the Roy's concept to be sure it is being properly
executed, maintained and enhanced, including but not limited to, developing the
schematic and conceptual drawings for each Restaurant for approval by the Joint
Venture, recommending to the Joint Venture for approval the appropriate
"corporate" operations executives who will possess the necessary knowledge and
skill to train the Restaurant managerial employees concerning the proper
execution of the Roy's concept, hiring and firing of the executive chef, sous
chef and pastry chef, training and supervision of said chefs, control over menu
and recipe development, control over kitchen design, control over wine lists and
training and supervision of the general manager and assistant managers.
Notwithstanding the foregoing, the parties acknowledge and agree that the
day-to-day implementation of the foregoing duties and obligations will be
delegated to the President of the Joint Venture, as provided for in Section 8.1,
below, except that said President and the Joint Venturers will recognize and
give due consideration to the unique and specialized knowledge and skill of each
Joint Venturer in its respective area of primary duties and obligations.
3.2.3 Outback's Primary Duties and Obligations
Outback shall be primarily responsible for consulting with the
President regarding the training, development and supervision of all Joint
Venture executive level and Restaurant managerial employees relating to the
administrative, financial and other aspects of the Restaurants that do not
materially impair the quality and integrity of the food and customer service at
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the Restaurants or the Roy's concept, including but not limited to, conducting
preliminary site selection and negotiations with landlords, preparing
development and operating budgets for approval by the Joint Venture, selection
of and negotiations with the contractor(s) for the construction of each
Restaurant, hiring and firing of the bookkeeper for each Restaurant,
establishment of accounting and cash control policies and procedures, selection
of and negotiation with all liability, property, health and workers'
compensation insurers, preparation of all operating and financial statements for
each Restaurant and the Joint Venture, preliminary selection of the general
manager and assistant managers for each Restaurant for approval by the Joint
Venture, and recommending to the Joint Venture for approval the appropriate
general and administrative staff (executive, managerial and non-managerial) to
support the Restaurants and the Joint Venture. Notwithstanding the foregoing,
the parties acknowledge and agree that the day-to-day implementation of the
foregoing duties and obligations will be delegated to the President of the Joint
Venture, as provided for in Section 8.1, below, except that said President and
the Joint Venturers will recognize and give due consideration to the unique and
specialized knowledge and skill of each Joint Venturer in its respective area of
primary duties and obligations.
Article IV. Contributions/Liabilities
4.1. Nature and Amount of Contributions
The amount and nature of the contributions of each Joint Venturer are
as follows:
Outback $1,000,000 cash
Roy's $1,000,000 cash
In addition to the foregoing, Roy's shall grant or cause to be granted
to the Joint Venture a royalty-free master license for the exclusive use in the
world of the service mark "Roy's" and the Roy's system and shall contribute the
services specified in Article III, above. Such license, however, shall expressly
reserve unto Roy's the right to continue use and licensing of the service mark
in connection with its existing Hawaii and franchise operations. Attached hereto
as Exhibit "A" is a list of said existing Hawaii and franchise operations.
In addition to the foregoing, Outback agrees to cause its parent
company, Outback Steakhouse, Inc. to provide the Joint Venture with financial
guarantees for up to 50% of any debt of the Joint Venture where such guarantees
will be beneficial to the Joint Venture, including but not limited to,
Restaurant premises leases, any promissory notes or other indebtedness of the
Joint Venture, and any lease for furniture, fixture and equipment. Outback shall
also contribute the services described in Article III, above.
4.2. Time for Making Contributions
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(a) The contributions of money by each party must be made on or before
June 30, 1999.
(b) The contributions of services and skill must be made commencing
immediately following the full execution of this Agreement.
4.3. Effect of Failure To Make Contributions
If any Joint Venturer fails to make that Joint Venturer's contribution
within the time specified in this Agreement, the nondefaulting Joint Venturer
shall have the right to enforce any and all remedies available at law or in
equity, including but not limited to, rescinding this Agreement, seeking
injunctive relief and/or recovering damages.
4.4. Subsequent Capital Contributions
In no event shall any Joint Venturer be obligated to make any
additional capital contributions, except as otherwise expressly provided herein.
4.5. Interest on Capital Contributions
No Joint Venturer shall receive, or be entitled to receive, interest on
its contributions to the capital of the Joint Venture
4.6 Liabilities
4.6.1. Liability for Certain Obligations
The parties acknowledge that the Joint Venture will incur certain
material long term obligations, including, without limitation, liability as
lessee under leases for Restaurant premises and liability on loans. Roy's and
Outback covenant and agree that as to any debt, liability, or obligation of the
Joint Venture, including, without limitation, the liabilities described in the
preceding sentence, Roy's and Outback shall each be proportionately liable to
the third party creditor for only up to fifty percent (50%) of amounts
outstanding under such obligations and shall not be jointly and severally liable
therefor.
4.6.2. Documentation
Roy's and Outback covenant and agree that all documentation evidencing
the Joint Venture's material, long term obligations, including, without
limitation, a Restaurant premises lease, any promissory notes, and any lease for
furniture, fixture and equipment, shall limit the liability of each of Roy's and
Outback to proportionately fifty percent (50%) of any amounts outstanding under
such obligations and shall specifically state that Roy's and Outback shall not
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be individually liable for the entire amount thereof, nor jointly and severally
liable therefor.
4.6.3 Indemnification
Roy's and Outback each hereby indemnify and hold each other harmless
from and against any liability, claim, damage, action or obligation for any
material long term obligation of the Joint Venture, including, but not limited
to, the liabilities described herein, in excess of fifty percent (50%) of
amounts outstanding under such obligations.
Article V. Ownership of Venture Property
5.1. Title to Property
All property of the Joint Venture shall be held in the name of the
Joint Venture.
5.2. Interest in Property
Except as provided below, the beneficial interest of each party in
Joint Venture property, unless changed pursuant to the terms of this Agreement,
shall be as follows: Fifty percent (50%) Roy's and Fifty percent (50%) Outback.
5.3 Interest in Recipes
All recipes developed by the Joint Venture shall be owned by the Joint
Venture. All recipes developed by Roy's shall be owned by Roy's. Any recipes
developed through the collaborative efforts of Roy's and the Joint Venture,
shall be owned jointly by Roy's and the Joint Venture. During the continued
existence of the Joint Venture, Roy's and the Joint Venture agree to license to
the other use of each other's recipes.
Article VI. Term
The term of the Joint Venture will commence on the date first indicated
above and shall terminate as provided in Article X, below.
Article VII. Distributions; Allocation of Profits and Losses
7.1. Division or Share of Profits
Any profits of the Joint Venture shall be allocated among the Joint
Venturers in the following percentages unless that percentage is changed
pursuant to the terms of this Agreement:
Roy's 50%
Outback 50%
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7.2. Calculation of Profits
For the purposes of this Agreement, the profits of the Joint Venture
shall be calculated as follows:
(a) The expenses of conducting the Joint Venture shall be deducted from the
income of the Joint Venture. The expenses of conducting the Joint Venture shall
include all expenses customarily incurred by businesses similar to the Joint
Venture.
(b) In regards to the San Francisco, San Diego and Dallas Restaurants, after the
payment of expenses as described above and retention of adequate operating and
capital reserves, Roy's and Outback shall each be entitled to receive equal
distributions of any remaining available cash. As to all other Restaurants, the
parties agree that except for distributions necessary to enable each party to
pay their respective income tax obligations, all available cash from operations
shall be reinvested into new Restaurants.
7.3. Apportionment or Share of Loss
Should a loss be sustained by the Joint Venture, the parties shall bear
the loss in the same percentages as profits.
7.4. Computation of Loss
In computing any loss as between the parties, deductions shall be made
from any assets remaining in the same manner as computing profits in 7.2, that
is, deductions shall first be made to pay expenses, and any remaining sums shall
be allocated on a pro rata percentage basis to contributions, as set forth in
7.2 for computing profits. Should there be insufficient assets to pay expenses
due and owing as a result of the conduct of the joint enterprise, each party
shall contribute to the payment of those expenses in the percentage of losses
attributed to that party in this Article.
Article VIII. Management Structure
8.1. Management of Joint Venture
The business and affairs of the Joint Venture shall be managed by a
committee (the "Executive Committee") consisting of five (5) members appointed
by the Joint Venturers. Outback shall name two (2) members of the committee,
Roy's shall name two (2) members of the committee, and the fifth member (the
"Wise Man") shall be named jointly by Outback and Roy's. The Wise Man must be
(i) independent and not employed by or have any ownership interest in or
licensing or franchise relationship with either Joint Venturer (or its
Affiliates), and (ii) possess not less than ten (10) years of full-time
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executive level management experience in one or more casual, fine dining
restaurants having at least ten (10) stores under his or her control or such
other qualifications as Outback and Roy's may agree. Each individual named to
the Executive Committee will serve as a member of the Executive Committee until
his or her death, withdrawal or expulsion from the Executive Committee, or until
his or her removal from the Executive Committee by the Joint Venturer who
appointed him or her or in the case of the Wise Man, by the majority vote or
consent of the Joint Venturers. All decisions as to the day to day operations of
the Joint Venture shall be made by a President hired by the majority agreement
of the Executive Committee, provided, that the President shall not, without the
majority consent of all of the members of the Executive Committee:
(1) Confess a judgment against the Joint Venture;
(2) Admit any person as a Joint Venturer;
(3) Execute or deliver any assignment for the benefit of the creditors of
the Joint Venture;
(4) Enter into any lease of real or personal property;
(5) Enter into any loan transaction or incur any indebtedness of the Joint
Venture in excess of $25,000;
(6) Open any Restaurant;
(7) Purchase any real property;
(8) Fire Gordon Hopkins (Corporate Chef), Christian Maldonado (Operations
Director), Randal Caparoso (Wine and Beverage Director), or hire/fire
their respective successors; and
(9) Such other matter(s) as may be mutually agreed upon by the parties.
8.2. Composition of Committee
The following individuals are appointed as the initial members of the
Executive Committee:
ROY'S APPOINTEES OUTBACK APPOINTEES
---------------- ------------------
Roy Yamaguchi Chris Sullivan
Terrence Lee Michael O'Donnell
The Wise Man shall be appointed by said members within sixty (60) days from the
effective date hereof.
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Vacancies on the Executive Committee shall be filled by the Joint
Venturer who appointed the member who created the vacancy, or in the case of the
Wise Man, by vote or written consent of a majority of the Joint Venturers.
8.3. Actions by Majority Vote
Except as otherwise expressly provided in this Agreement, all actions
taken by the Executive Committee shall be by majority vote of its members.
Article IX. Confidentiality
9.1. Definition
For the purpose of this Agreement, "Proprietary Information" shall
include all information designated by any Joint Venturer, either orally or in
writing, as confidential or proprietary, or which reasonably would be considered
proprietary or confidential to the business contemplated by this Agreement,
including but not limited to suppliers, marketing and technical plans, plans for
products and ideas, recipes, menus, wine lists and proprietary techniques and
other trade secrets. Notwithstanding the foregoing, "Proprietary Information"
shall not include information which (i) has entered the public domain or became
known other than due to a breach of any obligation of confidentiality owed to
the owner of such information; (ii) was known prior to the disclosure of such
information; (iii) became known to the recipient from a source other than a
Joint Venturer or its Affiliate, provided there was no breach of an obligation
of confidentiality owed to said Joint Venturer or its Affiliate; or (iv) was
independently developed by the party receiving such information.
9.2. No Disclosure, Use, or Circumvention
No Joint Venturer or its Affiliates shall disclose any Proprietary
Information to any third parties (other than existing or permitted franchisees)
and will not use any Proprietary Information in that Joint Venturer's or
Affiliates' business or any affiliated business without the prior written
consent of the other Joint Venturer, and then only to the extent specified in
that consent. Consent may be granted or withheld at the sole discretion of any
Joint Venturer. No Joint Venturer shall contact any suppliers, customers,
employees, affiliates or associates to circumvent the purposes of this
provision.
9.3. Maintenance of Confidentiality
Each Joint Venturer shall take all steps necessary or appropriate to
maintain the strict confidentiality of the Proprietary Information and to assure
compliance with this Agreement.
Article X. Termination
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10.1. Date of Termination
This Agreement shall be terminated on the earlier to occur of:
(a) The mutual agreement of all of the parties to this Agreement;
(b) Any act or event which makes the continuation of the business of the
Joint Venture impossible or impracticable;
(c) The bankruptcy or insolvency of any of the parties to this Agreement;
or
(d) Fifteen (15) years after the effective date hereof .
10.2. Effect of Termination
On the termination of this Joint Venture, the Joint Venture shall be
dissolved and wound up in accordance with the provisions of the Florida Uniform
Partnership Act, except as otherwise specifically provided in this Agreement or
any amendment to this Agreement.
Article XI. Put Options/Maximization of Value
11.1 Put Options in Favor of Roy's
Roy's shall have the right to require Outback to purchase up to 25% of
Roy's interests in the Joint Venture at anytime after the 5th anniversary of the
effective date hereof. Additionally, at anytime after the 10th anniversary of
the effective date hereof, Roy's shall have the right to require Outback to
purchase up to another 25% (total 50%) of Roy's interests in the Joint Venture.
The percentage interest in the entire Joint Venture being sold under these put
options is referred to herein as the "Put Percentage". The purchase price to be
paid by Outback shall be equal to the fair market value of the Joint Venture as
of the date Roy's exercises its put option, multiplied by the Put Percentage.
11.2 Exercise of Put Options
11.2.1 Exercise Notice
Upon Roy's exercising its put options, it shall give Outback written
notice thereof. The written notice (the "Exercise Notice") shall state the
proposed fair market value of the Joint Venture, a detailed explanation of the
valuation methodology and supporting information utilized by Roy's in arriving
at said fair market value and the Put Percentage.
11.2.2 Answering Notice
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Within five (5) business days after receipt of such notice by Outback,
it shall advise Roy's in writing (the "Answering Notice") if Outback either :
(a) agrees with such valuation, or (b) disagrees with such valuation, in which
case Outback shall propose its own valuation and a detailed explanation of the
valuation methodology and supporting information utilized by Outback in arriving
at its proposed value.
11.2.3 Responding Notice
Within five (5) business days after Roy's receives the Answering
Notice, Roy's shall respond to Outback in writing (the "Responding Notice")
stating either: (a) Roy's agreement with Outback's valuation, or (b) Roy's
disagreement with such valuation and any revised value.
11.2.3 Resolution of Disputed Value by Wise Man
In the event Roy's and Outback fail to reach agreement on the valuation
of the Joint Venture within ten (10) business days following Outback's receipt
of the Responding Notice, then the value shall be determined by the Wise Man,
who shall be limited to selecting either of the values most recently proposed in
writing by Roy's or Outback in the Exercise Notice, Answering Notice and/or
Responding Notice. The Wise Man shall be empowered to engage such consultant(s)
as he deems reasonable and prudent, at the expense of the Joint Venture, to
assist him in selecting which of the two most recently proposed values best
represents the fair market value of the Joint Venture. The Wise Man shall notify
each party in writing of his decision no later than twenty (20) days after the
matter has been submitted to him. Upon the Wise Man rendering his written
decision, the value established by said decision shall be final and binding upon
Roy's and Outback.
11.2.4 Payment of Purchase Price
The purchase price shall be equal to the fair market value of the Joint
Venture, as established by mutual agreement or by the decision of the Wise Man,
multiplied by the Put Percentage. Within ten (10) business days after the
purchase price is finally established, Outback shall pay Roy's the applicable
purchase price in either cash or unrestricted Outback common stock or any
combination of both. The term "unrestricted Outback common stock" means that
there shall be no limitations or restrictions on Roy's ability to sell all of
said stock on the stock exchange handling the buying and selling of such stock
contemporaneously upon receipt of such stock.
11.3 Outback Right to Void Exercise of Option if Acquisition of Put
Percentage is Dilutive
Notwithstanding the foregoing, in the event the final purchase price
has the effect, upon Outback's acquisition of the Put Percentage at such price,
of diluting the earnings per share for the next 12 months of Outback, Outback
shall have the option of voiding Roy's exercise of its put option, which must be
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exercised by written notice to Roy's of Outback's election to void said exercise
(the "Void Notice") prior to the expiration of the 10-day period to pay the
purchase price. The purchase price will be considered to dilute the earnings per
share of Outback if the accounting effect of the transaction, determined in
accordance with generally accepted accounting principles, would cause a
reduction in pro forma Basic Earnings Per Share and/or Diluted Earnings Per
Share (or an increase in Net Loss Per Share) calculated in accordance with SFAS
No. 128 "Earnings Per Share" for the 12 months following the purchase. Upon
Roy's receipt of the Void Notice, Roy's may elect to accept a lower purchase
price which has the effect of eliminating said dilutive effects of Outback's
acquisition, which election must be exercised by written notice to Outback
within five (5) business days after receipt of the Void Notice (the "Lower Price
Notice"). Outback shall pay Roy's said lower purchase price amount in cash,
stock or any combination thereof as aforesaid, within ten (10) business days
after receipt of the Lower Price Notice.
11.4 Maximization of Value
The Joint Venturers agree that from time to time, they shall evaluate
in good faith all available options to the Joint Venture to maximize the value
of each Joint Venturer's ownership interests in the Joint Venture, such as but
not limited to, an initial public offering, strategic sale or merger into
Outback Steakhouse, Inc.
Article XII. Assignment
No Joint Venturer may assign its rights and obligations hereunder due
to the unique expertise and qualifications of the Joint Venturers. It shall be
permissible, however, to assign or pledge as collateral either Joint Venturer's
interest in profit distributions and/or Roy's put options.
Article XIII. Arbitration
Any dispute arising under this Agreement, or under any instrument made
to carry out the terms of this Agreement, shall be submitted to arbitration in
accordance with the commercial dispute arbitration rules of the American
Arbitration Association. The venue and situs for such arbitration proceedings
shall be San Francisco, California.
Article XIV. Notices
All notices to the Joint Venturers pursuant to this Agreement shall be
in writing and shall be deemed effective when given by personal delivery or by
certified mail, express delivery service, or facsimile transmission.
Article XV. Applicable Law
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To the extent not otherwise provided in the Agreement, the terms of
this Joint Venture and the relationship of the Joint Venturers to each other
shall be governed by the provisions of the Florida Uniform Partnership Act, and
any amendments or successor statute to that Act.
Article XVI. Amendments
This Agreement may be amended only by the written agreement of all of
the Joint Venturers.
Article XVII. Condition Subsequent
As a condition subsequent to each Joint Venturer's obligations under
the Agreement, the Joint Venture must secure a credit facility for not less than
$20 million dollars from a reputable lending institution on terms and conditions
satisfactory to the Joint Venture to be used to finance the business purpose of
the Joint Venture. If the Joint Venture is unable to secure such a credit
facility within 90 days following the effective date hereof, either party may
terminate the Agreement upon prior written notice to the other. Upon such
termination, each party shall be released and discharged from any and all
obligations under this Agreement.
Article XVIII. Tax Related Provisions
18.1 Composition of Capital Accounts
A separate capital account shall be maintained by the Joint Venture for
each Joint Venturer in accordance with Section 704(b) of the Internal Revenue
Code of 1986, as amended (the "Code"), and Treasury Regulations promulgated
thereunder. There shall be credited to each Joint Venturer's capital account (i)
the amounts 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 Section 752 of the Code), and
(iii) allocations to it of Joint Venture income and gain (or items thereof),
including income and gain exempt from tax, as computed for book purposes, in
accordance with Treasury Regulation Section 1.704-1(b)(2)(iv)(g), as set forth
pursuant to Article VII of this Agreement. Each Joint 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 distributed property that such Joint
Venturer is considered to assume or take subject to pursuant to Section 752 of
the Code), (iii) allocations to such Joint Venturer of expenditures of the Joint
Venture described in Section 705(a)(2)(B) of the Code, and (iv) allocations of
Joint Venture loss and deduction (or items thereof), including loss or
deduction, computed for book purposes, as described in Treasury Regulation
Section 1.704-1(b)(2)(iv)(g), as set forth pursuant to Article VII of this
Agreement.
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18.2 Adjustments to Tax Basis
In the event of adjustment to the adjusted tax basis of Joint Venture
property under Code Sections 732, 734 or 743, the capital accounts of the Joint
Venturers shall be adjusted to the extent provided in Treasury Regulation
Section 1.704-1(b)(2)(iv)(m).
18.3 Income Tax Elections
In the event of a distribution of property made in the manner provided
under Section 734 of the Code, or in the event of a transfer of any Joint
Venture Interest permitted by this Agreement made in the manner provided in
Section 743 of the Code, Outback, on behalf of the Joint Venture, may, but shall
not be required to, file an election under Section 754 of the Code in accordance
with the procedures set forth in the applicable regulations promulgated
thereunder.
18.4 Audits of Income Tax Returns
(a) Appointment of Tax Matters Partner. The tax matters partner (the
"TMP"), as referred to in Code Section 6231(a)(7), for the Joint Venture shall
be Outback.
(b) Employment of Advisors. The TMP shall employ experienced tax
advisors to represent the Joint Venture in connection with any audit or
investigation of the Joint Venture by the Internal Revenue Service and in
connection with all subsequent administrative and judicial proceedings arising
out of such audit. The fees and expenses of such tax advisors shall be an
expense of the Joint Venture. It shall be the responsibility of the Joint
Venturers, at their own expense, to employ tax advisors to represent their
respective separate interests.
(c) Notice and Expenses. The TMP shall keep the Joint Venturers
reasonably informed of all administrative and judicial proceedings, as required
by the Code, and shall furnish to each Joint Venturer who so requests in writing
a copy of each notice or other communication received by the TMP from the
Internal Revenue Service (except such notices or communications as are sent
directly to such requesting Joint Venturer by the Internal Revenue Service). All
expenses incurred by the TMP in serving as TMP shall be Joint Venture expenses
and shall be paid by the Joint Venture. Any Joint Venturer has the right to
participate in such administrative proceedings relating to the determination of
Joint Venture items. Each Joint Venturer who elects to participate in such
proceedings will be responsible for any such expenses incurred by such Joint
Venturer in connection with such participation.
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(d) Authority of Tax Matters Partner. The TMP shall have the authority
to take any and all action reasonably required as TMP, including by way of
example, any of the following: (i) enter into a settlement agreement with the
Internal Revenue Service that purports to bind the Joint Venturers other than
the TMP; (ii) file a Tax Court Petition as contemplated in Code Section 6226(a)
or Section 6228; (iii) intervene in any action as contemplated in Code Section
6226(b); (iv) file any requests for administrative adjustment contemplated in
Code Section 6227(b); or (v) enter into an agreement extending the limitations
period as contemplated by Code Section 6229(b)(1)(B).
(e) Indemnification of TMP. The Joint Venture shall indemnify the TMP
against any and all judgments, fines, amounts paid in settlement and expenses
(including reasonable attorneys' fees, whether incurred before or at trial or
during any appellate proceedings, and court costs) incurred by the TMP in any
civil, criminal or investigative proceeding in which the TMP is involved or
threatened to be involved by reason of being the TMP for the Joint Venture;
PROVIDED, HOWEVER, that the TMP shall not be indemnified under this provision
against any liability incurred by the Joint Venture or any Joint Venturer which
arises out of fraud, by willful or intentional misconduct, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of its
position as TMP.
IN WITNESS WHEREOF, the undersigned have executed this Agreement
effective as of the date first above written.
RY-8, INC. [OUTBACK SUBSIDIARY]
By________________________ By__________________________
Name: Name:
Title: Title:
Outback Steakhouse, Inc., a Delaware corporation ("OSSI"), does hereby
acknowledge and irrevocably agree to perform the obligations provided for in
Section 3.2.1 regarding not becoming involved with any Pacific Rim or Euro-Asian
restaurant concept that would materially impair the viability of the Joint
Venture and Section 4.1 regarding guaranteeing up to 50% of the debts of the
Joint Venture. OSSI further irrevocably agrees to guaranty the payment
obligations of [OUTBACK SUBSIDIARY] to pay Roy's the purchase price for the Put
Percentage upon Roy's exercise of its put option(s) and provided such
acquisition by Outback is not dilutive. OSSI hereby waives any and all surety
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defenses relating to its guaranty obligations hereunder. OSSI confirms that
[OUTBACK SUBSIDIARY] is its wholly owned subsidiary and that OSSI shall be
deemed to have actual or constructive knowledge of all matters known by [OUTBACK
SUBSIDIARY] and shall be deemed to have ratified and approved all actions of
[OUTBACK SUBSIDIARY] relating to Roy's exercise of it put option(s) unless OSSI
shall expressly notify Roy's in writing of any objections it may have to any
actions by [OUTBACK SUBSIDIARY] relating to said exercise of the put option(s)
within five (5) business days after such action.
OUTBACK STEAKHOUSE, INC.
By__________________________
Name:
Title:
Roy Yamaguchi does hereby acknowledge and agree to perform his
obligations provided for in Section 3.2.1 regarding his efforts to maximize the
success of the Joint Venture and the Restaurants.
__________________________________
ROY YAMAGUCHI
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EXISTING HAWAII AND FRANCHISE OPERATIONS
HAWAII
Roy's Restaurant- Honolulu (Oahu)
Roy's Kahana Bar & Grill (Maui)
Roy's Nicolina Restaurant (Maui)
Roy's Poipu Bar & Grill (Kauai)
Roy's Waikoloa Bar & Grill (Big Island)
Roy's Kihei Bar & Grill*
FRANCHISES
Roy's Restaurant Guam (Guam)
Roy's at Pebble Beach (CA)
Roy's Aoyama Bar & Grill (Tokyo, Japan)
Roy's Hiroo Bar & Grill (Tokyo, Japan)
Roy's Seattle (WA)
Roy's Scottsdale (AZ)
Roy's Bonita Spring (FL)
Roy's New York (NY)
Roy's Newport Beach (CA)**
Roy's Phoenix (AZ)***
* Anticipated opening date March 2000
** Anticipated opening date in July 1999
*** Anticipated opening date December 1999
EXHIBIT "A"
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