LIMITED LIABILITY LIMITED PARTNERSHIP AGREEMENT OF ROCK BEACH GRILL OF PEMBROKE PINES, LLLP

This LIMITED LIABILITY LIMITED PARTNERSHIP AGREEMENT (“Agreement”) is made and entered into effective as of June 26, 2008, by and among ROCK BEACH HOLDINGS, LLC, a Florida limited liability company, as General Partner (the “General Partner”); and SHELLS SEAFOOD RESTAURANTS, INC., a Delaware corporation (“Shells”), and Philip R. Chapman and Barry Bernstein (each a “Investor Limited Partner” and together “Investor Limited Partners”) as Limited Partners. Shells and the Investor Limited Partner are sometimes hereinafter individually referred to as a “Limited Partner” and collectively referred to as the “Limited Partners.” The General Partner and the Limited Partners are sometimes hereinafter individually referred to as a “Partner” and collectively referred to as the “Partners.” The definitions of certain other terms used in this Agreement are set forth in Section 20.

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 “Rock Beach Grill” restaurant under the Shells System (as described herein) to be located at 11825 Pines Boulevard, Pembroke Pines, Florida; and

WHEREAS, Shells and the Partnership have entered into a Management and License Agreement of even date herewith (the “Management Agreement”) relating to the operation and management of the restaurant owned by the Partnership and the license by Shells of certain proprietary information to the Partnership.

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 (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. The Partnership shall be formed as a limited liability limited partnership under Chapter 620, of the Act.

(b)   Name . The Partnership name shall be, and the business of the Partnership shall be conducted under, the name “Rock Beach Grill of Pembroke Pines, LLLP.” The business of the Partnership may be conducted under any other name permitted by the Act that is selected by the General Partner, in its sole and absolute discretion. The General Partner, on behalf of the Partnership, shall promptly execute, file, and record any assumed or fictitious name certificates required by the laws of the State of Florida or any other state in which the Partnership conducts business.

(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 16313 North Dale Mabry Highway, Tampa, Florida 33618.

(d)   Purpose and Character of the Business of the Partnership . The purpose and character of the business of the Partnership shall be:

(i)   to operate one restaurant under the Shells System (together with any and all other directly or indirectly related business) at 11825 Pines Boulevard, in Pembroke Pines, Florida (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 this Agreement by all the Partners and shall continue for a period ending on the earliest to occur of the following:

(i)   June 30, 2058;

(ii)   the date on which all or 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 pro-visions hereof;

(iv)   the date on which the Partnership is dissolved by judicial decree; or

(v)   the date on which the Management Agreement terminates or expires.

Section 2. Capital of the Partnership .

(a)   General Partner .

(i)   The General Partner and its address are set forth on Exhibit 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 A hereto.

(b)   Limited Partners .

(i)   The Limited Partners and their addresses are set forth on Exhibit 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 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.

(c)   Capital Accounts .

(i)   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.

(e)   Liability of Partners .

(i)   Except as otherwise provided in the Act, no Limited Partner shall have any personal liability whatsoever in its capacity as a Limited Partner, whether to the Partnership, to any of the Partners or to the creditors of the Partnership, for the debts, liabilities, contracts or any other obligations of the Partnership, or for any losses of the Partnership. A Limited Partner shall not be required to repay to the Partnership, any Partner or any creditor of the Partnership all or any fraction of any negative amount of such Limited Partner’s Capital Account.

(ii)   The General Partner shall not have any personal liability to any Limited Partner for the repayment of any amounts outstanding in the Capital Account of a Limited Partner, including, but not limited to, Capital Contributions. Any such payment shall be solely from the assets of the Partnership. The General Partner shall not be liable to any Limited Partner by any reason of any change in the federal income tax laws as they apply to the Partnership and the Limited Partners, whether such change occurs through legislative, judicial or administrative action.

(iii)   The General Partner shall have no personal liability to repay to the Partnership any portion or all of any negative amount of the General Partner’s Capital Account.

Section 3. Additional Capital Contributions and Loans .

(a)   Additional Capital Contributions . The Partners shall not be required to make any additional Capital Contributions to the Partnership. Upon the agreement of all of the Partners, a Partner may make an additional Capital Contribution. The Interests of the Partners shall be adjusted to reflect any additional Capital Contribution at the time it is made in the manner determined by all of the Partners.

(b)   Loans . At any time prior to the dissolution of the Partnership, if the General Partner determines that there is insufficient Net Cash Flow to fund the ownership, operation and business activities of the Partnership, each of the Partners shall be given the opportunity to make a loan to the Partnership, in proportion to their respective Interests (a “Partner Loan”). No Partner shall be obligated to make a Partner Loan. In the event a Partner Loan is made to the Partnership, such Partner Loan shall be evidenced by a promissory note of the Partnership to the Partner(s) making such Partner Loan and such Partner Loan shall bear interest and shall become payable at a rate, on terms and on a date which is mutually agreed between the General Partner and the Partner or Partners making such Partner Loan (whether or not the General Partner is the Partner making such Partner Loan).

(c)   Shells Loan . If at any time prior to the dissolution of the Partnership, an Investor Limited Partner declines to make a Partner Loan and the General Partner determines funds are necessary to discharge the Partnership’s obligations under the Management Agreement or that capital expenditures at the Restaurant are needed for the Business ( e.g. , furniture, fixtures and equipment and capital improvements) from time to time, Shells shall be obligated to make a loan to the Partnership to discharge the Partnership’s obligations under the Management Agreement and to provide it with funds sufficient for the Partnership to make such capital expenditures (a “Shells Loan”); provided, however , that Shells’ cumulative obligation under this Section 3(c) shall not exceed $175,000.00 in the aggregate. Any such Shells Loan shall be evidenced by a promissory note and bear interest at ten percent (10%) per annum.

(d)   Priority of Obligations . For any given period, (i) the Partnership’s obligations owing under the Management Agreement shall be satisfied prior to (1) the repayment of principal or interest owing under any Shells Loan or Partner Loan for such period or (2) the distribution of Net Cash Flow to satisfy the Preferred Return for such period; (ii) principal and interest owing under any Shells Loan shall be repaid in full prior to (1) the repayment of principal or interest under any Partner Loan for such period (with the older of any Shells Loan being repaid first) or (2) the distribution of Net Cash Flow to satisfy the Preferred Return for such period; and (iii) principal and interest owing under any Partner Loan shall be repaid in full prior to any distribution of Net Cash Flow to satisfy the Preferred Return for such period (with the older of any Partner Loan being repaid first).

Section 4. Profits, Losses .

(a)   Sharing of Losses .

(i)   For each Fiscal Year, after giving effect to the special allocations set forth in Sections 4(c)-(d) below, if any, Losses shall be allocated to the Partners in proportion to their Interests.

(ii)   The Losses allocated pursuant to Section 4(a)(i) shall not exceed the maximum amount of Losses that can be so allocated without causing any Partner to have a Negative Capital Account at the end of any Fiscal Year. In the event some but not all of the Partners would have a Negative Capital Account as a consequence of an allocation of Losses pursuant to Section 4(a)(i), the limitation set forth in this Section 4(a)(ii) shall be applied on a Partner by Partner basis so as to allocate the maximum permissible Losses to each Partner under Treasury Regulation Section 1.704-1(b)(2)(ii)(d). All Losses in excess of the limitations set forth in this Section 4(a)(ii) shall be allocated to the General Partner.

(b)   Sharing of Profits . For each Fiscal Year, after giving effect to the special allocations set forth in Sections 4(c)-(d) below, if any, Profits shall be allocated to the Partners as follows:

(i)   First, to the Partners up to the aggregate of, and in proportion to, any unrecovered Losses previously allocated to each Partner in accordance with Section 4(a) in the reverse order in which such Losses were allocated;

(ii)   Second, one hundred percent (100%) to the Investor Limited Partners pro rata until such time as they have been allocated Profits equal to the Preferred Return for such Fiscal Year and any prior Fiscal years; and

(iii)   Third, to each of the Partners in proportion to their Interests.

(c)   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.

(d)   Nonrecourse Deductions . The Partnership shall allocate any nonrecourse deductions consistent with Treasury Regulation Section 1.704-2, and subsequent allocations of income or gain shall take into account the minimum gain chargeback requirement of Treasury Regulation Section 1.704-2(f). Partner nonrecourse deductions shall be specially allocated to the Partner that bears the economic risk of loss with respect to the partner nonrecourse debt to which such partner nonrecourse deductions are attributable in accordance with Treasury Regulation Section 1.704-2(i)(1), and subsequent allocations of income or gain shall take into account the partner minimum gain chargeback requirement of Treasury Regulation Section 1.704-2(i)(4).

(e)   Tax Allocations . Partnership income, gain, loss, deduction and credit, as calculated for tax purposes, shall be allocated among the Partners, to the extent possible, in accordance with the allocations of the corresponding Profit, Losses or items of income, gain, loss or deduction among the Partners pursuant to Sections 4(a)-(d).

Section 5. Distributions .

(a)   Distribution of Net Cash Flow . Distributions of Net Cash Flow may be made from time to time in the discretion of the General Partner, in the following order of priority:

(i)   First, to the Investor Limited Partners pro rata equal to their respective Preferred Returns for the current or most recently completed Fiscal Year;

(ii)   Second, to the Investor Limited Partners pro rata equal to their respective Preferred Returns accrued but unpaid from prior Fiscal Years; and

(iii)   Third, any remaining amounts shall be distributed to the Partners in proportion to their Interests.

(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 6. No Participation in the Management of Partnership Business .

(a)   Except as specifically provided herein, the Limited Partners shall not take part in, or interfere in any manner with, the conduct or control of the Partnership or the Business, and the Limited Partners shall not have any right or authority to act for or bind the Partnership, and the Limited Partners therefore have no personal liability. 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/or of the Partnership and accomplish any duties as such employee, executive or director in his representative corporate or employee capacity and not as a limited partner or as an individual.

(b)   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.

(c)   All matters related to the Partnership and this Agreement, including but not limited to the amendment of this Agreement, shall be under the exclusive discretion of the General Partner.

Section 7. 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 and the Business which are as follows:

(A)   to do all acts and things in the ordinary course of business related to the Business;

(B)   to manage, develop, promote, improve, maintain and service the 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 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 shall be subject to all of the liabilities of a partner in a partnership without limited partners.

(b)   Transactions Between the Partnership and its Partners.

(i)   The Partnership may enter into reasonable arms’-length transactions, contracts, agreements or arrangements with any Partner (including the General Partner) and/or any affiliate of any Partner (including the General Partner) if approved in advance by the General Partner.

(ii)   The Partnership may purchase materials, goods, and supplies, and may purchase or rent equipment from any Partner (including the General Partner) and/or any affiliate of any Partner (including the General Partner) if approved in advance by the General Partner.

(iii)   Nothing herein shall preclude reimbursement for reasonable and necessary out-of-pocket Partnership business expenses paid by a Partner (including the General 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 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 reasonable business practices. The General Partner shall be responsible for and shall have the authority to conduct all general administrative and business matters of the Partnership.

Section 8. Limited Partner Special Provisions .

(a)   Withdrawal of or Distributions in Reduction of Capital Contributions .

(i)   No Limited Partner shall have the right to withdraw its Capital Contribution to the Partnership, except with the consent of the General Partner or as a result of the dissolution of the Partnership.

(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, for one (1) year such Limited Partner may be liable to the Partnership for any sum returned to such Partner, 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.

(b)   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, notwithstanding any provision of law to the contrary.

(c)   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.

(d)   Right to Information . Each Limited Partner shall be entitled to:

(i)   inspect, for any proper purpose, 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)   obtain, upon reasonable request, accurate information concerning matters materially affecting the Partnership and a formal accounting (at such Limited Partner’s expense) of Partnership affairs whenever circumstances render it just and reasonable.

(e)   Exercise of Rights Under This Agreement . No right exercised by a Limited Partner under this Agreement shall impose any personal liability on any Limited Partner. Upon the imposition of any personal liability, such grant or exercise shall be void ab initio.

(f)   Withdrawal of a Limited Partner . No Limited Partner may withdraw from the Partnership without the consent of the General Partner, which consent is solely with the discretion of the General Partner and which the General Partner is under no obligation to give.

Section 9.   Transfers of Interests .

(a)   No Interest may be Assigned without the prior written consent of the General Partner, which consent is solely within the discretion of the General Partner and which the General Partner is under no obligation to give.

(b)   A Person who acquires one or more Interests of a Limited Partner but who is not admitted as a substituted Limited Partner pursuant to Section 9(c) shall be entitled only to allocations and distributions with respect to such Interests in accordance with this Agreement, and shall have no right to any information or accounting of the affairs of the Partnership, shall not be entitled to inspect the books or records of the Partnership, and shall not have any of the rights of a General Partner or a Limited Partner under the Act or this Agreement. Any such Assignee of an Interest of a Limited Partner, including an Assignee of an Investor Limited Partner, shall be subject to the terms of this Agreement, including, Sections 9, 10 and 11.

(c)   An Assignee of the Interest of a Limited Partner may be admitted to the Partnership as a substitute Limited Partner only upon satisfaction of the conditions set forth below:

(i)   the General Partner consents to such admission, which consent maybe given or withheld in the sole and absolute discretion of the General Partner;

(ii)   the Interests with respect to which the Assignee is being admitted were acquired by means of an Assignment not in violation of this Agreement;

(iii)   the Assignee becomes a party to this Agreement as a Limited Partner and executes such documents and instruments as the General Partner may reasonably request (including, without limitation, amendments to the Certificate of Limited Partnership) as may be necessary or appropriate to confirm such Assignee as a Limited Partner in the Partnership and such Assignee’s agreement to be bound by the terms and conditions of this Agreement; and

(iv)   the Assignee pays or reimburses the Partnership for all reasonable legal, filing, and publication costs that the Partnership incurs in connection with the admission of the Assignee as a Limited Partner with respect to the Assigned Interests.

(d)   No Person owning or holding any shares of stock or membership, partnership or equity interest of an Investor Limited Partner (a “Second Tier Owner”) or any Person owning or holding any shares, membership, partnership or equity interest of any Second Tier Owner may Assign any shares, membership, partnership or equity interest in an Investor Limited Partner or Second Tier Owner nor shall a nInvestor Limited Partner or Second Tier Owner issue additional shares, membership, partnership or equity interests or otherwise modify its capital structure without the prior written consent of the General Partner, which consent is solely within the discretion of the General Partner and which the General Partner is under no obligation to give.

Section 10.   Involuntary Transfers.

(a)   Notice . In the event any Interest held by an Investor Limited Partner or any shares of stock or membership, partnership or other equity interest of an Investor Limited Partner or any of its stockholders, members, partners or owners, is the subject of an involuntary transfer, whether due to divorce, bankruptcy, assignment for benefit of creditors, judicial order, legal process, execution, attachment, enforcement of a pledge or other encumbrance or otherwise, or the subject of a charging order or charging lien (collectively, an “Involuntary Transfer”), the Interest held by an Investor Limited Partner (hereinafter referred to as the “Affected Interest”) may be purchased by Shells pursuant to the provisions of this Section 10, and the Investor Limited Partner shall notify the Partnership and Shells in writing within three (3) days of the Interest becoming an Affected Interest.

(b)   Purchase of Affected Interest .

(i)   Option . Within thirty (30) days after the General Partner and Shells have received actual notice of the proposed Involuntary Transfer, Shells shall have the option, but not the duty, to purchase all but not less than all of the Affected Interest. Shells shall not be obligated to redeem all of the Interest under this Section 10.

(ii)   Notice of Exercise . The notice of exercise of option under this Section 10 shall specify a date for the closing of the purchase of the Affected Interest (hereinafter referred to as the “Closing”). The Closing shall be held at the principal office of Shells. The Closing shall occur on a date not less than thirty (30) days nor more than ninety (90) days after the expiration of the time within which Shells may exercise its option to purchase, unless the Investor Limited Partner and Shells otherwise mutually agree. Once Shells has elected to purchase the Affected Interest pursuant to the provisions of this Section 10, the acceptance of the option to purchase shall be binding.

(c)   Purchase Price and Payment . If Shells elects to purchase all of the Affected Interest, the price for the Affected Interest shall be payable in immediately available funds and shall be the lesser of:

(i)   the fair market value of the Affected Interest as determined by an appraiser mutually agreeable to the Investor Limited Partner and Shells; or

(ii)   The total amount due to the creditor of the Limited Partner who was to be the recipient of the Affected Interest.

Notwithstanding the foregoing, if the Involuntary Transfer triggering the purchase rights under this Section 10 is divorce or legal separation, then the purchase price shall be the price for the Interest established by Secti