JOINT VENTURE AND LIMITED LIABILITY COMPANY AGREEMENT by and among Teknik Digital Arts, Inc. and Playentertainment, L.L.P.
Exhibit 10.3
JOINT VENTURE
AND
LIMITED LIABILITY COMPANY
AGREEMENT
by and among
Teknik Digital Arts, Inc.
and
Playentertainment, L.L.P.
TABLE OF CONTENTS
ARTICLE 1 - DEFINITIONS |
1 | |||
ARTICLE 2 - PRELIMINARY MATTERS |
4 | |||
ARTICLE 3 - FORMATION OF THE JV |
5 | |||
ARTICLE 4 - CONTRIBUTIONS; CAPITAL ACCOUNTS; DISTRIBUTIONS |
6 | |||
ARTICLE 5 - MANAGEMENT OF THE JV |
8 | |||
ARTICLE 6 - COVENANTS |
10 | |||
ARTICLE 7 - REPRESENTATIONS AND WARRANTIES |
11 | |||
ARTICLE 8 - TERM AND TERMINATION |
13 | |||
ARTICLE 9 - TRANSFERS OF PARTICIPATING INTERESTS; WITHDRAWAL |
14 | |||
ARTICLE 10 - CONVERSION OF JV INTERESTS |
16 | |||
ARTICLE 11 - MISCELLANEOUS |
17 |
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JOINT VENTURE AND LIMITED LIABILITY COMPANY AGREEMENT
THIS AGREEMENT is entered into as of March 24, 2004, by and between Teknik Digital Arts, Inc., a Nevada corporation (“Teknik”), and Playentertainment, L.L.P., an Arizona limited liability partnership (“Playentertainment” ).
WHEREAS, Teknik and Playentertainment desire to form the JV as a limited liability company under the Arizona Limited Liability Company Act, A.R.S. §§ 29-601, et seq., as amended from time to time (the “Arizona Act”), to conduct the Business.
For purposes of this Agreement: “Arizona Act” means “The Arizona Limited Liability Company Act,” Arizona Revised Statutes, §§ 29-601, et seq.;
“Capital Account” has the meaning set forth in Section 4.5(a);
“Capital Expenditure” means any amount properly incurred by a Member to purchase or maintain any item of equipment or other capital asset for the JV, which amount would be recorded as a capital expenditure for GAAP purposes;
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“Capital Expenditure Distribution Amount” means, with respect to any Capital Expenditure, ten percent of the amount of such Capital Expenditure in the fiscal quarter in which such Capital Expenditure is incurred and in each of the succeeding nine fiscal quarters;
“Change of Control” means any event (except going public), transaction or occurrence as a result of which the current shareholders or interestholders of a Member cease to directly or indirectly own and control 50% or more of the economic and voting rights of each class of the outstanding capital stock or the interests of such Member on a fully diluted basis.
“Code” means the Internal Revenue Code of 1986, as amended;
“Common Stock” means the common stock of Teknik.
“Deceased Spouse” has the meaning set forth in Section 9.1(c);
“Development Activities” means the research, development, manufacture and sale of the Video Games, including the provision of the funding for the acquisition of the Future JV Licenses and the provision of accounting services.
“Distribution Allocation” has the meaning set forth in Section 4.6;
“Divorced Member” has the meaning set forth in Section 9.1(d);
“Divorced Spouse” has the meaning set forth in Section 9.1(d);
“Existing Playentertainment Licensed Property” means, collectively, the rights of Playentertainment or its affiliates; (i) subject to The Next Action Star License, to publish Video Games for console and mobile applications; and (ii) subject to the Fear Factor License, to publish Video Games for mobile applications, which rights shall be assigned to the JV by Playentertainment pursuant to Section 4.4(a)(i);
“Existing Playentertainment Licenses” means the the Next Action Star License and the Fear Factor License.
“Fear Factor License” means the agreement dated April 1, 2003, and related documents, by which an affiliate of Playentertainment has obtained from NBC Enterprises, Inc. the right to use the Fear Factor name, logo, content, ideas and copyrights associated with the “Fear Factor” television program in the production and publishing of Video Games.
“Fiscal Year” has the meaning set forth in Section 3.5;
“Future JV Licenses” means the rights hereafter acquired by the JV to publish Video Games.
“GAAP” means generally accepted accounting practices in the United States, consistently applied;
“Improvements” means any and all Technology developed by (or on behalf of) the JV or Teknik, alone or in conjunction with others, or with respect to which the JV or Teknik acquires intellectual property rights, during the term of this Agreement;
“Initiating Member” has the meaning set forth in Section 9.6;
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“JV” means “Teknik Playentertainment,LLC”, or such other name hereafter selected by the Members, the limited liability company to be formed by the Members pursuant to Article 3;
“JV Financings” means short or long term secured or unsecured JV debt, or private placements or public offerings of JV equity;
“JV Licenses” means the Existing Playentertainment Licenses and the Future JV Licenses;
“Know-How” means the general and specific knowledge, experience, and information, not in written or printed form, used by the JV or Teknik and applicable to the design, development, manufacture, assembly, servicing, or sale of Video Games;
“Liens” means all charges, claims, encumbrances, leases, liens, mortgages, security interests, and other restrictions of any kind and nature against personal or real property;
“Liquidating Member” has the meaning set forth in Section 8.3;
“Management Committee” has the meaning set forth in Section 5.1(a);
“Manager” has the meaning set forth in Section 5.4;
“Maximum Drawdown Other Member” has the meaning set forth in Section 9.5;
“Member Spouse” has the meaning set forth in Section 9.1(c);
“Member Representatives” has the meaning set forth in Section 5.1(a);
“Members” has the meaning set forth in Section 3.4;
“Membership Interest Conversion Right” has the meaning set forth in Section 10.1;
“Net Distributions” has the meaning set forth in Section 4.6;
“Net Profits” or “Net Loss” means, as appropriate, the taxable income or loss of the JV for a designated period for Federal income tax purposes as determined by the JV’s independent public accountants, increased by the amount of any tax-exempt income of the JV during such period and decreased by the amount of any Code Section 705(a)(2)(B) expenditures of the JV within the meaning of Treasury Regulation Section 1.704-1(b)(2)(iv) of the JV;
“Next Action Star License” means the agreement dated November 21, 2003, and related documents, by which an affiliate of Playentertainment has obtained from Xxx Xxxxxxxx Marketing Group, LLC the right to use the Next Action Star name, logo, content, ideas and copyrights associated with the “Next Action Star” television program in the production and publishing of Video Games.
“Other Member” has the meaning set forth in Section 9.5;
“Participating Interests” has the meaning set forth in Section 4.1;
“Party” or “Parties” means an individual or entity that has executed this Agreement or is an assignee under it;
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“Playentertainment” has the meaning set forth in Section 3.4;
“Playentertainment Assignment” has the meaning set forth in Section 4.4(a)(i);
“Profit/Loss Allocation” has the meaning set forth in Section 4.2;
“Reimbursable Expenses” means: (i) a Party’s direct costs and expenses incurred after the date hereof relative to the development, fabrication, manufacture, or distribution of the Video Games for the JV, (ii) a Party’s costs and expenses incurred after the date hereof relative to its corporate overhead, administration of the JV, promotion of the Video Games, and negotiation for the JV, which overhead, administrative and general costs that are reasonable and fairly attributable to the JV shall be determined by mutual agreement of both Parties, (iii) a Party’s out-of-pocket expenses incurred after the date hereof for the JV in developing the Improvements, and (iv) a Party’s out-of-pocket legal and other expenses incurred in the preparation of this Agreement and the organization of the JV;
“Subject Interest” has the meaning set forth in Section 9.1(a);
“Technical Data” means documents containing technical information, engineering or production data, blueprints, drawings, plans, specifications, descriptions of assembly and manufacturing procedures, quality and inspection standards, test records and data, and other written materials owned and used by the JV or Teknik, and applicable to the design, development, manufacture, assembly, servicing, or sale of Video Games;
“Technology” means Technical Data in human or machine readable form, inventions (whether or not patentable), works of authorship, products, Know-How, manufacturing methods, processes, concepts, designs, computer hardware and software, models, prototypes, automations, designs, and related information and things applicable to the design, development, manufacture, assembly, servicing, or sale of Video Games;
“Teknik” has the meaning set forth in Section 3.4;
“Terms of Sale” has the meaning set forth in Section 9.5;
“Third Party Expenses” means any amounts owing by the JV or a Party on behalf of the JV to third parties unaffiliated with a Party;
“Unauthorized Transfer” has the meaning set forth in Section 9.2; and
“Video Games” means the video games developed and marketed by the JV pursuant to the JV Licenses;
“Withdrawing Member” has the meaning set forth in Section 9.1(a).
ARTICLE 2 - PRELIMINARY MATTERS
2.1. THE EXISTING PLAYENTERTAINMENT LICENSED PROPERTY. Concurrent with the execution of this Agreement as defined in Paragraph 4.4, Playentertainment and/or its affiliates shall assign its interest in the Existing Playentertainment Licensed Property to the JV.
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ARTICLE 3 - FORMATION OF THE JV
3.1 Name and Address. The name of the JV shall be “Teknik Playentertainment, LLC”, or such other name hereafter selected by the Members. The principal place of business of the JV shall be 0000 X. Xxxxxxxxxx Xxxxx Xxxx # 000, Xxxxxxxxxx, Arizona.
3.2 Registered Office and Registered Agent. Xxxx Xxxx is hereby designated as the registered agent of the JV for service of process in the State of Arizona. His office located at 0000 X. Xxxxxxxxx #000, Xxxxxxx, Xxxxxxx 00000 is designated as the registered office of the JV in the State of Arizona. The JV may from time to time change its registered agent for service of process, the location of its registered office within the State of Arizona and the location of its principal place of business.
3.4 Members. The names and the addresses of the initial Members are as follows:
Name |
Address |
|
Teknik Digital Arts, Inc.
|
0000 X. Xxxxxxxxxx Xxxxx Xxxx #000 Xxxxxxxxxx, Xxxxxxx 00000 |
|
Playentertainment, L.L.P.
|
0000 X. Xxxxx Xxxxx #000 Xxxxxxxxxx, Xxxxxxx 00000 |
The initial Members may withdraw, be replaced, or be removed from the JV, and new Members may be added, withdraw, be replaced, or be removed from the JV, all as provided in this Agreement.
3.5 Fiscal Year. A “Fiscal Year” of the JV shall be a calendar year.
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ARTICLE 4 - CONTRIBUTIONS; CAPITAL ACCOUNTS; DISTRIBUTIONS
Name |
Participating Interest |
|||
Teknik Digital Arts, Inc. |
50 | % | ||
Playentertainment, L.L.P. |
50 | % |
Allocations attributable to | ||||||||
Video Games published | Allocations attributable to | |||||||
pursuant to the | Video Games published | |||||||
Name |
Next Action Star License |
pursuant to all other titles |
||||||
Teknik Digital Arts, Inc. |
50 | % | 60 | % | ||||
Playentertainment, L.L.P. |
50 | % | 40 | % |
4.3 Initial Capital Contributions. The initial capital contribution of each Member to the JV in cash or other property shall be as follows:
Name |
Initial Capital Contribution |
|||
Teknik Digital Arts, Inc. |
$ | 37,500.00 | ||
Playentertainment, L.L.P. |
$ | 37,500.00 |
4.4 Equalization Transactions.
(a) | Playentertainment shall: |
(i) | assign to the JV, in a form of assignment mutually acceptable to each of Teknik and Playentertainment (the “Playentertainment Assignment”), all of Playentertainment’s right, title, and interest in and to the Existing Playentertainment Licensed Property, for the purposes of engaging in the activities set forth in Section 3.3; and | |||
(ii) | make available for purchase by the JV the right to use all titles that Playentertainment hereafter obtains through its license negotiations; provided, that the purchase by the JV of such license rights shall be by mutual agreement of each of Teknik and Playentertainment. |
(b) | Teknik shall: |
(i) | undertake the Development Activities; and | |||
(ii) | make certain Capital Expenditures on behalf of the JV, as more particularly set forth in Section 6.1, and otherwise contribute, as Reimbursable Expenses, funds necessary to finance the Development |
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Activities; provided, that at any time and from time to time, Teknik may decide not to make such contributions but to rely on JV Financings negotiated, approved, and executed solely by Teknik during the term of this Agreement; and if such JV Financings are not available, Teknik will not be obligated to make such additional contributions; and |
(a) | 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: (i) credited with: (x) such Member’s initial capital contribution, (y) allocations of Net Profits to such Member, and (z) additional capital contributions made by such Member, including, without limitation, Capital Expenditures, and (ii) decreased by: (x) allocations of Net Losses to such Member, and (y) distributions to such Member of Capital Expenditure Distribution Amounts or Net Distributions. | |||
(b) | Upon the occurrence of any event specified in Treasury Regulation Section 1.704-1(b)(2)(iv)(i), the Management Committee may cause the Capital Accounts of the Members to be adjusted to reflect the fair market value of the JV’s assets at such time (as determined by the Management Committee in its sole discretion) in accordance with such regulation. |
Distributions attributable to | ||||||||
Video Games published | Distributions attributable | |||||||
pursuant to the | to Video Games published | |||||||
Name |
Next Action Star License |
pursuant to all other titles |
||||||
Teknik Digital Arts, Inc. |
50 | % | 60 | % | ||||
Playentertainment, L.L.P. |
50 | % | 40 | % |
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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 (the “Management Committee”) composed of two individuals (the “Member Representatives”), one of whom shall be appointed by each Member. The Management Committee shall be responsible for: (i) formulating the policy of the JV, (ii) determining initial and annual capital and operating budgets, (iv) authorizing individuals to carry out all material decisions regarding JV activities and operations, including decisions regarding material capital expenditures and investments, and (iii) monitoring the efforts and progress of such individuals to determine that such decisions are being properly implemented. In these regards, each of the Members agrees to devote the time and to exercise his best reasonable efforts to cause the JV to achieve its purposes, as set forth in Section 3.3. | |||
(b) | Meetings. |
(i) | The Management Committee shall meet at least once every month, or more or less frequently as determined by the Member Representatives. 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 |
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taken without a meeting if all of the Member Representatives consent in writing. | ||||
(ii) | Special meetings of the Management Committee may be held upon the call of any Member Representative for any purpose. Written notice of each regular and special meeting shall be sent to each Member Representative not less than twenty-four hours before such meeting. Notice of any meeting need not be given to any Member Representative who shall submit, either before or after the meeting, a signed waiver of notice or who shall attend the meeting. |
(c) | Term of Member Representatives. Each Member Representative shall hold office until his death, resignation, retirement, or removal by the Member that appointed him. If a vacancy shall occur in the Management Committee, the Member that appointed such vacating Member Representative may appoint his successor by giving written notice thereof to the other Member. 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. | |||
(d) | Compensation. Member Representatives 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 Representative. | |||
(e) | Quorum. The presence, by proxy, in person, or by telephone, of both Member Representatives at any regular or special meeting of the Management Committee shall be necessary to constitute a quorum. | |||
(f) | Vote. Each Member Representative shall vote the Participating Interest of the Member that appointed him. |
5.2 Actions of the Management Committee. At any meeting at which a quorum is present, the Management Committee shall act, except as otherwise provided herein, upon the vote of both Member Representatives, and such action shall be binding upon the Members and the JV.
5.3 Unanimous Consent Matters. The JV shall not take, and the Management Committee shall not cause the JV to take, any of the following actions without the consent in favor thereof of both Members:
(a) | waive any provision of this Agreement; | |||
(b) | sell, transfer, or encumber a material part 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 ownership interests in the JV, except as permitted in Section 4.4(b)(ii); |
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(d) | 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; | |||
(e) | enter into any transaction with, or make or incur any obligation to make any payment to, a Member or an affiliate of a Member, other than as expressly provided in this Agreement; | |||
(f) | merge, reorganize, or restructure the JV, or register any securities in the JV pursuant to any provision of any applicable securities laws, except as permitted in Section 4.4(b)(ii); or | |||
(g) | file a petition in voluntary bankruptcy; make an assignment for the benefit of creditors; consent to the appointment of a receiver or receivers of a material 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 or any State thereof or any similar laws of any other jurisdiction. |
5.4 Management. The day-to-day operations of the JV, including manufacturing, marketing, and sales decisions, shall be managed by Teknik. Teknik shall report regularly to the Management Committee. Teknik shall select a general manager (the “Manager”) reasonably satisfactory to the other Member and shall establish such other management positions as Teknik shall deem appropriate from time to time. The Manager shall be under a fiduciary duty to conduct the affairs of the JV in the best interests of the JV and its Members, including the safekeeping of all JV property and the use thereof for the exclusive benefit of the JV. The Manager may be removed by either Member for “good cause”, which for purposes of this Agreement shall be limited to an act relating to the business of the JV which constitutes fraud, gross negligence, a willful violation of fiduciary duty, a willful usurpation of an opportunity of the JV, willful misconduct, or a willful failure to follow directions of the Management Committee. The removal of a Manager shall be effective upon written notice from either Member. Following removal of a Manager, a new Manager may be appointed by Teknik subject to Playentertainment’s reasonable satisfaction. At any time when there is no Manager, the Manager’s responsibilities shall be vested in Teknik. The Manager shall devote such time and effort as is necessary for the management of the JV and the conduct of its business in an efficient, thorough, and businesslike manner, devoting appropriate attention to all matters affecting the conduct of the JV’s business.
5.5 Communications. The Members shall promptly advise and inform each other of any transaction, notice, event, or proposal, other than in the ordinary course of business of the JV, of which they become aware that directly relates to the management and operation of the JV or to any assets of the JV, to the extent any such matter does or could materially affect, either adversely or favorably, the JV, its business, or its assets.
6.1 Capital Expenditures.
(a) | Teknik shall devote adequate resources to the JV, subject to its right to rely on JV Financings as provided in Section 4.4(b), to engage in such Development Activities as are needed or desirable for the JV to achieve its purposes set forth in Section 3.3. |
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(b) | Consistent with capital budgets approved by the Management Committee, Teknik shall have the exclusive authority to commit to and make Capital Expenditures on behalf of the JV; provided, that a Capital Expenditure in excess of $100,000.00 shall require the prior written consent of Playentertainment, such consent not to be unreasonably withheld. Any equipment or capital assets purchased by Teknik on behalf of the JV shall be the property of the JV. |
6.2 Improvements; Protection of Rights in Improvements.
(a) | The JV shall devote adequate resources to the Development Activities in the furtherance of the development of the Video Games and to the research and development of Improvements to maximize the exploitation by the JV of the JV Licenses. Teknik shall present such Improvements to the JV and shall provide all information regarding such Improvements reasonably necessary for the JV to determine whether or not to endeavor to have patent letters issued for such Improvements. | |||
(b) | Playentertainment shall promptly consult with Teknik on any actions or events that could materially impact the value of the Existing Playentertainment Licenses assigned to the JV, including litigation. |
ARTICLE 7 - REPRESENTATIONS AND WARRANTIES
7.1 Playentertainment Representations and Warranties. Playentertainment hereby represents and warrants to Teknik as follows:
(a) | Due Organization and Good Standing. Playentertainment is a limited liability partnership duly organized, validly existing, and in good standing under the laws of the jurisdiction of its organization and has full power and authority to own its assets and properties and to carry on its business as now conducted. Playentertainment is duly qualified as a foreign limited liability partnership to transact business, and is in good standing, in each jurisdiction where the character of its properties, owned or leased, or the nature of its activities makes such qualification necessary, except where the failure to be so qualified would not have an adverse effect material to Playentertainment. | |||
(b) | Authorization and Validity of Agreements. Playentertainment has the full corporate power and authority to enter into, execute, and deliver this Agreement and the Playentertainment Assignment and to perform fully its obligations hereunder and thereunder. The execution, delivery, and performance of this Agreement and the Playentertainment Assignment, and the consummation of the transactions contemplated hereby and thereby, have been duly authorized by all necessary action on the part of Playentertainment. No other action is necessary for the authorization, execution, delivery, and performance by Playentertainment of this Agreement and the Playentertainment Assignment and the consummation by Playentertainment of the transactions contemplated hereby and thereby. This Agreement and the Playentertainment Assignment have been duly executed and delivered by Playentertainment and constitute valid and legally binding obligations of Playentertainment enforceable against it in accordance with their terms. |
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(c) | No Governmental Approvals or Notices. Neither the execution and delivery by Playentertainment of this Agreement and the Playentertainment Assignment, the performance by Playentertainment of its obligations hereunder and thereunder, nor the performance by Playentertainment of any action contemplated hereby or thereby requires any consent, approval, order, or authorization of, or registration or filing with, or the giving of notice to, any governmental or public body or authority. | |||
(d) | No Conflict. Neither the execution and delivery by Playentertainment of this Agreement and the Playentertainment Assignment, the performance by Playentertainment of its obligations hereunder and thereunder, nor the performance by Playentertainment of any action contemplated hereby or thereby will: (i) violate (with or without the giving of notice or the lapse of time or both) any law, rule, regulation, order, judgment, or decree, or (ii) conflict with or result in the breach or violation of, or constitute (or with or without the giving of notice or the lapse of time, or both, would constitute) a default under: (x) the partnership agreement of Playentertainment, or (y) any instrument, contract, or other agreement to which Playentertainment is a party or by or to which its assets or properties are bound or subject, including without limitation the Next Action Star License and the Fear Factor License. |
7.2 Teknik Representations and Warranties. Teknik hereby represents and warrants to Playentertainment as follows:
(a) | Due Organization and Good Standing. Playentertainment is a limited liability partnership duly organized, validly existing, and in good standing under the laws of the jurisdiction of its organization and has full power and authority to own its assets and properties and to carry on its business as now conducted. Playentertainment is duly qualified as a foreign limited liability partnership to transact business, and is in good standing, in each jurisdiction where the character of its properties, owned or leased, or the nature of its activities makes such qualification necessary, except where the failure to be so qualified would not have an adverse effect material to Playentertainment. | |||
(b) | Authorization and Validity of Agreements. Teknik has the full authority to enter into, execute, and deliver this Agreement and to perform fully its obligations hereunder. No other action is necessary for: (i) the authorization, execution, delivery, and performance by Teknik of this Agreement, or (ii) the consummation by Teknik of the transactions contemplated hereby. This Agreement has been duly executed and delivered by Teknik and constitutes a valid and legally binding obligation of Teknik enforceable against it in accordance with its terms. | |||
(c) | No Governmental Approvals or Notices. Neither the execution and delivery by Teknik of this Agreement, the performance by Teknik of its obligations hereunder, nor the performance by Teknik of any action contemplated hereby, requires any consent, approval, order, or authorization of, or registration or filing with, or the giving of notice to, any governmental or public body or authority. | |||
(d) | No Conflict. Neither the execution and delivery by Teknik of this Agreement, the performance by Teknik of its obligations hereunder, nor the performance by |
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Teknik of any action contemplated hereby will: (i) violate (with or without the giving of notice or the lapse of time or both) any law, rule, regulation, order, judgment, or decree, or (ii) conflict with or result in the breach or violation of, or constitute (or with or without the giving of notice or the lapse of time, or both, would constitute) a default under any instrument, contract, or other agreement to which Teknik is a party or by or to which his assets or properties are bound or subject. |
ARTICLE 8 - TERM AND TERMINATION
8.2 Termination. The JV shall be dissolved as set forth below:
(a) | by the mutual agreement of both Members; | |||
(b) | by the remaining Member, in the event the JV is required by a court of competent jurisdiction to recognize an Unauthorized Transfer, as set forth under Article 9.2 hereof; | |||
(c) | by the remaining Member, in the event the other Member withdraws, pursuant to Article 9.4 hereof; | |||
(d) | upon a Change of Control of Teknik; | |||
(e) | upon the exercise by Playentertainment of its Membership Interest Conversion Rights under Article 10 of this Agreement; or | |||
(f) | upon the giving of at least ninety days’ prior written notice: |
(i) | by either of the Members, effective at the end of the Initial Term or any Additional Term, | |||
(ii) | by either Member in the event the other Member has materially breached its obligations under this Agreement and fails to cure such breach within thirty days of receipt of notice from the non-breaching Member of such breach, | |||
(iii) | by either Member at any time following the end of the first year of the Initial Term if the JV does not secure JV Financing adequate to fund the activities of JV, but only if Teknik is not funding the Reimbursable Expenses of the JV, or | |||
(iv) | by either Member in the event the other Member is in bankruptcy proceedings or has entered into an assignment for the distribution of assets to creditors. |
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inventory, and (ii) to sell any equipment and other assets owned by the JV. Upon the dissolution of the JV, the Liquidating Member shall pay out of JV assets, first the expenses of winding up, liquidation, and dissolution of the JV, and thereafter all of the remaining assets of the JV shall be distributed in the following order:
(a) to creditors, including the Members, in the order of priority as provided by law; provided, that repayment of Capital Expenditure Distribution Amounts and Reimbursable Expenses to Members shall be made in accordance with the Distribution Allocation, as set forth in Section 4.6; and provided further, that the excess of the amount of any Capital Expenditure over the prior distributions of Capital Expenditure Distribution Amounts made with respect to such Capital Expenditure shall be deemed to be a Capital Expenditure Distribution Amount for purposes of this Section 8.3(a); and
(b) to each Member in an amount equal to such Member’s Capital Account and thereafter in accordance with their respective Distribution Allocation, as set forth in Section 4.6. Any gain or loss attributable to the termination of the JV shall be allocated among the Members in accordance with their respective Profit/Loss Allocation, as set forth in Section 4.2.
ARTICLE 9 - TRANSFERS OF PARTICIPATING INTERESTS; WITHDRAWAL
9.1 Transfers of Participating Interests.
(a) | Death, Divorce, or Bankruptcy of a Member. |
(i) | In the event of the death of a Member (which for purposes of this Section 9.1 shall be deemed to cover the death, divorce, or bankruptcy of an individual owning a controlling interest in a Member that is a business entity), where the Participating Interest owned by the bankrupt or divorcing Member is or would be transferred in any manner to any other person as a result of the death, divorce, or bankruptcy of the Member (the deceased, divorcing, or bankrupt Member is referred to as the “Withdrawing Member”), the JV shall have the option to purchase and acquire from the estate of the Withdrawing Member, the Member, or any other person, all of the Participating Interest which the Withdrawing Member owned at the time of his death, divorce, or bankruptcy at the price and upon the terms and conditions set forth herein. Such purchase shall be closed within thirty days following the death of the Withdrawing Member or the agreement or order authorizing or compelling the transfer of the Member’s Participating Interest as a result of the divorce or bankruptcy of the Withdrawing Member. The Participating Interest subject to the obligations set forth in the preceding sentence shall be referred to herein as the “Subject Interest.” In the event that the JV shall be prohibited by law from purchasing the Subject Interest, or any portion thereof or elect not to purchase the Subject Interest, or any portion thereof, the remaining Member of the JV shall have the option to purchase and acquire the Subject Interest or the portion thereof which the JV does not purchase at the same price and upon the same terms and conditions applicable to the purchase thereof by the JV. Upon the occurrence of any of the foregoing, the Withdrawing Member or the personal representative of the Member shall be obligated to sell and convey the Subject Interest to the JV or the remaining Member at such price and upon the terms and conditions hereinafter set forth. |
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(ii) | The purchase price for the Subject Interest shall be that price agreed to by the Withdrawing Member, the personal representative of the Withdrawing Member, or any other legal representative of the Withdrawing Member, as applicable, and the JV or the remaining Member, as applicable. |
(b) | Death of a Member’s Spouse. | |||
In the event of the death of a spouse (the “Deceased Spouse”) of a Member (the “Member Spouse”) under circumstances in which by the will of the Deceased Spouse or by the laws of intestate succession the community interest of the Deceased Spouse in any Member’s Participating Interest would pass to or vest in a person other than the Member Spouse, either legally or beneficially, the Member Spouse shall have the option to purchase from such other person or the estate of the Deceased Spouse the community interest of the Deceased Spouse in such Participating Interest, and such other person and/or the estate of such Deceased Spouse shall sell any Member’s Participating Interest to the Member Spouse, at the price determined in accordance with Section 9.1(a)(ii). | ||||
(c) | Divorce of a Member. | |||
In the event of the divorce of a person that has ownership in, or contractual rights to control, a Member (the “Divorced Member”) under circumstances in which such person’s spouse (the “Divorced Spouse”) has or receives any interest in or to any Member’s Participating Interest by community property rights or otherwise, the Divorced Member shall have the option to purchase from the Divorced Spouse any and all interest of the Divorced Spouse in or to any Member’s Participating Interest, and the Divorced Spouse shall sell any such interest in and to such Member’s Participating Interest to the Divorced Member, at the price determined in accordance with Section 9.1(a)(ii). | ||||
(d) | Liens and Security Interests. | |||
No Member shall pledge, mortgage, hypothecate, or grant (or permit or suffer to attach) any lien or security interest in his or her Participating Interest without the prior written consent of the other Member, which approval shall not be unreasonably withheld. | ||||
(e) | Parties Bound. | |||
The provisions of this Section 9.1 shall be binding on each Member of the JV, and on the spouses, heirs, executors, administrators, successors, and assigns of each such Member. |
9.2 Unauthorized Transfers. Any purported transfer of any Member’s Participating Interest which does not comply with the conditions set forth in Section 9.1 (an “Unauthorized Transfer”) shall be null and void and of no force or effect whatsoever; provided, that if the JV is required by a court of competent jurisdiction to recognize an Unauthorized Transfer, then the person to whom such Participating Interest is transferred shall have only the rights of an assignee with respect to such Interest, and the remaining Member may terminate this Agreement pursuant to Section 8.2. Any distributions with respect
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to such transferred Participating Interest may be applied (without limiting any other legal or equitable rights of the JV) towards the satisfaction of any debts, obligations, or liabilities for damages that the transferor or transferee of such transferred Participating Interest may have to the JV.
9.3 Rights of Assignee. An assignee under Section 9.2 shall be entitled to distributions pursuant to Article 4 with respect to the Participating Interest transferred to such assignee. An assignee, in such capacity: (a) shall have no right to vote or otherwise participate in JV matters, (b) shall take no part in the management of the JV’s business and affairs or transact any business on behalf of the JV, (c) shall have no right to any notices provided hereunder, (d) shall have no power to sign on behalf of, or to bind, the JV, (e) shall have no right to any information or accounting of the affairs of the JV, (f) shall not be entitled to inspect the books or records of the JV, and (g) shall not have any other rights of a Member under the Arizona Act or this Agreement, other than those described in the first sentence of this Section 9.3.
9.4 Withdrawal of Members. Except as provided herein, a Member shall have the right to withdraw from the JV, but shall have no right to withdraw capital from the JV. Upon the written notice of a Member to withdraw, the remaining Member may terminate this Agreement pursuant to Section 8.2. Upon the written notice of a Member to withdraw and the continuation of the JV by the remaining Member, the withdrawn Member shall not receive any distribution for its Participating Interest, shall no longer be obligated to make additional capital contributions, shall remain obligated for liabilities and obligations incurred or accrued hereunder or by the JV prior to such withdrawal, and shall have (or may exercise) only those rights, if any, determined by the remaining Member. .
ARTICLE 10 - CONVERSION OF JV INTERESTS
(a) | twenty (20) times the share of the net pre-tax earnings of the JV for the most recent Fiscal Year allocated to Playentertainment; and | |||
(b) | five (5) times the share of the gross revenues of the JV for the most recent Fiscal Year allocated to Playentertainment. |
Such right of conversion shall be exercised by Playentertainment by giving written notice to Teknik of its election to convert its Membership Interest into Common Stock at any time during Teknik’s usual business hours on the date set forth in such notice, together with a statement of the name or names (with address) in which the certificate or certificates for shares of Common Stock shall be issued.
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and deliver, or cause to be issued and delivered, to Playentertainment, registered in such name or names as Playentertainment may direct, a certificate or certificates for the number of whole shares of Common Stock issuable upon the conversion of the Membership Interest. To the extent permitted by law, such conversion shall be deemed to have been effected and the Membership Interest Conversion Value and the per share value of the Common Stock shall be determined as of the close of business on the date on which such written notice shall have been received by Teknik, and at such time the rights of Playentertainment in respect of the JV shall cease, and the person or persons in whose name or names any certificate or certificates for shares of Common Stock shall be issuable upon such conversion shall be deemed to have become the holder or holders of record of the shares of Common Stock represented thereby.
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11.13 Amendments. This Agreement may be amended only by unanimous vote of the Management Committee.
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MEMBERS:
TEKNIK DIGITAL ARTS, INC. | PLAYENTERTAINMENT, L.L.P. | |||||
By:
|
By: | |||||
Name: Xxxx Xxxx | Name: Xxxxxxxx X. Xxxxxx | |||||
Title: President | Title: General Manager | |||||
By: | ||||||
Name: Xxxxxxxx X. Xxxxxx | ||||||
Title: General Manager | ||||||
NAS, L.P. | PLAYINTERACTIVE, L.L.P. | |||||
By:
|
By: | |||||
Name: Xxxxxxxx X. Xxxxxx | Name: Xxxxxxxx X. Xxxxxx | |||||
Title: General Manager | Title: General Manager | |||||
By:
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By: | |||||
Name: Xxxxxxxx X. Xxxxxx | Name: Xxxxxxxx X. Xxxxxx | |||||
Title: General Manager | Title: General Manager |
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