EXHIBIT 10.5
JOINT VENTURE AND
LIMITED LIABILITY COMPANY
AGREEMENT
JOINT VENTURE AND LIMITED LIABILITY COMPANY AGREEMENT dated as of APRIL 8,
1997, by and between GameTech International, Inc., a Delaware corporation
("GTI"), and The Satellite Bingo Network (US) INC., a Delaware corporation
("TSBN") (each, a "Member" and, collectively, the "Members").
WHEREAS, GTI and TSBN wish to enter into a joint venture for the purpose of
designing, managing, operating and marketing a satellite bingo game for use
in bingo halls worldwide (except in Washington State and Canada); and
WHEREAS, GTI and TSBN desire to form and operate the joint venture as a
limited liability company under the Delaware Limited Liability Company Act,
6 Del. C. 18-101, et seg., as amended from time to time (the "Delaware Act").
NOW THEREFORE, in consideration of the covenants and agreements contained
in this Agreement and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree
as follows:
ARTICLE 1
DEFINITIONS
The following term shall have these meanings throughout this Agreement:
1.1 "ACCOUNTANT" shall have the meaning set forth in Section 7.5 hereof.
1.2 "CAPITAL ACCOUNT" shall have the meaning as set forth in Section 4.4
hereof.
1.3 "CLASS II GAMING" shall have such meaning as set forth in 2703(7) of
the Indian Gaming Regulatory Act, as amended from time to time,
including, without limitation, bingo.
1.4 "CODE" means the Internal Revenue Code of 1986, as amended.
1.5 "IMPROVEMENTS" shall have the meaning set forth in Section 3.4(c)
hereof.
1.6 "JV" means TSBN, L.L.C., the limited liability company formed by the
Members pursuant to Article 2 hereof.
1.7 "JV GAMES" means all bingo games developed and offered by the JV
pursuant to this Agreement excluding the proposed satellite game
for charity bingo halls in Washington State
1.8 "MANAGEMENT COMMITTEE" shall have the meaning set forth in
Section 5.1(a) hereof.
1.9 "MANAGER" shall have the meaning set forth in Section 5.5 hereof.
1.10 "BINGO HALLS" means bingo establishments (except in Washington State
and Canada) operated anywhere in the world.
1.11 "NET DISTRIBUTIONS" shall have the meaning set forth in Section 4.6
hereof.
1.12 "NIGC" shall mean the National Indian Gaming Commission.
1.13 "PERCENTAGE INTERESTS" shall have the meaning set forth in Section 4.1
hereof.
1.14 "REIMBURSABLE EXPENSES" means actual and reasonable direct operating
costs of GTI or TSBN (excluding indirect labor, corporate overhead
and depreciation on assets) incurred in performing their respective
responsibilities hereunder as supported by reasonable documentation.
1.15 "THIRD PARTY EXPENSES" means any amounts approved by the management
Committee which are due to affiliated third parties and all amounts
due to third parties unaffiliated with GTI or TSBN (e.g. bingo cards).
1.16 "TSBN LICENSE" shall have the meaning set forth in Section 3.4(a)
hereof.
1.17 "TSBN OPERATING SYSTEM" means all proprietary and/or licensed
technology, including, without limitation, all trademarks, service
marks, trade names, copyrights, trade secrets, technical data
and/or information and know how relating to the operation,
maintenance, construction or delivery of the JV Games to Bingo
Halls (via satellite transmission or other means), which is owned,
operated and/or licensed by TSBN.
1.18 "GROSS RECEIPTS" means the total amounts collected from the sale of
bingo cards before prizes, payments to bingo halls, and operating
expenses.
1.19 "GROSS REVENUES" means gross receipts less prizes, before payment to
bingo halls
1.20 "NET REVENUES" means gross revenues less payments to bingo halls.
ARTICLE 2
FORMATION OF THE JV
2.1 NAME AND ADDRESS. The name of the company is "TSBN L.L.C." (the "JV").
The address of the JV is 0000 X 0xx Xxxxxx, Xxxxx Xxxxxxx, 00000-0000.
2.2 REGISTERED OFFICE AND REGISTERED AGENT. The registered office of
the JV in the State of Delaware. The registered agent will be
selected by the management committee.
2.3 PURPOSES AND POWERS OF THE JV. The purpose of the JV shall be to
develop, operate, manage, market and sell satellite bingo based on
the TSBN Operating System to Bingo Halls worldwide (excepting
Washington State and Canada). The JV may also engage in other or
additional businesses that are either a direct or indirect outgrowth
of or are reasonably related to the foregoing purpose. In order to
carry out its purpose, the JV shall have and may exercise all powers
now or hereafter permitted to or conferred on limited liability
companies by the Delaware Act and other laws of the State of
Delaware and shall have the authority to execute, acknowledge and
deliver instruments and do any and all things necessary, appropriate,
proper, advisable, incidental to or convenient for the furtherance
and accomplishment of its purpose and for the protection and benefit
of the JV.
2.4 MEMBERS. The names and addresses of the Members are as follows:
Name Address
GameTech International, Inc. Suite 113-114
0000 X 0xx Xxxxxx
Xxxxx, Xxxxxxx
00000-0000
The Satellite Bingo Network (US) Inc. Suite 113
0000 X 0xx Xxxxxx
Xxxxx, Xxxxxxx
00000-0000
2.5 FISCAL YEAR. The fiscal year of the JV (the "Fiscal Year") shall
end on October 31 of each year.
2.6 LIABILITY OF MEMBERS. Neither the Members nor Managers shall have
any liability for the debts, obligations and liabilities of the JV,
except to the extent expressly provided in the Delaware Act.
2.7 RESTRICTIONS ON TRANSFER. No Member shall have the right to sell,
assign, pledge, transfer or otherwise dispose of all or any part of
its interest in the JV without the prior written consent of the
other Member in its sole discretion except to transfer all or any
part of its interests to another direct or indirect parent or
wholly-owned subsidiary of such Member so long as the transferring
Member shall, as between the Members, retain liability for such
transferee hereunder. Any purported sale, assignment, transfer or
other disposition of all or any part of an interest in the JV without
such prior written consent shall be null and void and of no force
and effect.
2.8 ADMISSION OF ADDITIONAL OR SUBSTITUTE MEMBERS. No substitute or
additional members shall be admitted to the JV without prior written
consent of the other Members.
ARTICLE 3
OPERATION OF THE JOINT VENTURE
3.1 JV GAMES. The JV will develop, operate, manage, market and sell JV
Games to be delivered via satellite transmission or other means
utilizing the TSBN Operating System to Bingo Halls worldwide
(excepting Washington State and Canada) subject to Section 3.3 hereof.
3.2 REVENUES. The JV Games will distribute a percentage of gross receipts
as prize winnings.
3.3 TERRITORY. The JV will not market or sell the JV Games for use in
Bingo Halls within the State of Washington for a period of one year
from the first operation of the Washington game.
3.4 TSBN OPERATING SYSTEM LICENSE
(a) GRANT OF LICENSE. Subject to the terms and conditions set forth
in this Agreement, TSBN hereby GRANTS TO THE JV AN exclusive license,
with rights to sublicense, to make, use, sell, offer, copy, modify,
edit, distribute and import TSBN operating System, and to create
derivative works therefrom, in the world (except Washington State and
Canada) during the Term for purposes of developing, operating and
marketing JV Games to be delivered via satellite transmission or
other means to Bingo Halls. JV shall not compile, recompile,
decompile, dissemble or reverse engineer the TSBN Operating System
without the prior written consent of TSBN.
(b) LICENSE FEE. JV shall pay TSBN six (6) percent of all net
revenues to an annual maximum of Seven Hundred and Fifty Thousand
Dollars US (US$750,000.00) generated in connection with developing,
operating, marketing and selling JV Games to be delivered via
satellite transmission or other means to Bingo Halls. The license
fee shall be earned by TSBN from the first operating date of the
JV's first satellite transmission but these fees will be accrued
and not paid until the expiration of the first six months of the
JV's first satellite transmission.
(c) OWNERSHIP AND NONDISCLOSURE.
1 TSBN shall at all times be the owner of the TSBN
Operating System. TSBN shall own any and all improvements,
modifications, alterations, and enhancements to the TSBN
Operating System, or derivative works therefrom, and all
proprietary information, trade secrets and other related
rights and interests developed thereto (the improvements)
as completed by TSBN.
2 The JV shall own any and all improvements,
modifications, alterations, and enhancements to the TSBN
Operating System, or derivative works therefrom, and all
proprietary information, trade secrets and other related
rights and interests developed thereto (the "Improvements")
as completed by the JV.
3 TSBN shall disclose the TSBN Operating System to the
JV subject to Section 7.1. Additionally, JV shall not cause
or permit disclosure, copying, display, loan, publication,
transfer of possession (whether by sale, exchange, gift,
operating, of law or otherwise), or other dissemination of
the TSBN Operating System, in whole or in part, to any third
party, without the prior written consent of TSBN.
(d) WARRANTY. TSBN hereby represents and warrants that it has
full legal title to the TSBN Operating System, free and clear of all
liens and encumbrances, and further, that TSBN has all consents or
approvals required to operate and license the TSBN Operating System
as contemplated herein. TSBN hereby represents that TSBN will be
responsible for it's cost to defend any claims against their title
to the TSBN Operating System.
3.5 NON COMPETITION WITH JV. Subject to section 3.3 hereof, during the
Term of the JV and for a period of two (2) years thereafter, other
than through its interest in the JV, neither Member shall engage,
hold or own any interest in, in either case, directly or indirectly,
any other venture of any nature which develops, manages, operates,
markets, sells or is otherwise engaged in the delivery of JV Games
to Bingo Halls worldwide by means of satellite transmission or other
means (excepting the TSBN involvement in Washington State or Canada).
3.6 MEMBER OBLIGATIONS.
(a) TSBN shall:
1 develop and implement such alterations, Improvements
and other changes as necessary to implement the TSBN
Operating System for use by the JV as contemplated in
Section 2.3 hereof;
2 develop a marketing proposal for presentation to Bingo
Halls identified by GTI as potential locations for operation
of the JV Games;
3 assist GTI in final marketing of JV Games to interested
Bingo Halls;
4 manage, supervise and oversee the set-up,
implementation and ongoing operation of JV Games; and
5 provide JV Games operations training for staff and
administration at Bingo Halls participating in JV Games.
6 provide corporate guarantees if required for purposes
of financing the joint venture businesses.
(b) GTI shall:
1 identify, screen and solicit potential Bingo Halls;
2 arrange adequate financing and/or capital to initiate
operations and ongoing development of the JV Games.
3 provide corporate guarantees if required for purposes
of financing the joint venture businesses.
3.7 FINANCING FEES. GTI will receive a fee equal to five (5) percent of
the total financing arranged for joint venture projects that cannot be
secured within the joint venture.
3.8 WITHDRAWL OF MEMBER. Subject to Section 6.2 hereof, a Member may not
withdraw from the JV.
ARTICLE 4
CONTRIBUTIONS; CAPITAL ACCOUNTS; DISTRIBUTIONS
4.1 PERCENTAGE INTERESTS. The "Percentage Interests" of the Members in
the JV are as follows:
Percentage
Member Interest
GTI 50%
TSBN 50%
4.2 ALLOCATION OF NET PROFITS AND NET LOSSES. The Net Profits and Net
Losses of the JV for each fiscal year (or other period) shall be
allocated to the Capital Account (as defined herein) of each
Member pro-rata based on Percentage Interests, or as set forth on
Exhibit 1.0 hereto in the event any Member transfers its interest
in accordance with the terms of this Agreement.
4.3 INITIAL CAPITAL CONTRIBUTIONS. The initial capital contribution of
each Member to the JV shall be US $50,000.00.
4.4 CAPITAL ACCOUNT. There shall be established for each Member on the
books of the JV a capital account (a "Capital Account"). The Capital
Account of a Member shall be managed as set forth on Exhibit 1.0
hereto, which is incorporated by reference into this Agreement and
made a part hereof.
4.5 EXPENSES. The gross receipts of the JV, less any reserves established
by the Management Committee with respect to any fiscal quarter, shall
be used as follows: first, to be paid out as prize winnings and hall
proceeds, second, to pay Third Party Expenses incurred in such fiscal
quarter or non third party JV expenses approved by the Management
Committee; third, to repay loans fourth, to pay royalties owing by
the JV pursuant to the TSBN License Fee; and fifth, to pay to the
Members the Reimbursable Expenses incurred by each in such fiscal
quarter; provided, however, that to the extent that the JV fails to
pay the full amount of the Reimbursable Expenses incurred in such
fiscal quarter.
(a) the payments to GTI and TSBN in respect of
Reimbursable Expenses will be made in proportion to the
relative amounts of Reimbursable Expenses incurred by
each in such fiscal quarter and
(b) any remaining amounts of Reimbursable Expenses will
be carried forward and become payable as an additional
Reimbursable Expense in the next succeed fiscal quarter.
4.6 DISTRIBUTIONS. Net cash Flow (as referred in Exhibit 1.0) will be
distributed to the Members in accordance with their respective interests.
4.7 LIABILITIES. Liabilities shall be determined in accordance with
generally accepted accounting principles applied on a consistent
basis; provided, however, that the Management Committee, in its
sole discretion, may provide reserves for estimated accrued
expenses, liabilities or contingencies, whether or not in
accordance with generally accepted accounting principles.
4.8 LIMITATION OF DISTRIBUTIONS. Distributions are subject to the
provision by the Management Committee for:
(a) all Company liabilities in accordance with the Delaware
Act and
(b) reserves for liabilities taken in accordance with Section
4.7 hereof. The unused portion of any reserve shall be distributed,
as determined by the Management Committee, after the Management
Committee has determined that the need therefor has ceased.
4.9 ALLOCATION OF INCOME AND LOSS FOR TAX PURPOSES. The JV's ordinary
income and losses, capital gains and losses and other items as
determined for Federal income tax purposes (and each item of
income, gain, loss or deduction entering into the computation
thereof) shall be allocated to the Members as set forth in Exhibit
1.0 hereto.
4.10 DETERMINATION BY THE MANAGEMENT COMMITTEE OF CERTAIN MATTERS. All
matters concerning valuations and the allocation of taxable income,
deductions, credits, Net Profits and Net Losses among the Members,
including taxes thereon, not expressly provided for by the terms of
this Agreement shall be allocated to the Members in accordance
with their percentage interests.
4.11 AMOUNTS WITHHELD. All amounts withheld pursuant to the Code or any
provision of any state or local tax law with respect to any payment,
distribution, or allocation to the JV Members shall be treated as
amounts distributed to the JV Members pursuant to this Section 4 for
all purposes under this Agreement. The JV Members Management
Committee is authorized to withhold from distributions, or with
respect to allocations, to the JV Members and to pay over to any
federal, state, or local government any amounts required to be so
withheld pursuant to the Code or any provisions of any other federal,
state, or local law and any such amounts shall allocate to the
Members with respect to which such amounts were withheld.
ARTICLE 5
MANAGEMENT OF THE JV
5.1 MANAGEMENT OF THE JV.
(a) Management Committee. The business and affairs of the JV
shall be governed in all respects by a committee composed of six
people, three of whom shall be appointed by TSBN, three of whom
shall be appointed by GTI (the "Management Committee"). The
Management Committee shall be responsible for formulating the
policy of the JV and authorizing all material decisions regarding
its operations, including decisions regarding material capital
expenditures and investments.
(b) Meetings.
1 The Management Committee shall meet at least once every
fiscal quarter or more frequently as appropriate. Management
Committee meetings may be held in person, by telephone
conference or by use of similar communications equipment. Any
action required or permitted to be taken by the Management
Committee may be taken without a meeting if all of the
members of the Management Committee consent thereto in
writing.
2 Special meetings of the Management Committee may be
held upon the call of any member of the Management Committee
for any purpose. Written notice of each regular and special
meeting shall be sent to each member of the Management
Committee not less than forty-eight hours before such
meeting. Notice of any meeting need not be given to any
member of the Management Committee who shall submit, either
before or after the meeting, a signed waiver of notice or
who shall attend the meeting.
(c) Term of Members. Each member of the Management Committee
shall hold office until death, resignation, retirement or removal by
the Member that appointed such person to the Management Committee.
If a vacancy shall occur in the Management Committee, the Member
that appointed such vacating member of the Management Committee may
appoint his or her successor by giving written notice thereof to the
other Member and the Management Committee. Similarly, if either
Member desires to replace its appointee, such Member may remove and
replace such appointee at any time by giving written notice thereof
to the other Member and the Management Committee.
(d) Compensation. Members of the Management Committee shall not
receive any salaries, fees or other compensation or expense
reimbursement from the JV in respect of their service on the
Management Committee. Any such compensation and reimbursement shall
be the obligation of the Member designating the particular member
of the Management Committee.
(e) Quorum. The presence, by proxy, in person or by telephone or
by use of similar communications equipment, at any regular or
special meeting of the Management Committee, of at least two members
of the Management Committee appointed by each Member shall be
necessary to constitute a quorum.
(f) Vote. Each member of the Management Committee shall have one
vote.
5.2 ACTIONS OF MANAGEMENT COMMITTEE. At any meeting at which a quorum is
present, the Management Committee shall act, except as otherwise
provided herein, upon the majority vote of the Management Committee,
provided that such majority includes at least one member of the
Management Committee appointed by each Member, and such action shall
be binding upon the Members and the JV.
5.3 UNANIMOUS CONSENT MATTERS. The JV shall not, and the Management
Committee shall not cause the JV to take any of the following
actions without the unanimous consent in favor thereof:
(a) amend, modify or waive any provision of this Agreement;
(b) sell, transfer or encumber all or a material portion of the
assets of the JV or cause the JV to merge or consolidate with any
other person or entity;
(c) admit any additional members or issue any additional
interests in the JV;
(d) acquire, by purchase, lease or otherwise, any real property
or construct any capital improvements (including tenant
improvements) thereon;
(e) obtain, increase, modify, consolidate or extend any loan,
whether secured or unsecured;
(f) sell, assign, convey or otherwise transfer or dispose of
any JV asset, except in the ordinary course of the JV's business;
(g) enter into a joint venture, partnership or similar
arrangement with any person or entity other than sales, distribution
and license agreements entered into in the ordinary course of
business of the JV;
(h) enter into any transaction with, or make or incur any
obligation to make any payment to, a Member or any affiliate of a
Member, other than as contemplated in this Agreement;
(i) reorganize, consolidate or restructure the JV or register
any securities in the JV pursuant to any provision of any
applicable securities laws;
(j) file a petition in voluntary bankruptcy or make an
assignment for the benefit of creditors or consent to the
appointment of a receiver or receivers of all or any substantial
part of the property of the JV; or file a petition or answer
seeking reorganization under the Federal bankruptcy laws or any
other applicable law or statute of the United States of America
or any state;
(k) call upon the Members for any additional contribution of
capital; and
(l) offer the JV games in Washington State or Canada
5.4 RESOLUTION OF DEADLOCK. In the event that there is a dispute as to
a decision requiring unanimous consent under Section 5.3 hereof, or,
if the Management Committee cannot break a deadlock on a decision
not requiring unanimous consent, the matter will be deemed to be a
no action item until either unanimous consent (for items requiring
unanimous consent) or a majority decision can be reached.
5.5 MANAGEMENT. The day to day business affairs of the JV shall be
managed by one or more managers (the "Managers"). The initial
Managers shall be Xxxxxxxx Xxxxx, Xxx Xxxxx and Xxxx Held.
Successor Managers shall be elected by the affirmative vote of a
majority of the Management Committee. The Managers shall serve
until their respective successors are elected and qualified. At
a meeting called expressly for that purpose, a Manager may be
removed with or without cause by affirmative vote of a majority
of the Management Committee. Except as reserved to the Management
Committee or the Members under this Agreement or by appropriate
action of the Management Committee or the Members, each Manager
shall have the full and complete authority, power and discretion
to make all decisions concerning the business affairs and
properties of the JV, with the following items to be approved by
the management committee:
contracts or agreements extending for o term of more than
one year.
contracts or agreements for amounts greater than $100,000.00
annual budgets
capital budget
ARTICLE 6
TERM AND TERMINATION
6.1 TERM. The JV shall continue to operate for an initial term of
Five (5) years, subject to earlier termination as set forth
herein (the "Initial Term"). Unless either Member exercises its
right to terminate after the Initial Term, as set forth below,
the JV shall continue to operate for additional Five (5) year
terms ("Additional Terms"). Each Additional Term shall
automatically renew, unless terminated as set forth below.
6.2 TERMINATION: The JV shall be dissolved and the Term terminate
upon the earlier of:
(a) at the election of either Member if the other Member
breaches any of its material obligations under this Agreement
and fails to cure such breach within 30 days of receipt of
notice from the other Member of such breach;
(b) at the election of either Member upon 90 day's
written notice prior to the end of the Initial Term or any
Additional Term;
(c) upon the bankruptcy or dissolution of either Member
unless the business of the JV is continued by the consent of the
remaining Member within 90 days following the occurrence of any
such event;
(d) the entry of a decree of dissolution under 18-802 of
the Delaware Act; or
(e) if no JV Games have commenced within one year of the
date of this Agreement
(f) the written agreement of both Members.
6.3 DISSOLUTION
(a) Upon dissolution, an accounting shall be made by the
Accountants of the accounts of the JV and of the JV's assets,
liabilities and operations, from the date of the last previous
accounting until the date of dissolution. The Members shall
immediately proceed to wind up the affairs of the JV.
(b) If the JV is dissolved and its affairs are to be
wound up, the Members shall (i) sell or otherwise liquidate all
the JV's assets as promptly as practicable (except to the extent
the Members unanimously may determine to distribute any assets to
the Members in kind), (ii) allocate any Profits and Losses
resulting from such sales to the Member's Capital Accounts in
accordance with Exhibit 1.0 hereof, (iii) discharge all
liabilities of the JV, including all costs relating to the
dissolution, winding up and liquidation and distribution of
assets, (iv) establish such reserves as determined by the
Management Committee to provide for contingent liabilities of the
JV and (v) distribute all remaining cash and assets of the JV to
the Members in accordance with their Capital Accounts. Any amounts
withheld as reserves but not ultimately required to discharge
liabilities of the JV shall be distributed to the Members as
promptly as possible. Distributions to the Members shall be
made in accordance with the time requirements set forth in
Regulations 1.704-1 (b)(2)(ii)(b)(2).
(c) Notwithstanding anything to the contrary in this
Agreement, upon a liquidation within the meaning of Regulations
1.704-1 (b)(2)(ii)(g), if any member has a negative deficit
Capital Account balance (after giving effect to all
contributions, distributions, allocations and other Capital
Account adjustments for all taxable years, including the year
during within the meaning of Regulations 1.704-1 (b)(2)(ii)(g),
such Member shall have no obligation to make any contribution to
the capital of the JV, and the negative balance of such Member's
Capital Account shall not be considered a debt owed by such Member
to the JV, another Member or to any other person for any purpose
whatsoever.
(d) When all debts, liabilities and obligations have been
paid and discharged or adequate provisions have been made therefor
and all of the remaining property and assets have been
distributed to the Members, a Certificate of Cancellation shall
be executed and filed with the Delaware Secretary of State. Upon
completion of the winding up, liquidation and distribution of
the assets and filing of the Certificate of Cancellation, the
existence of the JV shall be terminated.
ARTICLE 7
MISCELLANEOUS
7.1 CONFIDENTIALITY. Each Member agrees that it shall not, directly
or indirectly, without the prior written consent of the other
Member, use for its own benefit (except as a Member) or disclose to
any person any information, trade secrets, confidential customer
information, patents, patent rights, technical data, or know-how
relating to the products, processes, methods, equipment, or
business practices of the JV or the other Member hereto, except
(a) to the extent the member can clearly show any of the
foregoing is, or becomes, available to the public other than as a
result of disclosure by such Member or any of its affiliates or
the directors, officers, employees, agents, advisors, and
controlling persons of it or any of its affiliates, (b) as may
be required by law, (c) as either Member may disclose to its
business, financial and legal advisors (under confidentiality
agreements, as appropriate or necessary), or (d) to the extent
the Member can clearly show any of the foregoing is received by
such Member in a non-confidential manner from a third party
having the right to disclose such information, or was already in
such Member's possession prior to negotiations related to this
Agreement. If either Member is required by applicable law or
regulation or by legal process to disclose any of the foregoing,
it will provide the other Member with prompt notice thereof, to
the extent practicable under the circumstances, to enable it to
seek an appropriate protective order. In the event the JV is
dissolved, each Member shall return to the other Member all
confidential documents (and all copies thereof) in its possession,
or will certify to the other that all such documents not returned
have been destroyed. This confidentiality provision shall survive
the expiration or termination of this Agreement for any reason.
7.2 PUBLIC ANNOUNCEMENTS. Except as may otherwise be required by
law, neither Member shall make any public announcement with
respect to the JV or any of the transactions contemplated by
this Agreement or the agreements entered into in connection
herewith without the prior consent of the other Member.
7.3 AFFILIATE TRANSACTIONS. Other then those contemplated in this
Agreement, the Members shall not cause or permit the JV to enter
into any agreement or arrangement with a Member or any affiliate
thereof, other than on commercially reasonable terms, at least
as favorable to the JV as could be available with a third party
in an arms length transaction.
7.4 BOOKS AND RECORDS. The books and records of the JV shall be
maintained by the Manager at the principal offices of the JV.
Each Member shall have the right to inspect, audit and copy said
books and records upon reasonable notice and at reasonable
times. Within forty-five (45) days after the close of each
fiscal quarter the Manager shall provide each Member with a
balance sheet, income statement and statement of sources and uses
of cash for the quarter then ended, together with a comparison
of actual and budgeted results. Within ninety (90) days
following the end of each fiscal year, the Manager shall provide
each Member with audited statements for the year then ended,
together with a comparison of actual and budgeted results. The
Manager shall provide the Members with such additional reports and
information relating to the JV as the Members may reasonably
request from time to time in writing.
7.5 TAX MATTERS: Accountants. The accountants for the JV shall be such
accounting firm ("Accountants") as the Management Committee shall
determine. All tax returns of the JV shall be prepared by the
Accountants. As soon as practicable after the end of each year,
the Manager or the Accountants shall provide both Members with
all information necessary to complete the income tax returns for
the JV and the Member's taxable income or loss, deductions, and
other items relating to the operating results of the JV. The Manager
or the Accountants shall cause to be prepared, at the JV's expense,
and shall cause to be timely filed all income tax returns fo the JV
and shall furnish a copy thereof to each Member promptly after the
filing thereof. The Members intend that the JV be treated as a
partnership for Federal income tax purposes. GTI shall be designated
to act as the "Tax Matters Partner" within the meaning of
Section 623(1)(a)(7) of the Code. GTI shall promptly provide TSBN
with copies of all notices, statements or other communciations to or
from government taxing authorities and shall keep TSBN fully informed
as to all audits, assessments or other actions of government tax
authorities.
7.6 BENEFITS OF AGREEMENT. None of the provisions of this Agreement
shall be for the benefit of or enforceable by any creditor of
the JV or of any Member.
7.7 INTEGRATION. This Agreement constitutes the entire agreement among
the parties hereto pertaining to the subject matter hereof and
supersedes all prior and contemporaneous agreements and understandings
of the parties in connection therewith.
7.8 HEADINGS. The headings in this Agreement are for reference purposes
only and shall not in any way affect the meaning or interpetation
of this Ageement.
7.9 COUNTERPARTS. This Agreement may be executed by the parties hereto in
counterparts, each of which shall be considered an original, and all
of which shall together constitute but one and the same instrument.
7.10 NOTICES. All notices or other communications relating to this
Agreement shall be in writing (and shall be deemed to have been
duly given upon receipt) by personal delivery, facsimile transmission
or by registered, certified or express mail, postage prepaid,
addressed as set forth in Section 2.4 hereof. Any party may change
the address to which such notices are to be sent by giving written
notice of such change in the manner provided herein for giving, notice.
7.11 GOVERNING LAW. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware, without giving
effect to conflicts of law principles of such State.
7.12 ARBITRATION. Any dispute, controversy or claim arising out of or
relating to this Agreement, or the breach, termination or invalidity
of it shall be settled by arbitration in accordance with the UNCITRAL
Arbitration Rules in effect on the date of this Agreement. The
appointing authority shall be the American Arbitration Association.
The number of arbitrators shall be one.
7.13 AMENDMENTS. This Agreement may be amended only by unanimous written
consent of the Members of the JV.
IN WITNESS WHEREOF, the undersigned have duly excuted this Joint Venture and
Limited Liability Company Agreement as of the date first written above.
MEMBERS:
GAMETECH INTERNATIONAL, INC.
By: /s/ (Illegible) /s/ (Illegible)
------------------------------ ------------------------------
Name:
Title:
THE SATELLITE BINGO NETWORK (US) INC.
By: /s/ (Illegible) /s/ (Illegible)
----------------------------- ------------------------------
Name:
Title:
EXHIBIT 1.0
DISTRIBUTIONS; ALLOCATIONS OF PROFITS AND LOSSES
1 DISTRIBUTION OF NET CASH FLOW. Except in connection with the
dissolution of the JV, in which case all distributions shall be
made in accordance with Section 6.3 of the Agreement, distributions
of Net Cash Flow shall be made to the Members no less often than
annually in accordance with the Members' respective Percentage
Interests.
2 DEFINITION OF NET CASH FLOW. "Net Cash Flow" of the JV shall be
computed by deducting from the net revenues received by the JV from
all sources: (i) all operating expenses of the JV, including
management fees (if any), Third party expenses, royalties owing
under the TSBN license, reimbursable expenses further to Section
4.5 hereof, taxes, and insurance premiums, but excluding
depreciation and amortization allowances, (ii) interest and
principal payments on indebtedness of the JV (including advances by
Members), (iii) proceeds from borrowing or proceeds from the sale,
exchange or other disposition of JV assets, (iv) additions to
reserves, (v) all cash expenditures for fixed asset additions,
improvements and replacements, (vi) capital contributions, and
(vii) any other amounts that the Members unanimously determine, in
their sole discretion, shall be retained for investment in the JV
business.
3 LIABILITY OF MEMBER FOR RETURN OF DISTRIBUTION. Each Member
understands that if it receives cash or other property in violation
of 18-607 of the Delaware Act, it may be liable to the JV for the
return of such amount pursuant to such Section.
4 METHOD OF ACCOUNTING. The JV books shall be kept in such manner
and by using Generally Accepted Accounting Principles of the US.
5 MAINTENANCE OF CAPITAL ACCOUNTS. There shall be established for
each Member on the books and records of the JV and account (a
"Capital Account"), which shall initially be zero and which shall
be adjusted as follows:
(a) the amount of the Capital Contribution made to the JV by
each Member as set forth on Section 4.3 to the Agreement shall be
credited to the Capital Account of such Member;
(b) the amount of any cash and the fair market value of any
property distributed or deemed distributed pursuant to Section 1
hereof by the JV to each Member shall be debited against the
Capital Account of such Member; and
(c) the Profits and Losses of the JV (and the items entering
into the determination thereof) allocated to each Member pursuant
to Section 4.2 of the Agreement shall be credited to, and debited
against, respectively, the Capital Account of such Member.
(d) The provisions of the Agreement relating to the maintenance
of Capital Accounts are intended to comply with the applicable
Regulations under Code 704 and to provide for allocations which
have "substantial economic effect" within the meaning of those
Regulations or, in the case of allocations attributable to
nonrecourse indebtedness, which are deemed pursuant to those
Regulations to be in accordance with each Member's interest in the
JV. The provisions of this Agreement shall be interpreted and
applied in a manner consistent with this intention.
6 ALLOCATION OF PROFITS AND LOSSES. Subject to the provisions of
Sections 7 and 8 hereto and Section 4.2 of the Agreement. Profits
and Losses shall be allocated to the Members in accordance with
their Percentage Interests.
7 SPECIAL ALLOCATIONS. The following special allocations shall be
made in the following order:
(a) Except as otherwise provided in Regulations 1.704-2(f),
notwithstanding any other provision of this Exhibit 1.0, if there
is a net decrease in Minimum Gain during any Fiscal Year, each
Member shall be specially allocated items of JV income and gain for
such Fiscal Year (and, if necessary, subsequent Fiscal Years) in an
amount equal to such Member's share of the net decrease in Minimum
Gain, determined in accordance with Regulations 1.704-2(g).
Allocations pursuant to the previous sentence shall be made in
proportion to the respective amounts required to be allocated to
each Member pursuant thereto. The items so to be allocated shall be
determined in accordance with Regulations 1.704-2(f)(6) and
1.704-2(j)(2). This subsection is intended to comply with the
minimum gain chargeback requirement in Regulations 1.704-2(f) and
shall be interpreted consistently therewith.
(b) Except as otherwise provided in Regulations 1.704-2(i)(4),
notwithstanding any other provision of this Exhibit 1.0, if there
is a net decrease in Member Nonrecourse Debt Minimum Gain
attributable to a Member Nonrecourse Debt during any Fiscal year,
each Member who has a share of the Member Nonrecourse Debt Minimum
Gain attributable to such Member Nonrecourse Debt, determined in
accordance with Regulations 1.704-2(i)(5), shall be specially
allocated items of JV income and gain for such year (and, if
necessary, subsequent Fiscal Years) in an amount equal to such
Member's share of the net decrease in Member Nonrecourse Debt
Minimum Gain attributable to such Member Nonrecourse debt
determined in accordance with Regulations 1.704-2(i)(4).
Allocations pursuant to the previous sentence shall be made in
proportion to the respective amounts required to be allocated to
each Member pursuant thereto. The items to be so allocated shall be
determined in accordance with Regulations 1.704-2(i)(4) and
1.704-2(j)(2). This subsection is intended to comply with the
minimum gain chargeback requirement in Regulations 1.704-2(i)(4)
and shall be interpreted consistently therewith.
(c) In the event any Member, in such capacity,
unexpectedly receives any adjustments, allocations or distributions
described in Regulation 1.704-1(b)(2)(ii)(d)(4) (regarding
depletion deductions), 1.704-1(b)(2)(ii)(d)(5) (regarding certain
mandatory allocations under Regulations regarding family
partnerships, the so called varying interest rules, or certain
in-kind distributions), or 1.704-1(b)(2)(ii)(d)(6) (regarding
certain distributions to the extent they exceed certain expected
offsetting increase in a Member's Capital Account), items of the
JV's income and gain shall be specially allocated to such Members
in an amount and a manner sufficient to eliminate to the extent
required by the Regulations, as quickly as possible, the Adjusted
Capital Account Deficit of such Member.
(d) Nonrecourse Deductions for any Fiscal Year shall be
specially allocated to the Members in accordance with their
Percentage Interests.
(e) Any Member Nonrecourse Deductions for any Fiscal Year
shall be specially allocated to the Member who bears the economic
risk of loss with respect to the Member Nonrecourse Debt to which
such Member Nonrecourse Deductions are attributable in accordance
with Regulations 1.107-2(i)(1).
(f) To the extent an adjustment to the adjusted tax basis of
any JV asset pursuant to Code 734(b) or 743(b) is required to be
taken into account pursuant to Regulations 1.704-1(b)(2)(iv)(m)(2)
or 1.704-1(b)(2)(iv)(m)(4) in determining Capital Accounts as the
result of a
distribution to a Member in complete liquidation of its Membership
Interest, the amount of such adjustment to Capital Accounts shall
be treated as an item of gain (if the adjustment increases the
basis of the asset) or loss (if the adjustment decreases such
basis) and such gain or loss shall be specially allocated to the
Members in accordance with their interests in the JV if Regulations
1.704-1(b)(2)(iv)(m)(2) applies, or to the Member to whom such
distribution was made if Regulations 1.704-1(b)(iv)(m)(4) applies.
8 OTHER ALLOCATIONS RULES. In accordance with Code 704(c) and the
applicable Regulations issued thereunder, income, gain, loss and
deduction with respect to any property contributed to the capital
of the JV, shall, solely for tax purposes, be allocated among the
Members so as to take account of any variation between the adjusted
basis of such property to the JV for federal income tax purposes
and its initial Gross Asset Value. In the event the Gross Asset
Value of any JV property is adjusted pursuant to this Agreement,
subsequent allocations of income, gain, loss and deduction with
respect to such asset shall take into account any variation between
the adjusted basis of such asset for federal income tax purposes
and its Gross Asset Value in the same manner as under Code 740(c)
and the Regulations thereunder. Any elections or other decisions
relating to such allocations shall be made by the Members in any
manner that reasonably reflects the purpose of this Agreement.
Allocations made pursuant to this section 8 are solely for purposes
of federal, state and local taxes and shall not affect, or in any
way be taken into account in computing, any Member's Capital
Account or share of Profits, Losses, other items, or distributions
pursuant to any provision of this Agreement.
9 ALLOCATIONS AND DISTRIBUTIONS WITH RESPECT TO TRANSFERRED
INTERESTS. If any transfer of an interest in the JV permitted by
this Agreement occurs during a fiscal year (whether or not the
assignee is admitted as a substituted Member), then all allocations
of Profits and Losses attributable to the transferred interest for
such year shall be divided and allocated between the transferor and
the transferee by taking into account their varying interests during
such fiscal period, using any convention or method of allocation
selected by the Member which is then permitted under Code Section
706 and the regulations promulgated thereunder. All distributions
of Net Cash Flow made prior to the effective date of any such
transfer shall be made to the transferor and any such distributions
made after the effective date of such transfer shall be made to the
transferee.
10 DEFINITIONS. The capitalized terms used in this Exhibit 1.0 and
not defined elsewhere herein or in the Agreement shall have the
meanings as defined in the provision referenced below, where such
term appears in boldface print.
(a) "Adjusted Capital Account Deficit" means, with respect to
any Member, the deficit balance, if any, in such Member's Capital
Account as of the end of the relevant Fiscal Year, after giving
effect to the following adjustments:
(1) Credit to such Capital Account any amounts which such
Member is obligated to restore pursuant to any provision of
this Agreement or is deemed to be obligated to restore
pursuant to the penultimate sentences of Regulations
1.704-2(g)(1) and 1.704-2(i)(5): and
(2) Debit to such Capital Account the items described in
Regulations 1.704-1(b)(ii)(d)(4). 1.704-1(b)(2)(ii)(d)(5)
and 1.7041(b)(2)(ii)(d)(6).
(3) The foregoing definition of Adjusted Capital Account
Deficit is intended to comply with the provisions of
Regulations 1.704-1 (b)(2)(ii)(d) and shall be interpreted
consistently therewith.
(b) "Capital Account" means the account established and
maintained for each Member pursuant to Section 4.4 of the Agreement.
(c) "Depreciation" means, for each Fiscal Year, an amount equal
to the depreciation, amortization, or other cost recovery deduction
allowable with respect to an asset for such Fiscal Year, except that
if the Gross Asset Value of an asset differs from its adjusted basis
for federal income tax purposes at the beginning of such Fiscal
Year, Depreciation shall be an amount which bears the same ratio to
such beginning Gross Asset Value as the federal income tax
depreciation, amortization, or other cost recovery deduction for
such Fiscal Year bears to such beginning adjusted tax basis;
provided, however, that if the adjusted basis for federal income tax
purposes of an asset at the beginning of such Fiscal Year is zero,
Depreciation shall be determined with reference to such beginning
Gross Asset Value using any reasonable method selected by the
Members.
(d) "Gross Asset Value" means, with respect to any asset, the
asset's adjusted basis for federal income tax purposes, except as
follows:
(1) The initial Gross Asset Value of any asset contributed
by a Member to the JV shall be the fair market value of such
asset as of the date of contribution as determined and
mutually agreed upon by the contributing Member and the JV;
(2) The Gross Asset Value of all JV assets shall be
adjusted to equal their respective fair market values, as
determined by the Members, as of the following times: (a)
the acquisition of an additional interest in the IV by any
new or existing Member in exchange for more than a de
minimis Capital Contribution; (b) the distribution by the JV
to a Member of more than a de minimis amount of JV property
as consideration for any interest in the JV if the Members
reasonably determine that such adjustment is necessary or
appropriate to reflect the relative economic interests of
the Members in the JV; and (c) the liquidation of the JV
within the meaning of Regulations 1.704-1 (b)(2)(ii)(g);
(3) The Gross Asset Value of any JV asset distributed to
any Member shall be the fair Market value of such asset on the
date of distribution; and
(4) The Gross Asset Values of JV assets shall be increased
(or decreased) to reflect any adjustments to the adjusted
basis of such assets pursuant to Code 734(b) or 743(b), but
only to the extent that such adjustments are taken into
account in determining Capital Accounts pursuant to
Regulations 1.704-1(b)(2)(iv)(m) and Section 4.4 hereof;
provided, however, that Gross Asset Values shall not be
adjusted pursuant to this subsection (4) to the extent the
Members determine that an adjustment pursuant to subsection
(2) hereof is necessary or appropriate in connection with a
transaction that would otherwise result in an adjustment
pursuant to this subsection (4).
(5) If the Gross Asset Value of an asset has been
determined or adjusted pursuant to (1), (2) or (4) above,
such Gross Asset Value shall thereafter be adjusted by the
Depreciation taken into account with respect to such asset
for the purposes of computing Profits and Losses.
(e) "Minimum Gain" has the meaning set forth in Regulations
1.704-2(b)(2) and 1.704-2(d).
(f) "Nonrecouse Deductions" has the meaning set forth in
Regulations 1.704-2(b)(1).
(g) "Profits" and "Losses" means, for each Fiscal Year, an
amount equal to the JV's taxable income or loss for such Fiscal
Year, determined in accordance with Code 703(a) (for this purpose,
all items of income, gain, loss, or deduction required to be stated
separately pursuant to Code 730(a)(1) shall be included in taxable
income or loss), with the following adjustments:
(1) Any income of the JV that is exempt from federal
income tax and not otherwise taken into account in computing
Profits or Losses pursuant to this definition of Profits
and Losses shall be added to such taxable income or loss;
(2) Any expenditures of the JV described in Code
705(a)(2)(B) or treated as Code 705(a)(2)(B) expenditures
pursuant to Regulations 1.704(b)(2)(iv)(/1, and not
otherwise taken into account in computing Profits or Losses
pursuant to this definition shall be subtracted from such
taxable income or loss;
(3) In the event the Gross Asset Value of any asset is
adjusted pursuant to subsections 10 d(2) or (3) of the
definition of Gross Asset Value contained in this Agreement,
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;
(4) Gain or loss resulting from any disposition of JV
property with respect to which gain or loss is recognized
for federal income tax purposes shall be computed by
reference to the Gross Asset Value of the JV property
disposed of, notwithstanding that the adjusted tax basis of
such JV property differs from its Gross Asset Value;
(5) In lieu of the depreciation, amortization, and other
cost recovery deductions taken into account in computing
such taxable income or loss, there shall be taken into
account Depreciation for such Fiscal Year, computed in
accordance with the definition of Gross Asset Value
contained in this Agreement;
(6) To the extent an adjustment to the adjusted tax basis
of any JV asset pursuant to Code 734(b) or Code 743(b) is
required pursuant to Regulations 1.704-1 (b)(2)(iv)(m)(4) to
be taken into account in determining Capital Accounts as a
result of a distribution other than in liquidation of a
Member's interest in the JV, the amount of such adjustment
shall be treated as an item of gain (if the adjustment
increases the basis of the asset) or loss (if the adjustment
decreases the basis of the asset) from the disposition of
the asset and shall be taken into account for purposes of
computing Profits or Losses; and
(7) Notwithstanding any other provision of this definition
of Profits and Losses any items which are specially
allocated pursuant to Section 7 hereof shall not be taken
into account in computing Profits or Losses.
(8) The amounts of the items of JV income, gain, loss or
deduction available to be specially allocated pursuant to
Section 7 hereof shall be determined by applying rules
analogous to those set forth in this definition of Profits and
Losses.
(h) "Regulations" means the temporary and final Treasury
Regulations issued under the Code, as such regulations may
be amended from time to time (including corresponding
provisions of succeeding regulations).
