6.22 Sample Joint Venture Agreement: General Partnership Form
JOINT VENTURE AGREEMENT
THIS JOINT VENTURE AGREEMENT (the "Agreement"), is made and entered into as of the
_____ day of _____, _____ (the "Closing Date"), by and between _____, a [state] [corporation]
("Partner A") and _____, a [state] [corporation] ("Partner B").
RECITALS
A. Partner A and Partner B propose to form a joint venture to engage in the business of
[brief description of business]. Such business is described with more specificity in Section 3.1 of
this Agreement. Partner A and Partner B further propose that the joint venture take the form of a
general partnership.
B. Partner A has agreed to contribute [$_____] in cash to the partnership. Partner B has
agreed to contribute certain tangible and intangible property to the partnership. The partnership will
use such cash and other property to engage in the business described in Section 3.1 of this
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained,
the Venturers hereby covenant and agree as follows:
ARTICLE 1
DEFINITIONS
The following defined terms used in this Agreement shall have the respective meanings
specified below.
An "Affiliate", when used with respect to a specified Person, shall mean (i) any other
Person directly or indirectly controlling, controlled by, or under common control with, such
specified Person, (ii) any officer, director, partner (including any officer or director of Partner A or
Partner B), legal representative (including a trustee for the benefit of such specified Person) or
employee of such specified Person, and (iii) any Person for which such specified Person acts as an
officer, director, partner or employee. As used in this definition of "Affiliate," the term "control"
and any derivatives thereof mean the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of a Person, whether through ownership of
voting securities, by contract, or otherwise.
"Agreement" shall have the meaning set forth in the preamble.
"Annual Budget and Strategic Plan" shall have the meaning set forth in Section 6.7(b).
"Appraiser" shall mean an independent appraiser or investment bank.
The "Closing Date" shall have the meaning set forth in the preamble.
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"Contribution Agreement" will mean the Contribution Agreement dated as of the date
hereof between Partner A and Partner B.
"Debt Consideration" shall have the meaning set forth in Section 10.2(g).
The "Defaulting Venturer" shall have the meaning set forth in Section 11.2(a).
"Encumbrances" shall have the meaning set forth in Section 10.2(d).
An "Event of Default" shall have the meaning set forth in Section 11.2.
"Fair Market Value" shall mean, with respect to any property or asset, the dollar value of
the property or asset determined (i) by mutual agreement of the Venturers, or (ii) if the Venturers
cannot so agree within 20 days after one Venturer first proposes in writing to the other Venturer
that Fair Market Value be determined, by two independent Appraisers, one selected by each
Venturer, provided, that if a Venturer fails to appoint an Appraiser within 10 days following the
expiration of such 20 day period, Fair Market Value shall be determined by the Appraiser selected
by the other Venturer. If by two Appraisers are selected, each Appraiser shall submit to the
Venturers their respective appraisals within 30 days after their selection. If a discrepancy between
the dollar value of the appraisals exceeds 10% of the higher appraisal and the Venturers do not
agree on a settlement of the discrepancy within 10 days after receipt of the appraisals, then a third
Appraiser mutually selected by the Venturers (or if they cannot so select, then selected by the first
two Appraisers), shall be afforded access to the first two appraisals. The third Appraiser shall select
one of the appraisals of the first two Appraisers, which selection shall constitute a final
determination of Fair Market Value of the property or asset and shall be binding upon the
Venturers. If a discrepancy between the appraisals of the first two Appraisers is less than 10% of
the higher appraisal, then the Fair Market Value of the property or asset shall be the average of the
two appraisals.
The "Indemnified Party" shall have the meaning set forth in Section 16.3.
The "Indemnifying Party" shall have the meaning set forth in Section 16.3.
The "Insolvent Venturer" shall have the meaning set forth in Section 11.1.
"Insolvency Event" shall have the meaning set forth in Section 11.1
The "Liquidating Venturer" shall have the meaning set forth in Section 17.1.
The "Managing Board" shall mean those Members selected by the Venturers pursuant to
Section 6.1(b) who collectively manage the business and affairs of the Venture.
"Members" shall have the meaning set forth in Section 6.1(b).
The "Nondefaulting Venturer" shall have the meaning set forth in Section 11.2(a).
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"Notice of Default" shall have the meaning set forth in Section 11.2(a).
"Notice of Election" shall have the meaning set forth in Section 10.2(b).
"Notice of Proposed Transfer" shall have the meaning set forth in Section 10.2(a).
"Other Indemnified Persons" shall have the meaning set forth in Sections 16.1(a).
"Partner A" shall have the meaning set forth in the preamble.
The "Partner A Initial Contribution" shall have the meaning set forth in Section 5.1.
"Partner B" shall have the meaning set forth in the preamble.
The "Partner B Initial Contribution" shall have the meaning set forth in Section 5.2.
"Person" shall mean any individual, partnership, association, governmental instrumentality,
corporation, trust or other legal person or entity.
The "Principal Office" shall have the meaning set forth in Section 2.3.
The "Property Value" shall have the meaning set forth in Section 10.2(g).
A "Proposed Purchaser" shall have the meaning set forth in Section 10.2(a).
A "Proposed Transfer" shall have the meaning set forth in Section 10.2(a).
The "Proposing Venturer" shall have the meaning set forth in Section 10.2(a).
"Pro Rata Basis," when used with respect to the sale of the Venturers' interests in the
Venture pursuant to Section 10.2(b)(i), shall mean that each Venturer shall sell to the Proposing
Venturer a portion of its interest in the Venture. The sum of such portions shall equal the interest
that the Proposing Venturer proposed to transfer in its Notice of Proposed Transfer. The percentage
that each such portion bears to the total interest being conveyed shall equal the percentage that such
Venturer's interest in the Venture bears to the sum of the Venturers' interests in the Venture.
The "Purchase Price" shall have the meaning set forth in Section 10.2(a).
The "Remaining Venturer" shall have the meaning set forth in Section 10.2(a).
The "Rules" shall have the meaning set forth in Section 15.2.
The "Solvent Venturer" shall have the meaning set forth in Section 11.1.
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The "Tax Matters Partner" shall mean that Person required by Section 6231(a)(7) of the
Internal Revenue Code.
The "Term" shall have the meaning set forth in Section 2.4.
"Venture" shall have the meaning set forth in Section 2.1.
"Venturer" shall have the meaning set forth in Section 2.1.
ARTICLE 2
FORMATION OF VENTURE
2.1. Formation. Partner A and Partner B hereby form a general partnership (the "Venture")
for the purposes hereinafter set forth. Each of Partner A and Partner B (and their permitted
successors in interest) are general partners in the Venture and are referred to herein individually as
a "Venturer," and collectively as the "Venturers."
2.2. Name. The name of the Venture shall be: _______________ and the Venture shall be a
[Delaware] general partnership. The Venturers shall execute, publish and/or file all assumed or
fictitious name, or other similar, certificates required by law to be published or filed, in connection
with the formation and operation of the Venture in each state and locality where it is necessary or
desirable to publish or file such certificates in order to form, maintain and/or operate the Venture.
2.3. Principal Office. The principal office and headquarters of the Venture shall be at
[_________] or at such other place as the Managing Board may, from time to time, determine (the
"Principal Office").
2.4. Term. The Venture shall commence on the date of this Agreement and shall terminate
on [_________] (the "Term") unless sooner terminated as otherwise provided in this Agreement or
by law.
ARTICLE 3
PURPOSES AND POWERS
3.1. Purposes. The purposes for which the Venture is formed are [_________] and to
engage in such other business that may be approved by the Managing Board.
3.2. Powers. The Venture shall have such powers as are necessary or appropriate to carry
out the purposes of the Venture and for the protection and benefit of the Venture, including without
limitation, the following powers, directly or through subsidiaries:
(a) to form, own, manage and dissolve one or more subsidiaries;
(b) to borrow money and to guarantee the obligations of any subsidiary and any
other Affiliate of the Venture for any business, object or purpose of the Venture from time to time,
without limit as to amount; to issue promissory notes, drafts, bills of exchange, warrants, bonds,
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debentures, and any other kinds of negotiable and non-negotiable instruments and evidences of
indebtedness, whether or not in connection with borrowing money, and to secure the payment
thereof (and of the interest thereon) by the creation of any interest in the property or rights of the
Venture, or in any property owned by others when the Venture has the right so to do, whether
owned by or subject to such right of the Venture at the time such indebtedness is incurred or
thereafter;
(c) to purchase, borrow, acquire, hold, exchange, sell, distribute, assign, transfer,
lend, mortgage, pledge, hypothecate, convert, redeem, escrow or reissue instruments evidencing its
indebtedness;
(d) to make such investments as the Managing Board deems advisable and approves;
(e) to have and maintain one or more offices within or without the State of [_____],
and in connection therewith to rent, lease or purchase office or manufacturing space, facilities and
equipment, to engage and pay personnel and do such other acts and things and incur such other
expenses on its behalf as may be necessary or advisable in connection with the maintenance of such
offices or manufacturing space or the conduct of the Venture;
(f) to open, maintain and close bank accounts, and to draw checks and other orders
for the payment of money;
(g) to employ and dismiss from employment any and all employees, agents or
independent contractors;
(h) to sue and to defend suits, to prosecute, settle or compromise claims against
others, to compromise, settle or accept judgments or claims against the Venture and to execute all
documents and make any representations, admissions and waivers in connection therewith;
(i) to enter into, make and perform all such contracts, agreements and other
undertakings, including indemnity agreements, as may be necessary or advisable or incident to
carrying out the foregoing purposes; and
(j) to take such other actions as the Managing Board may deem necessary or
advisable in connection with the foregoing, including the retention of agents, independent
contractors, attorneys, accountants and other experts selected by the Managing Board on behalf of
and at the expense of the Venture, and in connection with the preparation and filing of all Venture
tax returns.
Without limiting the foregoing, the Venture may carry out its objectives and accomplish its
purposes as principal or agent, directly or indirectly through one or more of its subsidiaries or
Affiliates, alone or with associates, or as a member or as a participant in any firm, association, trust,
partnership or other entity. Although the Venture may engage in any or all of the above activities,
the Venture need not engage in any one or more of them.
ARTICLE 4
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INTERESTS OF VENTURERS
4.1. Interests. Except as otherwise expressly stipulated in Sections 8.5, 17.4 and 17.6, the
interest of the respective Venturers in the assets, liabilities, profits and losses of the Venture shall
be as follows:
Partner A 50%
Partner B 50%
4.2. Continuation of Interest. The interest of each Venturer in the Venture as provided in
Section 4.1 shall continue unless and until some or all of such interest is assigned pursuant to
Article 10.
ARTICLE 5
CAPITAL CONTRIBUTIONS AND OTHER CONTRIBUTIONS OF THE VENTURERS
5.1. Contribution of Partner A. Pursuant to the terms of the Contribution Agreement, upon
formation of the Venture, Partner A shall contribute to the Venture, as its capital contribution,
[$_____] (the "Partner A Initial Contribution"), and shall receive therefor the ownership interest in
the Venture described in Section 4.1.
5.2. Contribution of Partner B. Pursuant to the terms of the Contribution Agreement, upon
formation of the Venture, Partner B shall contribute to the Venture, as its capital contribution, the
assets set forth on Schedule A attached hereto (the "Partner B Initial Contribution"), and shall
receive therefor the owner Venture described in Section 4.1. The Venturers have agreed that the
Partner B Initial Capital Contribution has a fair market value of [$_____].
5.3. Additional Contributions. The Managing Board may call for additional capital
contributions to the Venture, provided that the timing and amount of such call must be reasonable
in view of the current and reasonably foreseeable future needs of the Venture. The amount to be
contributed by each Venturer shall be in the same proportion as each Venturer's percentage interest
in the Venture as provided in Section 4.1, provided, however, that no Venturer shall be required to
make contributions pursuant to this Section 5.3 which in the aggregate shall exceed [$_____].
5.4. Loans by Venturers. Any Venturer may lend funds to the Venture (i) upon the prior
written approval of all Venturers, (ii) upon the occurrence of an Event of Default, as described in
Sections 11.1 and 11.2, of the other Venturer, or (iii) upon the failure of the other Venturer to make
an additional capital contribution called for by the Managing Board pursuant to Section 5.3, above.
Any loan made by a Venturer to the Venture shall be upon such terms and conditions (including
interest) as the Managing Board shall determine. In the event a Venturer makes a loan pursuant to
clause (i) above, all principal and interest payments that have become due and payable with respect
to such loan shall be made prior to any distributions to the Venturers. In the event a Venturer makes
a loan pursuant to clause (ii) or (iii) above, the principal amount of such loan and any interest
accrued thereon shall be repaid in its entirety prior to the making of any distribution to the other
Venturer.
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5.5. No Withdrawals. The capital of the Venture shall not be withdrawn except as
hereinafter expressly stipulated.
ARTICLE 6
MANAGEMENT OF THE VENTURE
6.1. Managing Board.
(a) Except as reserved to the Venturers in this Agreement, the business and affairs of
the Venture shall be managed under the direction of the Managing Board, and the Managing Board
shall have all power and authority to manage, and direct the management and the business and
affairs of, the Venture. Any power not delegated pursuant to a policy of delegation adopted by the
Managing Board shall remain with the Managing Board. Approval by or action taken by the
Managing Board in accordance with this Agreement shall constitute approval or action by the
Venture and shall be binding on the Venturers.
(b) The Managing Board shall at all times consist of four members, two of whom
shall be appointed by Partner A and two of whom shall be appointed by Partner B (the "Members").
Each of Partner A and Partner B shall have the power to remove (with or without cause) any
Member of the Managing Board appointed by it by delivering written notice of such removal to the
Venture and to the other Venturer. Each Member shall serve until (i) his successor is designated by
the Venturer that appointed him or (ii) his earlier resignation, removal, death, or inability to serve.
Any Member may resign at any time upon written notice to the Venture and the Venturer that
appointed him. Vacancies on the Managing Board shall be filled by the Venturer that appointed the
Member previously holding the position which is then vacant. Appointment of a Member by a
Venturer shall be effective upon receipt of notice by the Venture and the other Venturer from the
Venturer taking such action.
6.2. Notice of Managing Board Meetings; Location; Waiver of Notice. Regular meetings of
the Managing Board shall be held at least once a quarter at the offices of the Venture or at such
other times and places as may be fixed by the Managing Board, and may be held without further
notice. Special meetings of the Managing Board may be called by the Chief Executive Officer or
by any two Members upon seven days' prior written notice, which notice shall identify the purpose
of the special meeting of the business to be transacted; provided that the failure to identify
specifically an action to be taken or business to be transacted shall not invalidate any action taken
or any business transacted at a special meeting. Notice of meeting may be waived before or after a
meeting by a written waiver of notice signed by the Member entitled to notice. A Member's
attendance at a meeting shall constitute waiver of notice unless the Member states at the beginning
of the meeting his objection to the transaction of business because the meeting was not lawfully
called or convened.
6.3. Quorum; Approvals; Proxies; Written Action. The presence in person or by proxy of at
least one Member of the Managing Board appointed by each Venturer shall constitute a quorum for
the transaction of business at a Managing Board meeting. The unanimous vote of all Members of
the Managing Board present at a duly constituted meeting shall govern all of the Managing Board's
actions and constitute approval by the Managing Board. Each Member of the Managing Board may
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vote by delivering his proxy to another Member of the Managing Board. The Managing Board may
act without a meeting if the action taken is approved in advance in writing by the unanimous
consent of all Members of the Managing Board. The Managing Board shall cause written minutes
to be prepared of all action taken by the Managing Board and shall cause a copy thereof to be
delivered to each Member within 15 days thereafter.
6.4. Authority of the Managing Board. Unless otherwise agreed to in writing by the
Venturers, the Managing Board, by its own action or by action of a subcommittee of the Managing
Board, but not by delegation to officers or other employees of the Venture, shall, in addition to any
other power granted to it in this Agreement, have the right, power and authority to take the
following actions and no such action will be taken without the approval of the Managing Board:
(a) making overall policy decisions with respect to the business and affairs of the
Venture;
(b) approving the Annual Budget and Strategic Plan for the Venture, and any
material amendments and supplements thereto;
(c) approving any contract, agreement and commitment with a value in excess of
$50,000 or a term longer than six (6) months (or a group of related contracts, agreements and
commitments with an aggregate value in excess of $50,000);
(d) approving the choice of bank depositories, and approving arrangements relating
to signatories on bank accounts;
(e) approving the choice of the Venture's attorneys, independent accountants, and
any other consultants, including but not limited to market consultants, leasing agents, management
agents, and advertising and public relations agents, where it is contemplated that such consultants
will provide services with a value in excess of $50,000, or for a period longer than six (6) months;
(f) approving all contracts that are proposed to be entered into between the Venture
and any Venturer or Affiliate of a Venturer, in accordance with the criteria set forth in Section 14.1;
(g) approving any change of the Venture's fiscal year;
(h) approving all distributions to the Venturers;
(i) approving the conveyance, sale, transfer, assignment, pledge, encumbrance, or
disposal of, or the granting of a security interest in, any assets of the Venture;
(j) approving the entry of the Venture into any other partnership or joint venture;
(k) the incurring of indebtedness by the Venture or the loaning of any sum or any
other extension of credit by the Venture to any Person in an amount in excess of $50,000, or for a
period in excess of six (6) months;
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(l) the guarantee by the Venture of any indebtedness of any other Person in any
amount in excess of $50,000 or for a period in excess of six (6) months, or the guarantee of any
contractual obligations of any other Person with a value in excess of $50,000 or for a period in
excess of six (6) months;
(m) the entrance by the Venture into any real estate lease with a value in excess of
$50,000 or a term greater than six (6) months, or the acquisition by the Venture of any real estate
with a value in excess of $100,000;
(n) the authorization of any Venturer to act for or to assume any obligation or
responsibility on behalf of the Venture;
(o) the employment, appointment and removal of any Venture employee who will be
involved in the day to day management of the business of the Venture, and who will receive
compensation in excess of $50,000 per year;
(p) any change in accounting principles used by the Venture, except to the extent
required by generally accepted accounting principles;
(q) approving any tax elections of the Venture;
(r) the conduct of litigation to which the Venture is a party;
(s) approving the acquisition of any business or a business division from any Person
whether by asset purchase, stock purchase, merger or other business combination; and
(t) approving the transfer of any assets of the Venture, or any interest therein, other
than in the ordinary course of business, the fair market value of which may reasonably be expected
to exceed $250,000.
6.5. Subcommittees. The Managing Board may designate one or more subcommittees. Each
subcommittee shall be composed of such number of Members as the Managing Board may
determine, including at least one Member appointed by each Venturer. Any subcommittee, to the
extent provided by the Managing Board, shall have and may exercise all the power and authority of
the Managing Board.
6.6. No Individual Authority. Except as otherwise expressly provided in this Agreement, no
Venturer, acting alone, shall have any authority to act for, or undertake or assume any obligation or
responsibility on behalf of, the other Venturer or the Venture.
6.7. Executive Officers.
(a) The Managing Board shall unanimously agree on and appoint a chief executive
officer (the "Chief Executive Officer"), who will manage the day-to-day affairs of the Venture,
carry out the directions of the Managing Board and effectuate the business plan as set forth in the
Annual Budget and Strategic Plan. Unless otherwise agreed to by the Venturers, the initial Chief
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Executive Officer will be [____]. In the event of [_____'s] death, retirement, resignation,
termination or inability to serve, a successor Chief Executive Officer shall be appointed by the
Managing Board.
(b) The Chief Executive Officer shall prepare, and submit to the Managing Board, as
soon as practicable after the date hereof for the fiscal year ending [____] and at least sixty (60) days
prior to the commencement of each subsequent fiscal year, an annual budget and a strategic plan
(the "Annual Budget and Strategic Plan") which describes the business plan for the Venture for
such fiscal year. Each Annual Budget and Strategic Plan approved by the Managing Board shall
remain operative until amended by the Managing Board or a successor Annual Budget and
Strategic Plan has been approved by the Managing Board. The Chief Executive Officer shall
conduct day-to-day affairs of the Venture in accordance with the approved Annual Budget and
Strategic Plan. The Chief Executive Officer shall additionally make all decisions for the Venture
which are not reserved to the Managing Board pursuant to this Agreement.
(c) The Managing Board shall unanimously agree on and appoint a treasurer, a
secretary, and a vice president (together with the Chief Executive Officer, each an "Executive
Officer") with such duties as may be established by the Managing Board.
6.8. Bank Accounts. The Venture shall maintain bank accounts in such banks as the
Managing Board may designate exclusively for the deposit and disbursement of all funds of the
Venture. All funds of the Venture shall be promptly deposited in such accounts. The Chief
Executive Officer from time to time shall authorize signatories for such accounts.
ARTICLE 7
DISTRIBUTIONS TO THE VENTURERS
7.1. Cash Payments. Distributions and capital withdrawals of cash shall be made in
accordance with Sections 7.2. and 17.6.
7.2. Distributions. The Venture shall distribute such cash or other property of the Venture as
may be approved by the Managing Board from time to time, such distributions to be made at the
end of the fiscal year to the Venturers in shares equal to their respective interests as specified in
Section 4.1 above.
ARTICLE 8
BOOKS AND RECORDS, AUDITS, CAPITAL ACCOUNTS AND TAXES
8.1. Books; Statements. The Venture shall keep accurate, full and complete books and
accounts showing its assets and liabilities, operations, transactions and financial condition. All
financial statements shall be accurate in all material respects, shall present fairly the financial
position and results of the Venture and shall be prepared on an accrual basis in accordance with
generally accepted accounting principles consistently applied. Except where specifically provided
for in this Agreement, the Managing Board shall determine the methods to be used in the
preparation of financial statements and federal, state and municipal income and other tax or
information returns for the Venture, in connection with all items of income and expense including,
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but not limited to, valuation of assets, the method of depreciation, elections, credits and accounting
procedures.
Following the formation of the Venture:
(a) No later than 20 days after each month during the term of this Agreement, the
Venture shall prepare and submit or cause to be prepared and submitted to each Venturer, an
accrual basis balance sheet together with an accrual basis profit and loss statement for the month
next preceding with a cumulative calendar year accrual basis profit and loss statement to date and
with such other financial statements and information as may be reasonably requested by a Venturer
or any of its Affiliates including any such information required to enable a Venturer or any of its
Affiliates to prepare quarterly reports to be filed pursuant to foreign, federal, or state securities
laws; and
(b) As soon as practicable after the end of each fiscal year of the Venture, a general
accounting and audit shall be taken and made by the Venture's independent certified public
accountants, covering the assets, properties, liabilities and net worth of the Venture, and its
dealings, transactions and operations during such fiscal year, and all other matters and things
customarily included in such accounts and audits, and a full, detailed certified statement shall be
furnished to each Venturer within 45 days after the end of such fiscal year, showing the assets,
liabilities, properties, net worth, profits, losses, and net income of the Venture for such fiscal year.
A full and complete report of the audit scope and audit findings in the form of a management audit
report shall also be furnished to each Venturer within 45 days after the end of such fiscal year.
8.2. Where Maintained; Access. The books, accounts and records of the Venture shall be at
all times maintained at the Principal Office. Each Venturer shall have access to and may inspect
and copy the books, accounts and records of the Venture, provided that any request for access to
the books, accounts and records of the Venture must be reasonable.
8.3. Audits. In addition to the foregoing, any Venturer may, at its option and at its own
expense, conduct internal audits of the books, records and accounts of the Venture. Audits may be
on either a continuous or a periodic basis or both and may be conducted by employees of any
Venturer, or of an Affiliate of any Venturer, or by independent auditors retained by the Venture or
by any Venturer.
8.4. Capital Accounts. A separate capital account shall be maintained for each Venturer.
The initial capital account of Partner A shall be equal to the dollar amount of the Initial Capital
Contribution of Partner A. The initial capital account of Partner B shall be equal to the dollar
amount of the Initial Capital Contribution of Partner B as set forth in Section 5.2. Except as
otherwise provided in Section 17.4, all items of income, gain, loss or deduction shall be allocated
equally between the Venturers and shall increase (in the case of income or gain) or decrease (in the
case of a loss or deduction) each Venturer's capital account. Distributions to a Venturer shall reduce
its capital account.
8.5. Taxes.
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(a) As soon as practicable after the end of each fiscal year of the Venture, the
Venture shall prepare and mail to each Venturer who had been a Venturer during such fiscal year a
report containing all information necessary for such Venturer to include its share of taxable income
or loss (or items thereof) in its income tax return.
(b) Except as otherwise provided in this Section 8.5, for tax purposes, all items of
income, gain, loss and deduction shall be allocated between the Venturers in the same manner that
the corresponding book items are allocated to the respective capital accounts of the Venturers.
(c) For federal income tax purposes, any loss attributable to a nonrecourse loan
made to the Venture by a Venturer (i.e., any loss that would be economically borne by such
Venturer in his capacity as lender) shall be allocated to such Venturer in accordance with Treas.
Reg. ¤ 1.704-1(b)(4)(iv)(g). If any allocation of loss is made pursuant to the preceding sentence,
subsequent income and gain of the Venture shall first be allocated to such Venturer until the
amount of income and gain so allocated equals the amount of loss previously allocated to the
Venturer pursuant to the preceding sentence.
(d) For federal income tax purposes, any loss attributable to a nonrecourse loan
made to the Venture other than by a Venturer shall be allocated pursuant to Treas. Reg. ¤ 1.7041(b)(4)(iv) according to the Venturers' interests in the Venture as described in Article 4.
(e) In accordance with Section 704(c) of the Code and the Treasury Regulations
thereunder, depreciation, amortization, gain and loss, as determined for tax purposes, with respect
to any contributed property the book value of which differs from its adjusted basis for federal
income tax purposes, shall, for tax purposes, be allocated between the Venturers so as to take
account of any variation between the adjusted basis of such property to the Venture for federal
income tax purposes and its book value.
The assets initially contributed to the Venture by Partner B shall have a book value
equal to the fair market value of such assets at the time of the contribution as set forth in Section
5.2.
Allocations pursuant to this Section 8.5 are solely for purposes of federal, state, and
local taxes and shall not affect, or in any way be taken into account in computing, the capital
account of any Venturer or such Venturer's share of profit, loss, other items, or distributions
pursuant to any provision of this Agreement. The provisions of this Section 8.5 relating to federal
income tax treatment of an item shall apply for state and local income tax purposes to the extent
permitted under applicable law. Any elections or other decisions relating to such allocations shall
be made by the Managing Board pursuant to Section 6.4(q) of this Agreement.
(f) The Tax Matters Partner of the Venture shall be designated from time to time by
the Chief Executive Officer. The Tax Matters Partner shall not extend the statute of limitations on
behalf of the Venture, submit any written material to any taxing authority, settle or offer to settle
any controversy, select the Venture's choice of litigation forum in a tax controversy, or take any
other action in its capacity as Tax Matters Partner without the consent of the Managing Board. The
Tax Matters Partner shall keep the Members of the Managing Board fully advised of the progress
of any audit and shall supply the Members of the Managing Board with copies of any written
communications received from the Internal Revenue Service or other taxing authority relating to
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any audit within ten (10) days of receipt thereof, and shall at least ten (10) business days prior to
submitting any materials to the Internal Revenue Service, or other taxing authority, provide such
materials to the Members of the Managing Board. The Tax Matters Partner shall be reimbursed by
the Venture for any reasonable expenses incurred in its capacity as Tax Matters Partner.
(g) If the Managing Board determines that any of the provisions of this Section 8.5
do not comply with the rules of Treas. Reg. ¤ 1.704-1(b)(3) for allocating income, gain, loss, and
deductions of the Venture in accordance with the Venturers' interests in the Venture, the Managing
Board may make any modifications required to cause such provisions to comply with such rules.
8.6. Other Information. The Venture shall make available to each Venturer such information
and financial statements in addition to the foregoing as shall be required by either of them in
connection with the preparation of registration statements, current and periodic reports, proxy
statements and other documents required to be filed under foreign, federal or state securities laws
and shall cooperate in the preparation of any such documents.
ARTICLE 9
FISCAL YEAR
9.1. Fiscal Year. The fiscal year of the Venture shall be January 1 through December 31,
unless the Managing Board shall approve any change thereto pursuant to Section 6.4(g).
ARTICLE 10
ASSIGNMENT AND RIGHTS TO SALE OF INTEREST
10.1. Consent Required. Except as provided in Sections 10.2 and 10.3, without the prior
written consent of the other Venturer (which may be withheld for any or no reason), no Venturer,
nor any assignee or successor in interest of any Venturer, shall (voluntarily or involuntarily) sell,
assign, give, pledge, hypothecate, encumber or otherwise transfer all or any part of its interest in the
Venture (including a transfer pursuant to a foreclosure sale of any of the assets of a Venturer), or
the assets of the Venture.
10.2. Right of First Refusal.
(a) If a Venturer proposes to sell, assign, or otherwise transfer (a "Proposed
Transfer") all or any part of its interest in the Venture to a third party (including an Affiliate) (a
"Proposed Purchaser"), such Venturer (the "Proposing Venturer") shall submit a written notice (a
"Notice of Proposed Transfer") to the other Venturer (the "Remaining Venturer") describing the
material terms and conditions of the Proposed Transfer in reasonable detail, including, without
limitation, the proposed purchase price (the "Purchase Price"), the amount and kind of
consideration to be paid, and the identity of the Proposed Purchaser. Such material terms and
conditions shall be confirmed in writing by the Proposed Purchaser.
(b) The Remaining Venturer shall have the right, exercisable by written notice (the
"Notice of Election") to the Proposing Venturer within 60 days of receipt of the Notice of Proposed
Transfer, to elect to:
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(i) require that its interest in the Venture be sold to the Proposed Purchaser
on a Pro Rata Basis with the sale of the Proposing Venturer's interest, and on the same terms and
conditions specified in the Notice of Proposed Transfer with respect to the Proposing Venturer's
interest in the Venture; or
(ii) purchase the Proposing Venturer's entire interest in the Venture on the
same terms and conditions specified in the Notice of Proposed Transfer; or
(iii) neither sell its interest in the Venture nor purchase the Proposing
Venturer's interest in the Venture.
The failure to deliver a Notice of Election within the required time period shall be deemed an
election by the Remaining Venturer of clause (iii) above.
(c) If the Remaining Venturer elects clause (i) of Section 10.2(b) above, (i) the
Proposing Venturer shall promptly, acting in good faith, seek to cause the Proposed Purchaser to
purchase both its and the Remaining Venturer's interests in the Venture on a Pro Rata Basis, and (ii)
the Proposing Venturer may transfer its interest in the Venture only if the Proposed Purchaser
purchases, within 60 days of the Notice of Election, both its and the Remaining Venturer's interest
in the Venture on a Pro Rata Basis and on the terms and conditions specified in the Notice of
Proposed Transfer.
(d) If the Remaining Venturer elects clause (ii) of Section 10.2(b) above, the
Venturers shall, within 30 days after receipt of the Notice of Election, execute such documents and
instruments reasonably acceptable to the Venturers required to consummate the contemplated
transaction on the terms and conditions specified in the Notice of Proposed Transfer (subject to
Section 10.2(g) below), and the closing of such purchase shall take place as soon as practicable
thereafter, but in any case within 30 days following the date on which any government regulatory
approvals required for the consummation of the transaction have been obtained or otherwise
satisfied. At such closing, the Proposing Venturer shall, and hereby covenants to, transfer its
interest in the Venture to the Remaining Venturer free and clear of any and all liens, mortgages,
pledges, security interests or other restrictions or encumbrances ("Encumbrances") other than
Encumbrances arising out of Venture financing.
(e) If the Remaining Venturer elects clause (iii) of Section 10.2(b) above, the
Proposing Venturer may transfer its interest in the Venture within 60 days after receipt of the
Notice of Election, but only on the terms and conditions, and only to the Proposed Purchaser,
specified in the Notice of Proposed Transfer.
(f) After the expiration of the time periods for the closing of a purchase or transfer
set forth in Sections 10.2(c), (d) and (e) above, no Venturer may sell, assign or otherwise transfer
its interest in the Venture except by submitting another Notice of Proposed Transfer and following
the procedures set forth in this Section 10.2.
(g) In the event the Purchase Price specified in the Notice of Proposed Transfer
includes any property (including, without limitation, notes or other evidences of indebtedness
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(collectively, "Debt Consideration")) other than cash, such Purchase Price shall be deemed to be the
amount of any cash included in the Purchase Price plus the fair market dollar value of such other
property. The fair market dollar value of such other property (the "Property Value") shall be
determined in good faith by the Proposing Venturer and set forth in the Notice of Proposed
Transfer. If, within 10 days after receipt of the Notice of Proposed Transfer, the Remaining
Venturer questions such determination, then the Fair Market Value of such other property shall be
determined and shall constitute the Property Value. If the Remaining Venturer advises the
Proposing Venturer that it questions the Proposing Venturer's determination of Property Value, the
60 day period referred to in Section 10.2(b) shall not commence until the determination of the
Property Value. Any consideration to be paid by the Remaining Venturer to the Proposing Venturer
pursuant to an election under clause (ii) of Section 10.2(b) shall be, at the option of the Remaining
Venture, (x) in cash in an amount equal to the cash and the Property Value (as determined above)
included in the Purchase Price, or (y) in the event the Purchase Price includes Debt Consideration,
in cash in an amount equal to the cash and the Property Value (as determined above) included in
the Purchase Price, minus the face amount of any Debt Consideration included in the Purchase
Price, plus a debt obligation of the Remaining Venturer equivalent as to face amount, interest rate
and other material terms of the Debt Consideration included in the Purchase Price.
(h) The fees of each of the first two Appraisers selected to determine Fair Market
Value pursuant to Section 10.2(g) above, shall be borne by the Venturer that selected it and the fees
of the third Appraiser, if any, shall be borne equally by the Venturers.
(i) No Venturer shall be entitled to exercise any of its rights under this Section 10.2
after receipt of an Offeree Notice in accordance with Section 10.3 hereof.
10.3. Right to Purchase and Sell.
(a) At any time, each Venturer (the "Offering Venturer") shall have the right,
exercisable from time to time by written notice to the other Venturer, to purchase the interest of the
other Venturer (the "Offeree Venturer") in the Venture at a price fixed by such Venturer (the
"Offered Price"). Within 10 days following the giving of such notice, the Offeree Venturer shall
have the right, exercisable by written notice to the Offering Venturer (the "Offeree Notice"), to (i)
accept the Offering Venturer's offer to purchase its interest in the Venturer at the Offered Price or
(ii) purchase the Offering Venturer's interest in the Venture at the Offered Price. Within 30 days of
the Offeree Notice, the Venturers shall execute such documents and instruments reasonably
acceptable to the Venturers required to consummate the contemplated transaction. The closing of
such transaction shall take place within 30 days following the date on which any government
regulatory approvals required for consummation of the transaction have been obtained or otherwise
satisfied. Should the Offeree Venturer elect to sell its interest pursuant to (i) above, at the closing of
such transaction, the Offeree Venturer shall, and hereby covenants to, transfer its interest in the
Venture to the Offering Venturer free and clear of any and all Encumbrances other than
Encumbrances arising out of Venture financing. Should the Offeree Venturer elect to purchase the
Offering Venturer's interest pursuant to (ii) above, at the closing of such transaction, the Offering
Venturer shall, and hereby covenants to, transfer its interest in the Venture to the Offeree Venturer
free and clear of any and all Encumbrances other than Encumbrances arising out of Venture
financing.
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10.4. Assumption by Assignee. Any assignment of all or a portion of an interest in the
Venture permitted under this Article 10 shall be in writing, and shall be an assignment and transfer
of all the assignor's rights and obligations hereunder with respect to such interest or portion thereof,
and the assignee shall expressly agree in writing to be bound by all of the terms of this Agreement
and assume and agree to perform all of the assignor's agreements and obligations hereunder with
respect to such interest or portion thereof existing or arising at the time of and subsequent to such
assignment. Upon any such permitted assignment of all or a portion of the assignor's interest, the
assignor shall be relieved of its agreements and obligations hereunder with respect to such interest
or portion thereof arising after such assignment. An executed duplicate copy of each such
assignment of an interest in the Venture and assumption of a Venturer's obligations shall be
delivered to the other Venturer and to the Venture. Upon such delivery, the assignee shall be
admitted to the Venture as a Venturer.
10.5. Allocation. Upon the transfer of a Venturer's interest or portion thereof in the Venture,
the distributive share of all items of income, gain, loss, deduction or credit associated with that
interest or portion thereof for the taxable year in which the transfer occurs shall be allocated
between the transferor and the transferee according to the relative number of days in the year before
and after the date the transfer is recognized by the Venture.
10.6. No Transfer in Violation of Law. No transfer of an interest in the Venture pursuant to
this Article 10 shall be permitted if such transfer would violate federal or state securities laws or
any other laws.
10.7. Other Assignment Void. Any purported assignment or transfer of an interest in the
Venture not permitted by this Article 10 shall be null and void and have no effect whatsoever.
ARTICLE 11
DEFAULTS
11.1. Insolvency. In the event:
(a) a receiver, liquidator, assignee, custodian, trustee, conservator, sequestrator (or
other similar official) shall take possession of a Venturer or any substantial part of its property
without its consent, or a court having jurisdiction in the premises shall enter a decree or order for
relief in respect of a Venturer in an involuntary case under any applicable bankruptcy, insolvency,
moratorium or other similar law now or hereafter in effect, or appointing a receiver, liquidator,
assignee, custodian, trustee, conservator, sequestrator (or other similar official) of such Venturer or
for any substantial part of its property, or ordering the winding-up or liquidation of its affairs and
such decree or order shall remain unstayed and in effect for a period of [60] consecutive days; or
(b) a Venturer shall commence a voluntary case under any applicable bankruptcy,
insolvency, moratorium or other similar law now or hereafter in effect, or shall consent to the entry
of an order for relief in an involuntary case under any such law, or shall consent to the appointment
of or taking possession by a receiver, liquidator, assignee, trustee, custodian, conservator,
sequestrator (or other similar official) of such Venturer or of any substantial part of its property, or
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shall make any general assignment for the benefit of creditors, or shall take any corporate action in
furtherance of any of the foregoing; or
(c) a Venturer shall admit in writing its inability to pay its debts as they mature; or
(d) a Venturer shall give notice to any governmental body of insolvency or pending
insolvency, or suspension or pending suspension of operations; then, in any such event (an
"Insolvency Event"), the other Venturer (the "Solvent Venturer") shall (i) have the right to cause
the determination of Fair Market Value and purchase the interest of the first Venturer (the
"Insolvent Venturer") in the Venture at a price equal to eighty percent (80%) of the Fair Market
Value of such interest, or (ii) at the option of the Solvent Venturer, cause a dissolution of the
Venture and the Solvent Venturer shall be the Liquidating Venturer (as described in Article 17).
The Venturers agree that damages resulting from an Insolvency Event are impossible to measure;
therefore the Venturers further agree that the reduction in the purchase price for the Insolvent
Venturer's interest in the Venture set forth in clause (i) above constitutes the Venturers' best
estimate of any such damages and is not a penalty. The rights of the Solvent Venturer shall become
exercisable as of the date of any such event and shall be exercised, if at all, within 60 days after (x)
the determination of Fair Market Value in the cause of clause (i) above, or (y) the Solvent Venturer
receives notice of such event in the case of clause (ii) above. The fees of any and all Appraisers
used to determine Fair Market Value under this Section 11.1 shall be borne by the Insolvent
Venturer.
11.2. Breach of Covenants; Failure to Perform Obligations.
(a) If any Venturer fails to perform any of its obligations or covenants or breaches
any of its representations hereunder (an "Event of Default"), then the other Venturer (the
"Nondefaulting Venturer") shall have the right to give such party (the "Defaulting Venturer") a
notice of default ("Notice of Default"). The Notice of Default shall set forth the nature of the
obligations which the Defaulting Venturer has not performed.
(b) If within the 30 day period following receipt of the Notice of Default, the
Defaulting Venturer in good faith commences to perform such obligations and cure such default,
and thereafter prosecutes to completion with diligence and continuity the curing thereof and cures
such default within a reasonable time, then it shall be deemed that the Notice of Default was not
given and the Defaulting Venturer shall lose no rights hereunder. If, within such 30 day period, the
Defaulting Venturer does not commence in good faith the curing of such default or does not
thereafter prosecute to completion with diligence and continuity the curing thereof, then the
Nondefaulting Venturer shall have the rights set forth in Section 11.2(c) below.
(c) If any default is not cured as set forth in Section 11.2(b), then the Nondefaulting
Venturer which gave the Notice of Default shall have the right to (i) cause the determination of Fair
Market Value and purchase the Defaulting Venturer's interest in the Venture at a price equal to
eighty percent (80%) of the Fair Market Value of such interest, or (ii) at the option of the
Nondefaulting Venturer, terminate this Agreement by giving the Defaulting Venturer written notice
thereof whereupon such default may be treated by such Nondefaulting Venturer as a dissolution of
the Venture, and such Nondefaulting Venturer shall be the Liquidating Venturer (as described in
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Article 17). The Venturers agree that damages resulting from an Event of Default are impossible to
measure; therefore the Venturers further agree that the reduction in the purchase price for the
Defaulting Venturer's interest in the Venture set forth in clause (i) above constitutes the Venturers'
best estimate of any such damages and is not a penalty. The rights of the Nondefaulting Venturer
shall become exercisable upon the expiration of the 30 day period referred to in Section 11.2(b), or
a reasonable time thereafter as determined in the judgment of the Nondefaulting Venturer if a cure
has not been completed, and shall be exercised, if at all, within 60 days after (x) the determination
of Fair Market Value in the case of clause (i) above, or (y) the expiration of such 30 day period or
reasonable time thereafter, as the case may be, in the case of clause (ii) above. The fees of any and
all Appraisers used to determine Fair Market Value under this Section 11.2(c) shall be borne by the
Defaulting Venturer.
(d) Failure by a Nondefaulting Venturer to give any Notice of Default as specified
herein, or any failure to insist upon strict performance of any of the terms of this Agreement, shall
not constitute a waiver of any such breach or any of the terms of this Agreement. No breach shall
be waived and no duty to be performed shall be altered or modified except by written instrument.
One or more waivers or failures to give Notice of Default shall not be considered as a waiver of a
subsequent or continuing breach of the same covenant.
11.3. Not Exclusive Remedy. The rights granted in Section 11.1 and Section 11.2 above
shall not be deemed an exclusive remedy of a Nondefaulting Venturer or a Solvent Venturer, but all
other rights and remedies, legal and equitable, shall be available to it.
ARTICLE 12
COVENANT NOT TO COMPETE
12.1. Covenant not to Compete. Each Venturer and its Affiliates are prohibited from
directly or indirectly engaging in or possessing an interest in an activity, the purpose or business of
which is similar to that described in Section 3.1, in any [geographic area] in which the Venture
does business during the Term of the Venture and for a period of three years following the
termination of the Venture as provided for in Section 2.4.
ARTICLE 13
REPRESENTATIONS AND WARRANTIES
13.1. Representations and Warranties by Partner A. Partner A represents and warrants to,
and covenants with Partner B, as follows:
(a) Partner A is a [corporation] duly organized and validly existing under the laws of
the State of [_____] and is in good standing in such jurisdiction. Partner A is qualified to do
business and in good standing as a foreign corporation in any other jurisdiction where the failure to
be so qualified or in good standing would have a material adverse impact on the business or
financial condition of the Venture.
(b) Partner A has the full right, power and authority to enter into this Agreement and
will at all times have the full power and authority to perform its obligations under this Agreement.
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This agreement has been duly authorized, executed and delivered by it, and this Agreement
constitutes its valid and binding obligation, enforceable in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency, moratorium or other loss affecting
creditors' rights generally, or equitable principles, whether applied in a proceeding in equity or law.
(c) Partner A is not, nor at any time will it be, a party to any contract or other
arrangement of any nature that will materially interfere with its full, due and complete performance
of this Agreement.
(d) There is no litigation or proceeding pending nor, to the best of Partner A's
knowledge and belief, is any investigation pending or litigation, proceeding, or investigation
threatened involving Partner A [or its parents], which could, if adversely determined, materially
and adversely affect the operation or financial condition of the Venture or the performance of
Partner A's obligations under this Agreement.
(e) Partner A is not, nor at any time will it be, in violation of any existing law, be it
state or federal, by entering into and undertaking the performance of this Agreement.
13.2. Representations and Warranties by Partner B. Partner B represents and warrants to,
and covenants with, Partner A, as follows:
(a) Partner B is a [corporation] duly organized and validly existing under the law of
the State of [_____] and is a [corporation] in good standing in such jurisdiction. Partner B is
qualified to do business and in good standing as a foreign corporation in any other jurisdiction
where the failure to be so qualified or in good standing would have a material adverse impact on
the business or financial condition of the Venture.
(b) Partner B has the full right, power and authority to enter into this Agreement and
will at all times have the full power and authority to perform its obligations under this Agreement.
This Agreement has been duly authorized, executed and delivered by it, and this Agreement
constitutes its valid and binding obligation, enforceable in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency, moratorium or other loss affecting
creditors' rights generally, or equitable principles, whether applied in a proceeding in equity or law.
(c) Partner B is not, nor at any time will it be, a party to any contract or other
arrangement of any nature that will materially interfere with its full, due and complete performance
of this Agreement.
(d) Partner B is not, nor at any time will it be, in violation of any existing law, be it
state or federal, by entering into and undertaking the performance of this Agreement.
(e) There is no litigation or proceeding pending nor, to the best of Partner B's
knowledge and belief, is any investigation pending or litigation, proceeding, or investigation
threatened involving Partner B [or its parents], which could, if adversely determined, materially and
adversely affect the operation or financial condition of the Venture or the performance of Partner
B's obligations under this Agreement.
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(f) Partner B has full rights in, and complete and unencumbered title to, the assets
conveyed by it to the Venture in accordance with Section 5.2.
ARTICLE 14
TRANSACTIONS WITH VENTURERS OR AFFILIATES
14.1. Transactions with Venturers or Affiliates. Any transaction between the Venture and a
Venturer or Affiliate of a Venturer shall be no less favorable to the Venture than would be the case
with unrelated entities in arms-length transactions.
ARTICLE 15
RESOLUTION OF DISPUTES
15.1. Mediation. If a disagreement exists between or among the Venturers concerning a
Venturer's exercise of its business judgment, as manifested by its Member's vote on the Managing
Board, any Venturer may require the other Venturer to submit the reasons for its position, in
writing, and to then enter into good faith negotiations to attempt to resolve the disagreement. If
such disagreement cannot be settled by good faith negotiation between the Venturers, and if the
continued failure to settle such disagreement is likely to have a material adverse impact on the
Venture, any Venturer may elect to submit the disagreement to mediation under the Commercial
Mediation Rules of the American Arbitration Association. If any Venturer so elects, the other
Venturer shall submit to mediation. The mediator shall not have authority to impose a settlement
upon the Venturers, but will attempt to help them reach a satisfactory resolution of the
disagreement. The mediator shall end the mediation whenever, in his judgment, further efforts at
mediation would not contribute to a resolution of the submitted disagreement.
15.2. Arbitration. All claims, disputes and other matters in question arising out of, or
relating to, this Agreement or the performance thereof shall be submitted to, and determined by,
arbitration if good faith negotiations among the parties do not resolve such claim, dispute or other
matter within 60 days and the parties have not elected to submit such claim, dispute or other matter
to mediation pursuant to Section 15.1. Such arbitration shall proceed in accordance with the
Commercial Arbitration Rules of the American Arbitration Association then pertaining (the
"Rules"), insofar as such Rules are not inconsistent with the provisions expressly set forth in this
Agreement, unless the parties mutually agree otherwise, and pursuant to the following procedures:
(a) Notice of the demand for arbitration shall be filed in writing with the other party
to this Agreement and with the American Arbitration Association. Each Venturer shall appoint an
arbitrator, and those party-appointed arbitrators shall appoint a third neutral arbitrator within 10
days. If the party-appointed arbitrators fail to appoint a third, neutral arbitrator within 10 days, such
third, neutral arbitrator shall be appointed by the American Arbitration Association in accordance
with the Rules. A determination by a majority of the panel shall be binding.
(b) Reasonable discovery shall be allowed in arbitration.
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(c) All proceedings before the arbitrators shall be held in [location]. The governing
law shall be as specified in Section 19.1.
(d) The costs and fees of the arbitration, including attorneys' fees, shall be allocated
by the arbitrators, except as provided for in Section 17.1.
(e) The award rendered by the arbitrators shall be final and judgment may be entered
in accordance with applicable law and in any court having jurisdiction thereof.
ARTICLE 16
INDEMNIFICATION
16.1. By the Venture.
(a) The Venture shall indemnify, defend, and hold harmless each Venturer
(including those who have been, but no longer are, Venturers) and its employees, officers, directors
and agents (the "Other Indemnified Persons") from and against all loss, cost, liability and expense
which may be imposed upon or reasonably incurred by such Venturer or Other Indemnified
Persons, including reasonable attorneys' fees and disbursements and reasonable settlement
payments, in connection with any claim, action, suit or proceeding or threat thereof, made or
instituted in which such Venturer or Other Indemnified Persons may be involved or be made a
party by reason of such Venturer being, or having been in the past, a Venturer, or by reason of any
action alleged to have been taken or omitted by such Venturer in such capacity, or by such Other
Indemnified Persons acting on behalf of such Venturer or the Venture, if such Venturer or Other
Indemnified Persons were acting in good faith and with reasonable care in what it (or he)
reasonably believed to be its (or his) scope of authority set forth in this Agreement and in the best
interests of the Venture.
(b) The Venture shall indemnify, defend, and hold harmless each Venturer
(including those who have been, but no longer are, Venturers) and the Other Indemnified Persons
from and against all loss, cost, liability and expense which may be imposed upon or reasonably
incurred by such Venturer or Other Indemnified Persons, including reasonable attorneys' fees and
disbursements and reasonable settlement payments, in connection with any claim, action, suit or
proceeding or threat thereof, made or instituted in which such Venturer or Other Indemnified
Person may be involved or be made a party because and to the extent that such Venturer or Other
Indemnified Persons have guaranteed to a third party the performance of any obligation of the
Venture; provided such guarantee was requested by the Venture in accordance with Section 6.4(n).
(c) Nothing in this Section 16.1 shall be construed to require the Venture to
reimburse, defend, indemnify or hold harmless any Venturer, Affiliate, or other Person with respect
to any loss, cost, liability or expense in any circumstance in which this Agreement requires a
Venturer to reimburse, defend, indemnify or hold harmless any other Venturer or the Venture.
16.2. By a Venturer. Each Venturer shall indemnify, defend, and hold harmless the Venture
and each other Venturer (including those who have been, but no longer are, Venturers) and its
Other Indemnified Persons from and against all loss, cost, liability and expense which may be
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imposed upon or reasonably incurred by the Venture or the other Venturer or Other Indemnified
Persons, including reasonable attorneys' fees and disbursements and reasonable settlement
payments, in connection with any claim, action, suit or proceeding or threat thereof, made or
instituted in which the Venture, the other Venturer or Other Indemnified Persons may be involved
or be made a party by reason of a breach of such Venturer's representations or covenants.
16.3. Procedure for Defense. Promptly after receipt by a person or entity indemnified under
any express provision of this Agreement (the "Indemnified Party") of notice of the commencement
of any action against the Indemnified Party, such Indemnified Party shall give notice to the person
or persons or entity or entities obligated to indemnify the Indemnified Party pursuant to the express
provisions of this Agreement (the "Indemnifying Party"). The Indemnifying Party shall be entitled
to participate in the defense of the action and, to the extent that it may elect in its discretion by
written notice to the Indemnified Party, to assume the control and defense and/or settlement of such
action; provided, however, that (i) both the Indemnifying Party and the Indemnified Party must
consent and agree to any settlement of any such action, except that if the Indemnifying Party has
reached a bona fide settlement agreement with the plaintiff(s) in any such action and the
Indemnified Party does not consent to such settlement agreement, then the dollar amount specified
in the settlement agreement shall act as an absolute maximum limit on the indemnification
obligation of the Indemnifying Party, and (ii) if the defendants in any such action include both the
Indemnifying Party and the Indemnified Party and if the Indemnified Party shall have reasonably
concluded that there are legal defenses available to it which are in conflict with those available to
the Indemnifying Party, then the Indemnified Party shall have the right to select separate counsel to
assert such legal defenses and otherwise to participate in the defense of such action on its own
behalf, and the fees and disbursements of such separate counsel shall be included in the amount
which the Indemnified Party is entitled to recover under the terms and subject to the conditions of
this Agreement.
ARTICLE 17
DISSOLUTION
17.1. Negation of Right to Dissolve by Will of Venturer.
(a) Except as set forth in Section 17.1(b) below, no Venturer shall have the right to
terminate this Agreement or dissolve the Venture by its express will or by withdrawal without the
express written consent of the other Venturer. Without limiting any other rights or remedies (in
equity or at law) available to a Venturer, upon any dissolution occurring in contravention of this
Agreement caused by the express will or withdrawal of Partner A, Partner B shall be the liquidating
Venturer (the "Liquidating Venturer"), and upon any dissolution occurring in contravention of this
Agreement caused by the express will or withdrawal of Partner B, Partner A shall be the
Liquidating Venturer.
(b) The Venture shall continue until dissolved and terminated pursuant to the terms
of this Agreement. The Venture shall disso
