UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): August 9, 2019
ALLIED ESPORTS ENTERTAINMENT, INC.
(Exact Name of Registrant as Specified in Charter)
Delaware | 001-38226 | 82-1659427 | ||
(State or other jurisdiction of incorporation) |
(Commission File Number) |
(I.R.S. Employer Identification No.) |
17877 Von Karman Avenue, Suite 300
Irvine, California, 92614
(Address of Principal Executive Offices) (Zip Code)
(949) 225-2600
(Registrant’s Telephone Number, Including Area Code)
Black Ridge Acquisition Corp., c/o Black Ridge Oil & Gas, Inc., 110 North 5th Street, Suite 410, Minneapolis, MN 55403
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
[_] | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
[_] | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
[_] | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
[_] | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e 4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common Stock | AESE | The NASDAQ Stock Market LLC |
Warrants | AESEW | The NASDAQ Stock Market LLC |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 1.01. | Entry into Material Definitive Agreement. |
As disclosed under the sections entitled “The Merger Proposal” and “The Agreement” beginning at pages 56 and 77, respectively, of the definitive proxy statement (the “Proxy Statement”) filed with the Securities and Exchange Commission (the “Commission”) on June 12, 2019 by Black Ridge Acquisition Corp. (“Black Ridge”), now known as Allied Esports Entertainment, Inc. (the “Company”), and as updated pursuant to the supplement to the Proxy Statement filed with the Commission on August 6, 2019 (the “Proxy Supplement”), Black Ridge entered into an Agreement and Plan of Reorganization, dated as of December 19, 2018 (the “Agreement”), with Black Ridge Merger Sub Corp. (“Merger Sub”), Allied Esports Media, Inc. (f/k/a Allied Esports Entertainment, Inc.) (“AEM”), Noble Link Global Limited (“Noble”), Ourgame International Holdings Ltd. (“Ourgame”), and Primo Vital Ltd. (“Primo”). Pursuant to the Agreement, on the closing date, Noble would merge with and into AEM (the “Redomestication Merger”) with AEM being the surviving entity of the Redomestication Merger, and immediately after the Redomestication Merger, Merger Sub would merge with and into AEM (the “Transaction Merger” and together with the Redomestication Merger, the “Mergers”), with AEM being the surviving entity of the Transaction Merger and becoming a wholly-owned subsidiary of the Company.
On August 5, 2019, the Company entered into an amendment to the Agreement (the “Amendment”). The Amendment reduced the closing condition originally contained in the Agreement requiring Black Ridge to have minimum cash on hand following the proper exercise of conversion rights by the holders of public shares from at least $80,000,000 to $22,000,000 (the “Cash Closing Condition”). The Agreement also originally provided for the Company to repay $35,000,000 of indebtedness of the entities which collectively comprise Allied Esports (“Allied Esports” or “AEII”) and the World Poker Tour® (hereinafter collectively referred to as “WPT”) owed to Ourgame in cash at the closing of the transactions. Pursuant to the Amendment, the parties agreed that instead of paying the full $35,000,000 in cash at the closing, the Company would (i) assume $10,000,000 of the debt obligations of Ourgame and Noble (including an additional $1,200,000 of accrued interest) and (ii) repay Ourgame the remaining balance of $23,800,000 by (a) paying $3,500,000 in cash to Ourgame and its designees, (b) issuing to Ourgame and its designees 2,928,679 shares of the Company’s common stock, and (c) Ourgame retaining $1,000,000 of the proceeds of such loans to pay its transaction expenses incurred in the Mergers (as defined below). Black Ridge Oil & Gas, Inc., the Company’s sponsor (the “Sponsor”) also agreed to transfer an aggregate of 600,000 shares of the Company’s common stock held by it to Ourgame.
Additionally, on August 5, 2019, the Company entered into an amendment and acknowledgement agreement (the “Acknowledgement Agreement”) pursuant to which Allied Esports and WPT amended the terms of a bridge financing, pursuant to which a series of convertible promissory notes (the “Notes”) were previously issued, whereby bridge holders provided $14 million to be used for the operations of Allied Esports and WPT. Pursuant to the Acknowledgement Agreement, the bridge holders have agreed to defer repayment of the Notes to one year and two weeks following the closing of the Mergers (the “Closing,” and the maturity date of the Notes, the “Maturity Date”). In consideration of agreeing to the deferred repayment, the bridge holders will be paid an additional six months of interest (i.e., a total of 18 months interest) to the extent any bridge holder elects not to convert their Note to equity. The Company agreed to assume the debt under the Notes as part of the Mergers, and agreed that the debt will be secured by all the assets of the Company following the Closing. The Sponsor also agreed that following the Closing, it would not make any further transfer of its initial shares, subject to certain exceptions, until the debt is repaid. The Notes are convertible at any time by a holder between the Closing and the Maturity Date, into shares that are freely tradable without restriction, at the lesser of $8.50 per share or the price at which shares are issued to Ourgame or its affiliates in connection with the Mergers.
On August 9, 2019, Black Ridge held a special meeting of stockholders (the “Special Meeting”), at which the Black Ridge stockholders considered and adopted, among other matters, a proposal to approve the Merger Agreement and the transactions contemplated thereby, including the Mergers.
Pursuant to the terms and subject to the conditions set forth in the Agreement, as amended by the Amendment (collectively, the “Merger Agreement”), following the Special Meeting, on August 9, 2019 (the “Closing Date”), Noble merged with and into AEM with AEM being the surviving entity of the Redomestication Merger, and immediately after the Redomestication Merger, Merger Sub merged with and into AEM, with AEM being the surviving entity of the Transaction Merger and becoming a wholly-owned subsidiary of the Company. As part of the Closing, Ourgame agreed to reduce the Cash Closing Condition to $20.8 million. As a result of the Mergers, the Company is now the owner of Allied Esports and WPT. Allied Esports is a premier esports entertainment company with a global network of dedicated esports properties and content production facilities. WPT is the creator of the World Poker Tour – the premier name in internationally televised gaming and entertainment with brand presence in land-based tournaments, television, online and mobile.
2 |
Item 2.01 of this Current Report on Form 8-K (the “Report”) discusses the consummation of the Mergers and various other transactions and events contemplated by the Merger Agreement (collectively, the “Transactions”) and is incorporated herein by reference.
Item 2.01. | Completion of Acquisition or Disposition of Assets. |
As described above, on August 9, 2019, Black Ridge held the Special Meeting, at which the Black Ridge stockholders considered and adopted, among other matters, a proposal to approve the Merger Agreement and the Transactions contemplated thereby. On the same date, the parties consummated the Mergers.
Holders of 12,261,851 shares of Black Ridge common stock sold in its initial public offering (“public shares”) exercised their rights to convert those shares to cash at a conversion price of approximately $10.29 per share, or an aggregate of approximately $126.2 million. 9,246,727 of such shares were redeemed in advance of Black Ridge’s special meeting held on July 9, 2019, and the remaining 3,015,124 were converted in advance of the Special Meeting.
As a result of the Mergers, among other things, pursuant to the Merger Agreement, the Company issued to the former owners of Allied Esports and WPT (i) an aggregate of 11,602,754 shares of common stock and (ii) five-year warrants to purchase an aggregate of 3,800,003 shares of common stock at a price per share of $11.50. Additionally, the former owners of Allied Esports and WPT will be entitled to receive their pro rata portion of an aggregate of an additional 3,846,153 shares of common stock if the last sales price of the Company’s common stock reported on the Nasdaq Capital Market equals or exceeds $13.00 per share (as adjusted for stock splits, dividends, and the like) for 30 consecutive trading days at any time during the five-year period after the consummation of the Mergers.
Pursuant to the terms of the Amendment, at the Closing, the Company also issued the following shares of its common stock: (i) 744,422 shares to management of WPT in satisfaction of profit participation agreements; (ii) 144,158 shares for prior bonus amounts owed to Adam Pliska, the President of the Company post-Closing and the CEO of WPT; (iii) 197,268 shares to finders (one of whom is Adam Pliska, who received 98,634 of such shares), and (iv) 1,842,831 shares to Primo Vital Limited in cancellation of $12,144,260 of debt owed by Allied Esports and WPT.
In July and August 2019, the Company entered into subscription agreements with several third parties (the “Subscribers”) pursuant to which the Subscribers agreed to purchase an aggregate of $18,000,000 of shares of the Company’s common stock in open market or privately negotiated transactions. Subscribers that were unable to purchase their full amount of shares of common stock in open market or privately negotiated transactions purchased 478,932 shares of common stock from the Company at Closing for $10.30 per share. One of the agreements also contains certain restrictions on the use of cash from the purchase following the closing of the Mergers. At the Closing, the Company issued to the Subscribers 262,136 shares of common stock pursuant to the agreements with the Subscribers representing 1.5 shares of common stock for every 10 shares purchased by them under the purchase agreements. Additionally, Black Ridge Oil & Gas, Inc., the Company’s sponsor from its initial public offering (the “Sponsor”), transferred an aggregate of 720,000 shares held by it to the Subscribers.
After giving effect to the Transactions, there are currently 23,088,700 shares of the Company’s common stock issued and outstanding. Upon the Closing, the Company’s common stock and warrants commenced trading on the Nasdaq Capital Market under the symbols “AESE” and “AESEW,” subject to ongoing review of the Company’s satisfaction of all listing criteria post-business combination.
3 |
As noted above, the aggregate conversion price of $126.2 million was paid to holders of public shares electing conversion from the Company’s trust account, and the remaining balance immediately prior to the Closing of approximately $15.9 million remained in the trust account. Of the remaining amount in the trust account, (i) approximately $2.3 million was used to pay transaction expenses and (ii) the balance of approximately $13.6 million was released to the Company to be used for working capital purposes.
Of the shares of the Company’s common stock and warrants issued as consideration for the Mergers, an aggregate of 1,160,275 shares of common stock and warrants to purchase an aggregate of 380,000 shares of common stock (“Escrow Securities”) were placed in escrow pursuant to an escrow agreement (“Indemnity Escrow Agreement”) entered into by the Company, Continental Stock Transfer & Trust Company, as escrow agent, and a representative of the former owners of Allied Esports and WPT. The Escrow Securities provide a fund of payment to the Company with respect to its post-closing rights to indemnification under the Merger Agreement for breaches of representations and warranties and covenants by the other parties to the agreement. Claims for indemnification will be reimbursable to the full extent of the damages in excess of a $500,000 deductible (but in no event in excess of the securities held in escrow). The Escrow Securities shall be released from escrow, subject to reduction for shares cancelled for claims ultimately resolved and those still pending resolution at the time of the release, on August 9, 2020 (the one-year anniversary of the Closing).
FORM 10 INFORMATION
Item 2.01(f) of Form 8-K states that if the registrant was a shell company, as the Company was immediately before the Mergers, then the registrant must disclose the information that would be required if the registrant were filing a general form for registration of securities on Form 10. Accordingly, the Company is providing below the information that would be included in a Form 10 if it were to file a Form 10. Please note that the information provided below relates to the combined company after the consummation of the Mergers, unless otherwise specifically indicated or the context otherwise requires.
Business
The business of the Company is described in the Proxy Statement in the section entitled “Business of Allied Esports and WPT” beginning on page 134 and that information is incorporated herein by reference.
Risk Factors
The risks associated with the Company’s business are described in the Proxy Statement in the section entitled “Risk Factors” beginning on page 28 and are incorporated herein by reference.
Financial Information
Reference is made to the disclosure set forth in Section 9.01 of this Report concerning the financial information of the Company.
4 |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS OF ALLIED ESPORTS AND WPT
The following discussion and analysis of AEII/WPT’s financial condition and results of operations should be read in conjunction with AEII/WPT’s combined financial statements and related notes included herein. In addition to historical combined financial information, the following discussion contains forward-looking statements that reflect AEII/WPT’s plans, estimates, or beliefs. Actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Current Report on Form 8-K and in the Proxy Statement, particularly in “Risk Factors.” AEII/WPT and BRAC assume no obligation to update any of these forward-looking statements.
Results of Operations
Six Months Ended June 30, 2019 Compared to Six Months Ended June 30, 2018
Percentage of revenue | ||||||||||||||||||||
Six Months ended June 30, | Increase | Six Months ended June 30, | ||||||||||||||||||
(in thousands except percentage of revenue data) | 2019 | 2018 | (Decrease) | 2019 | 2018 | |||||||||||||||
Revenues: | ||||||||||||||||||||
Multiplatform content | $ | 2,509 | $ | 1,172 | $ | 1,337 | 18.5% | 12.1% | ||||||||||||
Interactive | 4,764 | 4,681 | 83 | 35.1% | 48.2% | |||||||||||||||
In-person experiences | 6,300 | 3,866 | 2,434 | 46.4% | 39.8% | |||||||||||||||
Total revenues | 13,573 | 9,719 | 3,854 | 100.0% | 100.0% | |||||||||||||||
Costs and expenses: | ||||||||||||||||||||
Multiplatform (exclusive of depreciation and amortization) | 2,121 | 1,054 | 1,067 | 15.6% | 10.8% | |||||||||||||||
Interactive (exclusive of depreciation and amortization) | 1,406 | 1,290 | 116 | 10.4% | 13.3% | |||||||||||||||
In-person (exclusive of depreciation and amortization) | 1,491 | 2,778 | (1,287 | ) | 11.0% | 28.6% | ||||||||||||||
Online operating expenses | 530 | 1,771 | (1,241 | ) | 3.9% | 18.2% | ||||||||||||||
Selling and marketing expenses | 1,939 | 2,841 | (902 | ) | 14.3% | 29.2% | ||||||||||||||
General and administrative expenses | 8,666 | 8,494 | 172 | 63.8% | 87.4% | |||||||||||||||
Depreciation and amortization | 3,418 | 3,336 | 82 | 25.2% | 34.3% | |||||||||||||||
Impairment of investment in ESA | 600 | 4,338 | (3,738 | ) | 4.4% | 44.6% | ||||||||||||||
Loss from operations | (6,598 | ) | (16,183 | ) | 9,585 | -48.6% | -166.5% | |||||||||||||
Loss on equity method investment | – | – | – | 0.0% | 0.0% | |||||||||||||||
Interest expense, net | (67 | ) | (1,313 | ) | 1,246 | -0.5% | -13.5% | |||||||||||||
Other income | – | (116 | ) | 116 | 0.0% | -1.2% | ||||||||||||||
Net loss | $ | (6,665 | ) | $ | (17,612 | ) | $ | 10,947 | -49.1% | -181.2% | ||||||||||
Net loss attributed to non-controlling interest | – | 2,804 | (2,804 | ) | – | 28.9% | ||||||||||||||
Net loss attributed to Parent | (6,665 | ) | (14,808 | ) | 8,143 | -49.1% | -152.4% |
5 |
Revenues
Multiplatform content revenues increased by approximately $1.337 million, or 114%, to approximately $2.5 million for the six months ended June 30, 2019 from approximately $1.2 million for the six months ended June 30, 2018. The increase in multiplatform revenues all relate to the WPT business with increases in distribution revenue of approximately $551 thousand and approximately $545 thousand of music revenue. Sponsorship and Advertising revenue also increased by $241 thousand.
Interactive revenues increased by approximately $83 thousand, or 2%, to approximately $4.8 million for the six months ended June 30, 2019 from approximately $4.7 million for the six months ended June 30, 2018. The increase in interactive revenues all relates to the WPT business and pertains to an increase in product licensing revenue of approximately $83 thousand. Other revenue increased approximately $22 thousand. WPT managed social gaming in-house in 2018, but has licensed out the product resulting in a $417 thousand decrease in the 2019 period as compared to the 2018 period. This is offset by an increase in 3rd party virtual products revenue of approximately $432 thousand. Subscription revenue decreased by $37 thousand.
In-person experiences revenues increased by approximately $2.4 million, or 63%, to approximately $6.3 million for the six months ended June 30, 2019 from approximately $3.9 million for the six months ended June 30, 2018. The increase in in-person revenues is driven by AEII, particularly revenue generated from AEII’s flagship Esports Arena Las Vegas, which opened its doors in March of 2018. AEI’s revenues as a group increased by approximately $1.9 million for the six months ended June 30, 2019 compared to the same period in 2018. This was largely a result of increase in revenues at AEII’s flagship Esports Arena Las Vegas and gaming truck events. WPT casino revenue increased approximately $545 thousand for the six months ended June 30, 2019 compared to the same period in 2018.
Costs and expenses
Multiplatform costs (exclusive of depreciation and amortization) increased by approximately $1.1 million, or 101%, to approximately $2.1 million for the six months ended June 30, 2019 from approximately $1.1 million for the six months ended June 30, 2018. The increase in multiplatform costs was due to an increase of $872 thousand in production cost, an increase of $196 thousand in commissions.
Interactive costs (exclusive of depreciation and amortization) increased by approximately $116 thousand, or 9%, to approximately $1.4 million for the six months ended June 30, 2019 from approximately $1.3 million for the six months ended June 30, 2018. The increase in interactive costs relates to increase in revenue share cost of $158 thousand in 2019 as compared to 2018. There was also an increase in platform fees of $59 thousand. There was an increase of $28 thousand in prize pool over the same period in 2018. This is offset by the lower processing fees of $97 thousand, fewer chargebacks of $25 thousand and reduced other costs of $7 thousand.
In-person costs (exclusive of depreciation and amortization) decreased by approximately $1.3 million, or 46%, to approximately $1.5 million for the six months ended June 30, 2019 from approximately $2.8 million for the six months ended June 30, 2018. The decrease in in-person costs was due to the reduction in expenses related to the Esports Arenas Santa Ana and Oakland which are not consolidated in the six months ended June 30, 2019 due to the reduction in ownership. Therefore, no costs were included in these arenas for the six months ended June 30, 2019.
Online operating expenses decreased by approximately $1.2 million, or 70%, to approximately $0.5 million for the six months ended June 30, 2019 from approximately $1.8 million for the six months ended June 30, 2018.
WPT had a decrease in online expenses of approximately $891 thousand due to a decrease in development and hosting for the WPT platform.
6 |
Selling and marketing expenses decreased by approximately $0.9 million, or 32%, to approximately $1.9 million for the six months ended June 30, 2019 from approximately $2.8 million for the six months ended June 30, 2018. The decrease in selling and marketing expenses is partially related to a decrease in AEI’s advertising and promotion expense of approximately $524 thousand primarily pertaining to the grand opening of AEI’s flagship arena in Las Vegas in early 2018, WPT had additional decreases in advertising costs of approximately $89 thousand for the ClubWPT and PlayWPT products, $94 thousand decrease in agency and other promotional activities, and $210 thousand decrease in the costs incurred at events.
General and administrative expenses increased by approximately $0.2 million, or 2%, to approximately $8.7 million for the six months ended June 30, 2019 from approximately $8.5 million for the six months ended June 30, 2018. The increase in general and administrative expenses related primarily to the WPT business increase in general and administrative costs of approximately $1.7 million largely due to a credit of $0.8 million in 2018 resulting from a change in incentive structures. WPT also incurred $518 thousand in audit and legal costs in preparation for the transaction. WPT also incurred $264 thousand of additional rent relating to the new lease. AEII’s general and administrative expenses decreased by $1.5 million due to a reduction in overall general corporate expenses that were related to grand opening of the flagship arena in Las Vegas as well as the exclusion of Esports Arenas Santa Ana and Oakland expenses due to deconsolidation in the six months ended June 30, 2019.
Depreciation and amortization increased by approximately $0.1 million, or 2%, to approximately $3.4 million for the six months ended June 30, 2019 from approximately $3.3 million for the six months ended June 30, 2018. The increase in depreciation and amortization relates to increased depreciation for AEII’s flagship Esports Arena Las Vegas which was put into service in March of 2018 as well as the U. S. mobile arena truck which was purchased in January of 2018. The Company started depreciating the assets related to AEII’s flagship Esports Arena Las Vegas in the second quarter of 2018. WPT depreciation and amortization decreased by $433 thousand for the six months ended June 30, 2019 compared to the same period in 2018 mostly due to assets becoming fully depreciated and amortized, and assets that were previously fully depreciated being written off.
Impairment of investment in ESA was approximately $0.6 million for the six months ended June 30, 2019 and $4.3 million for the six months ended June 30, 2018. The losses were the result of the derecognition and disposal of the assets, liabilities and equity of an investment made in 2018 by AEII for which AEII conveyed a portion of its membership interests to the former non-controlling interest members in order to reduce its ongoing contribution requirements, thus reducing its membership interest to 25 percent.
Interest expense
Interest expense, was approximately $0.1 million and approximately $1.3 million for the six months ended June 30, 2019 and 2018, respectively. The 2019 interest relates to $4.0 million of convertible debt incurred in April of 2019. All of the interest in the 2018 period was related to loans to AEII from its parent company and/or affiliates to fund operating and capital costs. The loans from its parent were converted to equity in November 2018.
7 |
Year Ended December 31, 2018 Compared to Years Ended December 31, 2017
Percentage of revenue | ||||||||||||||||||||
Years ended December 31, | Increase | Year ended December 31, | ||||||||||||||||||
In thousands except percentage of revenue data | 2018 | 2017 | (Decrease) | 2018 | 2017 | |||||||||||||||
Revenues: | ||||||||||||||||||||
Multiplatform content | $ | 2,997 | $ | 1,441 | $ | 1,556 | 14.5% | 10.5% | ||||||||||||
Interactive | 9,175 | 7,792 | 1,383 | 44.5% | 57.0% | |||||||||||||||
In-person experiences | 8,431 | 4,440 | 3,991 | 40.9% | 32.5% | |||||||||||||||
Total revenues | 20,603 | 13,673 | 6,930 | 100.0% | 100.0% | |||||||||||||||
Costs and expenses: | ||||||||||||||||||||
Multiplatform (exclusive of depreciation and amortization) | 2,297 | 7,880 | (5,583 | ) | 11.1% | 57.6% | ||||||||||||||
Interactive (exclusive of depreciation and amortization) | 2,474 | 2,689 | (215 | ) | 12.0% | 19.7% | ||||||||||||||
In-person (exclusive of depreciation and amortization) | 2,554 | 969 | 1,585 | 12.4% | 7.1% | |||||||||||||||
Online operating expenses | 2,245 | 1,744 | 501 | 10.9% | 12.8% | |||||||||||||||
Selling and marketing expenses | 4,023 | 3,384 | 639 | 19.5% | 24.7% | |||||||||||||||
General and administrative expenses | 18,442 | 10,341 | 8,101 | 89.5% | 75.6% | |||||||||||||||
Depreciation and amortization | 6,711 | 4,207 | 2,504 | 32.6% | 30.8% | |||||||||||||||
Impairment of investment in ESA | 9,683 | – | 9,683 | 47.0% | 0.0% | |||||||||||||||
Impairment of deferred production costs and intangible assets | 1,005 | – | 1,005 | 4.9% | 0.0% | |||||||||||||||
Loss from operations | (28,831 | ) | (17,541 | ) | (11,290 | ) | -139.9% | -128.3% | ||||||||||||
Interest expense, net | (2,117 | ) | (540 | ) | (1,577 | ) | -10.3% | -3.9% | ||||||||||||
Other income | (72 | ) | (6 | ) | (66 | ) | -0.3% | 0.0% | ||||||||||||
Net loss | (31,020 | ) | (18,087 | ) | (12,933 | ) | -150.6% | -132.3% | ||||||||||||
Net loss attributed to non-controlling interest | 404 | – | 404 | 2.0% | 0.0% | |||||||||||||||
Net loss attributed to Parent | $ | (30,616 | ) | $ | (18,087 | ) | $ | (12,529 | ) | -148.6% | -132.3% |
Revenues
Multiplatform content revenues increased by approximately $1.6 million, or 108%, to approximately $3.0 million for the year ended December 31, 2018 from approximately $1.4 million for the year ended December 31, 2017. The increase in multiplatform revenues all relates to the WPT business with increases in distribution revenue of approximately $0.7 million, sponsorship revenue of approximately $0.2 million, television sponsorship revenue of approximately $0.5 million and approximately $0.2 million of music revenue.
Interactive revenues increased by approximately $1.4 million, or 18%, to approximately $9.2 million for the year ended December 31, 2018 from approximately $7.8 million for the year ended December 31, 2017. The increase in interactive revenues all relates to the WPT business and pertains to an increase in licensing revenue for virtual products.
8 |
In-person experience revenues increased by approximately $4.0 million, or 90%, to approximately $8.4 million for the year ended December 31, 2018 from approximately $4.4 million for the year ended December 31, 2017. The increase in in-person revenues is driven by revenue from AEII, particularly revenue generated from AEII’s flagship Esports Arena Las Vegas, which opened its doors in March of 2018. AEII’s revenues increased approximately $4.2 million when comparing the year ended December 31, 2018 compared to the same period in 2017, of which approximately $2.8 million was generated by Esports Arena Las Vegas, approximately $0.9 million was from the two Esports affiliates in Santa Ana and Oakland prior to their deconsolidation on August 1, 2018, approximately $0.4 million was generated by the U. S. mobile arena truck purchased in January of 2018 and approximately $0.4 million from increased revenues for the European mobile arena truck.
Costs and expenses
Multiplatform costs (exclusive of depreciation and amortization) decreased by approximately $5.6 million, or 71%, to approximately $2.3 million for the year ended December 31, 2018 from approximately $7.9 million for the year ended December 31, 2017. The decrease in multiplatform costs was due to the write-off in 2017 of approximately $3.7 million of production costs as deferred production costs were in excess of forecast revenues.
Interactive costs (exclusive of depreciation and amortization) decreased by approximately $0.2 million, or 8%, to approximately $2.5 million for the year ended December 31, 2018 from approximately $2.7 million for the year ended December 31, 2017. The decrease in interactive costs largely relates to lower processing fees in 2018 as compared to 2017 due to the mix of vendors.
In-person costs (exclusive of depreciation and amortization) increased by approximately $1.6 million, or 164%, to approximately $2.5 million for the year ended December 31, 2018 from approximately $1.0 million in for the year ended December 31, 2017. The increase in in-person costs relates to increased activity due to the opening of the Las Vegas flagship arena in March of 2018.
Online operating expenses increased by approximately $0.5 million, or 29%, to approximately $2.2 million for the year ended December 31, 2018 from approximately $1.7 for the year ended December 31, 2017. The increase in online expenses related to a increase in hosting fees for the WPT platform.
Selling and marketing expenses increased by approximately $0.6 million, or 19%, to approximately $4.0 million for the year ended December 31, 2018 from approximately $3.4 million for the year ended December 31, 2017. The increase in selling and marketing expenses related to an increase in AEII’s advertising and promotion expense of approximately $1.0 million primarily pertaining to the grand opening of AEII’s flagship arena in Las Vegas, offset in part by a decrease in advertising costs of approximately $0.2 million for the ClubWPT and PlayWPT products.
General and administrative expenses increased by approximately $8.1 million, or 78%, to approximately $18.4 million for the year ended December 31, 2018 from approximately $10.3 million for the year ended December 31, 2017. The increase in general and administrative expenses related primarily to increased general and administrative cost of approximately $9.8 million at AEII as it accelerated its activities with the opening of the Esports Arena Las Vegas and the U. S. mobile arena truck, and was comprised primarily of payroll and related costs, travel and professional services. Offsetting the increase at AEII, the WPT business had decreased general and administrative costs of approximately $1.7 million largely due to a $1.2 million decrease in stock-based payments as a change in incentive structures and $0.4 million in decreased legal costs and other associated costs due to a 2017 restructuring of WPT.
Depreciation and amortization increased by approximately $2.5 million, or 60%, to approximately $6.7 million for the year ended December 31, 2018 from approximately $4.2 million for the year ended December 31, 2017. The increase in depreciation and amortization relates to increased depreciation for AEII’s flagship arena in Las Vegas which was put into service in March of 2018 as well as the U. S. mobile arena truck which was purchased in January of 2018
9 |
Impairment of investment in ESA was approximately $9.7 million for the year ended December 31, 2018. There was no similar loss on deconsolidation in the 2017 comparative period. The 2018 loss was the result of the impairment, derecognition and disposal of the assets, liabilities and equity of an investment made earlier in 2018 by AEII for which AEII conveyed a portion of its membership interests to the former non-controlling interest members in order to reduce its ongoing contribution requirements, thus reducing its membership interest to 25 percent.
Impairment of deferred production costs and intangible assets was approximately $1.0 million in 2018. Management determined that the projected cash flows from certain deferred production costs and intellectual property would not be sufficient to recover the carrying value of those assets. There was no comparable loss in 2017.
Interest expense, net
Interest expense, net, was approximately $2.1 million and approximately $0.5 million for the year ended December 31, 2018 and 2017, respectively. Of the interest expense, approximately $2.0 million in the 2018 period and all of the interest in the 2017 period was related to loans to AEII from its parent company and/or affiliates to fund operating and capital costs. The increase in interest expense is due to the increases in the note payable to Parent balance as advances continued to be made throughout the last quarter of 2017 and the year ended December 31, 2018. The remaining interest expense in 2018 relates to a $5 million line of credit entered into by AEII in May of 2018 and repaid in October, 2018.
Net loss attributable to non-controlling interest
Net loss attributable to non-controlling interest was approximately $0.4 million for the year ended December 31, 2018. This is due to attributing the non-controlling share of losses to minority shareholders from January through July 31, 2018 while AEII was the majority shareholder in ESA. There were no similar attributions of losses or net income in the 2017 comparative period.
Liquidity and Capital Resources
AEII/WPT’s primary sources of liquidity and capital resources are cash on the balance sheet and borrowings from its parent. As of June 30, 2019, the Company had cash, a working capital deficit and Parent’s net investment of approximately $7.0 million, $33.6 million and $17.4 million, respectively. For the six months ended June 30, 2019 and 2018, the Company incurred net losses of approximately $6.7 million and $17.6 million, respectively, and used cash in operations of $5.0 million and $10.0 million, respectively. The aforementioned factors raise substantial doubt about the Company’s ability to continue as a going concern within one year after the issuance date of these condensed combined financial statements.
On May 15, 2019, Noble issued a series of secured convertible promissory notes (the “Notes”) whereby investors provided Noble with $4 million to be used for the operations of AEII/WPT. The Notes accrue annual interest at 12%; provided that no interest is payable in the event the Notes are converted into Company Common Stock as described below. The Notes are due and payable on the first to occur of (i) the one-year anniversary of the issuance date, or (ii) the date on which a demand for payment is made during the time period beginning on the closing date of the Merger and the date that is three (3) months after the closing date of the Merger upon conversion of the Notes into equity as part of the Merger. If the note is paid by AEM or BRAC, the investor will receive one year of interest. As security for purchasing the Notes, the investors received a security interest in Allied Esports’ assets (second to any liens held by the landlord of the Las Vegas arena for property located in that arena), as well as a pledge of the equity of all of the entities comprising WPT, and a guaranty of Ourgame and the Company. The debt is convertible into shares of BRAC common stock at $8.50 per share.
Additionally, on August 5, 2019, the Company entered into an amendment and acknowledgement agreement (the “Acknowledgement Agreement”) pursuant to which Allied Esports and WPT amended the terms of a bridge financing, pursuant to which the Notes and another $10 million series of convertible promissory notes (collectively, the “Bridge Notes”) were previously issued, whereby bridge holders provided $14 million to be used for the operations of Allied Esports and WPT. Pursuant to the Acknowledgement Agreement, the bridge holders have agreed to defer repayment of the Bridge Notes to one year and two weeks following the closing of the Mergers (the “Closing,” and the maturity date of the Notes, the “Maturity Date”). In consideration of agreeing to the deferred repayment, the bridge holders will be paid an additional six months of interest (i.e., a total of 18 months interest) to the extent any bridge holder elects not to convert their Bridge Note to equity. The Company agreed to assume the debt under the Bridge Notes as part of the Mergers, and agreed that the debt will be secured by all the assets of the Company following the Closing. The Sponsor has also agreed that it will not make any further transfer of its initial shares, subject to certain exceptions, until the debt is repaid. The Bridge Notes are convertible at any time by a holder between the Closing and the Maturity Date, into shares that are freely tradable without restriction, at the lesser of $8.50 per share or the price at which shares are issued to Ourgame or its affiliates in connection with the Mergers.
10 |
Each Bridge Note holder will receive a Warrant to purchase shares of BRAC Common Stock in an amount equal to the product of (i) 3,800,000 shares, multiplied by (ii) the investor’s investment amount, divided by (iii) $100,000,000. The Warrants will be subject to the exercise price and such other terms and conditions as determined by BRAC and Ourgame in the Merger; provided, however, the terms and conditions of the Warrant and the date of issuance of the Warrants shall be the same as the warrants to be issued to Ourgame, the Company and/or its affiliates in connection with the Merger.
If the investors in the bridge financing elect to convert their Bridge Notes into Company Common Stock, they would be entitled to receive additional shares of Company Common Stock (the “Earn-out Shares”) equal to the product of (i) 3,846,153 shares, multiplied by (ii) the investor’s investment amount, divided by (iii) $100,000,000, if at any time within five years after the closing date of the Merger, the last exchange-reported sale price of Company Common Stock trades at or above $13.00 for thirty (30) consecutive calendar days.
Cash Flows from Operating, Investing and Financing Activities
The tables below summarize cash flows for the six months ended June 30, 2019 and 2018, and the years ended December 31, 2018 and 2017.
Six months ended June 30, | Year ended December 31, | |||||||||||||||
In thousands | 2019 | 2018 | 2018 | 2017 | ||||||||||||
Net cash provided by (used in): | ||||||||||||||||
Operating activities | $ | (4,965 | ) | $ | (9,989 | ) | $ | (14,612 | ) | $ | (10,759 | ) | ||||
Investing activities | (2,219 | ) | (20,252 | ) | (23,072 | ) | (6,133 | ) | ||||||||
Financing activities | 3,683 | 30,531 | 34,295 | 27,974 |
Net Cash Used in Operating Activities
Net cash used in operating activities primarily represents the results of operations exclusive of non-cash expenses, including depreciation, amortization, losses on disposal of assets, stock-based compensation and the impact of changes in operating assets and liabilities.
Net cash used in operating activities for the six months ended June 30, 2019 was approximately $5.0 million as compared to approximately $10.0 million for the six months ended June 30, 2018, a decrease of approximately $5.0 million. The primary driver for the decrease in cash used in operating activities was a decrease in the net loss to approximately $6.7 million for the six months ended June 30, 2019 from approximately $17.6 million in the comparable 2018 period. The reduction in loss was driven by increased sales, primarily from increased in-person revenues generated from AEII’s flagship Esports Arena Las Vegas as well as an increase in Truck revenue and events revenue and a reduction in impairment expenses of approximately 3.7 million. Changes in operating working capital items (excluding cash, debt and balances due to Parent) increased cash used in operations by $2.4 million and $1.2 million for the six months ended June 30, 2019, and 2018 respectively.
Net cash used in operating activities for the year ended December 31, 2018 was approximately $14.6 million as compared to approximately $10.8 million for the year ended December 31, 2017, an increase of approximately $3.8 million. The primary driver for the increase in cash used in operating activities was the increase in general and administrative expenses and selling and marketing expenses which together represent approximately $8.7 million increase and result primarily from the growth of the operations of AEII, which was formed in 2016 and experienced an increase in activity with the construction and completion of its Las Vegas arena in 2018.
Net Cash used in Investing Activities
Net cash used in investing activities primarily relates to the purchase of property and equipment.
11 |
Net cash used in investing activities for the six months ended June 30, 2019 was approximately $2.2 million as compared to approximately $20.3 million for the six months ended June 30, 2018, a decrease of approximately $18.0 million. The primary driver for the decrease in cash used in investing activities was the construction and completion of AEII’s Las Vegas arena in 2018.
Net cash used in investing activities for the year ended December 31, 2018 was approximately $23.1 million as compared to approximately $6.1 million for the year ended December 31, 2017, an increase of approximately $17.0 million. The primary driver for the increase in cash used in investing activities was the construction and completion of AEII’s Las Vegas arena in 2018.
Net Cash Provided by (Used in) Financing Activities
Net cash provided by financing activities primarily relates to the proceeds from cash infusions from Ourgame in the form of notes or intercompany payables and the issuance of Allied Esports’ line of credit and the issuance of convertible notes in 2019.
Net cash provided by financing activities for the six months ended June 30, 2019 was approximately $3.7 million as compared to approximately $30.5 million for the six months ended June 30, 2018, a net decrease of approximately $26.8 million. The primary driver for the decrease was a net decrease in cash infusions from Ourgame for the six months ended June 30, 2019 of $30.8 million as compared the comparable 2018 period offset by $4.0 million of convertible debt obtained in 2019. The cash infusions in the six months ended June 30, 2018 were primarily used for the construction and completion of AEII’s Las Vegas arena.
Net cash provided by financing activities for the year ended December 31, 2018 was approximately $34.3 million as compared to approximately $28.0 million for the year ended December 31, 2017, an increase of approximately $6.3 million. The primary driver for the increase was cash infusions of approximately $34.3 million from Ourgame in the year ended December 31, 2018 as compared to approximately $28.0 million in the comparable 2017 period. Proceeds of approximately $5.0 million from the issuance of an Allied Esports’ line of credit were received in 2018 and subsequently repaid in the same year.
Capital Expenditures
AEII will require continual investment to facilitate its growth plans. As a result of the reduced cash available after the closing of the Merger, we plan to pivot our business goals to focus on expanding and strengthening our strategic partnerships and developing other potential avenues of business, which we are in the process of finalizing. We will provide further updates in future filings as we update our business plans.
Debt Agreements
Line of Credit
In May 2018, Allied Esports entered into a $5,000,000 line of credit with a bank, bearing interest of 2.650% per annum with monthly payments of interest only. The line of credit is secured by a $5,000,000 certificate of deposit provided by Parent as collateral. All outstanding principal and accrued interest were due at maturity in May 2019. During the year ended December 31, 2018, Allied Esports paid an aggregate $55,178 of interest payments. In October 2018, the $5,000,000 line of credit was repaid by the Parent using its collateralized certificate of deposit resulting in an addition to the balances due to the Parent.
12 |
Convertible Debt
See “Related Part Transactions – Second Bridge Financing” below.
Contractual Obligations
AEII/WPT enters into certain contractual obligations in the normal course of its business. The following table summarizes the known contractual commitments as of June 30, 2019:
(in thousands) | Total | Less than 1 year | 1-3 years | 3-5 years | More than 5 years | |||||||||||||||
Operating lease obligations | 27,923 | 2,229 | 4,979 | 5,029 | 15,686 | |||||||||||||||
Total | $ | 27,923 | $ | 2,229 | $ | 4,979 | $ | 5,029 | $ | 15,686 |
Off-Balance Sheet Arrangements
AEII/WPT does not engage in any off-balance sheet financing activities, nor does AEII/WPT have any interest in entities referred to as variable interest entities.
Customer Concentration
One customer accounted for 11% and 15% of AEII/WPT revenues for the six months ended June 30, 2019 and 2018, respectively.
During the six months ended June 30, 2019 and 2018, 11% and 15%, respectively, of AEII/WPT revenue was from customers in foreign countries.
During the year ended December 31, 2018, one customer accounted for 15% of total AEII/WPT revenue. No customer accounted for more than 10% of the AEII/WPT revenue in the year ended December 31, 2017.
During the years ended December 31, 2018 and 2017, 14% and 17%, of AEII/WPT revenue was from customers in foreign countries.
Seasonality
Historically, WPT’s results of operations have not been significantly affected by seasonality. AEII’s results of operations maybe affected by seasonality in the Las Vegas market where 1st and 4th quarters tend to be slightly lower than the rest of the year.
Quantitative and Qualitative Disclosures About Market Risk
AEII/WPT is exposed to market risks from foreign currency fluctuation. AEII/WPT has not entered into any derivative financial instrument transaction to manage or reduce market risk for speculative purposes. AEII/WPT has no significant exposure to interest rate or commodity price fluctuation. The combined financial statements are subject to subject to concentrations of credit risk consisting primarily of accounts receivable.
13 |
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. AEII/WPT regularly evaluates estimates and judgments based on historical experience and other relevant facts and circumstances.
AEII/WPT discusses its significant estimates used in the preparation of the financial statements in the notes accompanying the financial statements. Listed below are the accounting policies AEII/WPT believes are critical to its financial statements due to the degree of uncertainty regarding the estimates or assumptions involved.
Impairment of Long-Lived Assets
The Company reviews for the impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company measures the carrying amount of the asset against the estimated undiscounted future cash flows associated with it. Should the sum of the expected future net cash flows be less than the carrying value of the asset being evaluated, an impairment loss would be recognized for the amount by which the carrying value of the asset exceeds its fair value. The evaluation of asset impairment requires the Company to make assumptions about future cash flows over the life of the asset being evaluated. These assumptions require significant judgment and actual results may differ from assumed and estimated amounts. During the year ended December 31, 2018 the Company recorded an aggregate of $1,005,292 for impairment charges related to deferred production costs and intangible assets, and recorded an impairment charge of $9,683,158 related to its investment in ESA. During the six months ended June 30, 2019 the Company recorded an impairment charge of $600,000 related to its investment in ESA.
Deferred Production Costs
Capitalized production costs represent the costs incurred to develop and produce the Company’s proprietary shows. These costs primarily consist of labor, equipment, production overhead costs and travel expenses. Capitalized production costs are stated at the lower of cost, less accumulated amortization and tax credits, if applicable, or fair value. Production costs in an amount up to the amount of ultimate revenue expected to be earned from the related production are capitalized in accordance with FASB ASC Topic 926-20-50-2 “Other Assets – Film Costs” and are amortized over the expected revenue period using a ratio of revenue earned during the period to estimated ultimate revenues for the related production. Costs incurred in excess of expected ultimate revenue are expensed as incurred and included in Multiplatform costs in the accompanying combined statements of operations. Unamortized capitalized production costs are evaluated for impairment at each reporting period on a season-by-season basis. If estimated remaining revenue is not sufficient to recover the unamortized capitalized production costs for that season, the unamortized capitalized production costs will be written down to fair value.
Due to the inherent uncertainties involved in making such estimates of revenues and expenses, these estimates are likely to differ to some extent from actual results. The Company’s management regularly reviews and revises when necessary its revenue and cost estimates, which may result in a change in the rate of amortization of film costs, participations and residuals and/or write-down of all or a portion of the unamortized deferred production costs to its estimated fair value.
Revenue Recognition
The Company recognizes revenue when the following four criteria are met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services rendered; (3) fees are fixed or determinable, and (4) the collectability is reasonably assured.
For multiple element contracts, the Company allocates consideration to the multiple elements based on the relative selling price of each separate element which are determined using vendor specific objective evidence, third-party evidence or the Company’s best estimate in order to assign relative fair values.
14 |
Recent Accounting Pronouncements
In May 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers (Topic 606),” (“ASU 2014-09”). ASU 2014-09 supersedes the revenue recognition requirements in ASC 605 - Revenue Recognition (“ASC 605”) and most industry-specific guidance throughout ASC 605. The FASB has issued numerous updates that provide clarification on a number of specific issues as well as requiring additional disclosures. The core principle of ASC 606 requires that an entity recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. ASC 606 defines a five-step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than required under existing U.S. GAAP including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. The guidance also requires enhanced disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. The guidance may be adopted through either retrospective application to all periods presented in the financial statements (full retrospective approach) or through a cumulative effect adjustment to retained earnings at the effective date (modified retrospective approach). The guidance was revised in July 2015 to be effective for private companies and emerging growth public companies for annual and interim periods beginning on or after December 15, 2018. Except for certain contracts related to the Company’s distribution and event revenue streams, the Company has completed its ASC 606 analysis and, to date, no material differences in revenue recognition policies have been identified, as compared to ASC 605.
In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). ASU 2016-02 requires an entity to recognize assets and liabilities arising from a lease for both financing and operating leases. ASU 2016-02 will also require new qualitative and quantitative disclosures to help investors and other financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. ASU 2016-02 is effective for private companies and emerging growth public companies for fiscal years beginning after December 15, 2019, with early adoption permitted. The Company is currently evaluating ASU 2016-02 and its impact on its combined financial statements.
In March 2016, the FASB issued ASU No. 2016-09, “Compensation – Stock Compensation (Topic 718)” (“ASU 2016-09”). ASU 2016-09 requires an entity to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. ASU 2016-09 is effective for private companies and emerging growth public companies for fiscal years beginning after December 15, 2017, with early adoption permitted. The Company adopted this guidance effective January 1, 2018, and the standard did not have a material impact on the Company’s combined financial statements and related disclosures.
In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230) Classification of Certain Cash Receipts and Cash Payments” (“ASU 2016-15”). The new standard will make eight targeted changes to how cash receipts and cash payments are presented and classified in the statement of cash flows. The new standard is effective for fiscal years beginning after December 15, 2018. The Company will require adoption on a retrospective basis unless it is impracticable to apply, in which case the Company would be required to apply the amendments prospectively as of the earliest date practicable. The Company will require adoption on a retrospective basis unless it is impracticable to apply, in which case the Company would be required to apply the amendments prospectively as of the earliest date practicable. The adoption of ASU 2016-15 is not expected to have a material impact on the Company’s combined financial statements or disclosures.
In November 2016, the FASB issued ASU 2016-18, “Restricted Cash.” This guidance standardizes the presentation of changes to restricted cash on the statement of cash flows by requiring that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amount generally described as restricted cash or restricted cash equivalents. The provisions of this standard are effective for annual reporting periods, and interim reporting periods contained therein, beginning after December 15, 2017, and early adoption is permitted. The Company adopted this guidance effective January 1, 2018 and applied it retrospectively. The adoption of ASU 2016-18 had a material impact to the combined statements of cash flows, as the Company had $8,020,909 in restricted cash at December 31. 2017.
15 |
In May 2017, the FASB issued ASU No. 2017-09, Compensation — Stock Compensation (Topic 718); Scope of Modification Accounting. The amendments in this ASU provide guidance that clarifies when changes to the terms or conditions of a share-based payment award must be accounted for as modifications. If the value, vesting conditions or classification of the award changes, modification accounting will apply. The guidance is effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years. The Company adopted this guidance effective January 1, 2018, and the standard did not have a material impact on the Company’s combined financial statements and related disclosures.
In June 2018, the FASB issued ASU No. 2018-07, Compensation — Stock Compensation (Topic 718) - Improvements to Nonemployee Share-Based Payment Accounting, which simplifies accounting for share-based payment transactions resulting for acquiring goods and services from nonemployees. ASU 2018-07 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted. The Company is currently evaluating ASU 2018-07 and its impact on its combined financial statements or disclosures.
In July 2018, the FASB issued ASU No. 2018-10, “Codification Improvements to Topic 842, Leases” (“ASU 2018-10”). The amendments in ASU 2018-10 provide additional clarification and implementation guidance on certain aspects of the previously issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”) and have the same effective and transition requirements as ASU 2016-02. Upon the effective date, ASU 2018-10 will supersede the current lease guidance in ASC Topic 840, Leases. Under the new guidance, lessees will be required to recognize for all leases, with the exception of short-term leases, a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis. Concurrently, lessees will be required to recognize a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. ASU 2018-10 is effective for private companies and emerging growth public companies for interim and annual reporting periods beginning after December 15, 2019, with early adoption permitted. The guidance is required to be applied using a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative periods presented in the financial statements. The Company is currently assessing the impact this guidance will have on its combined financial statements.
In July 2018, the FASB issued ASU No. 2018-09, “Codification Improvements” (“ASU 2018-09”). These amendments provide clarifications and corrections to certain ASC subtopics including the following: Income Statement - Reporting Comprehensive Income – Overall (Topic 220-10), Debt - Modifications and Extinguishments (Topic 470-50), Distinguishing Liabilities from Equity – Overall (Topic 480-10), Compensation - Stock Compensation - Income Taxes (Topic 718-740), Business Combinations - Income Taxes (Topic 805-740), Derivatives and Hedging – Overall (Topic 815-10), and Fair Value Measurement – Overall (Topic 820-10). The majority of the amendments in ASU 2018-09 will be effective in annual periods beginning after December 15, 2019. The Company is currently evaluating and assessing the impact this guidance will have on its combined financial statements.
In July 2018, the FASB issued ASU No. 2018-11, “Leases (Topic 842): Targeted Improvements,” (“ASU 2018-11”). The amendments in ASU 2018-11 related to transition relief on comparative reporting at adoption affect all entities with lease contracts that choose the additional transition method and separating components of a contract affect only lessors whose lease contracts qualify for the practical expedient. The amendments in ASU 2018-11 are effective for private companies and emerging growth public companies for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The Company is currently assessing the impact this guidance will have on its combined financial statements.
In August 2018, the FASB issued ASU No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). The amendments in ASU 2018-13 modify the disclosure requirements associated with fair value measurements based on the concepts in the Concepts Statement, including the consideration of costs and benefits. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. The amendments are effective for all entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The Company is currently evaluating ASU 2018-13 and its impact on its combined financial statements.
16 |
Related Party Transactions
Amounts Due to Parent
As of December 31, 2018, amounts due to Parent consisted of payments of certain operating expenses, investing and financing activities made on behalf of AEII by the Parent. There is no stated interest rate or definitive repayment terms related to this liability.
Notes Payable to Parent
AEII had promissory notes payable to Parent. Borrowings on the notes are unsecured and bear interest at 6% per annum. The notes mature on December 31, 2021. During November and December of 2018, the amount due related to the notes of $37,372,522 and accrued interest payable of $2,150,487 were forgiven by the parent and recorded as a contribution to equity.
Bridge Financing
On October 11, 2018, the Parent issued a series of secured convertible promissory notes (the “Initial Notes”) whereby investors provided Parent with $10 million to be used for the operations of the Company. The Initial Notes were due and payable on the first to occur of (i) the one-year anniversary of the issuance date, or (ii) upon conversion of the Notes into equity as part of the Merger (as defined below). As security for purchasing the Initial Notes, the investors received a security interest in Allied Esports’ assets (second to any liens held by the landlord of the Las Vegas arena for property located in that arena), as well as a pledge of the equity of all of the entities comprising WPT. The liens and pledge described above would terminate upon the closing of the Merger.
Second Bridge Financing
On May 15, 2019, Noble issued a series of secured convertible promissory notes (the “Additional Notes,” and together with the Initial Notes, the “Notes”) whereby investors provided Noble with $4 million to be used for the operations of AEII/WPT. Ms. Man Sha purchased a $1 million Additional Note, and is the wife of Mr. Ng Kwok Leung Frank, who will join as a director and CEO upon the closing of the Mergers. As part of the Additional Notes, the terms of the Initial Notes were amended such that the terms of the Additional Notes applied to the Initial Notes. The Notes accrue annual interest at 12%; provided that no interest is payable in the event the Notes are converted into BRAC Common Stock as described below. The Notes were due and payable on the first to occur of (i) the one-year anniversary of the issuance date, or (ii) the date on which a demand for payment is made during the time period beginning on the Closing and ending on the date that is three (3) months after the Closing. If any Note is paid by AEM or BRAC, the investor will receive one year of interest. As security for purchasing the Notes, the investors received a security interest in Allied Esports’ assets (second to any liens held by the landlord of the Las Vegas arena for property located in that arena), as well as a pledge of the equity of all of the entities comprising WPT, and a guaranty of Ourgame and the Company. The debt is convertible into shares of BRAC Common Stock that are freely tradeable without restriction at $8.50 per share.
Additionally, on August 5, 2019, the Company entered into an amendment and acknowledgement agreement (the “Acknowledgement Agreement”) pursuant to which Allied Esports and WPT amended the terms the Notes. Pursuant to the Acknowledgement Agreement, the bridge holders have agreed to defer repayment of the Notes to one year and two weeks following the closing of the Mergers (the “Closing,” and the maturity date of the Notes, the “Maturity Date”). In consideration of agreeing to the deferred repayment, the bridge holders will be paid an additional six months of interest (i.e., a total of 18 months interest) to the extent any bridge holder elects not to convert their Note to equity. The Company agreed to assume the debt under the Notes as part of the Mergers, and agreed that the debt will be secured by all the assets of the Company following the Closing. The Sponsor has also agreed that it will not make any further transfer of its initial shares, subject to certain exceptions, until the debt is repaid. The Notes are convertible at any time by a holder between the Closing and the Maturity Date, into shares that are freely tradable without restriction, at the lesser of $8.50 per share or the price at which shares are issued to Ourgame or its affiliates in connection with the Mergers.
17 |
Each investor received a warrant to purchase shares of BRAC Common Stock in an amount equal to the product of (i) 3,800,000 shares, multiplied by (ii) the investor’s investment amount, divided by (iii) $100,000,000 The terms and conditions of the warrants and the date of issuance of the warrants were the same as the warrants issued to Ourgame, the Company and/or its affiliates in connection with the Mergers.
If the Note holders elect to convert their notes into Company common stock, they would be entitled to receive additional shares of Company Common Stock (the “Earn-out Shares”) equal to the product of (i) 3,846,153 shares, multiplied by (ii) the investor’s investment amount, divided by (iii) $100,000,000, if, at any time within five years after the closing date of Merger, the last exchange-reported sale price of BRAC Common Stock trades at or above $13.00 for thirty (30) consecutive calendar days.
Stock Options
In 2015, the Parent issued options to purchase common stock of the Parent to certain employees and a consultant of WPT, and the years ended December 31, 2018 and 2017, the Company recorded $(766,417), and $483,371, respectively, of stock-based compensation which is reflected in general and administrative expenses in the combined statements of operations. As of December 31, 2018, there was $5,877 of unamortized stock-based compensation expense, which would be recognized over a remaining period of 0.5 years.
Employees
As of July 31, 2019, the Company (including Allied Epsorts and WPT) had 96 full-time employees. The Company considers its employee relations to be satisfactory.
Properties
The Company’s main offices are located at 17877 Von Karman Avenue, Suite 300, Irvine, California, 92614, with WPT. Allied Esports currently maintains its principal executive offices at 4000 MacArthur Blvd. East Tower, Suite 600, Newport Beach, CA 92660, renting space on a month-to-month basis. Certain employees of the Company utilize the Sponsor’s offices located at 110 North 5th Street, Suite 410, Minneapolis, MN 55403. The Company considers the current office spaces, combined with the other office space otherwise available to its executive officers, adequate for current operations.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information as of the Closing regarding the beneficial ownership of the Company’s common stock by:
· | Each person known to be the beneficial owner of more than 5% of the Company’s outstanding common stock; |
· | Each director and executive officer of the Company; and |
· | All executive officers and directors as a group. |
18 |
Unless otherwise indicated, the Company believes that all persons named in the table have sole voting and investment power with respect to all common shares beneficially owned by them.
Name and Address of Beneficial Owners(1) | Number of Shares (2) | Percent | ||||||
Black Ridge Oil & Gas, Inc. (3) | 3,190,500 | 13.5% | ||||||
Primo Vital Limite (4) | 15,112,163 | 57.6% | ||||||
Kenneth DeCubellis(5) | 3,190,500 | 13.8% | ||||||
Lyle Berman(6) | 455,688 | 2.0% | ||||||
Bradley Berman(7) | – | – | ||||||
Benjamin S. Oehler(7) | – | – | ||||||
Joseph Lahti(7) | – | – | ||||||
Frank Ng(8) | 432,219 | 1.9% | ||||||
Eric Yang(9) | 15,388,646 | 66.5% | ||||||
Adam Pliska(10) | 1,115,487 | 4.8% | ||||||
Maya Rogers | – | – | ||||||
Dr. Kan Hee Anthony Tyen | – | – | ||||||
Ho min Kim | – | – | ||||||
All directors and executive officers, as a group (11 individuals) | 20,575,516 | 76.1% |
(1) | Unless otherwise noted, the business address of each of the following entities or individuals is 17877 Von Karman Avenue, Suite 300, Irvine, California, 92614 |
(2) | The percentage of beneficial ownership on the record date is calculated based on 23,088,701 outstanding shares of common stock as of such date, but does not reflect any shares of common stock issuable upon exercise of warrants that are not exercisable within 60 days. Unless otherwise indicated, we believe that all persons named in the table have sole voting and investment power with respect to all shares of common stock beneficially owned by them. |
(3) | These shares represent the 3,450,000 founder shares and 445,000 shares purchased in a private placement simultaneous with our initial public offering, less 600,000 shares that will be transferred Primo Vital Limited upon consummation of the Mergers, less 732,000 shares transferred to Subscribers as part of the Merger plus 66,000 shares issued upon conversion of convertible notes. Includes 505,000 warrants exercisable within 60 days of August 9, 2019. The address of Black Ridge Oil & Gas, Inc. is 110 North 5th Street, Suite 410, Minneapolis, Minnesota 55403 |
(4) |
Includes warrants to purchase 3,125,640 shares of common stock pursuant to the merger exercisable within 60 days of August 9, 2019. Of the 3,125,640 warrants issued in the merger, 324,665 warrants are currently being held in escrow and are subject to forfeiture during the one-year period following the merger to satisfy claims arising as a result of AEM's breach of any of its representations and warranties or covenants in the merger agreement.
|
(5) | Mr. DeCubellis does not beneficially own any shares of our common stock. Represents shares held by Black Ridge Oil & Gas, Inc., of which Mr. DeCubellis, as chief executive officer, exercises voting and dispositive power over such shares. Mr. DeCubellis has a pecuniary interest in shares of our common stock through his ownership of common stock in Black Ridge Oil and Gas, Inc. Mr. DeCubellis disclaims beneficial ownership of such shares except to the extent of his ultimate pecuniary interest. |
(6) | Represents (i) 292,000 shares purchased to fulfill obligation under purchase commitments, (ii) 43,689 shares issued as consideration for fulfilling purchase commitments by the Company as consideration in the Mergers and (iii) 120,000 shares transferred from Black Ridge Oil & Gas, Inc. as consideration for fulfilling purchase commitments in the Mergers. This calculation does not include shares for which Mr. Lyle Berman has a pecuniary interest in through his ownership of common stock in Black Ridge Oil and Gas, Inc. |
(7) | Mr. Bradley Berman, Mr. Ben Oehler and Mr. Joseph Lahti do not beneficially own any shares of our common stock. However, they have a pecuniary interest in shares of our common stock through their ownership of common stock and /or options to purchase common stock of Black Ridge Oil and Gas, Inc. |
19 |
(8) | Represents (i) 208,339 shares to be issued directly to Mr. Ng as consideration in the Mergers and (ii) 38,000 warrants to purchase common stock, and 117,647 shares will be issuable to Ms. Man Sha, the wife of Mr. Ng, upon conversion of the $1 million promissory note issued to Ms. Man Sha on or about May 17, 2019. Includes warrants to purchase 68,233 shares of common stock pursuant to the merger exercisable within 60 days of August 9, 2019. Of the 68,233 warrants issued in the merger, 6,823 warrants are currently being held in escrow and are subject to forfeiture during the one-year period following the merger to satisfy claims arising as a result of AEM's breach of any of its representations and warranties or covenants in the merger agreement. |
(9) | Represents 208,272 shares to be issued directly to Mr. Yang as consideration in the Mergers and 11,986,523 shares to be issued as consideration in the Mergers to Primo Vital Limited, a 100% owned subsidiary of Ourgame International Holdings Ltd., of which Mr. Yang, as director and co-chief executive officer, exercises voting and dispositive power over such shares. Includes warrants to purchase 68,211 shares of common stock pursuant to the merger exercisable within 60 days of August 9, 2019. Of the 68,211 warrants issued in the merger, 6,821 warrants are currently being held in escrow and are subject to forfeiture during the one-year period following the merger to satisfy claims arising as a result of AEM's breach of any of its representations and warranties or covenants in the merger agreement. |
(10) |
These shares represent the 469,113 shares to be issued directly to Mr. Pliska as consideration in the Mergers as follows: (i) 303,508 shares for profit participation payment converted into equity, (ii) 144,158 shares for WPT-related performance bonus converted to equity, and (iii) 21,447 shares issued for directors services to AEM. An additional 388,703 shares and 7,024 warrants were issued as consideration in the Mergers to Mr. Pliska for Trisara Ventures, LLC finder services, an entity of which Mr. Pliska owns 99% of the equity and is the sole executive officer, and which exercises voting and dispositive power over such shares. The above warrants issued on account of the finder services fee are exercisable within 60 days of August 9, 2019. Of the 102,024 warrants issued in the merger, 10,202 warrants are currently being held in escrow and are subject to forfeiture during the one-year period following the merger to satisfy claims arising as a result of AEM's breach of any of its representations and warranties or covenants in the merger agreement.
38,000 warrants to purchase common stock, and 117,647 shares will be issuable to the Lipscomb/Visoli Children’s Trust, of which Mr. Pliska is trustee, if the trust elects to convert the $1 million promissory note issued to such trust on or about May 17, 2019. Mr. Pliska disclaims any pecuniary interest in such shares and warrants. |
Directors and Executive Officers
The Company’s directors and executive officers upon the Closing are described in the Proxy Statement in the section entitled “The Director Election Proposal” beginning on page 100 and that information is incorporated herein by reference.
Executive Compensation
The executive compensation of Black Ridge’s and Allied Esports’ and WPT’s executive officers and directors is described in the Proxy Statement in the section entitled “The Director Election Proposal - Executive Compensation” beginning on page 112 and that information is incorporated herein by reference.
Certain Relationships and Related Transactions
The certain relationships and related party transactions of the Black Ridge, Allied Esports and WPT are described in the Proxy Statement in the section entitled “Certain Relationships and Related Person Transactions” beginning on page 159 and are incorporated herein by reference.
Legal Proceedings
There are no material legal proceedings against the Company.
Market Price of Common Stock and Warrants
Prior to Closing, Black Ridge’s common stock and warrants was traded on The Nasdaq Capital Market under the symbols BRAC and BRACW, respectively. The Company’s common stock and warrants began trading on the Nasdaq Capital Market under the symbols “AESE” and “AESEW,” respectively, on August 12, 2019, subject to ongoing review of the Company’s satisfaction of all listing criteria post-business combination, in lieu of the common stock and warrants of Black Ridge. The following table sets forth the high and low sales prices for our common stock and warrants for the periods indicated since the common and warrants began separate public trading on October 25, 2017.
20 |
The closing price of our common stock warrants on December 18, 2018, the last trading day before announcement of the execution of the Agreement, was $10.50, $9.98, $0.38, and $0.22, respectively. As of the record date, the closing price of each unit, share of common stock, right, and warrant was $10.7993, $10.33, $0.30, and $0.24, respectively.
The table below sets forth, for the calendar quarter indicated, the high and low bid prices of our units, common stock, rights, and warrants as reported on the Nasdaq Capital Market for the period from October 5, 2017 through August 12, 2019.
Common Stock | Warrants | |||||||||||||||
Low | High | Low | High | |||||||||||||
Fiscal 2019 | ||||||||||||||||
Third Quarter through August 12, 2019 | ||||||||||||||||
Second Quarter | 10.20 | 10.35 | 0.214 | 0.35 | ||||||||||||
First Quarter | 9.97 | 10.23 | 0.173 | 0.45 | ||||||||||||
Fiscal 2018 | ||||||||||||||||
Fourth Quarter | 9.52 | 12.11 | 0.17 | 0.45 | ||||||||||||
Third Quarter | 9.58 | 9.88 | 0.320 | 0.52 | ||||||||||||
Second Quarter | 9.69 | 9.80 | 0.28 | 0.45 | ||||||||||||
First Quarter | 9.58 | 9.72 | 0.196 | 0.43 | ||||||||||||
Holders of common stock and warrants should obtain current market quotations for their securities. The market price of our securities could vary at any time before the transactions.
Securities Authorized for Issuance Under Equity Compensation Plans
Reference is made to the disclosure described in the Proxy Statement in the section entitled “The Incentive Plan Proposal” beginning on page 119, which is incorporated herein by reference.
Description of Securities
General
As of the date of this Report, the Company is authorized to issue 65,000,000 shares of common stock, par value $0.0001, and 1,000,000 shares of preferred stock, par value $0.0001. As of the date of this Report, 23,088,700 shares of common stock are outstanding. No shares of preferred stock are currently outstanding. The following description summarizes the material terms of our securities. Because it is only a summary, it may not contain all the information that is important to you. For a complete description you should refer to our amended and restated certificate of incorporation, bylaws and the form of warrant agreement, which are filed as exhibits to this Report, and to the applicable provisions of Delaware law.
Common Stock
Our stockholders of record are entitled to one vote for each share held on all matters to be voted on by stockholders. Our board of directors is divided into three classes, each of which will generally serve for a term of three years with only one class of directors being elected in each year. There is no cumulative voting with respect to the election of directors, with the result that the holders of more than 50% of the shares eligible to vote for the election of directors can elect all of the directors. Our stockholders have no conversion, preemptive or other subscription rights and there are no sinking fund or redemption provisions applicable to the shares of common stock.
21 |
Preferred Stock
There are no shares of preferred stock outstanding. Our amended and restated certificate of incorporation authorizes the issuance of 1,000,000 shares of preferred stock with such designation, rights and preferences as may be determined from time to time by our board of directors. No shares of preferred stock are being issued or registered in this offering. Accordingly, our board of directors is empowered, without stockholder approval, to issue preferred stock with dividend, liquidation, conversion, voting or other rights which could adversely affect the voting power or other rights of the holders of common stock. We may issue some or all of the preferred stock to effect a business combination. In addition, the preferred stock could be utilized as a method of discouraging, delaying or preventing a change in control of us. Although we do not currently intend to issue any shares of preferred stock, we cannot assure you that we will not do so in the future.
Warrants
Each warrant entitles the registered holder to purchase one share of common stock at a price of $11.50 per share, subject to adjustment as discussed below, at any time after September 9, 2019 until expiration. However, no warrants will be exercisable for cash unless we have an effective and current registration statement covering the shares of common stock issuable upon exercise of the warrants and a current prospectus relating to such shares of common stock. Notwithstanding the foregoing, if a registration statement covering the shares of common stock issuable upon exercise of the public warrants is not effective within a specified period following the consummation of our initial business combination, warrant holders may, until such time as there is an effective registration statement and during any period when we shall have failed to maintain an effective registration statement, exercise warrants on a cashless basis pursuant to the exemption provided by Section 3(a)(9) of the Securities Act, provided that such exemption is available. If that exemption, or another exemption, is not available, holders will not be able to exercise their warrants on a cashless basis. In such event, each holder would pay the exercise price by surrendering the warrants for that number of shares of common stock equal to the quotient obtained by dividing (x) the product of the number of shares of common stock underlying the warrants, multiplied by the difference between the exercise price of the warrants and the “fair market value”(defined below) by (y) the fair market value. The “fair market value” for this purpose will mean the average reported last sale price of the shares of common stock for the 5 trading days ending on the trading day prior to the date of exercise. The warrants will expire on the fifth anniversary of our completion of an initial business combination, at 5:00 p.m., New York City time, or earlier upon redemption or liquidation.
We may call the warrants for redemption (excluding certain warrants), in whole and not in part, at a price of $0.01 per warrant.
· | at any time after the warrants become exercisable, |
· | upon not less than 30 days’ prior written notice of redemption to each warrant holder, |
· | if, and only if, the reported last sale price of the shares of common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations and recapitalizations), for any 20 trading days within a 30 trading day period ending on the third business day prior to the notice of redemption to warrant holders; and |
· | if, and only if, there is a current registration statement in effect with respect to the shares of common stock underlying such warrants. |
The right to exercise will be forfeited unless the warrants are exercised prior to the date specified in the notice of redemption. On and after the redemption date, a record holder of a warrant will have no further rights except to receive the redemption price for such holder’s warrant upon surrender of such warrant.
The redemption criteria for our warrants have been established at a price which is intended to provide warrant holders a reasonable premium to the initial exercise price and provide a sufficient differential between the then-prevailing share price and the warrant exercise price so that if the share price declines as a result of our redemption call, the redemption will not cause the share price to drop below the exercise price of the warrants.
22 |
If we call the warrants for redemption as described above, our management will have the option to require all holders that wish to exercise warrants to do so on a “cashless basis.” In such event, each holder would pay the exercise price by surrendering the warrants for that number of shares of common stock equal to the quotient obtained by dividing (x) the product of the number of shares of common stock underlying the warrants, multiplied by the difference between the exercise price of the warrants and the “fair market value” (defined below) by (y) the fair market value. The “fair market value” shall mean the average reported last sale price of the shares of common stock for the 5 trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders of warrants.
The warrants are in registered form under a warrant agreement between Continental Stock Transfer & Trust Company, as warrant agent, and us. The warrant agreement provides that the terms of the warrants may be amended without the consent of any holder to cure any ambiguity or correct any defective provision, but requires the approval, by written consent or vote, of the holders of at least 50% of the then outstanding warrants (including the private warrants) in order to make any change that adversely affects the interests of the registered holders.
The exercise price and number of shares of common stock issuable on exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend, extraordinary dividend or our recapitalization, reorganization, merger or consolidation. However, the warrants will not be adjusted for issuances of shares of common stock at a price below their respective exercise prices.
The warrants may be exercised upon surrender of the warrant certificate on or prior to the expiration date at the offices of the warrant agent, with the exercise form on the reverse side of the warrant certificate completed and executed as indicated, accompanied by full payment of the exercise price, by certified or official bank check payable to us, for the number of warrants being exercised. The warrant holders do not have the rights or privileges of holders of shares of common stock and any voting rights until they exercise their warrants and receive shares of common stock. After the issuance of shares of common stock upon exercise of the warrants, each holder will be entitled to one vote for each share held of record on all matters to be voted on by stockholders.
Under the terms of the warrant agreement, we have agreed to use our best efforts to have declared effective a prospectus relating to the shares of common stock issuable upon exercise of the warrants and keep such prospectus current until the expiration of the warrants. However, we cannot assure you that we will be able to do so and, if we do not maintain a current prospectus relating to the shares of common stock issuable upon exercise of the warrants, holders will be unable to exercise their warrants for cash and we will not be required to net cash settle or cash settle the warrant exercise.
Warrant holders may elect to be subject to a restriction on the exercise of their warrants such that an electing warrant holder would not be able to exercise their warrants to the extent that, after giving effect to such exercise, such holder would beneficially own in excess of 9.8% of the shares of common stock outstanding.
No fractional shares will be issued upon exercise of the warrants. If, upon exercise of the warrants, a holder would be entitled to receive a fractional interest in a share, we will, upon exercise, round up to the nearest whole number the number of shares of common stock to be issued to the warrant holder.
Dividends
We have not paid any cash dividends on our shares of common stock to date. The payment of cash dividends in the future will be dependent upon our revenues and earnings, if any, capital requirements and general financial condition. The payment of any dividends is within the discretion of our then board of directors. It is the present intention of our board of directors to retain all earnings, if any, for use in our business operations and, accordingly, our board does not anticipate declaring any dividends in the foreseeable future.
23 |
Our Transfer Agent, Rights Agent and Warrant Agent
The transfer agent for our securities and rights agent for our rights and warrant agent for our warrants is Continental Stock Transfer & Trust Company, 1 State Street Plaza, New York, New York 10004.
Recent Sales of Unregistered Securities
Reference is made to the disclosure set forth under Item 3.02 of this Report concerning the issuance of the Company’s common stock and warrants in connection with the Transactions, which is incorporated herein by reference.
Indemnification of Directors and Officers
The Company’s amended and restated certificate of incorporation contains provisions eliminating the personal liability of directors to the Company and its stockholders for monetary damages for breaches of their fiduciary duties as directors to the fullest extent permitted by Section 145 of the General Corporation Law of the State of Delaware or any other applicable law as it exists on the date of the Company’s amended and restated certificate of incorporation or as it may be amended. The General Corporation Law of the State of Delaware prohibits such elimination of personal liability of a director for:
· | any breach of the director’s duty of loyalty to the Company or its stockholders; |
· | acts or omissions not in good faith or involving intentional misconduct or a knowing violation of law; |
· | the payment of dividends, stock repurchases or redemptions that are unlawful under Delaware law; and |
· | any transaction in which the director receives an improper personal benefit. |
These provisions only apply to breaches of duty by directors as directors and not in any other corporate capacity, such as officers. In addition, these provisions limit liability only for breaches of fiduciary duties under the General Corporation Law of the State of Delaware and not for violations of other laws such as the U.S. federal securities laws and U.S. federal and state environmental laws. As a result of these provisions in the Company’s amended and restated certificate of incorporation, the Company’s stockholders may be unable to recover monetary damages against directors for actions taken by them that constitute negligence or gross negligence or that are in violation of their fiduciary duties. However, the Company’s stockholders may obtain injunctive or other equitable relief for these actions. These provisions also reduce the likelihood of derivative litigation against directors that might benefit the Company.
In addition, the Company’s amended and restated certificate of incorporation and bylaws provide that the Company will indemnify and advance expenses to, and hold harmless, each of the Company’s directors and officers (each, an “indemnitee”), to the fullest extent permitted by applicable law, who was or is made or is threatened to be made a party or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he, or a person for whom he is the legal representative, is or was a director or officer of the Company or, while a director or officer of the Company, is or was serving at the Company’s request as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust, enterprise or nonprofit entity, including service with respect to employee benefit plans, against all liability and loss suffered and expenses (including attorneys’ fees) reasonably incurred by such indemnitee. Notwithstanding the preceding sentence, except as otherwise provided in the Company’s amended and restated certificate of incorporation and bylaws, the Company will be required under the Company’s amended and restated certificate of incorporation and bylaws to indemnify, or advance expenses to, an indemnitee in connection with a proceeding (or part thereof) commenced by such indemnitee only if the commencement of such proceeding (or part thereof) by the indemnitee was authorized by the Company’s board of directors.
24 |
Financial Statements and Supplementary Data
Reference is made to the disclosure set forth under Item 9.01 of this Report concerning the financial statements and supplementary data of the Company, AEM and WPT.
Financial Statements and Exhibits
Reference is made to the disclosure set forth under Item 9.01 of this Report concerning the financial information of the Company, AEM and WPT.
Item 2.02 | Results of Operations and Financial Condition. |
Certain annual and quarterly financial information regarding Allied Esports and WPT was included in the Proxy Statement in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Allied Esports and WPT” beginning on page 142, which is incorporated herein by reference. The disclosure contained in Item 2.01 of this Report is also incorporated herein by reference.
Item 3.02. | Unregistered Sales of Equity Securities. |
Pursuant to the Merger Agreement, the Company issued to the former owners of Allied Esports and WPT (i) an aggregate of 11,602,754 shares of common stock and (ii) five-year warrants to purchase an aggregate of 3,800,003 shares of common stock at a price per share of $11.50. Additionally, the former owners of Allied Esports and WPT will be entitled to receive their pro rata portion of an aggregate of an additional 3,846,153 shares of common stock if the last sales price of the Company’s common stock reported on the Nasdaq Capital Market equals or exceeds $13.00 per share (as adjusted for stock splits, dividends, and the like) for 30 consecutive trading days at any time during the five-year period after the consummation of the Mergers.
Furthermore in connection with the Merger Agreement, at the Closing, the Company also issued the following shares of its common stock: (i) 744,422 shares to management of WPT in satisfaction of profit participation agreements; (ii) 144,158 shares for prior bonus amounts owed to Adam Pliska, the President of the Company post-Closing and the CEO of WPT; (iii) 197,268 shares to finders (one of whom is Adam Pliska, who received 98,634 of such shares), and (iv) 1,842,831 shares to Primo Vital Limited in cancellation of $12,144,260 of debt owed by Allied Esports and WPT.
The Company issued the foregoing securities pursuant to Rule 506 of Regulation D promulgated under the Securities Act, as a transaction not requiring registration under Section 5 of the Securities Act. The parties receiving the securities represented their intentions to acquire the securities for investment only and not with a view to or for sale in connection with any distribution, and appropriate restrictive legends were affixed to the certificates representing the securities (or reflected in restricted book entry with the Company’s transfer agent). The parties also had adequate access, through business or other relationships, to information about the Company, Allied Esports and WPT.
Item 5.01. | Changes in Control of Registrant. |
Reference is made to the disclosure described in the Proxy Statement in the section entitled “The Merger Proposal” beginning on page 56 and “The Agreement” beginning on page 77, which is incorporated herein by reference. Further reference is made to the information contained in Item 2.01 to this Report.
After giving effect to the Transactions, there are currently outstanding 23,088,700 shares of common stock of the Company. Together, the former owners of Allied Esports and WPT hold 52% of the outstanding shares of common stock of the Company.
25 |
Item 5.02. | Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers. |
Effective as of the Closing, the following people were appointed as directors of the Company:
Class A Directors: Ken DeCubellis, Lyle Berman, and Benjamin Oehler;
Class B Directors: Dr. Kan Hee Anthony Tyen , Ho min Kim, Bradley Berman and Joseph Lahti; and
Class C Directors: Frank Ng, Eric Yang, Adam Pliska, and Maya Rogers;
Effective as of the Closing, the executive officers of the Company are Frank Ng, Chief Executive Officer, Adam Pliska, President, Ken DeCubellis, Chief Financial Officer, and David Moon, Chief Operating Officer.
Reference is also made to the disclosure described in the Proxy Statement in the section entitled “The Director Election Proposal” beginning on page 100 for biographical information about each of the directors and officers following the Mergers, which is incorporated herein by reference.
Reference is made to the Proxy Statement section entitled “Certain Relationships and Related Person Transactions” beginning on page 159 for a description of certain transactions between the Company and certain of its directors and officers, which is incorporated herein by reference.
Item 5.03. | Amendments to Articles of Incorporation or Bylaws. |
As a result of the Transactions, Black Ridge amended its amended and restated certificate of incorporation to (i) change the name of Black Ridge from “Black Ridge Acquisition Corp.” to “Allied Esports Entertainment, Inc.”; (ii) increase the number of authorized shares of common stock from 35,000,000 shares to 65,000,000 shares; and (iii) remove provisions that will no longer be applicable to the Company after the Mergers. Reference is made to the disclosure described in the Proxy Statement in the section entitled “The Charter Proposals” on page 97, which is incorporated herein by reference.
Item 5.06. | Change in Shell Company Status. |
As a result of the Mergers, the Company ceased being a shell company. Reference is made to the disclosure in the Proxy Statement in the sections entitled “The Merger Proposal” beginning on page 56 and “The Agreement” beginning on page 77, which is incorporated herein by reference. Further reference is made to the information contained in Item 2.01 to this Report.
Item 5.07. | Submission of Matters to a Vote of Security Holders. |
On August 9, 2019, Black Ridge held the Special Meeting. At the Special Meeting, Black Ridge’s stockholders considered the following proposals:
1. A proposal to adopt the Merger Agreement and to approve the Mergers contemplated by such agreement, including the issuance of the merger consideration thereunder. The following is a tabulation of the votes with respect to this proposal, which was approved by Black Ridge’s stockholders:
For | Against | Abstain | Broker Non-Votes |
13,368,693 | 2,151,300 | 201,682 | 0 |
26 |
Prior to the Special Meeting, holders of 12,261,851 shares of Black Ridge common stock sold in its initial public offering exercised their rights to convert those shares to cash at a conversion price of approximately $10.29 per share, or an aggregate of approximately $126.2 million.
2. Proposals to approve the following amendments to Black Ridge’s amended and restated certificate of incorporation, effective following the Mergers:
(i) The name of Company is now “Allied Esports Entertainment, Inc.” as opposed to “Black Ridge Acquisition Corp.” The following is a tabulation of the votes with respect to this proposal, which was approved by the Company’s stockholders:
For | Against | Abstain | Broker Non-Votes |
13,814,314 | 1,705,679 | 201,682 | 0 |
(ii) The Company will have 65,000,000 authorized shares of common stock and 1,000,000 authorized shares of preferred stock, as opposed to the Company having 35,000,000 authorized shares of common stock and 1,000,000 authorized shares of preferred stock. The following is a tabulation of the votes with respect to this proposal, which was approved by the Company’s stockholders:
For | Against | Abstain | Broker Non-Votes |
13,813,718 | 1,706,213 | 201,744 | 0 |
(iii) The Company’s certificate of incorporation will not include the various provisions applicable only to special purpose acquisition corporations. The following is a tabulation of the votes with respect to this proposal, which was approved by the Company’s stockholders:
For | Against | Abstain | Broker Non-Votes |
13,368,657 | 1,705,679 | 647,339 | 0 |
3. A proposal to elect 11 directors who, upon the consummation of the Mergers, are directors of the Company, in the classes set forth below. The following is a tabulation of the votes with respect to each director elected at the Meeting:
Director | For | Withheld | Broker Non-Vote |
Class A | |||
Ken DeCubellis | 14,540,576 | 979,277 | 201,822 |
Lyle Berman | 13,912,696 | 1,607,157 | 201,822 |
Benjamin Oehler | 14,540,576 | 979,277 | 201,822 |
Class B | |||
Dr. Kan Hee Anthony Tyen | 13,912,495 | 1,607,358 | 201,822 |
Ho min Kim | 13,912,495 | 1,607,358 | 201,822 |
Bradley Berman | 14,540,274 | 979,579 | 201,822 |
Joseph Lahti | 14,540,576 | 979,277 | 201,822 |
Class C | |||
Frank Ng | 13,912,495 | 1,607,358 | 201,822 |
Eric Yang | 13,912,495 | 1,607,358 | 201,822 |
Adam Pliska | 13,912,495 | 1,607,358 | 201,822 |
Maya Rogers | 13,913,000 | 1,606,853 | 201,822 |
27 |
4. The Company’s 2019 Long-Term Incentive Equity Plan was approved by the Company’s stockholders. The following is a tabulation of the votes with respect to this proposal:
For | Against | Abstain | Broker Non-Vote |
13,441,213 | 1,607,690 | 647,761 |
Because the proposal to adopt the Merger Agreement and to approve the business combination contemplated by the Merger Agreement was approved, the proposal to adjourn the Meeting to a later date or dates, if necessary, was not presented at the Meeting.
Item 8.01. | Other Events. |
On August 12, 2019, the parties issued a joint press release announcing the completion of the Mergers, a copy of which is furnished as Exhibit 99.5 hereto.
The information set forth in this Item 8.01, including the text of the press releases attached hereto, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of such section. Such information shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act.
Item 9.01. | Financial Statement and Exhibits. |
(a)-(b) Financial Statements. | ||
(a) | Financial Statements of Business Acquired |
The audited combined balance sheets of AEII and WPT as of and for the years ended December 31, 2018 and 2017, the related combined statements of operations and comprehensive loss, combined statements of changes in Parent’s net investment and combined statements of cash flows for the years then ended, and the related notes to the financial statements, are filed as Exhibit 99.1 and incorporated herein by reference. The unaudited combined balance sheet of AEII and WPT as of June 30, 2019 and the unaudited combined statements of operations and comprehensive loss, condensed combined statements of changes in parent’s net investment, and condensed combined statements of cash flows for the periods ended June 30, 2019 and 2018 and the notes related thereto, are filed as Exhibit 99.2 and incorporated herein by this reference. Selected historical financial information of AEII and WPT is filed as Exhibit 99.4, and incorporated herein by this reference.
(b) | Pro Forma Financial Information |
The unaudited pro forma financial information of the Company for the six months ended June 30, 2019 and for the year ended December 31, 2018, is filed as Exhibit 99.3 and incorporated herein by reference.
28 |
(d) | Exhibits |
29 |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Dated: August 15, 2019
ALLIED ESPORTS ENTERTAINMENT, INC. | ||
By: | /s/ Ng Kwok Leung Frank | |
Ng Kwok Leung Frank Chief Executive Officer |
30 |
Exhibit 2.2
AMENDMENT TO
AGREEMENT AND PLAN OF REORGANIZATION
This Amendment to Agreement and Plan of Reorganization (this “Amendment”) is entered into as of August 5, 2019 by and among Black Ridge Acquisition Corp., a Delaware corporation (“Parent”), Black Ridge Merger Sub Corp., a Delaware corporation and wholly owned subsidiary of Parent, Allied Esports Media, Inc., f/k/a Allied Esports Entertainment, Inc., a Delaware corporation (“Company”), Noble Link Global Limited, a British Virgin Islands exempted company (“Noble”), Ourgame International Holdings Ltd., a Cayman Islands corporation (“Ourgame”), and Primo Vital Ltd., a British Virgin Islands exempted company and wholly owned subsidiary of Ourgame.
RECITALS
A. On December 19, 2018, the parties entered into that certain Agreement and Plan of Reorganization (the “Agreement”).
B. The parties desire to amend the Agreement pursuant to Section 11.11 of the Agreement, upon the terms set forth herein.
NOW, THEREFORE, in consideration of the mutual agreements specified in this Amendment, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereby agree as follows:
1. Definitions; Additional Terms. Capitalized terms used in this Amendment and not otherwise defined shall have the respective meanings ascribed to such terms in the Agreement.
2. Clause (vi) of Section 6.14 of the Agreement is amended and restated as follows:
“(vi) in partial satisfaction of the Ourgame Notes pursuant to Section 6.18.”
3. Parent Working Capital. Section 6.17 of the Agreement is amended and restated as follows:
“Parent Working Capital. On the Closing Date, after payments of amounts that Parent may pay in accordance with Section 6.14(i) hereof, Parent shall have at least $22,000,000 in cash or liquid securities available for the working capital needs of the Surviving Company and for general corporate purposes. $3,500,000 of such amount will be used to extinguish the Ourgame Notes at Closing pursuant to Section 6.18.”
4. Section 6.18 of the Agreement is amended and restated as follows:
“Ourgame Notes. In order to extinguish the Thirty-Five Million US Dollars ($35,000,000) of outstanding debt obligations of the Company held by Ourgame (the “Ourgame Notes”), at the Closing Parent will (A) assume $10,000,000 (plus $1,200,000 of accrued interest) of debt obligations of Ourgame and Noble set forth on Schedule 6.18(a) attached hereto and (B) repay the remaining $23,800,000 balance by (i) paying Ourgame or its designees $3,500,000 in immediately available funds pursuant to Ourgame’s wiring instructions, (ii) issuing to Ourgame or its designees 2,928,679 shares of Parent Common Stock as set forth on Schedule 6.18(b), which shall have no limitations or encumbrances on sale other than those required by applicable law, (iii) permitting Ourgame to retain $1,000,000 of loan proceeds from the Interim Financing for payment of the accounting, finance and legal expenses incurred by Ourgame to obtain shareholder approval and Hong Kong Stock Exchange approval of the Mergers, and (iv) causing Black Ridge Oil & Gas, Inc. to transfer to Ourgame or its designees an aggregate of 600,000 shares of Parent Common Stock held by it which shares shall continue to be subject to the terms of that certain Stock Escrow Agreement between Parent and Continental, dated as of October 4, 2017.”
5. A new Section 6.22 of the Agreement is added as follows:
“Purchase Agreements. Parent has entered into purchase agreements with several third parties pursuant to which such third parties will purchase an aggregate of $21,700,000 of shares of Parent Common Stock in open market or privately negotiated transactions. If the purchasers are unable to purchase the full $21,700,000 of shares of Parent Common Stock in open market or privately negotiated transactions, Parent shall issue to the purchasers newly issued shares at Closing at a per-share price equal to the per-share amount held in the Trust Account, and having an aggregate value equal to the difference between $21,700,000 and the dollar amount of shares purchased by them in the open market or in privately negotiated transactions. At the Closing, Parent will issue to the purchasers 1.5 shares of Parent Common Stock for every 10 shares purchased by them under the purchase agreements.
1 |
6. Section 9.1(i) of the Agreement is amended and restated as follows:
“(i) by Ourgame, the Company or Noble, if immediately prior to the Mergers, Parent does not have cash on hand of $22,000,000 after payment of amounts that Parent may pay in accordance with Section 6.14(i).”
7. Representations and Warranties. Each of the parties represents and warrants that (a) it has the corporate right, power and authority to enter into and to perform its obligations under this Amendment, and (b) assuming the due authorization, execution and delivery of this Amendment by the other parties, this Amendment constitutes the legal, valid and binding obligation of such party, enforceable in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, or other similar laws affecting the enforcement of creditors’ rights generally and by general principles of equity.
8. No Other Modification. Except as expressly set forth herein, the Agreement shall remain in full force and effect and shall not be modified by this Amendment.
9. Governing Law. This Amendment shall be governed by and construed in accordance with the internal laws of the State of Delaware regardless of the laws that might otherwise govern under applicable principles of conflicts-of-law thereof.
10. Counterparts; Electronic Delivery. This Amendment may be executed in one or more counterparts, all of which shall be considered one and the same document and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other party, it being understood that all parties need not sign the same counterpart. Delivery by facsimile or electronic transmission to counsel for the other party of a counterpart executed by a party shall be deemed to meet the requirements of the previous sentence.
Signature Page follows
2 |
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed as of the date first written above.
BLACK RIDGE ACQUISITION CORP.
By: /s/ Ken DeCubellis Name: Ken DeCubellis Title: CEO
BLACK RIDGE MERGER SUB CORP.
By: /s/ Ken DeCubellis Name: Ken DeCubellis Title: CEO
ALLIED ESPORTS MEDIA, INC.,
By: /s/ Frank Ng Name: Frank Ng Title: Director
NOBLE LINK GLOBAL LIMITED
By: /s/ Frank Ng Name: Frank Ng Title: Director
OURGAME INTERNATIONAL HOLDINGS LTD.
By: /s/ Eric Yang Name: Eric Yang Title: CEO
PRIMO VITAL LTD.
By: /s/ Frank Ng Name: Frank Ng Title: Director |
3 |
Exhibit 2.3
AGREEMENT OF MERGER
Between
NOBLE LINK GLOBAL LIMITED
AND
ALLIED ESPORTS MEDIA, INC.
THIS AGREEMENT OF MERGER (hereinafter the "Agreement") is made on 9 August 2019.
PARTIES
(1) | NOBLE LINK GLOBAL LIMITED, a company incorporated in the British Virgin Islands under the BVI Business Companies Act, 2004 (the “Act”) on 5 May 2015 (with company number 1872701), whose registered office is at Vistra Corporate Services Centre, Wickhams Cay II, Road Town, Tortola VG1110, British Virgin Islands (the “Merging Company”); and |
(2) | ALLIED ESPORTS MEDIA, INC., a company incorporated in the State of Delaware on 5 November 2018 (with company number 7131224) whose registered office is at National Registered Agents, Inc., 160 Greentree Drive, Suite 101, Dover, Delaware, USA (the “Surviving Company”) |
(together the “Parties” and each a “Party”).
BACKGROUND
(A) | The Merging Company is a company limited by shares, in good standing at the Registry of Corporate Affairs in the British Virgin Islands and validly existing under the laws of the British Virgin Islands. |
(B) | The Surviving Company is a company limited by shares, authorised to issue up to 20,000,000 shares of common stock, and 1,000,000 shares of preferred stock, of USD0.001 par value each share, in good standing at the office of the Delaware Secretary of State and validly existing under the laws of the State of Delaware. |
(C) | The Parties want to merge and enter into this Agreement, pursuant to the provisions of Part IX of the Act (the “Merger”). |
AGREED TERMS
1 | The constituent companies to this Agreement are the Surviving Company and the Merging Company. |
2 | After the Merger, the name of the company will be ALLIED ESPORTS MEDIA, INC.. |
3 | Upon the Merger, the separate corporate existence of the Merging Company shall cease and the Surviving Company shall become the owner, without other transfer, of all the rights and property of the Merging Company and the Surviving Company shall become subject to all liabilities obligations and penalties of the Surviving Company and the Merging Company. |
4 | Upon the Merger, the Surviving Company will promptly pay to the dissenting members of the Merging Company the amount, if any, to which they are entitled the laws of the British Virgin Islands (including, but not limited to the BVI Business Companies Act, 2004) with respect to the rights of dissenting members. |
5 | The Surviving Company agrees a service of process may be effected on it in the British Virgin Islands in respect of proceedings for the enforcement of any claim, debt, liability or obligation of the Merging Company or in respect of proceedings for the enforcement of the rights of a dissenting member of the Merging Company against the surviving corporation. |
6 | The Surviving Company irrevocably appoints Vistra (BVI) Ltd. as its agent to accept service of process in the proceedings referred to in this paragraph. The Surviving Company agrees that it will promptly pay to the dissenting members of Noble Link Global Limited the amount, if any, to which they are entitled under the Act. |
7 | After the Merger, the Surviving Company shall file the certificate of merger issued by the Delaware Secretary of State in respect of the Merger with the Registrar of Companies in the British Virgin Islands. |
1 |
8 | the separate corporate existence of the Merging Company shall cease and the Surviving Company shall become the owner, without other transfer, of all the rights and property of the Merging Company and the Surviving Company shall become subject to all liabilities obligations and penalties of the Surviving Company and the Merging Company |
9 | The Merger shall be effective as provided by the laws of the British Virgin Islands. |
10 | This Agreement may be executed in counterparts. |
11 | The terms of this Agreement shall control in the event of any conflict between the terms of this Agreement and the Agreement and Plan of Reorganization dated December 19, 2018, as amended, among the Parties, Allied Esports Entertainment, Inc., f/k/a Black Ridge Acquisition Corp., Black Ridge Merger Sub Corp., Ourgame International Holdings Ltd., and Primo Vital Ltd. |
2 |
IN WITNESS HEREOF the Parties hereto have caused this Agreement of Merger to be executed as a deed on 9 August 2019
/s/ Kwok Leung Frank NG
Kwok Leung Frank NG
Director
NOBLE LINK GLOBAL LIMITED
/s/ Adam Pliska
Adam Pliska
Secretary
ALLIED ESPORTS MEDIA, INC.
3 |
Exhibit 2.4
PLAN OF MERGER
Between
NOBLE LINK GLOBAL LIMITED
AND
ALLIED ESPORTS MEDIA, INC.
THIS PLAN OF MERGER (hereinafter the "Plan of Merger") is made on 9 August 2019.
PARTIES
(1) | NOBLE LINK GLOBAL LIMITED, a company incorporated in the British Virgin Islands under the BVI Business Companies Act, 2004 (the “Act”) on 5 May 2015 (with company number 1872701), whose registered office is at Vistra Corporate Services Centre, Wickhams Cay II, Road Town, Tortola VG1110, British Virgin Islands (the “Merging Company”); and |
(2) | ALLIED ESPORTS MEDIA, INC., a company incorporated in the State of Delaware on 5 November 2018 (with company number 7131224), whose registered office is at National Registered Agents, Inc., 160 Greentree Drive, Suite 101, Dover, Delaware, USA (the “Surviving Company”). |
(together the “Parties” and each a “Party”)
BACKGROUND
(A) | The Merging Company is a company limited by shares, in good standing at the Registry of Corporate Affairs in the British Virgin Islands and validly existing under the laws of the British Virgin Islands. |
(B) | The Surviving Company is a company limited by shares, authorised to issue up to 20,000,000 shares of common stock, and 1,000,000 shares of preferred stock, of USD 0.001 par value each share, in good standing at the office of the Delaware Secretary of State and validly existing under the laws of the State of Delaware. |
(C) | The Parties want to merge and enter into this Plan of Merger, pursuant to the provisions of Part IX of the Act (the “Merger”). |
(D) | The directors of the Merging Company deem it desirable and in the best interest of the Parties and their members (as the case may be) that the Merging Company be merged into the Surviving Company. |
(E) | The directors of the Surviving Company deem it desirable and in the best interest of the Parties and their stockholders (as the case may be) that the Merging Company be merged into the Surviving Company. |
(F) | The memorandum and articles of association of the Merging Company were registered with the Registrar of Companies in the British Virgin Islands on 5 May 2015. |
(G) | The articles of incorporation of the Surviving Company were registered with the Delaware Secretary of State on November 5, 2018. |
AGREED TERMS
1 | The constituent companies to this Plan of Merger are the Surviving Company and the Merging Company. |
2 | The Merging Company is NOBLE LINK GLOBAL LIMITED. |
3 | The Surviving Company is ALLIED ESPORTS MEDIA, INC.. |
4 | After the Merger, the name of the company will be ALLIED ESPORTS MEDIA, INC.. |
5 | The Merging Company is authorised to issue 50,000 shares of USD1.00 par value each. |
6 | The Merging Company has 50,000 shares in issue, all of which are entitled to vote on the Merger as one class. |
1 |
7 | The Surviving Company is authorised to issue 20,000,000 shares of common stock, and 1,000,000 shares of preferred stock, of USD0.001 par value each. |
8 | The Surviving Company has 11,602,754 shares in issue, all of which are entitled to vote on the Merger as one class. |
9 | Upon the Merger, the separate corporate existence of the Merging Company shall cease and the Surviving Company shall become the owner, without other transfer, of all the rights and property of the Merging Company and the Surviving Company shall become subject to all liabilities obligations and penalties of the constituent companies. |
10 | The terms and conditions of the Merger are as follows: |
(a) | each share issued and outstanding in the Merging Company on the effective date of the merger shall be cancelled. |
11 | The constitutional document of the Surviving Company shall be amended and restated in the form attached hereto as Schedule 1. |
12 | This Plan of Merger was be submitted to and approved by the members and stockholders, as applicable, of both the Surviving Company and Merging Company by way of a Resolution of Shareholders on 5 August 2019. |
13 | The Surviving Company agrees a service of process may be effected on it in the British Virgin Islands in respect of proceedings for the enforcement of any claim, debt, liability or obligation of the Merging Company or in respect of proceedings for the enforcement of the rights of a dissenting member of the Merging Company against the Surviving Company. |
14 | The Surviving Company irrevocably appoints Vistra (BVI) Ltd as its agent to accept service of process in the proceedings referred to in this paragraph. The Surviving Company agrees that it will promptly pay to the dissenting members of Noble Link Global Limited the amount, if any, to which they are entitled under the Act. |
15 | Attached as Schedule 2 is a certificate of merger issued by the Delaware Secretary of State in respect of the Merger. |
16 | The Merger shall be effective as provided by the laws of the British Virgin Islands. |
17 | This Plan of Merger may be executed in counterparts. |
18 | The terms of this Plan of Merger shall control in the event of any conflict between the terms of this Plan of Merger and the Agreement and Plan of Reorganization dated December 19, 2018, as amended, among the Parties, Allied Esports Entertainment, Inc., f/k/a Black Ridge Acquisition Corp., Black Ridge Merger Sub Corp., Ourgame International Holdings Ltd., and Primo Vital Ltd. |
2 |
IN WITNESS HEREOF the Parties hereto have caused this Plan of Merger to be executed as a deed on 9 August 2019
/s/ Kwok Leung Frank NG
Kwok Leung Frank NG
Director
NOBLE LINK GLOBAL LIMITED
/s/ Adam Pliska
Adam Pliska
Secretary
ALLIED ESPORTS MEDIA, INC.
3 |
Exhibit 3.1
SECOND AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
BLACK RIDGE ACQUISITION CORP.
- - - - - - - - - - - - - - - - - - - - - - - - - -
Pursuant to Section 245 of the
General Corporation Law of the State of Delaware
- - - - - - - - - - - - - - - - - - - - - - - - - -
BLACK RIDGE ACQUISITION CORP., a corporation existing under the laws of the State of Delaware (the “Corporation”), by its Chief Executive Officer, hereby certifies as follows:
1. The name of the Corporation is “Black Ridge Acquisition Corp.”
2. The Corporation’s Certificate of Incorporation was filed in the office of the Secretary of State of the State of Delaware on May 9, 2017. The Corporation’s first Amended and Restated Certificate of Incorporation was filed in the office of the Secretary of State of the State of Delaware on October 4, 2017.
3. This Second Amended and Restated Certificate of Incorporation restates, integrates and amends the first Amended and Restated Certificate of Incorporation of the Corporation.
4. This Second Amended and Restated Certificate of Incorporation was duly adopted by joint written consent of the directors and stockholders of the Corporation in accordance with the applicable provisions of Sections 141(f), 228, 242 and 245 of the General Corporation Law of the State of Delaware (“GCL”).
5. The text of the Certificate of Incorporation of the Corporation is hereby amended and restated to read in full as follows:
FIRST: The name of the corporation is Allied Esports Entertainment, Inc. (hereinafter sometimes referred to as the “Corporation”).
SECOND: The registered office of the Corporation is to be located at 1209 Orange Street, Wilmington, New Castle County, Delaware 19801. The name of its registered agent at that address is The Corporation Trust Company.
THIRD: The purpose of the Corporation shall be to engage in any lawful act or activity for which corporations may be organized under the GCL.
FOURTH: The total number of shares of all classes of capital stock which the Corporation shall have authority to issue is 66,000,000 of which 65,000,000 shares shall be Common Stock of the par value of $0.0001 per share and 1,000,000 shares shall be Preferred Stock of the par value of $0.0001 per share.
A. Preferred Stock. The Board of Directors is expressly granted authority to issue shares of the Preferred Stock, in one or more series, and to fix for each such series such voting powers, full or limited, and such designations, preferences and relative, participating, optional or other special rights and such qualifications, limitations or restrictions thereof as shall be stated and expressed in the resolution or resolutions adopted by the Board of Directors providing for the issue of such series (a “Preferred Stock Designation”) and as may be permitted by the GCL. The number of authorized shares of Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the voting power of all of the then outstanding shares of the capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, without a separate vote of the holders of the Preferred Stock, or any series thereof, unless a vote of any such holders is required pursuant to any Preferred Stock Designation.
1 |
B. Common Stock. Except as otherwise required by law or as otherwise provided in any Preferred Stock Designation, the holders of the Common Stock shall exclusively possess all voting power and each share of Common Stock shall have one vote.
FIFTH: The name and mailing address of the sole incorporator of the Corporation are as follows:
Name | Address | |
Jeffrey M. Gallant | Graubard Miller | |
The Chrysler Building | ||
405 Lexington Avenue | ||
New York, New York 10174 |
SIXTH: The Board of Directors shall be divided into three classes: Class A, Class B and Class C. The number of directors in each class shall be fixed exclusively by the Board of Directors and shall be as nearly equal as possible. The directors in Class A shall be elected for a term expiring at the first annual meeting of stockholders after the date on which this Certificate of Incorporation was first filed in the office of the Secretary of State of the State of Delaware (the “Effective Date”). The directors in Class B shall be elected for a term expiring at the second annual meeting of stockholders after the Effective Date. The directors in Class C shall be elected for a term expiring at the third annual meeting of stockholders after the Effective Date. Commencing at the first annual meeting of stockholders after the Effective Date, and at each annual meeting thereafter, directors elected to succeed those directors whose terms expire shall be elected for a term of office to expire at the third succeeding annual meeting of stockholders after their election. Except as the GCL may otherwise require, in the interim between annual meetings of stockholders or special meetings of stockholders called for the election of directors and/or the removal of one or more directors and the filling of any vacancy in that connection, newly created directorships and any vacancies in the Board of Directors, including unfilled vacancies resulting from the removal of directors for cause, may be filled only by the vote of a majority of the remaining directors then in office, although less than a quorum (as defined in the Corporation’s Bylaws), or by the sole remaining director. All directors shall hold office until the expiration of their respective terms of office and until their successors shall have been elected and qualified. A director elected to fill a vacancy resulting from the death, resignation or removal of a director shall serve for the remainder of the full term of the director whose death, resignation or removal shall have created such vacancy and until his successor shall have been elected and qualified.
SEVENTH: The following provisions are inserted for the management of the business and for the conduct of the affairs of the Corporation, and for further definition, limitation and regulation of the powers of the Corporation and of its directors and stockholders:
A. Election of directors need not be by ballot unless the by-laws of the Corporation so provide.
B. The Board of Directors shall have the power, without the assent or vote of the stockholders, to make, alter, amend, change, add to or repeal the by-laws of the Corporation as provided in the by-laws of the Corporation.
C. In addition to the powers and authorities hereinbefore or by statute expressly conferred upon them, the directors are hereby empowered to exercise all such powers and do all such acts and things as may be exercised or done by the Corporation; subject, nevertheless, to the provisions of the statutes of Delaware, of this Certificate of Incorporation, and to any by-laws from time to time made by the stockholders; provided, however, that no by-law so made shall invalidate any prior act of the directors which would have been valid if such by-law had not been made.
EIGHTH: A. A director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director’s duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the GCL, or (iv) for any transaction from which the director derived an improper personal benefit. If the GCL is amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the GCL, as so amended. Any repeal or modification of this paragraph A by the stockholders of the Corporation shall not adversely affect any right or protection of a director of the Corporation with respect to events occurring prior to the time of such repeal or modification.
2 |
B. The Corporation, to the full extent permitted by Section 145 of the GCL, as amended from time to time, shall indemnify all persons whom it may indemnify pursuant thereto. Expenses (including attorneys’ fees) incurred by an officer or director in defending any civil, criminal, administrative, or investigative action, suit or proceeding for which such officer or director may be entitled to indemnification hereunder shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Corporation as authorized hereby.
NINTH: Whenever a compromise or arrangement is proposed between this Corporation and its creditors or any class of them and/or between this Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of this Corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for this Corporation under Section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for this Corporation under Section 279 of Title 8 of the Delaware Code order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this Corporation as a consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of this Corporation, as the case may be, and also on this Corporation.
TENTH: A. Unless the Corporation consents in writing to the selection of an alternative forum, the sole and exclusive forum for any stockholder (including a beneficial owner) to bring (i) any derivative action or proceeding brought on behalf of the Corporation, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of the Corporation to the Corporation or the Corporation’s stockholders, (iii) any action asserting a claim arising pursuant to any provision of the GCL or this Certificate of Incorporation or the Corporation’s Bylaws, or (iv) any action asserting a claim governed by the internal affairs doctrine shall be the Court of Chancery of the State of Delaware (or if the Court of Chancery does not have jurisdiction, another state court located within the State of Delaware, or if no state court located within the State of Delaware has jurisdiction, the federal district court for the District of Delaware) in all cases subject to the court’s having personal jurisdiction over the indispensable parties named as defendants.
B. If any action the subject matter of which is within the scope of Section A immediately above is filed in a court other than a court located within the State of Delaware (a “Foreign Action”) in the name of any stockholder, such stockholder shall be deemed to have consented to (i) the personal jurisdiction of the state and federal courts located within the State of Delaware in connection with any action brought in any such court to enforce Section A immediately above (an “FSC Enforcement Action”) and (ii) having service of process made upon such stockholder in any such FSC Enforcement Action by service upon such stockholder’s counsel in the Foreign Action as agent for such stockholder.
C. If any provision or provisions of this Article TENTH shall be held to be invalid, illegal or unenforceable as applied to any person or entity or circumstance for any reason whatsoever, then, to the fullest extent permitted by law, the validity, legality and enforceability of such provisions in any other circumstance and of the remaining provisions of this Article TENTH (including, without limitation, each portion of any sentence of this Article TENTH containing any such provision held to be invalid, illegal or unenforceable that is not itself held to be invalid, illegal or unenforceable) and the application of such provision to other persons or entities and circumstances shall not in any way be affected or impaired thereby. Any person or entity purchasing or otherwise acquiring any interest in shares of capital stock of the Corporation shall be deemed to have notice of and consented to the provisions of this Article TENTH.
ELEVENTH: The doctrine of corporate opportunity, or any other analogous doctrine, shall not apply with respect to the Corporation or any of its officers or directors in circumstances where the application of any such doctrine would conflict with any fiduciary duties or contractual obligations they may have as of the date of this Certificate of Incorporation or in the future. In addition to the foregoing, the doctrine of corporate opportunity shall not apply to any other corporate opportunity with respect to any of the directors or officers of the Corporation unless such corporate opportunity is offered to such person solely in his or her capacity as a director or officer of the Corporation and such opportunity is one the Corporation is legally and contractually permitted to undertake and would otherwise be reasonable for the Corporation to pursue.
3 |
IN WITNESS WHEREOF, the Corporation has caused this Second Amended and Restated Certificate of Incorporation to be signed by Frank Ng, its Chief Executive Officer, as of the 9th day of August, 2019.
/s/ Frank Ng | |
Frank Ng | |
Chief Executive Officer |
4 |
Exhibit 10.9
SHARE PURCHASE AGREEMENT
This Share Purchase Agreement (“Agreement”), dated August 5, 2019, among Simon Equity Development, LLC (the “Purchaser”), Black Ridge Acquisition Corp. (the “Company”), Black Ridge Oil & Gas, Inc. (“BROG”) and Allied Esports Media, Inc. (“Allied”).
RECITALS:
A. The Company intends to hold a special meeting of its stockholders (“Meeting”) to consider and act upon, among other things, a proposal to adopt and approve an Agreement and Plan of Merger, dated as of December 19, 2018 (the “Merger Agreement”), by and among the Company, Black Ridge Merger Sub Corp., Allied Esports Media, Inc. (f/k/a Allied Esports Entertainment, Inc.), Noble Link Global Limited, Ourgame International Holdings Ltd. and Primo Vital Ltd.
B. The Purchaser is willing to purchase shares of common stock of the Company, based on the terms and conditions contained in this Agreement.
NOW THEREFORE IT IS AGREED:
1. Purchase of Shares. The Company hereby agrees that it shall sell to Purchaser at the Closing (defined below) $5,000,000 of newly issued shares of common stock of the Company (“New Shares”), valued at the price per share in the Company’s trust account established in connection with its initial public offering (“IPO”) after giving effect to the repayment of the $30,000 loan to the Company (the proceeds of which were placed into the trust account) described in the Company’s proxy statement dated June 28, 2019. Provided, however, that the dollar amount of New Shares which will be sold to Purchaser at Closing shall be reduced by the aggregate dollar amount Purchaser spends, at Purchaser’s sole option, purchasing shares of common stock of the Company in open market or privately negotiated transactions (“Public Shares”). The purchase price for the New Shares, less $50,000 as payment of the Purchaser’s fees and expenses in connection with the transactions contemplated by this Agreement, shall be delivered by the Purchaser one day prior to the Closing to Continental Stock Transfer and Trust Company, as escrow agent, (the “Escrow Agent”) pursuant to an escrow agreement by and between the Purchaser, an entity formed by the Company solely for purposes of entering into the Escrow Agreement “(NewCo”) and the Escrow Agent in the form attached hereto. If the Closing does not occur or this Agreement is otherwise terminated, the Escrow Agent shall promptly return any such purchase price without interest or deduction in accordance with the terms of the Escrow Agreement. All shares purchased hereunder pursuant to this Section 1, whether Public Shares or New Shares, shall hereafter be referred to as the “Purchased Shares.” Purchaser agrees that it will not seek conversion of any of the shares purchased hereunder at the Meeting.
2. Share Issuance/Transfer. In consideration of the agreements set forth in Section 1 hereof, upon consummation of the transactions contemplated by the Merger Agreement (the “Closing”), the Company will issue to the Purchaser one and one-half (1.5) additional share of common stock, par value $0.0001 per share (“Common Stock”), of the Company for every ten (10) Purchased Shares that are purchased by the Purchaser. Additionally, as an inducement for the Purchaser to enter into this Agreement, BROG shall transfer to the Purchaser for no consideration 200,000 shares of Common Stock it currently owns (the “BROG Shares”). The shares of Common Stock issued to the Purchaser by the Company pursuant to this Section 2 and the BROG Shares shall hereafter be collectively referred to as the “Additional Securities.”
3. Registration Rights. The Company shall, within thirty (30) calendar days after the Closing (the “Filing Deadline”), file with the Securities and Exchange Commission (the “Commission”) a registration statement registering the resale of the Purchased Shares and Additional Securities (as amended from time to time, the “Registration Statement”), and use its best efforts to have the Registration Statement declared effective within the earlier of (i) sixty (60) days of the filing of the Registration Statement and (ii) five (5) business days after being advised by the Commission that the Commission is not reviewing the Registration Statement or has no further comments to the Registration Statement (the “Effectiveness Deadline”). The Company shall file a post-effective amendment to the registration statement on Form S-3 covering all of the Purchased Shares and Additional Securities as soon as practical upon the Company becoming eligible to use Form S-3 for such purpose. The Company will use its reasonable best efforts to maintain the continuous effectiveness of the Registration Statement until the earlier of (a) the date on which such securities may be resold without volume or manner of sale limitations pursuant to Rule 144 promulgated under the Securities Act and (b) the date on which the Purchaser has notified the Company that all of such registrable securities have actually been sold. Upon the Registration Statement becoming declared effective by the Commission, (i) the Company will promptly notify the Purchaser of the effectiveness of the Registration Statements, and (ii) if after the date the Registration Statement is declared effective, the Purchaser seeks to sell the Purchased Share and/or Additional Securities, the Company shall take all actions reasonably necessary to allow, and shall use reasonable best efforts to ensure that the Company’s transfer agent and counsel facilitate, the sale or transfer of the Purchased Shares and Additional Shares pursuant to the Registration Statement.
1 |
The Company shall:
(a) | advise the Purchaser within one (1) Business Day: |
(1) | when the Registration Statement or any amendment thereto has been filed with the Commission and when such Registration Statement or any post-effective amendment thereto has become effective; | |
(2) | of any request by the Commission for amendments or supplements to the Registration Statement or the prospectus included therein or for additional information with respect thereto; | |
(3) | of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or the initiation of any proceedings for such purpose; | |
(4) | of the receipt by the Company of any notification with respect to the suspension of the qualification of the Purchased Shares or Additional Securities included therein for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; and | |
(5) | if it learns that any statement included in the Registration Statement or related prospectus is misleading and omits to state a material fact required to be stated therein or necessary to make the statements therein (in the case of a prospectus, in the light of the circumstances under which they were made) not misleading. |
Notwithstanding anything to the contrary set forth herein, the Company shall not, when so advising the Purchaser of such events, provide the Purchaser with any material, nonpublic information regarding the Company;
(b) use its commercially reasonable efforts to obtain the withdrawal of any order suspending the effectiveness of the Registration Statement as soon as reasonably practicable;
(c) upon the occurrence of any event contemplated above, except for such times as the Company is permitted hereunder to suspend, and has suspended, the use of a prospectus forming part of the Registration Statement, the Company shall use its best efforts to as soon as reasonably practicable prepare a post-effective amendment to such Registration Statement or a supplement to the related prospectus, or file any other required document so that, as thereafter delivered to purchasers of the Purchased Shares and Additional Securities included therein, such prospectus will not include any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading;
(d) use its commercially reasonable efforts to cause all the Purchased Shares and Additional Securities to be listed on each securities exchange or market, if any, on which equity securities issued by the Company have been listed; and
(e) use its reasonable best efforts to take all other steps necessary to effect the registration of the Purchased Shares and Additional Securities contemplated hereby.
The Company shall, notwithstanding any termination of this Agreement, indemnify, defend and hold harmless the Purchaser (to the extent a seller under any Registration Statement), the officers, directors, agents, partners, members, managers, stockholders, affiliates, employees and investment advisers of each of them, each person who controls the Purchaser (within the meaning of Section 15 of the Securities Act of 1933, as amended (the “Securities Act”) or Section 20 of the Securities Exchange Act of 1934, as amended, the “Securities Exchange Act”)) and the officers, directors, partners, members, managers, stockholders, agents, affiliates, employees and investment advisers of each such controlling person, to the fullest extent permitted by applicable law, from and against any and all losses, claims, damages, liabilities, costs (including, without limitation, reasonable attorneys’ fees) and expenses (collectively, “Losses”), as incurred, that arise out of or are based upon (i) any untrue or alleged untrue statement of a material fact contained in any Registration Statement, any prospectus included in any Registration Statement or any form of prospectus or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein (in the case of any prospectus or form of prospectus or supplement thereto, in light of the circumstances under which they were made) not misleading, or (ii) any violation or alleged violation by the Company of the Securities Act, Exchange Act or any state securities law or any rule or regulation thereunder, in connection with the performance of its obligations under Section 3, except to the extent, but only to the extent, that such untrue statements, untrue statements, omissions or omissions are based upon information regarding the Purchaser furnished in writing to the Company by the Purchaser expressly for use therein. The Company shall notify the Purchaser promptly of the institution, threat or assertion of any proceeding arising from or in connection with the transactions contemplated by Section 3 of which the Company is aware. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of an indemnified party and shall survive the transfer of the Purchased Shares and Additional Securities by the Purchaser.
2 |
4. Representations of Purchaser. Purchaser hereby represents and warrants to the Company that:
(a) This Agreement has been validly authorized, executed and delivered by the Purchaser and, assuming the due authorization, execution and delivery thereof by the other party hereto, is a valid and binding agreement enforceable in accordance with its terms, subject to the general principles of equity and to bankruptcy or other laws affecting the enforcement of creditors’ rights generally. The execution, delivery and performance of this Agreement by the Purchaser does not and will not conflict with, violate or cause a breach of, constitute a default under, or result in a violation of (i) any agreement, contract or instrument to which the Purchaser is a party which would prevent the Purchaser from performing its obligations hereunder or (ii) any law, statute, rule or regulation to which the Purchaser is subject.
(b) Purchaser is an “accredited investor” as defined by Rule 501 under the Securities Act.
(c) Purchaser acknowledges that it has had the opportunity to review this Agreement and the transactions contemplated by this Agreement with the Purchaser’s own legal counsel and investment and tax advisors. Purchaser is familiar with the business, management, financial condition and affairs of the Company.
(d) Purchaser has reviewed the documents of the Company filed with the Commission (the “Company Filings”), including the definitive proxy statement relating to the Meeting and any supplement thereto (collectively, the “Proxy Statement”), and Purchaser understands the content of the Company Filings and the risks described about an investment in the Company.
(e) Purchaser has been advised that the New Shares, if any, and the Additional Securities have not been registered under the Securities Act.
5. Company, BROG and Allied Representations and Covenants. Each of the Company, BROG and Allied, jointly and severally, hereby represents, warrants and covenants to the Purchaser that:
(a) The Company is duly organized and is validly existing in good standing under the laws of the jurisdiction of its organization as the type of entity that it purports to be.
(b) This Agreement has been validly authorized, executed and delivered by it and, assuming the due authorization, execution and delivery thereof by the other party hereto, is a valid and binding agreement enforceable in accordance with its terms, subject to the general principles of equity and to bankruptcy or other laws affecting the enforcement of creditors’ rights generally. The execution, delivery and performance of this Agreement by each of the Company and Allied does not and will not conflict with, violate or cause a breach of, constitute a default under, or result in a violation of (i) any agreement, contract or instrument to which the Company or Allied is a party which would prevent the Company or Allied from performing its obligations hereunder or (ii) any law, statute, rule or regulation to which the Company or Allied is subject.
(c) Each of the Company, BROG and Allied has the requisite corporate power and authority to enter into and to perform its obligations under this Agreement; and the execution, delivery and performance by the Company of this Agreement has been duly authorized by all necessary action on the part of the Company.
(d) None of the Company Filings, as of their respective dates (or, if amended or superseded by a filing prior to the date of this Agreement, then on the date of such filing), contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading and the Proxy Statement as of the date hereof contains and at the Closing date will not contain any untrue statement of a material fact or omit statement of a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.
(e) The representations and warranties the Company, Allied and their representative affiliates contained in their Merger Agreement are true, correct and complete and the Purchaser may rely on such representations and warranties as if such representations and warranties had been made directly to the Purchaser.
(f) The Company shall use the $5,000,000 of proceeds from the purchase price of the Purchased Shares as set forth in the letter agreement by and among the Company, Allied and the Purchaser dated as of June 26, 2019 (the “Letter Agreement”).
3 |
(g) BROG is the sole record and beneficial owner of the BROG Shares. None of the BROG Shares is subject to any lien, claim, restriction, security interest or encumbrance or to any option, warrant or agreement (collectively, “Encumbrances”) that restricts BROG from transferring good and marketable title to the BROG Shares to the Purchaser free and clear of any Encumbrances except for the restrictions on transferability set forth in that certain Stock Escrow Agreement, dated as of October 4, 2017, between the Company and BROG which restrictions will be released with respect to the BROG Shares on the Closing. BROG acknowledges and agrees that the Purchaser’s entering into this Agreement constitutes good and valuable consideration for BROG transferring the BROG Shares to the Purchaser as an inducement to enter into this Agreement, by virtue of the benefits BROG is receiving and a stockholder of the Company.
6. Conditions to Closing. The Purchaser shall not be required to purchase the New Shares or otherwise consummate the transactions contemplated hereby unless (i) the Company shall have formed NewCo and (ii) NewCo shall have entered into an escrow agreement with the Purchaser and the Escrow Agent in the form attached as Exhibit A hereto.
7. Disclosure; Exchange Act Filings. Promptly after execution of this Agreement, the Company will file a Current Report on Form 8-K (“Signing Form 8-K”) under the Exchange Act reporting it. The parties to this Agreement shall reasonably cooperate with one another to cause the Signing Form 8-K to be filed with the Commission.
8. Entire Agreement; Amendment. This Agreement, together with the Letter Agreement, (except to the extent the Letter Agreement is superseded hereby), constitute the entire agreement among the parties with respect to the subject matter hereof and may be amended or modified only by written instrument signed by all parties. The headings in this Agreement are for convenience of reference only and shall not alter or otherwise affect the meaning hereof.
9. Governing Law. This Agreement shall be governed by and construed in accordance with the law of the State of New York, including the conflicts of law provisions and interpretations thereof.
10. Counterparts. This Agreement may be executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. Delivery of an executed signature page by facsimile or other electronic transmission shall be effective as delivery of a manually signed counterpart of this Agreement.
11. Termination. Notwithstanding any provision in this Agreement to the contrary, this Agreement shall become null and void and of no force and effect (i) upon the termination of the Merger Agreement prior to the Closing, (ii) if the Purchaser fails to purchase the $5 million of Purchased Shares by the Closing, (iii) if the Merger shall not have been completed by August 10, 2019, (iv) if any condition or covenant set forth in the Merger Agreement has been amended, modified, deleted or otherwise changed or waived by any party to the Merger Agreement without the written consent of Purchaser, (v) if TV AZTECA S.A.B. DE C.V., a Grupo Salinas company, shall have not purchased $5 million of shares of Common Stock of BRAC on the same terms as the Purchaser’s purchase of Purchased Shares pursuant to this Agreement (vi) upon a breach by any party hereto of their respective representations, warranties or covenants set forth in this Agreement or (vii) the conditions set forth in Section 6 are not satisfied. Notwithstanding any provision in this Agreement to the contrary, the Company’s obligation to issue the shares of Common Stock to the Purchaser pursuant to Section 2 hereof and BROG’s obligation to transfer the BROG Shares to the Purchaser pursuant to Section 2 hereof shall be conditioned on the Closing occurring and the Purchaser purchasing the $5 million of Purchased Shares.
12. Remedies. Each of the parties hereto acknowledges and agrees that, in the event of any breach of any covenant or agreement contained in this Agreement by the other party, money damages may be inadequate with respect to any such breach and the non-breaching party may have no adequate remedy at law. It is accordingly agreed that each of the parties hereto shall be entitled, in addition to any other remedy to which they may be entitled at law or in equity, to seek injunctive relief and/or to compel specific performance to prevent breaches by the other party hereto of any covenant or agreement of such other party contained in this Agreement.
13. Binding Effect; Assignment. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective legal representatives, successors and permitted assigns. This Agreement shall not be assigned by either party without the prior written consent of the other party hereto.
[Signature Page Follows]
4 |
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.
PURCHASER: | |||
By: | |||
Name: | |||
Title: |
COMPANY: | |||||
By: | |||||
Name: | |||||
Title: | |||||
ALLIED: | |||||
By: | |||||
Name: | |||||
Title: | |||||
5 |
Exhibit 10.10
SHARE PURCHASE AGREEMENT
This Share Purchase Agreement (“Agreement”), dated August 5, 2019, among TV AZTECA, S.A.B. DE C.V. (the “Purchaser”) and Black Ridge Acquisition Corp. (the “Company”).
RECITALS:
A. The Company intends to hold a special meeting of its stockholders (“Meeting”) to consider and act upon, among other things, a proposal to adopt and approve the Agreement and Plan of Reorganization, dated as of December 19, 2018, as amended (the “Merger Agreement”), by and among the Company, Black Ridge Merger Sub Corp., Allied Esports Media, Inc. (f/k/a Allied Esports Entertainment, Inc.), Noble Link Global Limited, Ourgame International Holdings Ltd. and Primo Vital Ltd.
B. The Purchaser is willing to purchase shares of common stock (the “Public Shares”) of the Company sold in the Company’s initial public offering (“IPO”), based on the terms and conditions contained in this Agreement.
NOW THEREFORE IT IS AGREED:
1. Purchase of Shares. The Purchaser hereby agrees, subject to the terms and conditions contained herein, that it will use commercially reasonable efforts to purchase at least $5 million of Public Shares in the open market or in privately negotiated transactions commencing two business days after the filing of the Signing Form 8-K (defined below) and ending on the close of business on August 9, 2019. The Purchaser shall not be required to pay an amount in excess of the per share amount held in the Company’s trust account (currently approximately $10.30 per share) before deduction of any commission or other sales charges incurred in connection with the purchase of such shares for the Public Shares (the “Maximum Price”). To the extent, at any time prior to the time that Purchaser has purchased all Purchased Shares required by it to be purchased by it pursuant to this Section 1, the per share amount of funds held in the Company’s trust account is not $10.30, the Company shall provide prompt notice to the Purchaser of the new per share amount held in the Company’s trust account. Purchaser agrees that it will not seek conversion at the Meeting of any of the shares purchased hereunder. However, in the event the Mergers (as defined in the Merger Agreement) do not close on or before August 9, 2019, the Company will dissolve and liquidate and any shares purchased by Purchaser shall be redeemed for cash upon such liquidation with such cash being delivered to an account designated by the Purchaser. If Purchaser is unable to purchase the full $5 million of Public Shares at a price per share equal or less than the Maximum Price for any reason, the Company shall sell to Purchaser at the Closing (defined below) a number of newly issued shares of common stock of the Company (“New Shares”), valued at the Maximum Price, equal to the difference between $5 million and the aggregate purchase price of the Public Shares purchased hereunder by Purchaser (before deduction of any commission or other sales charges incurred in connection with such purchase). The purchase price for the New Shares shall be delivered by the Purchaser on or before the Closing to an account designated by the Company. Promptly after the Closing, certificates representing such New Shares shall be issued by the Company’s transfer agent to Purchaser. All shares purchased hereunder pursuant to this Section 1, whether Public Shares or New Shares, shall hereafter be referred to as the “Purchased Shares.” If the Closing does not occur on or before August 9, 2019, any purchase price delivered by the Purchaser to an account of the Company shall be promptly returned to the Purchaser.
2. Share Issuance/Transfer. Upon consummation of the transactions contemplated by the Merger Agreement (the “Closing”), the Company will issue to the Purchaser one and one-half (1.5) additional share of common stock, par value $0.0001 per share (“Common Stock”), of the Company for every ten (10) Purchased Shares that are purchased by the Purchaser. The Company will cause its transfer agent to issue the shares of Common Stock to Purchaser as promptly as possible. Additionally, Black Ridge Oil & Gas, Inc. shall transfer to Purchaser 200,000 shares of Common Stock of the Company. The shares of Common Stock issued and transferred to the Purchaser pursuant to this Section 2 shall hereafter be referred to as the “Additional Securities.” Notwithstanding any provision in this Agreement to the contrary, the Company’s obligation to issue and transfer the Additional Securities to the Purchaser shall be conditioned on the purchase by Purchaser of all Purchased Shares required to be purchased by it pursuant to Section 1.
1 |
3. Registration Rights. The Company agrees to file a registration statement covering the resale by the Purchaser of the New Shares, if any, and Additional Securities as promptly as practicable following the Closing and use its best efforts to have such registration statement declared effective by the Securities and Exchange Commission as soon as possible. The Company agrees to keep such registration statement effective until all New Shares, if any and Additional Securities have been sold pursuant to such registration statement or may be sold freely by the Purchaser under Rule 144 (“Rule 144”) under the Securities Act (as defined below) without any limitation on the manner of sale or amount of securities that may be sold. The costs and expenses of such registration statement (including Securities and Exchange Commission filing fees but excluding any commissions or other sales charges) shall be borne by the Company. Upon the registration statement becoming declared effective by the SEC, (i) the Company will promptly notify the Purchaser of the effectiveness of the registration statements, and (ii) if after the date the registration statement is declared effective, the Purchaser seeks to sell the New Shares and/or Additional Securities, the Company shall take all actions reasonably necessary to allow, and shall use reasonable best efforts to ensure that the Company’s transfer agent and counsel facilitate, the sale or transfer of the securities pursuant to the registration statement.
The Company shall:
(a) advise the Purchaser within one (1) Business Day:
(1) when the registration statement or any amendment thereto has been filed with the SEC and when such registration statement or any post-effective amendment thereto has become effective;
(2) of any request by the SEC for amendments or supplements to the registration statement or the prospectus included therein or for additional information with respect thereto;
(3) of the issuance by the SEC of any stop order suspending the effectiveness of the registration statement or the initiation of any proceedings for such purpose;
(4) of the receipt by the Company of any notification with respect to the suspension of the qualification of the securities included therein for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; and
(5) if it learns that any statement included in the registration statement or related prospectus is misleading or omits to state a material fact required to be stated therein or necessary to make the statements therein (in the case of a prospectus, in the light of the circumstances under which they were made) not misleading.
Notwithstanding anything to the contrary set forth herein, the Company shall not, when so advising the Purchaser of such events, provide the Purchaser with any material, nonpublic information regarding the Company;
(b) use its commercially reasonable efforts to obtain the withdrawal of any order suspending the effectiveness of the registration statement as soon as reasonably practicable;
(c) upon the occurrence of any event contemplated above, the Company shall use its best efforts to as soon as reasonably practicable prepare a post-effective amendment to such registration statement or a supplement to the related prospectus, or file any other required document so that, as thereafter delivered to purchasers of the securities included therein, such prospectus will not include any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading;
(d) use its reasonable best efforts to take all other steps necessary to effect the registration and sale of the securities contemplated hereby (including any registration or qualification required by any state securities laws, provided that the Company shall not be required to qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify or take any action to which it would be subject to general service of process or taxation in any such jurisdiction where it is not then otherwise so subject).
2 |
The Company shall, notwithstanding any termination of this Agreement, indemnify, defend and hold harmless the Purchaser (to the extent a seller under any Registration Statement), the officers, directors, agents, partners, members, managers, stockholders, affiliates, employees and investment advisers of the Purchaser, each person who controls the Purchaser (within the meaning of Section 15 of the Securities Act of 1933, as amended (the “Securities Act”) or Section 20 of the Securities Exchange Act of 1934, as amended, the “Securities Exchange Act”)) and the officers, directors, partners, members, managers, stockholders, agents, affiliates, employees and investment advisers of each such controlling person, to the fullest extent permitted by applicable law, from and against any and all losses, claims, damages, liabilities, costs (including, without limitation, reasonable attorneys’ fees) and expenses (collectively, “Losses”), as incurred, that arise out of or are based upon (i) any untrue or alleged untrue statement of a material fact contained in any registration statement, any prospectus included in any registration statement or any form of prospectus or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein (in the case of any prospectus or form of prospectus or supplement thereto, in light of the circumstances under which they were made) not misleading, or (ii) any violation or alleged violation by the Company of the Securities Act, Exchange Act or any state securities law or any rule or regulation thereunder, in connection with the performance of its obligations under Section 3, except to the extent, but only to the extent, that such untrue statements, untrue statements, omissions or omissions are based upon information regarding the Purchaser furnished in writing to the Company by the Purchaser expressly for use therein. The Company shall notify the Purchaser promptly of the institution, threat or assertion of any proceeding arising from or in connection with the transactions contemplated by Section 3 of which the Company is aware. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of an indemnified party and shall survive the transfer of the securities contemplated hereby by the Purchaser.
(e) any registration statement filed pursuant to this Agreement shall, to the extent permitted by the Securities Act and the rules and regulations promulgated therein be on or converted to a Form S-3 registration statement and register the securities registered thereby for resale pursuant to Rule 415 under the Securities Act.
4. Representations of Purchaser. Purchaser hereby represents and warrants to the Company that:
(a) Purchaser, in making the decision to purchase the Purchased Shares and receive the Additional Securities, has not relied upon any oral or written representations or assurances from the Company or any of its officers, directors, partners or employees or any other representatives or agents, other than those contained in Section 5 below.
(b) This Agreement has been validly authorized, executed and delivered by the Purchaser and, assuming the due authorization, execution and delivery thereof by the other party hereto, is a valid and binding agreement enforceable in accordance with its terms, subject to the general principles of equity and to bankruptcy or other laws affecting the enforcement of creditors’ rights generally. The execution, delivery and performance of this Agreement by the Purchaser does not and will not conflict with, violate or cause a breach of, constitute a default under, or result in a violation of (i) any agreement, contract or instrument to which the Purchaser is a party which would prevent the Purchaser from performing its obligations hereunder (ii) any law, statute, rule or regulation to which the Purchaser is subject or (iii) the Purchaser’s Certificate of Incorporation or bylaws.
(c) Purchaser is an “accredited investor” as defined by Rule 501 under the Securities Act of 1933, as amended (the “Securities Act”).
(d) Purchaser acknowledges that it has had the opportunity to review this Agreement and the transactions contemplated by this Agreement with the Purchaser’s own legal counsel and investment and tax advisors.
(e) Purchaser has reviewed the documents of the Company (“Company Filings”), filed as of the date hereof with the Securities and Exchange Commission (“SEC”), including the proxy statement relating to the Meeting, and Purchaser understands the content of the Company Filings and the risks described about an investment in the Company.
(f) Purchaser has been advised that the New Shares, if any, and the Additional Securities have not been registered under the Securities Act of 1933, as amended.
3 |
5. Company Representations. The Company hereby represents and warrants to the Purchaser that:
(a) The Company is duly organized and is validly existing in good standing under the laws of the jurisdiction of its organization as the type of entity that it purports to be.
(b) This Agreement has been validly authorized, executed and delivered by it and, assuming the due authorization, execution and delivery thereof by the other party hereto, is a valid and binding agreement enforceable in accordance with its terms, subject to the general principles of equity and to bankruptcy or other laws affecting the enforcement of creditors’ rights generally. The execution, delivery and performance of this Agreement by the Company does not and will not conflict with, violate or cause a breach of, constitute a default under, or result in a violation of (i) any agreement, contract or instrument to which the Company is a party which would prevent the Company from performing its obligations hereunder (ii) any law, statute, rule or regulation to which the Company is subject or (iii) the Company’s certificate of incorporation or bylaws.
(c) The Company has the requisite corporate power and authority to enter into and to perform its obligations under this Agreement; and the execution, delivery and performance by the Company of this Agreement has been duly authorized by all necessary action on the part of the Company.
(d) None of the Company Filings, as of their respective dates (or, if amended or superseded by a filing prior to the date of this Agreement, then on the date of such filing), contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The Company Filings and the Signing Form 8-K (as defined below) constitute all filings required to be filed by the Company with the SEC as of the date hereof. At the time of the purchase by the Purchaser of the Public Shares all information relating to a purchase or sale of Public Shares that a reasonable investor would deem material to its investment decision with respect to the Public Shares will be contained in the Company Filings, Signing Form 8-K and Future Filings (as defined below), if any, filed with the SEC. None of the Future Filings, as of their respective dates, will contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.
(e) The Public Shares have been duly authorized for issuance and are validly issued fully paid and non-assessable and have not been issued in violation of any preemptive rights or others rights to subscribe for or purchase securities. The New Shares, if any, and Additional Securities have been duly authorized for issuance and the New Shares, if any, and the Common Stock issued and/or sold to Purchaser pursuant to Section 2 will be validly issued and fully paid and non-assessable and will not have been issued in violation of any preemptive rights or others rights to subscribe for or purchase securities.
6. Disclosure; Exchange Act Filings. Promptly after execution of this Agreement, the Company will file a Current Report on Form 8-K (“Signing Form 8-K”) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) reporting it. The parties to this Agreement shall cooperate with one another to assure that all such disclosures are accurate and consistent. The Company agrees to timely file with the SEC any documents or reports required to be filed by it under the Exchange Act and the rules and regulations promulgated thereunder until the Closing (the “Future Filings”).
7. Purchased Shares. Purchaser agrees not to sell or transfer the Purchased Shares for twenty-four (24) months from the closing of the Mergers and shall give the Company 15 calendar days’ written notice prior to any sale or transfer of the Purchased Shares (the “Sale Notice”). The Company shall have the right to repurchase all, but not some of the Purchased Shares at a price per share equal to the average closing sale price of Company common stock on NASDAQ in the 30 trading days prior to the date of the Sale Notice (the “Repurchase Right”). In order to exercise the Repurchase Right, the Company must deliver written notice of such acceptance (“the Purchase Notice”) to the Purchaser no later than 15 calendar days after receipt by the Company of the Sale Notice and purchase all such Purchased Shares at the price set forth in the Sale Notice not later than twenty-five calendar days after the receipt by the Company of the Sale Notice. To the extent the Company fails to deliver the Purchase Notice within the immediately preceding 15-calendar day period, rejects the Repurchase Right or exercises the Repurchase Right but fails to purchase all Purchased Shares within such twenty-five-calendar day period, the Purchaser shall thereafter be free to sell or otherwise transfer the Purchased Shares.
4 |
8. Notices. All notices to a party pursuant to this Agreement shall be in writing by personal delivery, overnight courier, facsimile or email to the address set forth next to such party’s name on the signature pages hereto or such other address notified by such party to the other party hereto in accordance with this Section 8. Notice given by personal delivery or overnight courier shall be effective upon physical delivery and notice by facsimile or email shall be effective as of the date confirmed if delivered before 5:00 p.m. Eastern Time on any Business Day or the next succeeding Business Day if delivered on or after 5:00 p.m. Eastern Time on any Business Day or during any non-Business Day. For purposes of this Agreement, Business Day means any day other than, Saturday, Sunday or a day on which banks are required or authorized by law to be closed in the City of New York or Mexico City.
9. Entire Agreement; Amendment. This Agreement constitutes the entire agreement among the parties with respect to the subject matter hereof and this Agreement may be amended or modified only by written instrument signed by all parties. The headings in this Agreement are for convenience of reference only and shall not alter or otherwise affect the meaning hereof.
10. Governing Law. This Agreement shall be governed by and construed in accordance with the law of the State of New York, including the conflicts of law provisions and interpretations thereof.
11. Counterparts. This Agreement may be executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. Delivery of an executed signature page by facsimile or other electronic transmission shall be effective as delivery of a manually signed counterpart of this Agreement.
12. Termination. Notwithstanding any provision in this Agreement to the contrary, this Agreement shall become null and void and of no further force (i) upon the termination of the Merger Agreement or(ii) if the Purchaser fails to purchase the $5 million of Purchased Shares by the Closing. Notwithstanding any provision in this Agreement to the contrary, the Company’s obligation to issue the Additional Securities to the Purchaser shall be conditioned on the Closing occurring and the Purchaser purchasing the $5 million of Purchased Shares.
13. Remedies. Each of the parties hereto acknowledges and agrees that, in the event of any breach of any covenant or agreement contained in this Agreement by the other party, money damages may be inadequate with respect to any such breach and the non-breaching party may have no adequate remedy at law. It is accordingly agreed that each of the parties hereto shall be entitled, in addition to any other remedy to which they may be entitled at law or in equity, to seek injunctive relief and/or to compel specific performance to prevent breaches by the other party hereto of any covenant or agreement of such other party contained in this Agreement.
13. Binding Effect; Assignment. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective legal representatives, successors and permitted assigns. This Agreement shall not be assigned by either party without the prior written consent of the other party hereto provided that Purchaser may assign this Agreement to an Affiliate (as defined under Rule 144) without such written consent.
[Signature Page Follows]
5 |
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.
PURCHASER:
| |||
TV AZTECA, S.A.B. DE C.V.
| |||
By: | |||
Name: | |||
Title: |
Address: | |||
Email: | |||
Facsimile: | |||
COMPANY:
| |||
BLACK RIDGE ACQUISITION CORP.
| |||
By: | |||
Name: | |||
Title: |
Address: | |||
Email: | |||
Facsimile: | |||
6 |
Exhibit 10.11
AMENDED AND RESTATED SERVICES AND LICENSING AGREEMENT
This AMENDED AND RESTATED SERVICES AND LICENSING AGREEMENT is entered into as of December 1, 2018 (the “Effective Date”), by and between Pala Interactive LLC, a California limited liability company (“Pala”) and Club Services, Inc. (“CSI”). Each of Pala and CSI may be referred to individually as a “Party” and collectively as the “Parties”. CSI and Pala are parties to that certain Services and Licensing Agreement dated as of November 30, 2018 (the “Original Agreement”). The Parties hereby agree that as of the Effective Date, the Original Agreement shall be amended and restated in its entirety as set forth herein (the “Amended Agreement”, and together with Exhibit A, Exhibit B, Exhibit C, Exhibit D and Exhibit E, the “Agreement”). In the event of a contradiction between the terms of the Original Agreement and this Agreement, the terms of this Agreement will control.
WHEREAS, CSI desires to offer an online social gaming product under the WPT Brand (as defined below);
WHEREAS, Pala desires to provide CSI with an online social gaming product by customizing its and/or its licensors’ proprietary platform, content, and game engines for social media, web and mobile platforms; and
WHEREAS, CSI agrees and acknowledges that the Social Casino (as defined below) is not a gambling product, but a social gaming product, and Pala will not be providing a gambling product pursuant to this Agreement.
NOW, THEREFORE, in consideration of the promises and mutual covenants set forth herein and good and valuable consideration the receipt and sufficiency of which is hereby agreed to and acknowledged, the Parties hereby agree as follows:
Article 1
DEFINITIONS; interpretation
1.1 | Definitions. The following words and terms shall have the following meanings when used herein and such definitions shall apply to both the singular and plural forms of any such words and terms: |
“Adjusted Revenue” means Revenue less any revenue sharing retained by any Storefront directly related to the Social Casino.
“Affiliate” means, with respect to any Person, any Person directly or indirectly controlling, controlled by or under common control with such Person. For purposes of this definition, the term “control” shall mean the possession, direct or indirect, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities, by reason of management authority, by contract, or otherwise. For purposes of this Agreement, no Party shall be deemed an Affiliate of the other Party.
“Agreement” shall have the meaning set forth in the preamble to this Agreement.
“Android Bundle” means the application of the Social Casino for use on the Android smartphone and tablet Game Platform.
“Applicable Laws” means all federal, state, and local laws, statutes, regulations, rules, executive orders, supervisory requirements, export requirements, directives, circulars, opinions, decrees, treaties, interpretive letters, guidance or other official releases of or by any Governmental Entity, any authority, department, or agency thereof, or any regulatory or self-regulatory organization applicable to the Parties’ rights and obligations hereunder in all relevant jurisdictions.
“Branded Games” means those games set forth on Exhibit A (as may be updated by Pala from time to time) that, upon mutual agreement of the Parties, have been customized to feature the WPT Brand.
“Business Day” means a day (excluding Saturdays and Sundays) on which banks in Los Angeles, California are generally open for normal banking business.
“Confidential Information” shall have the meaning set forth in Section 11.1 of this Agreement.
1 |
“Credits” means, collectively, the Play Credits, Tournament Credits, Experience Credits and Reward Credits.
“CSI” shall have the meaning set forth in the preamble to this Agreement.
“Customer Data” means customer user data, including Personal Information, collected or created by, or provided to, Pala in connection with the Social Casino or otherwise under this Agreement. The term “Customer Data” expressly includes all anonymized data, all analytics data, and all metadata related to Social Casino Players.
“DAU” shall have the meaning set forth in Section 2.2(d)(v) of this Agreement.
“Deployment Fee” shall have the meaning set forth in Section 5.1(a) of this Agreement.
“Deliverables” means the deliverables set forth in Exhibit A of this Agreement, and such other deliverables as mutually agreed to by the Parties.
“Disclosing Party” shall have the meaning set forth in Section 11.1 of this Agreement.
“Effective Date” shall have the meaning set forth in the preamble to this Agreement.
“Experience Credits” shall have the meaning set forth in Section 2.3(i)(i) of this Agreement.
“Force Majeure Event” shall have the meaning set forth in Section 14.1 of this Agreement.
“Game Platforms” means iOS or Android based tablet and mobile devices, a downloadable client application, and stand-alone websites with customization of the Lobby.
“Games” means the Stock Games and Branded Games provided by Pala to CSI in accordance with this Agreement, as set forth on Exhibit A.
“Gaming Authority” means, collectively, those international, federal, state, local, foreign and other governmental, regulatory and administrative authorities, agencies, commissions, boards, bodies and officials responsible for or involved in the regulation of gaming or gaming activities or the ownership of an interest in any Person that conducts gaming in any applicable jurisdiction.
“Go Live Date” means, as applicable, the date that the Social Casino is live and available for play by Social Casino Players on any applicable Game Platform in accordance with this Agreement.
“Governmental Entity” means any federal, state, local, or foreign government or any provincial, departmental or other political subdivision thereof, or any entity, body or authority having or asserting executive, legislative, judicial, regulatory, administrative or other governmental functions or any court, department, commission, board, bureau, agency, instrumentality or administrative body of any of the foregoing, including any Gaming Authority.
“Hosting Costs” means during any period (i) the total server costs for hosting the Social Casino on a cloud or other platform and bandwidth usage costs during such period multiplied by (ii) a percentage determined by dividing the total number of Social Casino Players that logged onto the Social Casino during such period by the total number of Third Party Players plus the total number of social casino players that logged onto a social casino utilizing the Pala Platform during such period.
“Indemnified Party” shall have the meaning set forth in Section 8.3 of this Agreement.
2 |
“Indemnifying Party” shall have the meaning set forth in Section 8.3 of this Agreement.
“Industry Practice” means, in relation to any activity or requirement relevant to this Agreement, the exercise of that degree of skill, care, diligence, prudence and foresight which would reasonably and ordinarily be expected from a skilled and experienced Person engaged in the same type of activity or requirement under the same or similar circumstances and conditions.
“Intellectual Property Rights” means patents, copyrights (including rights in computer software), design rights, trade-marks, service marks, certification marks, trade dress, database rights, moral rights, know-how, trade secrets, domain names, URLs, trade names, together with any registrations or applications to register the same (and any licenses in connection with any of the same) and including the right to apply for registration of any such rights, whether or not registered or capable of registration, in each case for their full term, and whether subsisting in any specific country or countries or any other part of the world and together with any renewals, continuations or extensions.
“iOS Bundle” means the application of the Social Casino for use on the iOS smartphone and tablet Game Platform.
“JAMS” shall have the meaning set forth in Section 17.1 of this Agreement.
“Launch Jurisdiction” shall have the meaning set forth in Section 2.2(a) of this Agreement.
“Lobby” shall have the meaning set forth in Section 2.5(a) of this Agreement.
“MAU” shall have the meaning set forth in Section 2.2(d)(v) of this Agreement.
“Monthly Financial Calculations” shall have the meaning set forth in Section 5.7(b) of this Agreement.
“Pala” shall have the meaning set forth in the preamble to this Agreement.
“Pala Platform” means the Intellectual Property Rights in relation to Pala’s proprietary online social game technology platform and infrastructure, which allows social casinos and games to be offered on Game Platforms, including all engineering designs and technology for both the front-end and the back-end.
“Pala Standard Tournaments” shall have the meaning set forth in Section 2.3(a)(i) of this Agreement.
“Party” and “Parties” shall have the meaning set forth in the preamble to this Agreement.
“PCI DSS” shall have the meaning set forth in Section 7.1 of this Agreement.
“Person” means any individual, partnership, corporation, limited liability company, association, joint stock company, trust, joint venture, unincorporated organization, Governmental Entity.
“Personal Information” means information that may be used to identify an individual, including name, address, phone number, email address, driver’s license number, social security number, financial information (such as bank account numbers and credit card numbers and associated passwords or PINs), geographic location information, behavioral information, and any other information which may be used to identify an individual, collected through the Social Casino.
“Play Credits” shall have the meaning set forth in Section 2.3(i)(i) of this Agreement.
3 |
“Privacy Policy” shall have the meaning set forth in Section 7.5 of this Agreement.
“Promotion” shall have the meaning set forth in Section 2.3(e) of this Agreement.
“Receiving Party” shall have the meaning set forth in Section 11.1 of this Agreement.
“Records” shall have the meaning set forth in Section 5.8(a) of this Agreement.
“Revenue Split” shall have the meaning set forth in Section 5.5(a)(iii) of this Agreement.
“Revenue” means the total gross revenue generated from the Social Casino, including any sale of Play Credits from any Storefront (i.e., Facebook Credits, iTunes, GooglePlay, Amazon for in-app purchases, and any other storefront, social networks, platforms or portal other purchases) and any gross revenue generated from a Social Casino Player’s action in exchange for Play Credits or any other virtual item. Revenue does not include any monies generated from CSI’s Subscription Gaming Product (as defined below).
“Reward Credits” shall have the meaning set forth in Section 2.3(i)(i) of this Agreement.
“Shared Liquidity” means the integration of Social Casino Players and Third Party Players on the Pala Platform in a manner that provides such Social Casino Players and Third Party Players that ability to play Games and participate in Tournaments on a common network.
“Social Casino” means the Pala Platform branded with the WPT Brand, the Games and the Deliverables.
“Social Casino Player” means an individual that enters into the standard Terms of Service agreement to play or engage in the Social Casino.
“Software Development Agreement” means the Software Development Agreement entered into by the Parties dated September 16, 2008, along with amendments related thereto, pertaining to CSI’s Subscription Gaming Product (as defined below).
“Specifications” shall have the meaning set forth in Section 3.4 of this Agreement.
“Stock Games” means the slots games and other games as set forth on Exhibit A (as may be updated by Pala from time to time), none which will be customized or branded with the WPT Brand.
“Storefront” means any of the iOS or Google app stores, Facebook or any other online storefronts.
“Subscription Gaming Product” means CSI’s ClubWPT subscription/sweepstakes product as governed by the Software Development Agreement.
“Term” shall have the meaning set forth in Section 10.1 of this Agreement.
“Terms of Service” shall have the meaning set forth in Section 7.5 of this Agreement.
“Third Party” means a Person that is not a Party to this Agreement or affiliated to a Party to this Agreement, including an Affiliate of a Party.
“Third Party Expenses” shall mean any of the following expenses actually due and owing to a Third Party: (i) any fees in respect to a license from a Third Party for, or the provision of, certain games and/or features that are licensed and included in Social Casino, (ii) any refunds paid to Social Casino Players, (iii) any payment processing, charge-backs and associated costs, and (iv) any financial processing costs and fees (including credit card processing fees). Third Party Expenses do not include (x) any revenue share retained by a Storefront, which are deducted in determining Adjusted Revenue or (y) any costs or fees associated with marketing the Social Casino, Promotions, Hosting Costs, Verification Costs or any other costs related to the operation of the Social Casino, which shall be the responsibility of CSI.
4 |
“Third Party Games” means Games provided by Third Parties.
“Third Party Players” means players of social casino gaming products (other than the Social Casino Players) utilizing the Pala Platform.
“Tournament Credits” shall have the meaning set forth in Section 2.3(i)(i) of this Agreement.
“Tribe” shall have the meaning set forth in Section 16.1 of this Agreement.
“Verification Checks” means the checks carried out by Pala via Third Parties in order to attempt to verify the age, identity (i.e., know-your-customer) and location (including geo-locating) of potential Social Casino Players in accordance with Applicable Law.
“Verification Costs” means all Third Party costs and fees associated with Verification Checks.
“WPT Brand” shall have the meaning set forth in Section 6.2(b) of this Agreement.
“WPT Brand Standards” means the brand standards set forth on Exhibit C of this Agreement.
“WPT Group” means the group of companies which directly control the use of the World Poker Tour (WPT) brand (i.e., CSI, WPT Enterprises, Inc., Peerless Media Limited, WPT Distribution Worldwide Limited, WPT Studios Worldwide Limited, WPT Distribution USA, Inc., and WPT Studios USA, Inc.)
“WPT Tournaments” shall have the meaning set forth in Section 2.3(a)(ii)of this Agreement.
1.2 | Rules of Interpretation. In this Agreement, except to the extent otherwise provided or the context otherwise requires: (a) when a reference is made in this Agreement to an Article, Section, Exhibit or Schedule, such reference is to an Article or Section of, or an Exhibit or Schedule to, this Agreement unless otherwise indicated; (b) the table of contents and headings for this Agreement are for reference purposes only and do not affect in any way the meaning or interpretation of this Agreement; (c) whenever the words “include,” “includes” or “including” are used in this Agreement, they are deemed to be followed by the words “without being limited to”; (d) the words “hereof,” “herein” and “hereunder” and words of similar import, when used in this Agreement, refer to this Agreement as a whole and not to any particular provision of this Agreement; (e) all terms defined in this Agreement have the defined meanings when used in any certificate or other document made or delivered pursuant hereto, unless otherwise defined therein; (f) the definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms; (g) any reference to “days” means “calendar days” unless otherwise specified; (h) if a notice is to be given on a specified day, unless otherwise specifically provided herein, it must be given prior to 5:00 p.m., Los Angeles, California time; (i) references to a Person are also to its successors and permitted assigns; (j) the use of “or” is not intended to be exclusive unless expressly indicated otherwise; (k) any reference to “$” and “dollars” is to the lawful money of the United States of America; and (l) unless otherwise expressly provided herein, any agreement, instrument, statute, rule or regulation defined or referred to herein or in any agreement or instrument defined or referred to herein means such agreement, instrument, statute, rule or regulation as from time to time amended, modified or supplemented, including (in the case of agreements or instruments) by waiver or consent and (in the case of statutes, rules and regulations) by succession of comparable successor statutes, rules and regulations. |
1.3 | The schedules and recitals form an integral part of this Agreement and shall have effect as if set out in full in the body of this Agreement and any reference to this Agreement includes the schedules and recitals. |
Article 2
oBLIGATIONS OF PALA
2.1 | Provision and Maintenance of Platform and Infrastructure. Pala shall provide to CSI the Pala Platform such that the Social Casino can be offered on the Game Platforms. Pala shall be responsible for timely securing Third Party platform and services relationships with respect to such Game Platforms to host the Social Casino, and shall be the owner of all app store accounts, including, without limitation, payment accounts, associated therewith. For purposes of clarity, this is not applicable to CSI’s Subscription Gaming Product. Furthermore, Pala shall manage all aspects of such Third Party platform relationships, including the Facebook, Apple, and Google relationships, and any relationships related to an open-web offering. To the extent any Third Party platform provider requires Pala to provide certain information or items, or take, or refrain from taking certain actions, CSI shall assist with such requests and requirements as reasonably requested, and Pala shall not be responsible for its failure to meet its obligations under this Section 2.1 in the event that such failure is caused by CSI’s failure to provide such assistance or approval. CSI acknowledges and agrees that Pala may include the language “powered by Pala Interactive” or a similar acknowledgement on the Social Casino; provided that such language does not unreasonably interfere with the branding of the Social Casino. |
5 |
2.2 | Launch and Operation of Social Casino. |
(a) | Pala shall provide the necessary technical expertise to launch and operate the Social Casino. The Social Casino will run worldwide (the “Launch Jurisdiction”), but shall specifically exclude any state or other jurisdiction therein that has specifically determined online social games similar to the Social Casino are illegal. CSI shall be responsible for liability in connection with marketing of the Social Casino around the World, and shall ensure compliance with all Applicable Laws (wherein it may obtain a legal opinion from reputable counsel). Pala may elect, in its sole and absolute discretion, to not offer the Social Casino (or any aspect thereof) in any jurisdiction in the event that it determines (a) that the offering of the Social Casino (or any aspect thereof) would violate Applicable Laws or (b) operation in the jurisdiction will not be financially viable for Pala. The Parties agree that the Social Casino will not be offered in the state of Washington. In no event shall CSI have any liability associated with the functionality of the Games, unless such activity was the result of a CSI request or customization. To the extent that Pala is required by CSI to change the Social Casino, integrate any third party software or change its services (e.g. language support) to operate in any jurisdiction, CSI shall pay Pala the fees defined in Section 5.2(b), unless otherwise agreed by the Parties in writing. |
(b) | Unless otherwise agreed to by the Parties in writing, the Social Casino, and any support or other services to be provided by Pala hereunder, shall be offered in the English language only. |
(c) | Pala shall be solely responsible for administering and monitoring the Social Casino, and, subject to any delay caused by an act or omission of CSI, Pala shall use commercially reasonable efforts to cause the Go Live Date to occur on a date to be mutually agreed by the Parties. The Parties estimate Phase I of the launch to occur on or around November 2018, Phase II on or around March 2019, and Phase III on or around May 2019 (“Go Live Timelines”); and the Parties agree that a failure to meet such Go Live Timelines shall not result in a breach by Pala, but may trigger a termination right by CSI under Section 10.2(f). |
(d) | During the Term, Pala shall be responsible for the operation of the Social Casino, and the provision of the Pala Platform, and any software necessary to operate it. This shall include, but is not to be limited to, the following: |
(i) | Technical Operations. Pala shall be responsible for the technical operation of the Social Casino, including 24X7 fully managed infrastructure support, including security, hardware and software upgrades, monitoring, backups, data archiving, bug fixes and future network-wide product upgrades across all available platforms. |
(ii) | Game and Tournament Management. Pala shall be responsible for Game management, including oversight and scheduling of Games and tournaments. |
(iii) | Support. Pala shall provide customer support services via email and self-service customer knowledgebase, as further described on Exhibit B; |
(iv) | Reporting. Pala shall provide Customer Data to CSI on an ongoing basis, in a format digestible for CSI. Pala shall provide CSI with daily and monthly Customer Data reports containing at least the following information: new users, monthly active users (“MAU”), daily active users (“DAU”), DAU/MAU ratio, number of sessions, average session time, revenue, average revenue per daily active user, average revenue per paying user, total Play Credits wagered, total win, total loss, and hands played. In addition, Pala shall provide CSI access to its data warehouse through the use of Pala’s available API’s to permit CSI to generate custom reports and to export Customer Data, if desired. Pala shall provide to CSI the financial reports described in Section 5.7. |
(v) | Risk Management. Pala shall be responsible for risk management and managing consumer fraud, including enforcing the Terms of Service and Privacy Policy, any official rules, and other similar online agreements. |
(vi) | Third Party Game Content. In the event Pala incorporates Third Party Games or other content into the Social Casino, Pala shall be responsible for managing the relationship with such Third Party and payment of any associated fees, which such fees shall be allocated in accordance with Section 5.5. In the event CSI desires to incorporate Third Party Games or other content into the Social Casino, CSI shall submit a request to Pala, which request may be approved or denied in Pala’s sole and absolute discretion. In the event Pala approves CSI’s request, CSI shall be solely responsible for: (i) all licensing fees and other costs related to such Third Party Games or content and (ii) Pala’s fees and costs to integrate and deploy such Third Party Games or content, which shall be billed in accordance with the rates set forth in Section 5.2(b). In the event any supplier of Third Party Games or other content objects to the inclusion of its content in the Social Casino, Pala may exclude, or promptly remove, such Third Party Games or other content from the Social Casino. |
6 |
(e) | CSI acknowledges that Pala may, in its sole discretion, use Shared Liquidity and include Third Party Players in leaderboards and game statistics across the Pala Platform. |
2.3 | Features and Tools. Pala shall develop the user interface design of the Social Casino on all Game Platforms. Pala shall provide product management for the Social Casino. As of the Go Live Date under any Game Platform, the Social Casino shall include each of the following: |
(a) | Tournaments. |
(i) | Pala will facilitate and administer the offering of Pala standard tournaments and special offers through the Social Casino (collectively, the “Pala Standard Tournaments”). CSI shall provide Pala with notice of its desire to offer a Pala Standard Tournament at least thirty (30) days prior to the desired tournament date. |
(ii) | In the event CSI desires to offer a tournament (other than the Pala Standard Tournaments) or another special offer (a “WPT Tournament”), CSI shall notify Pala at least thirty (30) days prior to the desired tournament date and the Parties shall work in good faith to offer and set forth the relevant details for such WPT Tournament, including any sponsorship of the WPT Tournament. CSI shall be responsible for liability pertaining to the offering of such WPT Tournament that extends above and beyond the typical Pala Tournament and for ensuring compliance with all Applicable Laws (wherein it may obtain a legal opinion from reputable counsel). Pala may elect, in its sole and absolute discretion, to not offer such WPT Tournament if Pala believes offering such WPT Tournament would violate Applicable Law. |
(iii) | Pala shall (a) be responsible for tournament management, including the tournament scheduling and structure, and (b) shall consult with CSI (and modify if requested by CSI) regarding the specific aspects of any tournament, including admittance and any Promotions in connection therewith. |
(b) | Progression Levels. The Social Casino shall include progression levels, which may be achieved by acquiring Experience Credits. When a new progression level is achieved, the Social Casino Player may receive Play Credits, new features, or other benefits. |
(c) | Leaderboard and Statistics. The Social Casino shall include tournament leaderboards and game statistics, as well as Social Casino world records, which pursuant to Section 2.2(e) may include Third Party Players. |
(d) | Advertising. Advertising may be incorporated into the Social Casino in accordance with Article 4. |
(e) | Promotions. Pala shall consult with CSI regarding, and obtain the consent of CSI prior to offering, any promotional items (any such promotional item, a “Promotion”) awarded to winners of Pala Standard Tournaments in which the Social Casino Players participate. CSI may request a Promotion be included in a WPT Tournament. Except as set forth below, CSI shall be responsible for procuring and delivering all Promotions (whether for Pala Standard Tournaments or WPT Tournaments), including, without limitation, all delivery costs and sales or use taxes associated with all Promotions. No Social Casino Player shall receive a Promotion unless such Social Casino Player meets the eligibility requirements set forth in the official rules. For tournaments utilizing Shared Liquidity, CSI and other participating network partners shall share the costs of Promotions based upon their pro rata share of participating players, or as otherwise agreed to by all participating parties. |
(f) | Achievement Badges. Pala currently offers 61 badges that may be awarded to Social Casino Players for accomplishing certain activities, for example: achieving $1 million in Play Credits, having twenty (20) friends in a Game, playing seven (7) consecutive Games, or hitting 1000 spins in slot Games. Upon CSI’s reasonable request, Pala will use commercially reasonable efforts to develop additional badges specifically for Social Casino Players. |
7 |
(g) | Player Notifications. The Social Casino shall include the following formats for communicating with Social Casino Players: |
(i) | Notifications that occur when a Social Casino Players logs into the Social Casino. |
(ii) | Notifications that occur when a Social Casino Player achieves something in a Game or to provide a Promotion. |
(iii) | Player invoked notifications that are integrated into Facebook. |
(h) | Avatars. The Social Casino shall permit Social Casino Players to select an avatar to represent them in the Social Casino. Upon CSI’s reasonable request, Pala will use commercially reasonable efforts to develop additional avatars specifically for the Social Casino. |
(i) | Credits and Virtual Goods. |
(i) | Pala shall manage the provision and administration of the Credits to Social Casino Players. There shall initially be four types of credits acquired by Social Casino Players and used to participate in the Social Casino: (i) play chips, which are used to play the Games (“Play Credits”); (ii) tournament chips, which are used to participate in tournaments (“Tournament Credits”); (iii) experience credits, which are used to receive additional in-game virtual benefits (“Experience Credits”); and (iv) credits that are used to track a Social Casino Player’s loyalty to the Social Casino (“Reward Credits”). |
(ii) | The Play Credits shall be awarded on a free-to-play and a purchase model, including automatic, periodic free Play Credit awards, earning Play Credits by completing required actions, and purchasing Play Credits. The specific terms of awarding Play Credits and the cost of Play Credits shall be determined by Pala; provided, however, that such terms must at all times comply with Applicable Law, Storefront policies, Game Platforms and any network rules established by Pala. Furthermore, Pala may elect to offer a reasonable amount of coupon codes to give discounts on Play Credits; provided such coupon codes comply with Applicable Laws, Storefront policies, Game Platforms and any network rules established by Pala. |
(iii) | Tournament Credits are used exclusively for play in a particular tournament and expire immediately at the end of such tournament. The Tournament Credits shall be awarded for free, at the commencement of the tournament and shall expire after the conclusion of the tournament. Tournament Credits shall be used solely to determine the winner of the tournament and the ranking of Social Casino Players participating in the tournament and for no other purpose. The specific terms relating to Tournament Credits shall be determined by Pala; provided, however, that in connection with any WPT Tournament, Pala will consult with CSI regarding such Tournament Credits. |
(iv) | Experience Credits are awarded on all Games. Experience Credits cannot be purchased. Experience Credits help Social Casino Players progress in the Social Casino and unlock certain benefits, including game features and advancement to new levels. |
(v) | Reward Credits are awarded based on the player taking certain actions within the Social Casino including frequency and duration of play. Rewards Credits are not awarded based upon the outcome of any Games. CSI shall be solely responsible for: (1) awarding any Promotions in exchange for Reward Credits, (2) ensuring the Reward Credits program, and any Promotions awarded thereunder, complies with Applicable Laws, (3) procurement and fulfillment of any such Promotions, (4) accurately describing any such Promotions, (5) imagery used in connection with any such Promotions, (6) managing inventory levels for any such Promotions, (7) honoring such Promotions, and (8) all costs associated with such Promotions. Furthermore, CSI shall be responsible for any taxes or assessments associated with any such Promotions, excluding taxes winners may be required to pay. Prior to awarding any Promotion in exchange for Reward Credits, CSI shall certify to Pala in writing that the exchange rate for Reward Credits to Promotions is correct. CSI shall be responsible for liability associated with the offering of Reward Credits in association with Promotions (including, Promotions that have real-world value) and shall ensure compliance with all Applicable Laws (wherein it may obtain a legal opinion from reputable counsel). Pala may elect, in its sole and absolute discretion, to not offer Reward Credits if Pala believes offering Reward Credits would violate Applicable Law. In no event shall Pala have any responsibility for any fraud, malfunction or error related to, or bear any financial liability associated with any Promotion offered in connection with Rewards Credits. |
8 |
(vi) | Credits cannot be transferred, redeemed, or sold by Social Casino Players, for real money, goods or any other item of monetary value. No prizes shall be awarded to the winners of any Games on the Social Casino; provided, additional Play Credits may be awarded to winners of Games and Experience Credits may be awarded to winners of Games or tournaments on the Social Casino. |
(vii) | Social Casino Players may exchange Play Credits to purchase (for themselves or others) virtual goods to display at the table. Pala currently offers virtual goods. Upon CSI’s reasonable request, Pala will use commercially reasonable efforts to develop additional virtual goods specifically for Social Casino Players. |
(j) | Viral Mechanics. Social Casino Players that have connected their Facebook accounts may share their experience of the Social Casino and interact with others in the following ways: |
(i) | inviting friends, |
(ii) | sharing the fact that a new level has been achieved, |
(iii) | gifting Play Credits to friends, |
(iv) | sharing the fact that such Social Casino Player has been awarded an achievement badge, and |
(v) | sharing the fact that a new machine has been unlocked. |
(k) | Loyalty Program Integration. During the Term, if requested by CSI, Pala shall work with CSI to integrate the Social Casino with the WPT “Reward Program” loyalty system, reporting system and email system, such that a Social Casino Player shall receive certain benefits when playing in the Social Casino pursuant to a development plan and timeline reasonably agreed to by the Parties; CSI will be responsible for any and all costs, including all Third Party costs in connection with or related to the integration of such Reward Program. |
2.4 | Games. |
(a) | Pala shall provide the Games as mutually agreed to by the Parties from time to time. |
(b) | Pala shall provide to CSI for inclusion in the Social Casino all games it develops, obtains rights to, or integrates into the Pala Platform on a reasonable timeline, consistent with Pala’s development and deployment timeline, provided that such game can be offered in the Social Casino in compliance with Applicable Laws. Notwithstanding the foregoing, Pala shall not be obligated to provide CSI with any games it publishes or obtains rights to if: (i) any Third Party will not permit the game to be used in CSI’s Social Casino; or (ii) the game was developed for a Platform on which CSI does not currently, and does not desire in the future, to host the Social Casino; or (iii) Pala has provided another customer with the exclusive right to offer the game. |
(c) | Unless a Third Party will not permit such update or upgrade to be used in the Social Casino, Pala shall provide CSI with updates and upgrades to all Games and elements included in the Social Casino on a reasonably timeline, consistent with Pala’s development and deployment timeline, as the same are made available to any of Pala’s other customers, or used by Pala in its proprietary social casino offering. |
(d) | Pala shall be solely responsible for all quality assurance testing of the Social Casino, and all Games, on all Game Platforms prior to any Go Live Date. |
9 |
2.5 | Custom Development. |
(a) | In consideration of the Deployment Fees, Pala shall develop and brand with a single WPT Brand (i.e., ClubWPT) (i) the Branded Games and (ii) an online main “lobby”, which allows users to navigate through a menu of available Games for play (the “Lobby”). The Social Casino and Pala’s obligations under this Agreement with respect to developing and branding the Social Casino, the Lobby and each Branded Game shall be to brand each of the foregoing with the same single WPT Brand, which is set forth on Exhibit D. |
(b) | In the event CSI desires custom development services, the Parties shall mutually agree in writing the scope and timeline of such custom development, which custom development, including, without limitation, costs incurred by Pala directly related to the provisioning of the Pala Platform specifically for such customizations, and costs for testing and certifying any custom product, service, feature of functionality requested by CSI, will be billed to CSI in accordance with Section 5.2(b) unless otherwise agreed by the Parties in writing. The Parties shall mutually agree on a case-by-case basis in good faith in writing as to which Party shall own the Intellectual Property Rights in and to any custom developments, except for any pre-existing Intellectual Property Rights owned by CSI, which may be incorporated therein. For clarity, any disaster recovery or business continuity services, if requested by CSI above and beyond those offered via Amazon Cloud (or other such hosting service), shall be considered custom development services, and the offering of such services by Pala shall be subject to the foregoing procedures set forth in this Section 2.5(b). |
2.6 | Infrastructure. Subject to CSI’s obligation to pay all Hosting Costs, Pala is responsible for setup of the Social Casino solely in a cloud-based environment. |
2.7 | Subcontractors. Notwithstanding anything to the contrary in this Agreement, Pala shall be entitled to use Third Party contractors or subcontractors to perform or assist with its obligations hereunder with respect to the Social Casino. |
2.8 | Free Accounts. Pala shall provide CSI with free staff accounts to perform necessary tests on the Social Casino. |
Article 3
obligations of CSI
3.1 | Marketing. CSI shall be responsible for all marketing initiatives for the Social Casino, including advertising, player acquisition, retention and reactivation. |
3.2 | Compliance with Laws. CSI shall consult with Pala regarding compliance with all Applicable Laws in connection with the marketing of the Social Casino in jurisdictions in which the Social Casino is offered. The Parties agree that Pala shall not be liable to CSI for failure to comply with the Applicable Laws in jurisdictions outside North America in which the Social Casino is offered, unless such violation is the result of Pala failing to follow any written instruction from CSI regarding the same. |
3.3 | Websites and Domain Names. CSI will facilitate and ensure access to the websites and domains to be used for the Social Casino, whether such websites or domains are owned by CSI, its Affiliate, or a Third Party. |
3.4 | Assistance. CSI acknowledges that Pala’s ability to provide the services contemplated hereunder and any custom development undertaken pursuant to Section 2.5(b), and meet any timing expectations contained herein, is directly dependent upon CSI providing reasonable input and cooperation when requested by Pala. CSI acknowledges and accepts that if CSI cannot, or does not, do so, Pala will not be responsible to fulfill its obligations to CSI under this Agreement (or will be excused from timing expectations, as appropriate). Without limiting the generality of the foregoing, from time to time during the Term, Pala shall provide to CSI specifications for deliverables related to the Social Casino (the “Specifications”). Upon Pala’s completion of any Specifications, CSI shall have the opportunity to evaluate the Specifications to ensure they materially comply with the terms and conditions hereof. If CSI reasonably determines that the Specifications do not materially comply with the terms and conditions of this Agreement, it will notify Pala of any such material noncompliance, and Pala will use commercially reasonable efforts to correct such material noncompliance. In the event that CSI does not notify Pala of any nonconformities within five (5) Business Days after receiving the Specifications, the Specifications will be deemed approved. |
10 |
3.5 | Financial Services. CSI shall be responsible for financial services management in connection with the operation of the Social Casino, including processing payments and reconciliation of financial transactions through the Apple and Google app stores. These financial services shall include, upon offering the Social Casino on the open web, arranging for payment processing for each credit and debit card and other payment methods offered from time to time. |
Article 4
ADVERTISING
4.1 | CSI shall determine, in consultation with Pala: (i) whether any Third Party advertising, sponsorship or messaging appears in the Social Casino, and (ii) the extent of any Third Party advertising, sponsorship or messaging in the Social Casino; provided, however, that CSI has the right to cause Pala to insert sponsorship in the Branded Game of poker, where technically feasible; provided any costs of which shall be considered Custom Development. No Third Party advertising, sponsorship or messaging may appear in the Social Casino without CSI’s written consent. Notwithstanding the foregoing, CSI acknowledges that certain advertising may be restricted by certain Game Platforms or Storefronts. |
4.2 | All advertising, sponsorship and messaging shall be located within the Social Casino and presented in specific, non-intrusive times and/or methods throughout Game play as determined by the Parties. If desired, these ad units may be used to promote the CSI’s affiliated brands. Advertising may be presented in web and mobile ad units. If CSI desires to incorporate advertising in different formats, such a request would constitute a custom development request and would be handled in accordance with Section 2.5(b), unless otherwise agreed by the Parties. |
4.3 | For the avoidance of doubt, amounts paid by a Person to advertise, sponsor or message on the Social Casino shall not be deemed Revenue hereunder, and shall be retained by CSI, unless otherwise agreed by the Parties in writing. |
Article 5
FEES AND PAYMENTS
5.1 | One-Time Fees and Payments. |
(a) | Deployment Fees. |
(i) | In consideration of Pala’s services associated development of the Android Bundle, iOS Bundle, downloadable client and open-web offering, including customization of the Lobby and the Branded Games as contemplated by this Agreement for the launch of the Social Casino, Pala will waive its usual development fee. |
(ii) | Deployment on any other Game Platforms and the development fees associated therewith shall be negotiated by the Parties on a case-by-case basis. |
5.2 | Pala Reimbursed Expenses. |
(a) | Any and all travel and lodging expenses incurred by Pala and pre-approved by CSI in writing in connection with the performance of this Agreement, including with training or custom developments, shall be billed to and reimbursed by CSI at cost; provided, however, that Pala shall provide up to 7 hours of training at no charge for the deployment of the launch of each of Phases I, II and III hereunder. Pala shall invoice CSI on a monthly basis for reimbursement of such expenses, and CSI may offset such amounts against CSI’s share of the Revenue Split. |
(b) | Custom development undertaken by Pala pursuant to Section 2.5(b) or otherwise agreed by the Parties and any associated or additional training as mutually agreed by the Parties, shall in each case be charged at a rate of $150 per hour during the first twelve (12) months of the Term. Thereafter, the hourly rate shall increase by five percent (5%) for each subsequent twelve (12) month period to reflect cost of living adjustments. Pala shall invoice CSI on a monthly basis for such services, and CSI may offset such amounts against CSI’s share of the Revenue Split. |
11 |
5.3 | Costs. Other than costs associated with development of the Pala Platform (other than in relation to customization as provided in Section 5.2(b)), management of financial services and Storefronts (provided the costs payable to such Third Parties is paid in accordance with Section 5.5) and customer support as further described herein, CSI is responsible for any and all costs associated with offering the Social Casino to Social Casino Players, including fees associated with marketing, Promotions, Verification Costs, Hosting Costs, and disaster recovery and business continuity custom ordered by CSI above and beyond the Amazon Cloud (or other such hosting site). However, all amounts paid to Storefronts and the Third Party Expenses that reduce Revenue shall be paid in accordance with Section 5.5. Pala shall invoice CSI on a monthly basis for the Hosting Costs and Verification Costs, and CSI may offset the Hosting Costs and Verification Costs against CSI’s share of the Revenue Split. |
5.4 | Monthly Fee. |
(a) | Pala will waive its usual monthly minimum fee. |
5.5 | Revenue. |
(a) | From and after the Go Live Date for the first Game Platform, within twenty (20) days after receipt of an invoice by CSI from Pala for the Third Party Expenses (as detailed in Section 5.5(a)(ii) below) for the immediately preceding calendar month, CSI shall cause all the Adjusted Revenue received by CSI in the immediately preceding month to be distributed as follows: |
(i) | First, to the extent applicable, payment of any taxes (other than income or similar taxes on the Revenue Split) related to the Social Casino due and owing; |
(ii) | Second, to pay Pala for any Third Party for any Third Party Expenses due and owing (Pala shall invoice CSI on a monthly basis for reimbursement of such Third Party Expenses); |
(iii) | Last (and following all the deductions set forth in subsections (i) and (ii) above), 25% to Pala and 75% to CSI (such amount payable to each Party, its “Revenue Split”). Payment instructions shall be provided by Pala. |
(b) | Notwithstanding the foregoing, to the extent that there is no Revenue Split due to Pala during any month, then CSI shall reimburse Pala for any balance outstanding of the amounts due and owing pursuant to Section 5.2 and Section 5.3 for such month within thirty (30) days of receipt of an invoice from Pala. |
(c) | No Avoidance. CSI hereby agrees to take no actions the purpose of which is to avoid paying the Revenue Split to Pala due under this Agreement, and Pala hereby agrees to not take any actions the purpose of which is to invoice CSI expenses that are under Pala’s control improperly. Pala shall not share in revenues associated with the Subscription Gaming Product. |
5.6 | Late Payments. Should either Party fail to pay any amounts due and owing under this Agreement, the other Party shall, without prejudice to its other rights and remedies under this Agreement, be entitled (but not obliged) to charge interest on the overdue amount, from the due date up to the date of actual payment, at the rate of ten percent (10%) on the amount due and owing. |
5.7 | Financial Reporting. |
(a) | Each Party will maintain complete and accurate financial records in accordance with Industry Practices and generally accepted accounting principles, consistently applied. |
(b) | On the twentieth (20th) day of each calendar month following the Go Live Date for the first Game Platform, CSI will provide to Pala a report in a format satisfactory to Pala detailing: all Revenues, Adjusted Revenue, and Third Party Expenses from the immediately preceding month, and any other allowable deductions under this Agreement (the “Monthly Financial Calculations”). |
12 |
(c) | In the event of any dispute regarding the Monthly Financial Calculations, CSI shall, to the extent there is sufficient Adjusted Revenue, fund all undisputed amounts pursuant to Section 5.5 without delay and neither Party shall be deemed to have waived any claim or demand with regard to the amount in dispute. |
5.8 | Audit. |
(a) | Each Party shall keep at its respective principal place of business during the Term, and for at least three (3) years after the expiration or earlier termination of this Agreement, separate, complete and accurate books of account and records together with all relevant supporting documentation which relate to or affect this Agreement, including without limitation, source documents relating to deductions (“Records”). |
(b) | Without prejudice to any other right of audit or access granted to the Parties pursuant to this Agreement, each Party shall ensure that the other Party and its representatives have reasonable access to each Party’s principal place of business to inspect and/or audit the Records (with the right to make copies and take excerpts) to verify that each Party is correctly, in accordance with the terms of this Agreement, calculating the Monthly Financial Calculations. |
(c) | No later than seven (7) Business Days prior to undertaking an inspection and/or audit of the Records pursuant to this Section 5.8(c), either Party may provide the other Party with a list of specific Records (and/or categories of Records) that the Party conducting the audit (the “Auditing Party”) wishes to inspect and/or audit and the other Party shall ensure that it makes available to the Auditing such Records (and/or categories of Records) on the date of such inspection and/or audit. If a Party fails to make available to the Auditing Party such Records (and/or categories of Records) on the date of such inspection and/or audit, the Party shall reimburse the Auditing Party for its costs (including professional fees and expenses) incurred in conducting the inspection and/or audit and producing any audit report. |
(d) | Any inspection and/or audit under this Section 5.8(d) shall be carried out upon reasonable notice during normal business hours during the Term and up to three (3) years after the expiration or earlier termination of this Agreement, but in no event shall there be more than one such inspection and/or audit of a Party in a single calendar year, provided, if such inspection and/or audit reveals an reveals an underpayment or overpayment of five percent (5%) or more, then the other Party can conduct up to three (3) such inspections and/or audits of Pala in a single calendar year. |
(e) | If an inspection and/or audit reveals an incorrect calculation of amounts to be funded pursuant to Article 5, or any other sums payable under this Agreement, the owing Party shall promptly make an appropriate correcting payment or credit of any monies due to the applicable Party; provided, that if such calculation reveals an underpayment or overpayment of five percent (5%) or more, the owing Party shall reimburse the other Party for its reasonable Third Party costs (including professional fees and expenses) incurred in conducting the inspection and/or audit and producing any audit report (including professional fees and expenses). In the event the audit reveals that the payments to a Party for any year are in excess of the amount due, then, such excess amount would be deducted from future payments due to that Party. To the extent that any such overpayment is discovered after this Agreement has terminated, this obligation shall survive termination or expiration of this Agreement for any reason. |
(f) | Any inspection and/or audit, or failure to audit, shall not in any way release a Party from its obligations under this Agreement. |
(g) | Subject to Section 5.8(e), the Parties shall bear their own costs and expenses incurred in respect of compliance with their obligations under this Section 5.8(g), and any such information obtained shall be considered Confidential Information. |
5.9 | Taxes. The Parties shall cooperate in good faith to effectuate the terms of this Agreement in a tax efficient manner. The Parties believe that the payments due to each of them under this Agreement are not subject to withholding under any federal, state or local sales tax, charge, duty, levy, or value added tax. In the event that either Party becomes aware of any withholding obligation, the Parties shall reasonably cooperate to reduce such withholding obligation (tax or otherwise), to the extent legally feasible. If any amounts are required to be withheld under this Agreement, the Party with such withholding obligation shall be solely responsible for funding such withholding obligation, and such obligation shall not reduce any other amounts due and payable under this Agreement. Except as provided in Section 5.5(a)(i), each Party will be solely liable for any tax, charge or levy imposed by the relevant authority in respect of the receipt of any sum due and payable to such Party under this Agreement. |
13 |
Article 6
INTELLECTUAL PROPERTY
6.1 | Pala Intellectual Property. |
(a) | As between the Parties, Pala as publisher and developer of the Social Casino, the Pala Platform, and all Games and Intellectual Property Rights contained therein, is and shall remain the sole and exclusive owner of all Intellectual Property Rights in and to the Social Casino, the Pala Platform, the Games and the Deliverables. |
(b) | Pala hereby grants to CSI a revocable, non-exclusive, royalty-free license in the Launch Jurisdiction, during the Term, to use such of Pala’s and its licensors’ Intellectual Property Rights only to the extent necessary for CSI to receive the benefit of Pala’s services under this Agreement. |
6.2 | CSI Intellectual Property. |
(a) | As between the Parties, CSI is and shall remain the sole and exclusive owner of all Intellectual Property Rights owned by CSI prior to the Effective Date of this Agreement (including without limitation, the Subscription Gaming Product as outlined in the existing Software Development Agreement), and all Intellectual Property Rights created or acquired by CSI after the Effective Date of this Agreement, including without limitation, any WPT look-and feel-elements, but specifically excluding any derivation works of the Pala Intellectual Property to the extent they do not incorporate any Intellectual Property Rights of CSI. |
(b) | CSI hereby grants to Pala a revocable, non-exclusive, royalty-free license in the Launch Jurisdiction, and any other territory where the Social Casino is offered, during the Term, to use that certain trademark and aspects of its branding as set forth on Exhibit D hereto (the “WPT Brand”) as necessary for Pala to perform its obligations under this Agreement. All use of the WPT Brand shall be in accordance with the WPT Brand Standards and shall inure to CSI’s benefit. Pala shall not be granted the right to sublicense the WPT Brand for use by third parties (e.g., offer a third party the right to use the Branded Games on its own platform(s)). |
Article 7
CUSTOMER DATA AND END USER Agreements
7.1 | Pala shall collect and maintain, for CSI’s benefit, the Customer Data. Pala’s collection, access, use, storage, disposal and disclosure of all Personal Information will comply with Applicable Laws. Pala shall at all times remain (and cause any payments subcontractors to remain) in compliance with the Payment Card Industry Data Security Standard (“PCI DSS”) requirements (including any revisions or updates thereto). In the event that Pala discovers or receives notice of unauthorized access, acquisition, disclosure or use of Personal Information, then Pala shall give prompt notice to CSI, with full particulars, and reasonably cooperate in the investigation of any such incident. |
7.2 | As between the Parties, except as expressly set forth herein, CSI shall own all right, title and interest in and to the Personal Information, and Pala shall only use the Personal Information as necessary to provide the services contemplated hereunder. Both Parties shall own Customer Data that does not constitute Personal Information and shall have the right to use such Customer Data in any manner whatsoever consistent with Applicable Laws. Furthermore, nothing contained herein shall prevent Pala from collecting, using and sharing aggregated data or data that does not identify an individual, or from collecting, using or sharing such data outside of its performance of this Agreement. |
7.3 | At any time during the Term hereof, at CSI’s written request, or upon the termination or expiration of this Agreement for any reason, Pala within a reasonable time shall, and shall instruct all of its employees and contractors to, return or destroy (at CSI’s sole option) all copies, whether in written, electronic, or other form or media, of Personal Information in its possession or the possession of such employees and contractors and certify in writing to CSI that such Personal Information has been returned or disposed of securely. Pala shall comply with all reasonable directions provided by CSI with respect to the use and disposal of Personal Information. Nothing contained in this Section 7.3 shall obligate Pala to return or destroy (or cease use of) aggregated data or data that does not identify an individual. |
14 |
7.4 | CSI may provide Pala with access to User Data so that Pala can provide the Services. “User Data” means and any and all information provided to Pala by or at the direction of CSI, or collected by Pala in the course of Pala’s performance under this Agreement that can be used to identify or authenticate a living individual’s identity (including, without limitation, names, addresses, telephone numbers, email addresses, IP addresses traceable to an individual, financial/payment information, and other personal identifiers). User Data does not include information that has been anonymized or aggregated in a manner that makes it impossible to identify or authenticate a living individual’s identity. Unless it receives CSI’s prior written consent, Pala: (i) shall not access or use User Data other than as necessary to perform its obligations under this Agreement; and (ii) shall not give any third party access to User Data other than as expressly permitted pursuant to the terms of this Agreement or otherwise approved of by CSI in writing. In addition, CSI and any authorized third party shall: (1) keep and maintain all User Data in strict confidence, using such degree of care as is appropriate to avoid unauthorized access, use or disclosure; and (2) install and maintain safeguards reasonably designed to protect User Data from unauthorized access, destruction, use, modification or disclosure that are no less rigorous than accepted industry practices. Pala represents and warrants that its collection, access, use, storage, disposal and disclosure of User Data does and will comply with all applicable federal, state, and foreign privacy and data protection laws (“Data Protection Laws”), including but not limited to EU 2016/679 General Data Protection Regulation (“GDPR”). Pala shall permit CSI to examine Pala’s records from time to time by an independent third party auditor to ensure Pala’s compliance with its obligations under this Agreement. CSI may only request one inspection per calendar year, shall work with Pala to schedule any inspection at a time and date convenient to Pala, and shall pay all costs associated with any inspection. Pala shall reasonably assist CSI in responding to requests to individuals exercising their rights under the GDPR in relation to the User Data processed by Pala. Pala shall promptly inform CSI whenever it knows or reasonably believes a security breach has occurred that involves or potentially involves User Data and, at Pala’s sole cost and expense, investigate and remediate any such occurrence as required by applicable law. Upon expiration or termination of this Agreement, at CSI’s option, Pala shall (i) promptly return all copies of User Data to CSI (in a format reasonably acceptable to CSI); or (ii) destroy all copies of User Data and deliver to CSI a signed written certification from an officer of CSI stating that all User Data has been so destroyed. |
7.5 | Pala shall, at its sole cost and expense, implement and enforce terms of service for the Social Casino, which terms of service shall have been pre-approved by CSI in writing, and shall comply with all Applicable Laws (the “Terms of Service”). Pala shall post or link to a privacy policy on all Game Platforms from which the Social Casino can be accessed, and include access to such privacy policy in all applications, which privacy policy shall have been pre-approved by CSI in writing, and shall comply with all Applicable Laws (the “Privacy Policy”). The Terms of Service and the Privacy Policy shall be entered into by and among CSI, Pala and the Social Casino Player. The Parties shall ensure that the Terms of Service and Privacy Policy are updated on a regular basis to ensure each remains compliant with Applicable Laws. |
Article 8
INDEMNIFICATION
8.1 | Indemnification by Pala. Pala shall indemnify, defend and hold harmless CSI and its Affiliates, and each of their respective directors, officers, managers, employees, members, shareholders and agents and all of their respective successors and permitted assigns in respect of all claims, losses, liabilities, damages, fines, penalties, fees, expenses and costs including reasonable professional legal fees, incurred or suffered as a result of a Third Party claim (“Losses” and “Claims,” respectively) against CSI, or any of them arising out of: (i) any claim that a Deliverable provided by Pala to CSI, the Social Casino, the Games, or any other element of the Social Casino (except for (a) the Intellectual Property Rights owned by CSI or the WPT Brand and (b) Third Party Games or other content requested by CSI to be added to the Social Casino pursuant to Section 2.2(d)(vii)) when used in accordance with this Agreement, infringe or violate any Third Party’s Intellectual Property Rights; and (ii) Pala’s material breach of this Agreement, including any of its representations or warranties. |
8.2 | Indemnification by CSI. CSI agrees to indemnify, defend and hold harmless Pala, its Affiliates, and each of their respective directors, officers, managers, employees, members, shareholders and agents and all of their respective successors and permitted assigns in respect of all Losses for all Claims against Pala, or any of them arising out of: (i) any claim that the Intellectual Property Rights of CSI or the WPT Brand when used in accordance with this Agreement infringe or violate any Third Party’s Intellectual Property Rights; (ii) Reward Credits and any Promotion offered in connection therewith; and (iii) CSI’s material breach of this Agreement, including any of its representations or warranties. |
15 |
8.3 | Procedure. If any Third Party shall notify CSI or Pala (the Party so notified, the “Indemnified Party”) with respect to any matter which may give rise to a claim for indemnification against the other Party (the “Indemnifying Party”) under this Article 8, then the Indemnified Party shall promptly notify the Indemnifying Party thereof in writing; provided, however, that failure to notify any the Indemnifying Party shall not relieve the Indemnifying Party from any obligation hereunder unless (and then solely to the extent) the Indemnifying Party is materially prejudiced by such failure. The Indemnified Party will reasonably cooperate with Indemnifying Party with the defense and/or settlement thereof, which defense and/or settlement shall be controlled by Indemnifying Party, provided that, if any settlement requires an affirmative obligation of, results in any ongoing liability to or prejudices or detrimentally impacts, Indemnified Party in any way and such obligation, liability, prejudice or impact can reasonably be expected to be material, then such settlement shall require Indemnified Party’s written consent (not to be unreasonably withheld or delayed) and Indemnified Party may have its own counsel in attendance (at its sole expense) at all proceedings and substantive negotiations relating to such claim. |
8.4 | In the event that any Claim adjudicated to a final judgment relates to the use of any component of the Indemnifying Party’s Intellectual Property by the Indemnified Party in a manner that is in accordance with the license granted within the terms of this Agreement, the Indemnifying Party may, at its option, either: (i) substitute a fully equivalent non-infringing unit of the Intellectual Property; or (ii) modify or replace the infringing Intellectual Property with assets that are functionally equivalent; or (iii) obtain, at the Indemnifying Party’s expense, the right to continue use of such Intellectual Property. For the avoidance of doubt, this Section 8.4 shall not apply to the use of the WPT Brand nor the Intellectual Property rights contained therein. |
Article 9
REPRESENTATIONS AND WARRANTIES
9.1 | Mutual Representations and Warranties. Each Party represents and warrants to the other Party that with respect of itself: |
(a) | it is a corporation or company duly incorporated under the laws of the jurisdiction in which it is formed or incorporated; |
(b) | it has full right, power, legal capacity and authority to enter into and perform its obligations under this Agreement, including the right, power, legal capacity and authority necessary to grant the licenses granted herein; |
(c) | it has the requisite power and authority to execute, deliver and perform its respective obligations under this Agreement, including, if necessary, approval of the board of directors of such Party or its parent organization, and this Agreement is executed by its duly authorized representative; |
(d) | this Agreement is the valid and binding obligation of such Party, enforceable against it in accordance with its terms, except insofar as enforceability may be affected by bankruptcy laws or by principles governing the availability of equitable remedies. |
(e) | the execution, delivery and performance of this Agreement by such Party does not and will not (i) conflict with or violate any provision of such Party’s or any of its Affiliate’s organizational documents, (ii) result in any violation of or breach or default under or loss of rights under any contract or agreement that such Party or any of its Affiliates is a party or by which they are bound, or (iii) violate, conflict with or result in a default, right to accelerate or loss of rights under any order, judgment or decree to which such Party or any of its Affiliates is a party or by which such Person is bound or affected; |
(f) | to its knowledge, there is no action, arbitration, audit, claim, demand, proceeding, hearing, investigation, litigation or suit (whether civil, criminal, administrative, judicial or investigative, whether formal or informal or whether public or private) at law or in equity now pending or threatened by or against or affecting it which would substantially impair its right to carry on its business as contemplated herein or to enter into or perform its obligations under this Agreement, or which adversely affects its financial condition or operations; and |
(g) | it has not and will not enter into any other agreement or arrangement which conflicts with its ability to perform its obligations under this Agreement to such extent that this Agreement will be materially adversely impacted. |
16 |
Article 10
term and termination
10.1 | Term. This Agreement shall commence on the Effective Date and shall continue in effect for the duration of the term of the Software Development Agreement (the “Term”). The Parties may mutually agree to extend the Term in writing. |
10.2 | Termination by Either Party. Notwithstanding the foregoing, either Party may terminate this Agreement immediately upon notice on the occurrence of any of the following events: |
(a) | on or after the occurrence of a material breach of this Agreement by the other Party, provided that if the breach is capable of remedy, the breach is not remedied within thirty (30) days of receipt of notice in writing specifying the breach and requiring it to be remedied, provided, further, if such cure cannot reasonably be accomplished within such thirty (30) day period and the breaching Party in good faith commenced such cure within such thirty (30) day period, the cure period shall be extended to a time period in which such cure could reasonably be accomplished using diligent efforts; |
(b) | in accordance with Section 13.1; |
(c) | immediately if the other Party ceases to do business in the ordinary course, becomes insolvent, or files for bankruptcy; |
(d) | immediately if the offering of the Social Casino violates any Applicable Law and such violation is material and continuing; and |
(e) | immediately in the event that a Party reasonably determines that an association with the other Party or any of its respective Affiliates or associates, is likely to cause or otherwise result in a violation of any applicable gaming laws regarding prohibited relationships with entities engaged in gaming activities, or if such Party’s compliance committee or similar internal governing body determines, in good faith and in its sole discretion, that the other Party or its officers, directors, employees, agents, designees or representatives engaged in or is about to be engaged in any activity or activities, or was engaged in or is involved in any activities or relationship, which (i) could or does jeopardize such Party’s gaming licenses or those of any Affiliates, or if any such gaming license is threatened to be denied, curtailed, suspended or revoked or (ii) could or does jeopardize such Party’s access to providing a real money gaming service in any jurisdiction; and |
(f) | if the Go Live Timelines for any phase have extended longer than six (6) months beyond the initial target date, and notice by CSI has been given to Pala, and within thirty (30) days of receipt of such notice, the respective phase launch has still not taken place, CSI may elect to terminate this Agreement. |
10.3 | Effect of Termination. Following termination, the Parties shall cooperate in order to ensure a smooth transition and subsequent publishing of the Social Casino, with minimal disruption to the user experience. |
Subject to Applicable Laws, Customer Data shall be transferred promptly to CSI in a usable format in order to allow CSI to integrate such data into backend systems it designates.
10.4 | Survival: In addition to paying any amounts due and owing prior to termination or expiration of this Agreement, the following provisions shall survive any expiration or termination of this Agreement: Article 1, Section 5.8, Article 6, Section 7.2, Article 8, Sections 10.3, Section 10.4, Article 11, Article 16, Article 17, and Article 18. |
Article 11
CONFIDENTIALITY
11.1 | Each Party acknowledges and agrees that the terms of this Agreement and all information, data, materials, or technology communicated to such Party (the “Receiving Party”) by the other Party (the “Disclosing Party”) that is marked as “Confidential” or “Proprietary” or that, under the circumstances taken as a whole, would be reasonably be deemed to be confidential (“Confidential Information”) was and shall be received in confidence. For the avoidance of doubt, the terms of this Agreement (including the fee and revenue share information hereunder) and the Social Casino provided by Pala to CSI (except with respect to the WPT Brand contained therein) shall constitute Confidential Information of Pala. Each Party shall keep in confidence and use efforts that are similar to those used to protect its own confidential information (and, in any event, no less than reasonable efforts) to prevent the unauthorized duplication, use, access and disclosure of Confidential Information of the Disclosing Party. Each Receiving Party may disclose the Disclosing Party’s Confidential Information: (a) to its employees, officers, representatives or advisers who need to know such information for the purposes of providing the services hereunder; and (b) as may be required by Applicable Laws, a court of competent jurisdiction or any Governmental Entity (including any Gaming Authority), provided that the Receiving Party will provide advance notice to the Disclosing Party of such required disclosure, cooperate with the Disclosing Party, at the Disclosing Party’s expense, in seeking a protective order or similar treatment for such Confidential Information, and disclose only such Confidential Information as is required. Each Receiving Party will limit access to Confidential Information of the Disclosing Party to only those of its employees, agents and contractors having a need-to-know in connection with this Agreement. Each Receiving Party will advise its employees, agents and contractors to whom disclosure of Confidential Information is made of the obligations hereunder to protect the Confidential Information and such employees, agents and contractors shall be subject to obligations of confidentiality like those herein. The Disclosing Party’s Confidential Information is and shall remain the sole and exclusive property of the Disclosing Party, notwithstanding any disclosure made to the Receiving Party during the Term. For the purposes of this Agreement, “Confidential Information” shall include all Personal Information. |
17 |
11.2 | Except to the extent otherwise required by Applicable Law or professional standards, the Parties’ obligations under this Section 11.2 do not apply to information that: (i) is or becomes generally available to the public other than as a result of disclosure by the Receiving Party; (ii) was known to the Receiving Party or had been possessed by the Receiving Party without breach of any obligations of confidentiality prior to receipt from the Disclosing Party; (iii) is disclosed to the Receiving Party by a Third Party not under obligation of confidentiality to the Disclosing Party or otherwise lawfully becomes known by the Receiving Party; or (iv) is independently developed by the Receiving Party without reference to the Confidential Information of the Disclosing Party. |
11.3 | Each Receiving Party shall, within a reasonable time upon expiration or termination of this Agreement or otherwise upon demand, at the Disclosing Party’s option, either return to the Disclosing Party or destroy and certify in writing to the Disclosing Party the destruction of any and all documents (the term “document”, as used in this Section, shall include any writing, instrument, agreement, letter, memorandum, chart, graph, blueprint, photograph, financial statement or data, telex, facsimile, cable, tape, disk or other electronic, digital, magnetic, laser or other recording or image in whatever form or medium), papers and materials and notes thereon in the Receiving Party’s possession, including copies or reproductions thereof, to the extent they contain Confidential Information; provided, that, each Receiving Party may retain a copy of the Disclosing Party’s Confidential Information (subject to the obligations of confidentiality herein) to the extent required to comply with Applicable Laws, for internal audit purposes and to establish or protect such Party’s rights under this Agreement and further provided that documents which contain the Receiving Party’s internal content shall not be returned to the Disclosing Party, but rather destroyed and so certified. |
Article 12
WPT Brand EXCLUSIVITY
12.1 | During the Term, CSI shall not be permitted to, and shall ensure that no members of the WPT Group: |
(a) | operates itself or licenses from any third party, any competing social casino product, that is made available on or through the ClubWPT website or software platform or application, other than the Social Casino and the existing Subscription Gaming Product under the Software Development Agreement, that utilizes the WPT Brand (i.e., ClubWPT); or |
(b) | licenses to any third party the right to use the WPT Brand (i.e., ClubWPT) in connection with any competing social casino product other than Social Casino, excluding any marketing efforts with respect to the ClubWPT brand (e.g., marketing of the ClubWPT brand on Zynga). |
12.2 | Reservation of Rights. Nothing in this Agreement shall limit CSI or its Affiliates from operating or entering into third party license agreements with respect to social casino games that are branded with other WPT brands (e.g., World Poker Tour, WPT, WPT Alpha8). Further, Pala hereby acknowledges and agrees that (A) the WPT Brand has or potentially may have, many uses; (B) the license granted to Pala is a limited field-of-use license and Pala may use the WPT Brand only for such limited use as outlined in this Agreement and for no other use; and (C) CSI reserves and retains all other rights to the WPT Brand not expressly licensed to Pala hereunder. |
12.3 | Except as otherwise set forth herein, neither Party shall be prevented from performing services, or entering into relationships with any other Person, subject to each Party’s confidentiality obligations set forth in Article 11. |
Article 13
Privileged License; DUE Diligence
13.1 | CSI (a) acknowledges that Pala or its Affiliates hold one or more licenses under Applicable Laws related to real money gambling and (b) agrees that it shall (and shall cause its Affiliates and employees to) cooperate in good faith with Pala or its Affiliates, from time to time, as requested on a confidential basis, to provide a reasonable amount of information necessary to enable Pala and its Affiliates to respond to any requests for information in connection with preservation of any gaming licenses and compliance with any gaming regulations applicable to Pala and any of its Affiliates and the internal compliance policies of Pala and its Affiliates relating thereto (including information required in connection with any reasonable, necessary background checks or other reasonable investigations regarding credit standing, character and personal qualifications). If CSI believes compliance with this section becomes materially burdensome and unreasonable, CSI shall notify Pala and the Parties will work together in good faith to address CSI’s concerns; provided, if accommodations cannot be made and CSI’s compliance remains materially burdensome and unreasonable, CSI may elect to terminate this Agreement. |
18 |
Article 14
FORCE MAJEURE
14.1 | Neither Party shall be liable for any default or delay in the performance of its obligations if and to the extent such default or delay is caused by any of the following: an act of God, fire, casualty, flood, war, terrorist act, failure of public utilities, widespread labor or civic unrest (except for a Pala labor specific dispute), assertion or requirement of any governmental authority, epidemic, or destruction of production facilities, or other circumstances beyond the reasonable control of the Party (each, a “Force Majeure Event”). A Party wishing to claim the benefit of this Article 14 must: (a) promptly give notice to the other Party specifying the Force Majeure and giving a good faith estimate of the duration of the Force Majeure Event; (b) use reasonable efforts to overcome the effect of the Force Majeure as soon as possible; and (c) promptly notify the other Party when the Force Majeure has ceased or been overcome. Upon receipt of such notice, all obligations under this Agreement shall be immediately suspended for the period of such Force Majeure Event. |
Article 15
INSURANCE
15.1 | Pala will obtain and maintain at its own expense, insurance of the type and in the amounts that are commercially reasonable during the Term, as determined by Pala in its reasonable discretion as set forth on Exhibit E. |
Article 16
sovereign immunity
16.1 | The Pala Band of Mission Indians, a federally recognized Indian Tribe (the “Tribe”), is the majority shareholder in Pala. It is understood and agreed that any suit, action, proceeding and/or legal process of any type whatsoever arising out of this contract against Pala will be expressly limited to Pala, and the recovery of any monetary damages upon any settlement, arbitration, decision or judgment resulting therefrom shall be limited solely to recovery against the assets of Pala. The Tribe itself is not subject to jurisdiction of state or federal court, and does not waive its sovereign immunity in any respect, nor under any circumstances is there a waiver of any immunity of any elected or appointed officer, official, member, manager, employee or agent of the Tribe. Accordingly, in the event of any dispute, whether in the context of any arbitration or alternative dispute resolution or court proceeding between Pala and CSI, Pala will not assert application of any tribal laws, any requirements of following tribal court procedures, or sovereign immunity as to Pala. |
Article 17
GOVERNING LAW AND DISPUTE RESOLUTION
17.1 | This Agreement shall be governed by the laws of the State of California, without regard to that state’s conflict of law analysis. Resolution of all disputes between the Parties shall be handled as follows: The Parties shall first endeavor to immediately meet and confer in good faith in order to resolve any dispute, claim or other controversy arising in connection with this Agreement, including without limitation any dispute regarding the interpretation or enforcement of the Agreement. In the event the Parties are unable to resolve any dispute arising out of this Agreement between themselves within fourteen (14) days, then the Parties agree that the dispute will be submitted to mediation. The mediation will be conducted by the San Diego Offices of Judicial Arbitration & Mediation Services (“JAMS”). The complaining Party shall contact JAMS to schedule a mediation conference within thirty (30) days. The Parties are to select a mediator who is a retired judge from the JAMS panel. If they are unable to agree, JAMS shall provide a list of three available retired judge mediators and each Party may strike one. The remaining one will serve as the mediator; provided, however, if both Parties strike the same name, JAMS shall promptly select one of the two remaining names to serve as the mediator. As soon as the mediation is completed, if the matter is not resolved, either Party may initiate binding arbitration also to be conducted at the San Diego office of JAMS. The Parties agree that, if required, enforcement of any arbitration award, as well as any action to compel arbitration, may be brought in federal court in the United States District Court for the Southern District of California. This arbitration agreement applies only to these Parties with respect to this Agreement, and does not apply to any other claims or to any third party claims whatsoever. |
19 |
17.2 | Each Party acknowledges and agrees that the other Party would be damaged irreparably in the event any of the provisions of Article 6, Article 11, Article 12, or Article 16 of this Agreement is not performed in accordance with its specific terms or otherwise is breached. Accordingly, each Party agrees that, in addition to any other relief which may be available, the other Parties shall be entitled to an injunction or injunctions to prevent breaches of the provisions of Article 6, Article 11, Article 12, or Article 16 of this Agreement to enforce specifically this Agreement and the terms and provisions hereof (without the posting of bond or other security) in addition to any other remedy to which it may be entitled, at law or in equity. |
17.3 | Limitation. The Parties acknowledge that any dispute arising under this Agreement will be limited to the Persons that are Parties to this Agreement and, except to the extent reasonably necessary in connection with an action to seek injunctive relief resulting from actions by such Person that result in a breach of this Agreement, no Party shall (a) commence any lawsuit, arbitration or otherwise seek to impose any liability whatsoever against any Person in its capacity as an officer, director, shareholder, member, employee or agent of a Party or (b) permit any Person claiming through such Party to assert a claim or impose any liability against any Person in its capacity as an officer, director, shareholder, member, employee or agent of a Party as to any matter or thing arising out of or relating to this Agreement or any alleged breach or default by Party hereto or thereto. |
17.4 | Limitation of Damages. Notwithstanding any other provision of this Agreement to the contrary, other than in connection with fraud or willful misconduct, no Party shall be liable to any other Party for losses with respect to mental or emotional distress, exemplary, consequential, incidental, special damages, lost profits, diminution in value, damage to reputation or the like, including lost profits, even if such Party has been advised of the possibility of such damages. |
Article 18
MISCELLANEOUS
18.1 | Entire Agreement, Amendment, Waiver. This Agreement amends, restates, replaces and supersedes the Original Agreement in its entirety. This Agreement along with its attachments, exhibits, and schedules, constitute the entire agreement between the Parties concerning the subject matter hereof, and supersedes any prior or contemporaneous understandings, agreements or representations. The Parties acknowledge and agree that this Agreement does not impact the Software Development Agreement, which is still in existence as of the Effective Date. No supplement, modification, amendment or waiver of this Agreement shall be binding unless executed in writing by both Parties. The failure of either Party to enforce any of the provisions in this Agreement shall not be construed to be a waiver of the right of such Party thereafter to enforce such provisions. |
18.2 | Assignment. Neither Party may assign this Agreement except with the prior written authorization of the other Party; provided, however, such consent shall not be required in the event such assignment is in connection with the sale of all or substantially all of its assets of the other Party or a merger, acquisition, transfer of the majority of a Party’s stock, corporate reorganization, or consolidation, in which case notice shall be provided to the other Party within thirty (30) days after such assignment. Any attempt to assign any of the rights, duties, or obligations set forth in this Agreement without such consent shall be void. |
18.3 | Headings. The headings in this Agreement have been inserted for convenience only, and are not to affect the interpretation of this Agreement |
18.4 | Further Assurances. The Parties shall with reasonable diligence do all things and provide all reasonable assurances as may be required to complete the transactions contemplated by this Agreement, and each Party shall provide such further documents or instruments requested by the other Party as may be reasonably necessary or desirable to give effect to this Agreement and to carry out its provisions. |
18.5 | Severability. In the event that any part of this Agreement shall be held to be invalid or unenforceable by a court of competent jurisdiction, such provision shall be severed from this Agreement and the remaining portions of this Agreement shall be valid and enforceable. |
18.6 | Notices. Unless otherwise specified in this Agreement, all notices, demands, elections, requests or other communications that any Party may desire or be required to give hereunder must be in writing and must be given (a) by hand delivery, (b) by a recognized overnight courier service providing confirmation of delivery overnight courier, or (c) by Portable Document Format (PDF), to the addresses set forth below or at such other address as the Parties may specify by notice given to the other Parties in accordance with this Section 18.6. A notice sent by overnight courier shall be deemed given on the next Business Day after the day said notice is delivered to the overnight courier. A notice sent by hand delivery or by PDF shall be deemed given on the day sent (provided such PDF document is electronically confirmed received and is followed by delivery pursuant to (a) or (b) above). |
20 |
If to Pala:
Pala
Interactive, Inc.
Attn: Jim Ryan
PMB 40 35008 Pala Temecula Rd., Pala, California 92059
Email: Jim.Ryan@palainteractive.com
With
a copy to:
Brownstein Hyatt Farber Scheck, LLP
410 17th Street, Suite 2200
Denver, CO 80202
Attn: Elizabeth Paulsen
Email: epaulsen@bhfs.com
If to CSI:
Club
Services Inc.
Attn: Legal Dept.
1920 Main Street, Suite 1150
Irvine, CA 92614
18.7 | Expenses. Except as otherwise expressly provided in this Agreement, each Party will bear its own costs and expenses incurred in connection with the preparation, execution and performance of this Agreement, including all fees and expenses of agents, representatives, financial advisors, legal counsel and accountants. |
18.8 | Joint Preparation of Agreement. The Parties and their respective counsel have participated jointly in the negotiation and drafting of this Agreement. Each of the Parties acknowledges that it is sophisticated in business matters of the type contemplated hereby and has been advised by experienced counsel and, to the extent it has deemed necessary, other advisers in connection with the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement will be construed as if drafted jointly by the Parties, and no presumption or burden of proof will arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions of this Agreement. |
18.9 | Treatment. The Parties acknowledge and agree that nothing in this Agreement shall be deemed to create a partnership, joint venture or other association or a trust among the Parties. The CSI or any of its Affiliates, directors, officers, managers, employees, members, shareholders and agents, on the one hand, and the Pala or any of its Affiliates, directors, officers, managers, employees, members, shareholders and agents, on the other hand, agree that they will not in any manner assert or admit that this Agreement or any of the transactions or relationships contemplated hereby create a partnership, joint venture, agency or other association or a trust among the Parties. The Parties shall not, for any purpose be, or be deemed to be or treated in any way whatsoever to be, liable or responsible hereunder as partners or joint venturers. Nothing contained in this Agreement shall be construed as creating any fiduciary relationship of any nature between the Parties. Except pursuant to the authority expressly granted herein or as otherwise agreed in writing between the Parties, no Party shall have any authority to act for another Party or to assume any obligation or responsibility on behalf of the other Parties. |
18.10 | Press Releases. The content and timing of any press releases or announcements shall be subject to the Parties’ mutual approval, not to be unreasonably withheld, conditioned or delayed. |
18.11 | Counterparts; Facsimile: This Agreement may be executed in counterparts, each of which shall be deemed an original, but which together shall constitute one and the same instrument. If this Agreement is executed in counterparts, no signatory hereto shall be bound until the Parties named below have duly executed or caused to be duly executed a counterpart of this Agreement. A signature on a copy of this Agreement received by a Party by facsimile or email is binding upon the other Parties as an original. |
[Remainder of page intentionally left blank]
22 |
IN WITNESS WHEREOF, the Parties have duly executed this Agreement on the Effective Date set forth above and have signed:
Pala Interactive, LLC | Club Services, Inc. |
By: ___________________________________ Name: James A. Ryan Title: CEO |
By: ___________________________________ Name: Adam Pliska Title: CEO |
[Signature page to Services and Licensing Agreement]
23 |
Exhibit 10.12
SOFTWARE DEVELOPMENT AGREEMENT
This Software Development Agreement (this "Agreement") is made and enterered into as of the 16th day of September, 2008 (the "Effective Date") by and between REALTIME EDGE SOFTWARE INC, a corporation based in British Colombia, Canada ("REALTIME"), and CENTAURUS GAMES, LLC, a limited liability company formed under the laws of Delaware ("CENTAURUS").
Whereas REAL TIME was formed to perform software development services in respect of interactive software for the playing of certain games,
And whereas CENTAURUS desires to retain REALTIME to provide such software development services,
And whereas REALTIME and CENTAURUS desire to enter into a business relationship pursuant to which, among other things, REALTIME would develop such interactive software with such desired features as CENTAURUS shall designate,
And whereas this Agreement is intended to delineate the terms and conditions applicable to the software development aspects of such business relationship,
Now therefore, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, REALTIME and CENTAURUS covenant and agree as follows:
1. Definitions. For the purposes of this Agreement, the following terms will have these indicated meanings:
1.1. "CENTAURUS Technology" means the Product that REALTIME will work on under this Agreement and any and all future versions thereof and enhancements, upgrades and/modifications thereto, including any and all Derivative Technology created during the Term.
1.2. "Derivative Technology" means any and all technology created or developed by REALTIME pursuant to this Agreement based upon the CENTAURUS Technology, including, without limitation, the following: (i) for copyrightable or copyrighted material, any translation (including translation into other computer languages), portion, modification, correction, addition, extension, upgrade, improvement compilation, abridgment or other form in which an existing work may be recast, transformed or adapted; (ii) for patentable or patented material, any improvement hereon; and (iii) for material that is protected by trade secret, any new material derived from such existing trade secret material, including new material that may be protected by copyright, patent and/or trade secret.
1.3. "Internet" means any systems for distributing digital electronic content and information to end users via transmission, broadcast, public display, or other forms of delivery, whether direct or indirect, whether over telephone lines, cable television systems, optical fiber connections, cellular telephones, satellites, wireless broadcast, or other mode of transmission now known or subsequently developed.
1 |
1.4. "Product" means certain online gaming software that provides current and future game modules for operators to offer CENTAURUS's patent-pending subscription model, together with other licensed multiplayer gaming software, supporting back end systems and the random number generation system associated therewith. The Product includes the CENTAURUS game modules and supporting subscription modules only, and does not include, without limitation, the back-end system needed to conduct financial transactions for multi-players unless developed in the future under this contract. All future developments are the property of CENTAURUS. The parties agree that periodically, they shall acknowledge in writing, the contents of the Product, including all additions and improvements made since the date of this agreement. The Product currently does not include the software needed for real money wagering on the Internet. Attached hereto as Exhibit 1.4 is the schedule of Product contents.
1.5. "Services" means the further development, customization, enhancement, service and maintenance of the Product to be performed hereunder by REALTIME, in accordance with the Specifications for use by CENTAURUS, as they may be modified from time to time, and all other services performed by REALTIME pursuant to this Agreement, using such resources and personnel as CENTAURUS may determine after consultation with REALTIME.
1.6. "Specifications" means the specifications for the Services and Product, as mutually agreed upon and approved by CENTAURUS and REALTIME from time to time, which includes a product design and content summary, as well as a detailed specification for all required features and functionality, and a complete delivery and production schedule. The parties agree that the Specifications may be modified by CENTAURUS at any time during the Term and, when delivered to REALTIME, shall automatically be deemed to supersede or supplement (as the case may be) the previous specifications. Any modifications of the Specifications that increase the scope of the Product to be delivered to CENTAURUS or work to be performed by REALTIME shall be negotiated and mutually agreed on by the parties, and are subject to the agreement of both parties to such additional fees to be paid to REALTIME, if any, in respect of the increased scope of the Product or the increased/work to be performed.
1.7. "Term" means the period of time commencing on the Effective Date and continuing interrupted, unless earlier terminated in accordance with Section 8 of this Agreement.
1.8. "Website" means such sites designated by CENTAURUS from time to time.
2. Compensation.
2.1. For Maintenance of the Product, CENTAURUS shall pay REALTIME for the Services and the development of the CENTAURUS Technology in the amount of US$45,000 per month. "Maintenance" shall be limited to services necessary to keep the current Product functioning (based upon the product's agreed-upon scope of work), including bug fixes, but shall not include any new features. This Section 2.1 does not constitute a warranty that the Product will function without additional costs beyond/Maintenance. The parties agree and acknowledge that the warranties under this Agreement are exclusively set forth in Section 7 of this Agreement.
2 |
For any upgrades or modifications or projects beyond maintenance of the current Product, CENTAU US and REALTIME shall agree in writing on the fees for such upgrades or modifications prior to commencing work, with (unless an alternative fee schedule is agreed upon in writing) one-third of such fees paid in advance by CENTAURUS, one-third of such fees paid upon delivery of a beta (test) product, and one-third of such paid upon the release of the product. REALTIME's acceptance of any such projects shall be contingent upon negotiation of a mutually-agreeable fee and the availability of REALTIME personnel to complete such work.
3. Taxes. CENTAURUS is not liable to REALTIME for any taxes incurred in connection with this Agreement, unless they are sales or use taxes that are assessable under applicable law upon products or services produced or provided by REALTIME. Such sales or use taxes as may be exigible shall be paid to REALTIME by CENTAURUS in full. The parties agree that they shall take such steps as one or both of them may reasonably require to minimize the sales or use taxes paid or payable by CENTAURUS to REALTIME or any withholdings on amounts paid or payable to REALTIME by CENTAURUS pursuant to applicable law.
4. Product Development. REALTIME shall perform the Services, and deliver to CENTAURUS the CENTAURUS Technology for CENTAURUS's use, in accordance with the Specifications, as the same may change from time to time during the Term, and in accordance with all other terms and conditions contained in this Agreement, but subject to any increased fees as may be agreed upon by the parties as a result of any increased scope of the Product or any increased work to be performed by REALTIME. REALTIME will use its best efforts to meet each milestone in the schedule for delivering the Product. REALTIME agrees that the Services shall be performed in a professional manner and shall be of a high grade, nature and quality.
5. Scope of Rights/Exclusivity. CENTAURUS shall exclusively own the rights to the CENTAURUS Product developed by REALTIME. CENTAURUS shall have the right to sublicense, "skin" or otherwise transfer the rights granted by this Section 5 with the consent of the poker software IP owner. REALTIME will not develop any other blackjack or poker subscription product during the Term for any other client for use in the USA without CENTAURUS's prior written consent.
6. Escrow of Code. A copy of the Source Code of the Product (as defined in Section 1.4) (which product is limited to the gaming and supporting module), as such Source Code is modified and improved from time to time, shall be deposited every six months with an independent third party escrow agent agreed upon by both parties. The escrow agent shall be irrevocably instructed to provide a copy of this Source Code to CENTAURUS in the event that, during the Term and at the end of the Term, both (a) REALTIME becomes insolvent, subject to bankruptcy proceedings, or otherwise ceases operating as a going concern; and (b) and there is no successor organization to REALTIME to assume the obligations under this Agreement. The costs of the escrow agent shall be paid for by CENTAURUS. The "Source Code" as described in this Section 6 shall be limited to the game module that constitutes the
3 |
Product owned by CENTAURUS. Upon valid delivery of the escrowed Source Code for the reasons et forth in this Section 6, REALTIME will also provide to CENTAURUS a non-exclusive copy of the additional code ( the "Additional Code") that is necessary to run the subscription-based product. This additional code is not otherwise owned by CENTAURUS and will be provided on a non-exclusive basis only in the event that during the Term, the circumstances set forth in this Section 6 occur.
7. Representation and Warranties.
7.1. REALTIME warrants and represents that it has the full power to enter into this Agreement and to grant the rights set forth herein;
7.2. CENTAURUS warrants and represents that it has the full power to enter into this Agreement and to grant the rights set forth herein.
7.3. EXCEPT AS SET FORTH HEREIN, NEITHER PARTY MAKES ANY WARRANTY TO THE OTHER. ALL WARRANTIES, OBLIGATIONS, AND LIABILITIES ARE WAIVED BY BOTH PARTIES, TO THE FULLEST EXTENT PERMITTED BYLAW. ALL OTHER RIGHTS AND REMEDIES REGARDING SERVICES PROVIDED HEREUNDER ARE PROVIDED WITHOUT WARRANTY, INCLUDING BUT NOT LIMITED TO, ANY IMPLIED WARRANTY OF MERCHANTABILITY OR NON-INFRINGEMENT OR FITNESs FOR A PARTICULAR PURPOSE.
8. Termination a d Other Remedies.
8.1. This Agreement shall expire and terminate 4 years after the Effective Date, unless both parties agree to extend the terms in writing prior to such date of termination. Upon termination REALTIME shall deliver or cause to be delivered to CENTAURUS the Source Code and Additional Code as described in Section 6 above.
8.2. This Agreement may be terminated by convenience by CENTAURUS upon sixty (60) days written notice to REALTIME for any reason or no reason.
8.3. This Agreement may be terminated by convenience by REALTIME upon twelve (12) months written notice to CENTAURUS.
8.4. In addition to any other rights and/or remedies that the parties may have under the circumstances, all of which are expressly reserved, each party may suspend performance and/or terminate this Agreement immediately upon written notice at any time if:
8.4.1. the other party is in material breach of this Agreement and fails to cure that breach within twenty (20) days after written notice thereof;
or
8.4.2. the other party fails to timely make a payment required by this Agreement and fails to cure that breach within ten (10) days after written notice and demand thereof.
8.5. Upon any termination of this Agreement, REALTIME will pay any balance then owed to CENTAURUS. In the event of termination or expiration of this Agreement for any reason, sections 2, 5, 6, 7, 8, 9 & 10 shall survive termination.
4 |
Neither party shall be liable to the other for damages of any sort resulting solely from terminating this Agreement in accordance with its terms.
9. Confidentiality.
9.1. The parties hereby agree that all terms and conditions of this Agreement are confidential and proprietary information. The parties agree that the Specifications, the CENTAURUS Technology and all requested enhancements to the Product shall be treated as confidential and shall not be disclosed to any third party.
9.2. Neither party will issue any press release or make any public announcement(s) relating in any way whatsoever to this Agreement or the relationship established by this Agreement without the express prior written consent of the other party. However, the parties acknowledge that this Agreement, or portions thereof, may be required under applicable law to be disclosed, as part of or an exhibit to a party's required public disclosure documents or pursuant to the order of a court or administrative or governmental tribunal of competent jurisdiction. If either party is advised by its legal counsel that such disclosure is required, it will notify the other in writing an , the parties will jointly seek confidential treatment of this Agreement to the maximum extent reasonably possible, in documents approved by both parties and filed with the applicable governmental or regulatory authorities.
10. Limitation of Liability.
10.1. CENTAURUS's ENTIRE LIABILITY UNDER THIS AGREEMENT MAY IN NO EVENT EXCEED US$100,000.
10.2. NO ACTION RELATED TO THIS AGREEMENT MAY BE BROUGHT MORE THAN SIX (6) MONTHS AFTER DISCOVERY OF THE EVENT GIVING RISE TO THE CAUSE OF ACTION.
10.3. IN NO EVENT WITH EITHER PARTY BE LIABLE TO THE OTHER FOR ANY LOST DATA, LOST PROFITS, INTEREST OR COST OF MONEY, OR FOR ANY PUNITIVE, INDIRECT, INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES ARISING OUT OF PERFORMANCE OR NON-PERFORMANCE OR THE USE OF, INABILITY TO USE OR RESULTS OF USE, OR FAILURE TO MEET DELIVERY DATES, WITH RESPECT TO THE SERVICES OR PRODUCTS PROVIDED UNDER THIS AGREEMENT.
11. Miscellaneous.
11.1. UU. In the performance of the Services, REALTIME is an independent contractor that is developing the Product on a work for-hire basis in accordance with the terms of this Agreement, and uses its own means and methods for the performance of the Services. Neither party shall represent itself as the agent or legal representative of the other party for any purpose whatsoever, and neither party shall have the right to create or assume for the other any obligation of any kind. This Agreement shall not create or be deemed to create an agency, partnership, franchise, employment relationship or joint venture between the parties. Each party's employees and contractors that perform services related to this Agreement shall remain under the exclusive direction and control of their respective employer, principal, or contractor, as may be, and shall
5 |
11.7. Except as expressly set forth in this Agreement, neither party may transfer, assign or sublicense this Agreement, or any rights or obligations hereunder, whether by contract or by operation of law, except with the express written consent of the other party, and any attempted transfer, assignment or sublicense by a party in violation of this section shall be void. For purposes of this Agreement, a "transfer" under this section shall be deemed to include, without limitation, the transfer of an rights or obligations in the course of a liquidation or other similar reorganization of an entity. Neither party will unreasonably withhold consent to a transfer to an acquirer successor-in-interest of the other party if the transferee passes such party’s reasonable due diligence investigation including but not limited to any regulatory approvals. Subject to the provisions of this section, this Agreement shall be binding upon and inure to the benefit of each party and their respective successors and assigns.
11.8. All rights and obligations of the parties hereunder are personal to them. Except as otherwise specifically stated herein, this Agreement is not intended to benefit, nor shall it be deemed to give rise to, any rights in any third party.
11.9. Each party shall be responsible for compliance with all applicable laws, rules and regulations, if any, related to the performance of its obligations under this Agreement.
11.10. No waiver of any breach of any provision of this Agreement shall constitute a waiver of any prior, concurrent or subsequent breach of the same or any other provisions hereof or thereof, and no waiver shall be effective unless made in writing and signed by an authorized representative of the waiving party.
11.11. This Agreement contains the entire agreement of the parties with respect to the subject-matter herein contained, and may not be modified or amended except by a written instrument executed by both parties.
In witness hereof, intending to be legally bound hereby, the parties have executed this Agreement as of the date first above written.
REALTIME: | CENTAURUS: | |
REALTIME EDGE SOFTWARE INC | CENTAURUS GAMES, LLC | |
By: /s/ Uri Kotai | By: /s/ Santoro Millar | |
Name: Uri Kotai | Name: Santoro Millar | |
Title: President | Title: General Counsel | |
6 |
EXHIBIT 1.4
Product Contents
7 |
Exhibit 10.13
AMENDEMENT ONE TO SOFTWARE DEVELOPMENT AGREEMENT
This Amendment One ("Amendment One") to the Software Development Agreement is made as of this 12th day of September, 2011, by and between Realtime Edge Software Inc. ("Realtime") and Club Service, Inc. as successor-in-interest to Centaurus Games, LLC ("CSI").
WHEREAS, the Parties hereto entered into a Software Development Agreement dated as of September 16, 2008 (the "Agreement"); and
WHEREAS, the Parties hereto desire to amend the "Termination and Other Remedies" section (Section 8) of the Agreement.
NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties hereby agree as follows:
1. Capitalized Terms. Capitalized terms used but not defined herein shall have the meanings set forth in the Agreement.
2. Termination by CSL Section 8.2 of the Agreement is hereby deleted in its entirety and replaced with the following:
"This Agreement may be terminated by convenience by CSI upon six (6) months written notice to Realtime for any reason or no reason."
3. Counterparts. This Amendment One may be executed in one or more counterparts, each of which shall be deemed an original. This Amendment One may be executed by facsimile signature.
4. No Other Changes. Except as otherwise set forth herein, no other changes, amendments or modifications are made to the Agreement.
IN WITNESS WHEREOF, the Parties hereto have duly executed this Amendment One as of the date and year first written above.
Realtime Edge Software Inc. (“Realtime”) | Club Services, Inc. (“CSI”) | |
By: /s/ Uri Kozai | By: /s/ Adam Pliska | |
Name: Uri Kozai | Name: Adam Pliska | |
Its: President | Its: President |
Exhibit 10.14
AMENDEMENT TWO TO SOFTWARE DEVELOPMENT AGREEMENT
This Amendment Two ("Amendment Two") to the Software Development Agreement is made as of this 29th day of March, 2012, by and between Realtime Edge Software Inc. ("Realtime") and Club Service, Inc. as successor-in-interest to Centaurus Games, LLC ("CSI").
WHEREAS, the Parties hereto entered into a Software Development Agreement dated as of September 16, 2008, as amended by that certain Amendment One to the Software Development Agreement dated as of September 12, 2011 (the "Agreement"); and
WHEREAS, the Parties hereto desire to amend the definition of "Product" in the Agreement to include a web based application and amend the Agreement to reflect the development costs and maintenance fees related to the revised product.
NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties hereby agree as follows:
1. Capitalized Terms. Capitalized terms used but not defined herein shall have the meanings set forth in the Agreement.
2. Product. Section 1.4 of the Agreement is hereby deleted in its entirety and replaced with the following:
"1.4 "Product" means certain online gaming software that provides current and future game modules, including, but not limited to, a web browser based game module, for operators to offer CSI's subscription model, together with other licensed multiplayer gaming software, supporting back-end systems and the random number generation system associated therewith. The Product includes the CSI gan1e modules and supp01ting subscription modules only, and does not include, without limitation, the back-end system needed to conduct financial transactions for multi-players unless developed in the future under this contract. All future developments are the property of CSL The parties agree that periodically they shall acknowledge in writing the contents of the Product, including all additions and improvements made since the date of this Agreement. The Product currently does not include the software needed for real money wagering on the Internet. Attached hereto as Exhibit 1.4 is the schedule of Product contents."
3. Compensation. Section 2 of the Agreement is hereby deleted in its entirety and replaced with the following:
1 |
"2. Compensation.
2.1. For development of the web-browser based game module, CSI shall pay REALTIME a total of Four Hundred Thousand U.S. Dollars (US $400,000) payable as follows: One Hundred Thousand Dollars ($ l 00,000) shall be payable no later than thirty (30) days following execution of this Amendment Two and CSI's receipt of an invoice from REALTIME, One Hundred Thousand Dollars shall be payable no later than thirty (30) days following delivery of a beta (viewable/testable) web browser based game module and CSI's receipt of an invoice from REALTIME, One Hundred and Fifty Thousand Dollars ($150,000) shall be payable no later than thirty (30) days following public launch of the web-browser based game module and CSI's receipt of an invoice from REALTIME, and Fifty Thousand Dollars ($50,000) shall be payable no later than thirty (30) days following the end of the first month the web browser based game module is available to the public and CSl's receipt of an invoice from REALTIME.
2.2. For "Maintenance". of the Product, CSI shall pay REALTIME Forty-Five Thousand U.S. Dollars (US $45,000) per month and for "Reporting Support" CS! shall pay REALTIME Two Thousand Five Hundred U.S. Dollars (US $2,500) per month, plus the following: Five Thousand U.S. Dollars (US $5,000) per month for the first One Hundred Thousand (100,000) or less new "Active Players" a month on the web-browser based game module, and an additional Five Thousand U.S. Dollars (US $5,000) per month for every additional One Hundred Thousand (I 00,000) "Active Players" a month on the web-browser based game module, pl'ovided, however, that the total maintenance fees per month shall not exceed Ninety Five Thousand U.S. Dollars (US $95,000) even if the number of "Active Players" a month on the web-browser based game module exceeds One Million (1,000,000). For purposes of this Agreement, "Maintenance" shall mean services necessary to keep the current Product functioning based on the Product's agreed-upon scope of work, including bug fixes and minor modifications, but shall not include any new major features. For purposes of this Agreement, "Reporting Support" shall mean producing and supporting the production of reports as requested by CSL For purposes of this Agreement, "Active Players" shall mean new players (i.e. players who have not previously registered on any CS! game module, whether web-browser based or downloadable) who logged-on to the web-browser based game module at least once in the previous month. REALTIME shall provide CS! with a monthly report detailing the number of "Active Players" for such month and such report shall contain information in sufficient detail to permit the accuracy of each monthly maintenance fee payment due and payable pursuant to this Agreement to be readily determined. This Section 2.2 does not constitute a warranty that the Product will function without additional costs beyond Maintenance. The parties acknowledge and agree that the warranties under this Agreement are exclusively set forth in Section 7 of this Agreement"
2 |
2.3. For any major upgrades or modifications or projects beyond Maintenance or minor modifications of the current Product, CSI and REALTIME shall agree in writing on the fees for such major upgrades or modifications prior to commencing work as well as a fee payment schedule. REALTIME's acceptance of any such projects shall be contingent upon negotiation of a mutually-agreeable fee and the availability of REALTIME personnel to complete such work.
4. Term. Section 8.1 of the Agreement is hereby deleted in its entirety and replaced with the following:
"8.1 This Agreement shall expire nine (9) years after the Effective Date unless both parties agree to extend the terms in writing prior to such date of expiration. Upon expiration or any earlier termination of this Agreement, REALTIME shall deliver or cause to be delivered to CSI the Source Code and Additional Codes as described in Section 6 of this Agreement."
5. Exhibit 1.4. Exhibit 1.4 of the Agreement is hereby deleted in its entirety and replaced with the Exhibit 1.4 attached to this Amendment Two.
6. Counterpruts. This Amendment Two may be executed in one or more counterparts, each of which shall be deemed an original. This Amendment Two may be executed by facsimile signature.
7. No Other Changes. Except as otherwise set forth herein, no other changes, amendments or modifications are made to the Agreement.
IN WITNESS WHEREOF, the Parties hereto have duly executed this Amendment Two as of the date and year first written above.
Realtime Edge Software Inc. (“Realtime”) | Club Services, Inc. (“CSI”) | |
By: /s/ Uri Kozai | By: /s/ Adam Pliska | |
Name: Uri Kozai | Name: Adam Pliska | |
Its: President | Its: President |
3 |
EXHIBIT 1.4
PRODUCT CONTENTS
I) | Web-Browser Based Game Module Product: |
a. | The web-browser based game module product is a gaming application that connects to Facebook and provides a fully featured poker game and blackjack in ring and tournament f01mat. |
b. | Players can use their accounts on Facebook to authenticate and login. |
c. | Players can sign up and become VIP members and receive various benefits. |
d. | Players get a full social experience by using their Facebook profile (avatar etc.) and by playing with and against their friends. |
e. | The web-browser based game module product enhances the player gaming experience with virtual goods, badges and achievements, leaderboards, and playing with friends. |
f. | The web-browser based game module product provides players the means to buy play chips and use them in games and the means to buy virtual goods. |
4 |
Exhibit 10.15
AMENDEMENT THREE TO SOFTWARE DEVELOPMENT AGREEMENT
This Amendment Three ("Amendment Three") to the Software Development Agreement is made as of this 28 day of August, 2013, by and between Pala Interactive Canada, Inc. (formerly RealTime Edge Software Inc.) ("PALA") and Club Services, Inc. as successor-in-interest to Centaurus Games, LLC ("CSI").
WHEREAS, the Parties hereto entered into a Software Development Agreement dated as of September 16, 2008 (the "Original Agreement") as amended by that certain Amendment One to the Software Development Agreement dated as of September 12, 2011, and that certain Amendment Two to the Software Development Agreement dated as of March 29, 2012 (collectively, the "Agreement"); and
WHEREAS, the Parties hereto desire to amend the contents of the "Product" in the Agreement to include certain aspects of a social casino application, to amend the Agreement to provide for a license by PALA to CSI of the associated social casino. game engine, and to amend the Agreement to reflect the development and design fees related to the social casino application hereunder.
NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties hereby agree as follows:
1. Capitalized Terms. Capitalized terms used but not defined herein shall have the meanings set forth in the Agreement.
2. Social Casino. Pursuant to Section 2.3 of the Agreement, and subject to the following provisions of this section, the Parties acknowledge and agree that PALA shall develop a social casino application to add to the Product offering based on the contents outlined in the newly revised Exhibit 1.4, attached hereto and incorporated herein (the "CSI Social Casino"). CSI will own exclusively the unique "look and feel" elements of the CSI Social Casino Product developed by PALA for CSI hereunder (as more particularly outlined in Exhibit A attached hereto). It is understood and agreed that PALA owns the social casino game engine, being the programmed mathematics and related technology used to drive social casino games (the "Social Casino Game Engine") and all intellectual property rights therein, in addition to the back-end system needed to conduct financial transactions (as referred to in Section 1.4 of the Original Agreement). During the Term of the Agreement, PALA will license to CSI, on a non-exclusive, non-transferable (subject to Section 11.7 of the Original Agreement), royalty-free basis, the right to use the Social Casino Game Engine to operate the CSI Social Casino. Furthermore, and for greater certainty, it is agreed that nothing in the Original Agreement will be deemed to restrict PALA from developing or operating any social casino products utilizing the Social Casino Game Engine for itself or any affiliate or any other client, provided it does not incorporate therein any such unique "look and feel" elements of the CSI Social Casino. PALA shall use commercially reasonable efforts to deliver the CSI Social Casino in the timeline outlined in Exhibit B, attached hereto and incorporated herein; and CSI acknowledges that its feedback on such Product development shall be in a timely fashion and that PALA's obligation to meet such timelines is conditional upon receiving such timely feedback.
1 |
3. Development and Design Fees for CSI Social Casino. Pursuant to Section 2.3 of the Agreement, the Parties acknowledge and agree that CSI shall pay PALA for the development work of the CSI Social Casino in the amount of Seventy Eight Thousand One Hundred Twenty Five U.S. Dollars ($78,125 USD), payable as follows: Fifty Percent (50%) upon execution of this Amendment Three and within thirty (30) days after receipt of an invoice, Thirty Percent (30%) upon delivery of the beta version of the CS! Social Casino [i.e., on or around August 9, 2013 as outlined in Exhibit BJ and within Thirty (30) days after receipt of an invoice, and Twenty Percent (20%) within thirty (30) days after the final, CSI-approved CSI Social Casino product becomes available to the general public [i.e., 30 days after tl1e estimated date of August 26, 2013 as outlined in Exhibit BJ and within thirty (30) days after receipt of an invoice. Further, in addition to such sum of $78,125, CSI shall pay PALA the full cost of a contract designer for the Product, payable monthly within thirty (30) days after receipt of an invoice; wherein costs and timeline for such designer shall be mutually agreed by the Parties in advance of incurring any costs. PALA acknowledges and agrees no additional fees are necessary for Maintenance of the CSI Social Casino.
4. Exhibit 1.4. Exhibit 1.4 of the Agreement is hereby deleted in its entirety and replaced with the Exhibit 1.4 attached to this Amendment Three.
5. Counterparties. This Amendment Three may be executed in one or more counterparties, each of which shall be deemed an original. Facsimile or electronic signatures shall be deemed originals.
6. No Other Changes. Except as otherwise set forth herein, no other changes, amendments or modifications are made to the Agreement.
IN WITNESS WHEREOF, the Parties hereto have duly executed this Amendment Three as of the date and year first written above.
Pala Interactive Canada, Inc. | Club Services, Inc. (“CSI”) | |
By: /s/ Jim Ryan | By: /s/ Adam Pliska | |
Name: Jim Ryan | Name: Adam Pliska | |
Its: President and CEO | Its: President |
2 |
EXHIBIT 1.4
PRODUCT CONTENTS
!) Web-Browser Based Game Module Product:
a. | The web-browser based game module product is a gaming application that connects to Facebook and provides a fully featured poker game and blackjack in ring and tournament format. |
b. | Players can use their accounts on Facebook to authenticate and login. |
c. | Players can sign up and become VIP members and receive various benefits. |
d. | Players get a full social experience by using their Facebook profile (avatar etc.) and by playing with and against their friends. |
e. | The web-browser based game module product enhances the player gaming experience with virtual goods, badges and achievements, leaderboards, and playing with friends. |
f. | The web-browser based game module product provides players the means to buy play chips and use them in games and the means to buy virtual goods. |
2) | Social Casino Product: · |
a. | Lobby upgrade to include the Social Casino |
b. | 6 slots - graphically unique with sounds |
c. | 2 different pay tables |
d. | 3 video poker games at CSI's option |
e. | Roulette at CSI's option |
f. | Social features: |
i. | Sending chips to friends |
ii. | Find your friends |
iii. | Friend list filtering |
iv. | Give play chips gifts to friends |
v. | Banner outside Facebook |
vi. | All already-included social features in the social poker product apply to the Social Casino as well (e.g., buy virtual goods, buy play chips, badges and trophies [new achievements can be distributed to players based on casino game play at CSI's option]) |
3 |
EXHIBIT A
"Look and Feel" Elements of CSI Social Casino
The following design attributes incorporated into the CSI Social Casino:
1. Images
2. Animations
3. Sounds
4. Custom fonts
5. Custom colors
The icons in the casino tab of the ClubWPT lobby.
4 |
EXHIBIT B
Estimated 2013 Timeline for Social Casino Product
I. | Authentication - July-08 |
2. | Server modifications - July-15 |
3. | Lobby integration -July-IS |
4. | Game invocation and management of games (tabs) - July-22 |
5. | Slot design - (I slot a week- 6 weeks total) - Aug-05 |
1. | Slot #I - June-26 mockup delivery- feedback and co1Tection no later than July-01 |
2. | Slot #2 - July 03 mockup delivery - feedback and correction no later than July-08 |
3. | Slot#3 - July-10 mockup delivery- feedback and correction no later than July-15 |
4. | Slot#4 - July-17 mockup delivery - feedback and co1Tection no later than July-22 |
5. | Slot#5 - July-24 mockup delivery- feedback and correction no later than July-29 |
6. | Slot#6 - July-31 mockup delivery - feedback and connection no later than Aug-05 |
6. | Final Slot integration with design - Aug-05 |
7. | Beta - Aug-09 |
8. | Release - Aug-26 |
5 |
Exhibit 10.16
AMENDEMENT FOUR TO SOFTWARE DEVELOPMENT AGREEMENT
This Amendment Four ("Amendment Four'') to the Software Development Agreement is made as of this 24th day of April, 2014, by and between Pala Interactive Canada, Inc. (formerly RealTime Edge Software Inc.) ("PALA") and Club Services, Inc. as successor-in-interest to Centaurus Games, LLC ("CSI").
WHEREAS, the Parties hereto entered into a Software Development Agreement dated as of September 16, 2008 (the "Original Agreement") as amended by that certain Amendment One to the Software Development Agreement dated as of September 12, 2011, that certain Amendment Two to the Software Development Agreement dated as of March 29, 2012, and that certain Amendment Three to the Software Development Agreement dated as of August 28, 2013 (collectively, the "Agreement"); and
WHEREAS, the Parties hereto desire to amend the contents of the "Product" in the Agreement to include certain aspects of a Facebook product, to amend the Agreement to provide for a license by PALA to CSI of the associated product engines, and to amend the Agreement to reflect the development and design fees related to the new product created hereunder.
NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties hereby agree as follows:
1. Capitalized Terms. Capitalized terms used but not defined herein shall have the meanings set forth in the Agreement.
2. Facebook Product. Pursuant to Section 2.3 of the Agreement, and subject to the following provisions of this section, the Parties acknowledge and agree that PALA shall develop a social poker and casino offering as a Facebook application to add to the Product offering based on the contents outlined in the newly revised Exhibit 1.4, attached hereto and incorporated herein (the "CSI Facebook Application"). CSI will own exclusively the unique "look and feel" elements of the CSI Facebook Application developed by PALA for CSI hereunder. It is understood and agreed that PALA owns the Facebook application game engine, being the programmed mathematics and related technology used to drive the Facebook application (the "Facebook Application Game Engine") and all intellectual property rights therein, in addition to the back-end system needed to conduct financial transactions (as referred to in Section 1.4 of the Original Agreement). During the Term of the Agreement, PALA will license to CSI, on a non-exclusive, non-transferable (subject to Section 11.7 of the Original Agreement), royalty-free basis, the 1ight to use the Facebook Application Game Engine to operate the CSI Facebook Application. Furthermore, and for greater certainty, it is agreed that nothing in the Original Agreement will be deemed to restrict PALA from developing or operating any products utilizing the Facebook Application Game Engine for itself or any affiliate or any other client, provided it does not incorporate therein any such unique "look and feel" elements of the CSI Facebook Application. PALA shall use commercially reasonable efforts to deliver the final, CSI-approved CSI Facebook
1 |
Application no later than July 31, 2014; and CST acknowledges that its feedback on such CSI Facebook Application development shall be in a timely fashion and that PALA's obligation to meet such timelines is conditional upon receiving such timely feedback.
3. Development and Design Fees for CSI Facebook Application. Pursuant to Section 2.3 of the Agreement, the Parties acknowledge and agree that CSI shall pay PALA for the development work of the CSI Facebook Application in the amount of One Hundred and Twenty-Five Thousand U.S. Dollars ($125,000 USD), payable as follows: Fifty Percent (50%) upon execution of this Amendment Four and within thirty (30) days after receipt of an invoice, Thirty Percent (30%) upon delivery of the beta version of the CSI Facebook Application and within Thirty (30) days after receipt of an invoice, and Twenty Percent (20%) within thirty (30) days after the final, CST-approved CSI Facebook Application product becomes available to the general public [i.e., 30 days after the estimated date of July 31, 2014] and within thirty (30) days after receipt of an invoice. Further, in addition to such sum of $125,000, CSI shall pay PALA the full cost of a contract designer for the Product, payable monthly within thirty (30) days after receipt of an invoice, provided, however, that PALA agrees to inform CSI of the upcoming costs for such designer no later than the 1st of each calendar month and all designer costs shall be mutually agreed by the Parties in writing in advance of incurring any costs. PALA acknowledges and agrees no additional fees are necessary for Maintenance of the CST Facebook Application.
4. Exhibit 1.4. Exhibit 1.4 of the Agreement is hereby deleted in its entirety and replaced with the Exhibit 1.4 attached to this Amendment Four.
5. Counterparts. This Amendment Four may be executed in one or more counterparts, each of which shall be deemed an original. Facsimile or electronic signatures shall be deemed originals.
6. No Other Changes. Except as otherwise set forth herein, no other changes, amendments or modifications are made to the Agreement.
IN WITNESS WHEREOF, the Parties hereto have duly executed this Amendment Four as of the date and year first written above.
Pala Interactive Canada, Inc. (“PALA”) | Club Services, Inc. (“CSI”) | |
By: /s/ Jim Ryan | By: /s/ Adam Pliska | |
Name: Jim Ryan | Name: Adam Pliska | |
Its: President & CEO | Its: President |
2 |
Exhibit 10.17
AMENDMENT FIVE TO SOFTWARE DEVELOPMENT AGREEMENT
This Amendment Five ("Amendment Five") to the Software Development Agreement is made as of this 20 day of December, 2016 (the "Effective Date"), by and between Pala Interactive Canada, Inc. (formerly RealTime Edge Software Inc.) ("PALA") and Club Services, Inc. as successor-in-interest to Centaurus Games, LLC ("CSI") (collectively referred to as the "Parties").
WHEREAS, the Parties hereto entered into a Software Development Agreement dated as of September 16, 2008, as amended by that certain Amendment One to the Software Development Agreement dated as of September 12, 2011, that certain Amendment Two to the Software Development Agreement dated as of March 29, 2012, that certain Amendment Three to the Software Development Agreement dated as of August 28, 2013, and that certain Amendment Four to the Software Development Agreement dated as of April 24, 2014 (collectively, the "Agreement"); and
WHEREAS, the Parties hereto desire to extend the Term of the Agreement, amend the Compensation, and clearly outline events upon termination.
NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties hereby agree as follows:
1. Capitalized Terms. Capitalized terms used but not defined herein shall have the meanings set forth in the Agreement.
2. Term/Upon Termination. The Formal Notice of Termination sent by CSI to PALA dated August 24, 2016, is hereby revoked by the Parties, and Section 8.1 of the Agreement is hereby deleted in its entirety and replaced with the following:
"8.1 This Agreement shall expire two (2) years after the Effective Date of this Amendment Five. Upon expiration of the Term, CSI may request extension of the Term for an additional two (2) years upon the same terms of this Agreement by serving written notice to PALA at least ninety (90) days prior to the expiration of the then-existing Term. Such extension will require mutual agreement of the Parties. Upon expiration or any earlier termination of this Agreement, upon CSI's election, PALA shall deliver or cause to be delivered to CSI the Source Code and Additional Codes as described in Section 6 of this Agreement."
3. Compensation/Freemium. Section 2.2 of the Agreement is hereby deleted in its entirety and replaced with the following:
"2.2 For "Maintenance" of the Product and "Reporting Support," commencing as of January 1, 2017, CSI shall pay PALA Forty One Thousand, Six Hundred Sixty Six U.S. Dollars and Sixty Seven Cents ($41,666.67 USD) per month ("Monthly Fee"). This Monthly Fee shall include Services in which PALA assists CSI in migrating the freemium business of ClubWPT to CSI's parent company's PlayWPT platform (including, without limitation, PALA assisting with in-game messaging, removing play chips buying functionality, removing play chip top-up processes, modifying virtual goods features, shutting down ClubWPT Facebook product, etc.). Such Monthly Fee shall be payable monthly in advance on the first day of each month within thirty (30) days after receipt of an invoice.
1 |
For purposes of this Agreement, "Maintenance" shall mean services necessary to keep the current Product functioning based on the Product's agreed-upon scope of work, including bug fixes, minor modifications and minor enhancements to improve the Product as agreed by the Parties in good faith, but shall not include any new major features as set forth in Section 2.3. For purposes of this Agreement, "Reporting Support" shall mean producing and supporting the production of reports as requested by CSI. This Section 2.2 does not constitute a warranty that the Product will function without additional costs beyond Maintenance. The Parties acknowledge and agree that the warranties under this Agreement are exclusively set forth in Section 7 of this Agreement."
4. Migration. The following is added to the Agreement as new Section 2.4:
"Upon expiration or any earlier termination of this Agreement, if CSI elects for PALA to make the following deliveries and provide the following services relating to migration, the following provisions will apply:
(a) Prior to the date of expiration or termination, the parties will agree, in good faith, on a reasonable timetable for migration of information and materials and delivery by PALA of the services contemplated by this Section.
(b) The fee payable by CSI to PALA in consideration for the deliveries, services and assistance contemplated by this Section will be Five Hundred Thousand U.S. Dollars ($500,000 USD) (the "Termination Migration Fee"). On the date that CSI requests the commencement of the migration, CSI shall pay to PALA the first instalment of the Termination Migration Fee, in the amount of Two Hundred and Fifty Thousand U.S. Dollars ($250,000) (the "First Instalment") within thirty (30) days of receipt of an invoice.
(c) Subject to the prior receipt of the First Instalment and the following provisions of this Section, PALA shall deliver or cause to be delivered to CSI the encryption keys which will enable CSI to migrate its customer accounts, including without limitation historical transaction information ("Customer Data"). Delivery of such encryption keys shall be made pursuant to then-current PCI compliance guidelines (or other industry-standard best practice guidelines applicable to transfer of customer data) any other applicable laws and regulations, so as to ensure a seamless transition of customers to an alternate platform on the agreed timetable. PALA shall assist CSI with migration efforts by providing reasonable transferring services and migration support services in association with the termination ("Termination Migration Services") according to the agreed timetable; provided however, PALA's Termination Migration Services will be limited to 500 man hours, unless otherwise agreed by the parties.
2 |
(d) The balance of the Termination Migration Fee in the amount of Two Hundred and Fifty Thousand U.S. Dollars ($250,000) will be paid by CSI to PALA upon completion of the Termination Migration Services and within thirty (30) days of receipt of an invoice."
5. Exhibit 1.4. Exhibit 1.4 of the Agreement is hereby deleted in its entirety and replaced with the Exhibit 1.4 attached to this Amendment Five.
6. Counterparts. This Amendment Five may be executed in one or more counterparts, each of which shall be deemed an original. Facsimile or electronic signatures shall be deemed originals.
7. Governing Law/Venue/No Other Changes. The Agreement shall be governed by the laws of the State of California. The Parties agree that any dispute related to the Agreement must be venued in any court of competent jurisdiction in Orange County, California, and the Parties submit to the jurisdiction thereof . Except as otherwise set forth herein, no other changes, amendments or modifications are made to the Agreement.
IN WITNESS WHEREOF, the Parties hereto have duly executed this Amendment Five as of the date and year first written above.
Pala Interactive Canada, Inc. (“PALA”) | Club Services, Inc. (“CSI”) | |
By: /s/ Jim Ryan | By: /s/ Adam Pliska | |
Name: Jim Ryan | Name: Adam Pliska | |
Its: President & CEO | Its: CEO/President |
3 |
EXHIBIT 1.4
PRODUCT CONTENTS
1) Web-Browser Based Grune Module Product:
a. | The web-browser based game module product is a gaming application that connects to Facebook and provides a fully featured poker game and blackjack in ring and tournament format. |
b. | Players can use their accounts on Facebook to authenticate and login. |
c. | Players can sign up and become VIP members and receive various benefits. |
d. | The web-browser based game module product enhances the player gaming experience with virtual goods, badges and achievements, leaderboards, and playing with friends. |
4 |
Exhibit 10.18
AMENDMENT SIX TO SOFTWARE DEVELOPMENT AGREEMENT
This Amendment Six ("Amendment Six") to the Software Development Agreement is made as of this 7th day of September, 2017 (the "Effective Date"), by and between Pala Interactive Canada, Inc. (formerly RealTime Edge Software Inc.) ("PALA") and Club Services, Inc. as successor-in-interest to Centaurus Games, LLC ("CSI") (collectively referred to as the "Parties").
WHEREAS, the Parties hereto entered into a Software Development Agreement dated as of September 16, 2008 (the "Original Agreement"), as amended by that certain Amendment One to the Software Development Agreement dated as of September 12, 2011, that certain Amendment Two to the Software Development Agreement dated as of March 29, 2012, that certain Amendment Three to the Software Development Agreement dated as of August 28, 2013, that certain Amendment Four to the Software Development Agreement dated as of April 24, 2014, that certain Amendment Five to the Software Development Agreement dated as of December 20, 2016 (collectively, the "Agreement"); and
WHEREAS, the Parties hereto desire to migrate CSI's subscription game model known as ClubWPT.com to PALA's HTML5 poker code base and extend the Term of the Agreement.
NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties hereby agree as follows:
1. | Capitalized Terms. Capitalized terms used but not defined herein shall have the meanings set forth in the Agreement. In addition, the following terms will have the following meanings: |
"HTML5 Code Base" means the web and downloadable poker subscription product developed by Pala and built with:
(a) | HTMLS poker use interface; |
(b) | Pala Java back office platform and related web services; and |
(c) | MySql database. |
"Original Product" means the online gaming software defined as the "Product" in the Agreement.
2. | Term/Upon Termination. Section 8.1 of the Agreement is hereby deleted in its entirety and replaced with the following: |
"8.1 This Agreement shall expire three (3) years after the Effective Date of Amendment Five (i.e., on December 20, 2019). Upon expiration of the Term, CSI may request extension of the Term for an additional one (1) year upon terms mutually agreed by the Parties by serving written notice to PALA at least ninety (90) days prior to the expiration of the then-existing Term. Such extension will require mutual agreement of the Parties. Upon expiration or any earlier termination of this Agreement, upon CSI's election, PALA shall deliver or cause to be delivered to CSI the Source Code and Additional Codes for the Original Product as described in Section 6 of the Agreement, as well as the HTMLS ClubWPT Source Code (as defined below). For greater certainty, it is confirmed that neither the source code for the HTMLS Code Base nor the HTMLS ClubWPT Source Code are required to be deposited in escrow pursuant to Section 6 of the Original Agreement, and the HTMLS Code Base will not be delivered or caused to be delivered to CSI upon expiration or any earlier termination of the Agreement."
1 |
3. | HTMLS Development and Migration. |
(a) | Pursuant to Section 2.3 of the Agreement, and subject to the following provisions of this section, the Parties acknowledge and agree that PALA shall develop source code for the HTMLS poker table user interface for ClubWPT.com ("HTMLS ClubWPT Source Code") and thereafter migrate CSl's ClubWPT.com game model to PALA's HTMLS Code Base (the "HTMLS Migration"). It is understood and agreed that PALA owns the HTMLS Code Base and all intellectual property rights therein and all rights to any modifications, improvements, upgrades, enhancements or other changes thereto, and CSI will own the HTMLS ClubWPT Source Code and all intellectual property rights therein and all rights to any modifications, improvements, upgrades, enhancements or other changes thereto. During the Term of the Agreement, PALA will license to CSI, on a non-exclusive, non-sublicenseable, non-transferrable (subject to Section 11.7 of the Original Agreement), royalty-free basis, the right to use the HTMLS Code Base to operate the ClubWPT.com game model. PALA shall use commercially reasonable efforts to complete the HTMLS Migration by October 16, 2017. |
(b) | From and after completion of the HTMLS Migration, it is understood and agreed that Section 2.2 of the Agreement (which, for greater certainty, was amended by Amendment Five described above) will apply and will be deemed to apply to Maintenance and Reporting Support with respect to the HTMLS Code Base instead of the Original Product, and CSI shall pay PALA a Monthly Fee totaling Six Thousand Six Hundred Sixty Six U.S. Dollars and Sixty Seven Cents ($6,666.67 USO) per month, payable as outlined by Section 2.2 of the Agreement. |
(c) | Upon completion of the HTMLS Migration, the second sentence of Section 2.2 of the Agreement will be deleted and be of no further application. |
(d) | Pursuant to Section 2.3 of the Agreement, the Parties acknowledge and agree that CSI shall pay PALA for the development of the HTMLS ClubWPT Source Code in the amount of Thirty Five Thousand U.S. Dollars ($35,000 USD) per month, payable in advance on the first day of each month within thirty (30) days after receipt of an invoice. |
2 |
4. | Termination Rights. Sections 8.2 and 8.3 of the Agreement are hereby deleted in their entirety and replaced with the following: |
"8.2 Upon expiration or termination of the current Term for any reason, in the event this Agreement is extended thereafter (whether through extension, amendment, renewal or otherwise) (an "Extended Term"), CSI will have the right, at any time during such Extended Term, to terminate this Agreement for convenience upon six (6) months written notice to PALA for any reason or no reason.
8.3 During any Extended Term, this Agreement may be terminated for convenience by PALA upon twelve (12) months written notice to CSL"
5. | Counterparts. This Amendment Six may be executed in one or more counterparts, each of which shall be deemed an original. Facsimile or electronic signatures shall be deemed originals. |
6. | No Other Changes. Except as otherwise set forth herein, no other changes, amendments or modifications are made to the Agreement. |
IN WITNESS WHEREOF, the Parties hereto have duly executed this Amendment Six as of the date and year first written above.
Pala Interactive Canada, Inc. (“PALA”) | Club Services, Inc. (“CSI”) | |
By: /s/ Jim Ryan | By: /s/ Adam Pliska | |
Name: Jim Ryan | Name: Adam Pliska | |
Its: President & CEO | Its: CEO/President |
3 |
Exhibit 10.19
JOINT CONTENT LICENSE AGREEMENT
This JOINT CONTENT LICENSE AGREEMENT (the “Agreement”), dated February 1, 2018 (the “Effective Date”), is made by and between WPT Enterprises, Inc., a Delaware corporation, with offices located at 1920 Main Street, Suite 1150, Irvine, CA 92614 (“WPT”), and ZYNGA INC., a Delaware corporation with offices located at 699 8th Street, San Francisco CA, 94103 (“Zynga US”) and ZYNGA GAME IRELAND LIMITED, a limited company organized under the laws of Ireland, resident in Ireland and having its registered office located at The Oval, Building One, Third Floor 160 Shelbourne Road Ballsbridge 4 Co. Dublin Ireland (“Zynga Ireland,” and together with Zynga US and their respective Affiliates, “Zynga”).
In addition to the Definitions set forth in Section 1 of the Additional Provisions (attached and incorporated by reference), all capitalized terms used herein shall have the meanings set forth below.
In consideration of the mutual promises herein contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:
BASIC PROVISIONS
1. | Joint Content License Relationship. Among other games, Zynga produces and distributes the ZYNGA POKER® game on a number of global platforms, including Apple iOS, Google Android, Facebook and the zynga.com website. The ZYNGA POKER® game features a Zynga Poker Tournaments Mode that Zynga can customize. Among other things, WPT is the creator of the World Poker Tour, WPT Tournaments and the WPT Invitational Tournaments. WPT Tournaments and WPT Invitational Tournaments are televised poker tournaments where a partner can promote its brand. The parties desire to work cooperatively, but independently, to use commercially reasonable efforts to engage in the marketing and promotional activities described in Exhibit A, including, but not limited to Zynga promoting the WPT brand in a WPT-branded Zynga Poker Tournament Mode, and WPT promoting the Zynga brand in WPT Tournaments and WPT Invitational Tournaments. This Agreement describes the terms of a content license and cooperative marketing relationship under which each party will independently or cooperatively engage in mutually agreed activities to promote each other’s products and services throughout the Territory (as defined below). |
2. | Territory. The Territory for this Agreement is worldwide, but not including Asian countries (including, but not limited to, Bangladesh, Bhutan, Brunei, Cambodia, East Timor, Hong Kong, India, Indonesia, Japan, Laos, Macau, Malaysia, Maldives, Mongolia, Myanmar, Nepal, North Korea, Pakistan, People’s Republic of China, Philippines, Singapore, South Korea, Sri Lanka, Taiwan, Thailand, Vietnam). The parties acknowledge and agree that the rights granted hereunder by Zynga (a) with respect to the United States are granted to, held and exercised by Zynga US and (b) with respect to all other parts of the Territory are granted to, held and exercised by Zynga Ireland. |
1 |
3. | Term. This Agreement will be in effect for three (3) years from the Effective Date (“Initial Term”) unless terminated earlier in accordance with this Agreement. This Agreement shall automatically extend for an additional two (2) years on the same terms herein (“Renewal Term”) provided WPT receives payments greater than twelve million U.S. dollars ($12,000,000) within the Initial Term. The Initial Term and any such Renewal Term are collectively referred to as the “Term.” |
4. | Annual Minimum Guarantee. Zynga will pay WPT three million U.S. dollars ($3,000,000) per year according to the following schedule (which the parties may alter upon mutual agreement) (the “Annual Minimum Guarantee”): |
a. | Within thirty (30) days of executing this Agreement: $1.5M |
b. | July 1, 2018: $1.5M |
c. | January 1, 2019: $1.5M |
d. | July 1, 2019: $1.5M |
e. | January 1, 2020: $1.5M |
f. | July 1, 2020: $1.5M |
5. | Royalty. Zynga will pay to WPT ten percent (10%) of the cumulative Net Revenue (as defined in Section 3.b. of the Additional Provisions) (“Royalty”) from the WPT-branded Zynga Poker Tournament Mode or other such use of the WPT brand on the Zynga platform. Zynga shall not be required to pay the Royalty to the extent offset by the Annual Minimum Guarantee payments previously paid to WPT during the Term. Conversely, Zynga shall not be required to make Annual Minimum Guarantee payments to the extent offset by the Royalty previously paid to WPT during the Term. |
The Additional Provisions and any attached Exhibits are incorporated by reference.
Signature page to follow.
2 |
IN WITNESS WHEREOF
ZYNGA INC.
Signature: ______________________
Name: _________________________
Title: __________________________ |
WPT ENTERPRISES, INC.
Signature: _________________________
Name: ____________________________
Title: _____________________________ |
ZYNGA GAME IRELAND LIMITED
Signature: ______________________
Name: _________________________
Title: __________________________ |
3 |
ADDITIONAL PROVISIONS
The following Additional Provisions form part of the Agreement dated February 1, 2018 entered into by and between ZYNGA INC. and ZYNGA GAME IRELAND LIMITED and their respective affiliates (“Zynga”), and WPT Enterprises, Inc. (“WPT”).
1. | DEFINITIONS |
a. | “Affiliate” means an entity, directly or indirectly, controlled by, controlling of, or under common control with a party, either now or in the future, and their respective successors and assigns. |
b. | “Artwork” means, without limitation, all pictorial, graphic, visual, audio, audio-visual, digital, literary, animated, artistic, dramatic, sculptural, musical or any other type of creation or application, whether finished or not, including, without limitation, animation, drawings, designs, sketches, images, illustrations, film, video, electronic, digitized or computerized information, software, object code, source code, on-line elements, music, text, dialogue, stories, visuals, effects, scripts, voiceovers, logos, one-sheets, promotional pieces, packaging, display materials, printed materials, photographs, interstitials, notes, shot logs, character profiles and translations. |
c. | “Agreement” means the Basic Provisions, these Additional Provisions, and any and all attached Exhibits. |
d. | “Licensed Property” means those specific trademarks, service marks, publicity rights, copyrights, intellectual property rights, and any other items set forth in this Agreement, which the parties may utilize in connection with the marketing and promotional activities in Exhibit A. A list of the Licensed Property for each party is described in Exhibit B. |
e. | “Annual Minimum Guarantee” means the guaranteed minimum amount due to WPT by Zynga in consideration of the rights granted herein, which amount may be recoupable from Royalties as set forth below and in the Basic Provisions. |
f. | “Royalty” means the amount(s) set forth in the Basic Provisions and calculated as described in the Additional Provisions. |
g. | “Term” means the term of this Agreement as set forth in the Basic Provisions. |
h. | “Territory” means the territory throughout which the parties are authorized to engage in the marketing and promotional activities as described in Exhibit A and in the Basic Provisions. |
2. | TRADEMARKS, APPROVALS, AND RESERVATION OF RIGHTS |
a. | Materials. To the extent indicated on Exhibit A, each party will provide the other party with electronic files containing the Licensed Property of such party to be used under this Agreement, as specified in Exhibit B, if any. |
b. | License by Zynga. Subject to the terms and conditions of this Agreement, Zynga grants to WPT a non-exclusive, non-assignable, non-sublicensable, royalty-free, paid up, limited worldwide license to use and display Zynga’s Licensed Property solely as necessary to perform WPT’s obligations under this Agreement and as specifically described on Exhibit A, in any and all media now known or hereafter devised, for the Term (subject to Section 7.e. of Additional Provisions). |
c. | License by WPT. Subject to the terms and conditions of this Agreement, WPT grants to Zynga a non-exclusive, non-assignable, non-sublicensable, royalty-free, paid up, limited license in the Territory to use and display WPT’s Licensed Property solely as necessary to perform Zynga’s obligations under this Agreement and as specifically described on Exhibit A, for the Term. |
d. | Trademark Guidelines. In its use of the Licensed Property of the other party (“Licensee”), each party (“Licensor”) will comply with any trademark usage guidelines that Licensor may communicate to Licensee from time to time. Each use of Licensor’s marks by Licensee will be accompanied by the appropriate trademark symbol (either “™” or “®”) and a legend specifying that such marks are trademarks of Licensor as specified on Exhibit B, and will be in accordance with Licensor’s then-current trademark usage policies as provided in writing to Licensee from time to time. Licensee will provide Licensor with copies of any materials bearing any of Licensor's marks as requested by Licensor from time to time. If Licensee’s use of any of Licensor’s marks, or if any material bearing such marks, does not comply with the then-current trademark usage policies provided in writing by Licensor, Licensee will promptly remedy such deficiencies upon receipt of written notice of such deficiencies from Licensor. Other than the express licenses granted herein with respect to each Licensor’s marks, nothing herein will grant to Licensee any other right, title or interest in Licensor’s marks. All goodwill resulting from Licensee’s use of Licensor's marks will inure solely to Licensor. Each party recognizes the great value of the publicity and good will associated with the Licensed Property and acknowledges that: (a) such good will is exclusively that of Licensor or Licensee, as applicable; and (b) the Licensed Property have acquired a secondary meaning as trademarks and/or identifications of Licensor or Licensee, as applicable, in the mind of the purchasing public. Licensee will not, at any time during or after this Agreement, register, attempt to register, claim any interest in, contest the use of, or otherwise adversely affect the validity of any of Licensor’s marks (including, without limitation, any act or assistance to any act, which may infringe or lead to the infringement of any such marks). |
4 |
e. | Approvals. The Licensed Property shall be displayed or used only in such form and in such manner as has been approved in writing (which may be by email) by Licensor pursuant to this Section 2 and Licensee shall ensure its usage of the Licensed Property solely as approved. Throughout the Term, including any renewals or extensions (if applicable), Licensee shall comply with reasonable quality standards, style guides and clear specifications communicated to Licensee and rights of approval of Licensor set forth in this Section 2 with respect to any and all of its usage of the Licensed Property. Subject to Licensor’s prior written approval of any applicable Licensed Property (hereinafter the “Approved Content”), all Conforming Content will be deemed approved by Licensor. “Conforming Content” means any and all elements of the Approved Content which (i) do not represent deviations in quality, style, look-and-feel or other aspects of use from the Approved Content and (ii) are consistent with the aesthetic style or tone of the Approved Content. The parties will come to agreement with respect to Exhibit A as to whether prior written approval is needed in every instance or whether it is not needed after the first instance has been approved in writing (e.g., given exigencies in television production business, it is reasonable that Zynga would approve the use of its brand conceptually in elements of an episode but not need to re-approve the use in a similar manner for every episode the brand is used in; and similarly, given exigencies in the social gaming business, it is reasonable that WPT would approve use of its brand conceptually in elements of the Zynga platform but not need to re-approve the use in a similar manner for every poker tournament the brand is used in). |
i. | Licensee may use textual and/or pictorial matter pertaining to the Licensed Property on such promotional, display and advertising material as may, in Licensee’s reasonable judgment, promote the awareness, consumption and sale of the Licensed Property. All final advertising and promotional material using the Licensed Property must be submitted to Licensor for its prior written approval. All press releases respecting this Agreement or the relationship of the parties herein shall require prior written approval by the other party. |
ii. | Licensor will use commercially reasonable efforts to provide approval and/or feedback within five (5) business days after its receipt of a creative submission, or re-submission, with respect to the Licensed Property or marketing materials; provided that: (a) if Licensor declines to approve any submission or re-submission, then it shall provide reasonably detailed feedback in order to enable Licensee to modify the Licensed Property or marketing material accordingly in order to address Licensor’s concerns and obtain Licensor’s approval, and (b) if Licensor fails to (1) approve or (2) disapprove and provide feedback within such timeframe, then such submission or re-submission is deemed to have been approved. No approval may be unreasonably withdrawn by Licensor once delivered. |
iii. | Zynga shall advise WPT to Zynga’s knowledge as to which jurisdictions where it may be illegal to advertise Zynga’s Licensed Property (if any) given local laws or regulations. | |
iv. | WPT or its affiliates shall not authorize a Zynga Competitor to commercially exploit the Licensed Property in connection with social poker gaming via a license similar to the license granted herein for the Term. A “Zynga Competitor” means: 1) Aristocrat Technologies Australia Pty Ltd. Or Big Fish Games, Inc.; 2) HUUUGE Inc.; 3) Activision Blizzard, Inc., King.com Ltd. Or King.com (US) LLC; 4) Scientific Games Corporation; 5) Tencent Holdings Limited; and 6) Murka Ltd. The parties agree to work together in good faith to amend the definition of a Zynga Competitor if that meaning for Zynga reasonably changes during the Term. |
f. | Reservation of Rights. The parties acknowledge and agree that, except for the rights and licenses expressly granted by each party to the other party under this Agreement, each party will retain all right, title and interest in and to its products, services, marks, copyrights or other intellectual property, and all content, information and other materials on its website(s), and nothing contained in this Agreement will be construed as conferring upon such party, by implication, operation of law or otherwise, any other license or other right. |
3. | PAYMENT |
a. | Annual Minimum Guarantee. Zynga will pay to WPT the Annual Minimum Guarantee as set forth in the Basic Provisions. The Annual Minimum Guarantee shall be recoupable from such Royalties as are, or have become, paid to WPT. For clarification, the Annual Minimum Guarantee will operate as an advance payment, such that when accrued Royalties exceed the Annual Minimum Guarantee payments already paid, then the excess Royalties will be paid by Zynga to WPT. |
b. | Royalty. The Royalties to be paid by Zynga to WPT is the percentage of Net Revenue as set forth in Section 5 of the Basic Provisions. “Net Revenue(s)” shall be defined as one hundred percent (100%) of gross revenues and all other receivables of any kind whatsoever received by Zynga or any of Zynga’s affiliates attributable to the use of Paid Currency or in connection with the sale of Virtual Digital Goods derived from use of the WPT-brand on the Zynga platform, less the following actual and verifiable “Allowable Deductions”: (i) out-of-pocket, third-party payment processing and currency system fees, commissions, and platform distribution fees (e.g., Apple, Google or Facebook platform fees); (ii) any governmental taxes (e.g., VAT, excise or sales or use tax, etc.) arising in connection with related receipts, but excluding any taxes on Licensee’s net income; and (iii) charge-backs/refunds/cancellations/fraud. “Paid Currency” means virtual currency purchased using real money. “Virtual Digital Goods” means any virtual, digital representation of any actual or fictional thing or item within Zynga Poker, which is capable of being made available for distribution, placement, download or other display by electronic means. Any other deductions must be mutually agreed upon in advance and in writing by the parties. |
5 |
c. | Payment. All amounts payable and due will be made in U.S. dollars. If withholding taxes are required, Zynga may account for the required amount of such withholding taxes when calculating the Royalty or other payments payable prior to remittance to WPT. Zynga shall provide WPT with an official receipt or other equivalent documentation issued by the appropriate taxing authority or other evidence as is reasonably requested by WPT to establish that such taxes have been paid. Zynga shall pay all amounts accruing under this Agreement for any reporting period to WPT by check or wire transfer to the account specified by WPT in writing, concurrently with Zynga’s delivery of the applicable report under Section 3(d), provided that payments will only be paid if the amount owed to WPT for any reporting period is greater than five hundred dollars ($500.00). An amount due of less than five hundred dollars ($500.00) will be accumulated to the next payment and will be included in the amount to be paid to WPT on the next payment date, again provided that the amount owed to WPT in the subsequent month exceeds five hundred dollars ($500.00). Accumulated amounts do not accrue any interest. |
d. | Reporting. Zynga will, within thirty (30) days of the end of each calendar quarter, commencing with the first full calendar quarter following the Effective Date, furnish WPT with complete statements containing the following information with respect to all Net Revenue from the use of the WPT-brand on the Zynga platform, during the preceding period covered by such statement: the Territory; the amount due WPT (or the remaining unrecouped Annual Minimum Guarantee balance as applicable); Net Revenue; Royalties rate; the distribution channels or portals, the platform, the territory(ies), and itemized Allowable Deductions (“Royalty Statement(s)”). The amount shown to be payable to WPT shall be paid simultaneously with the rendition of the respective Royalty Statement. The statements and payments remitted hereunder shall be delivered to WPT via email to the following email address: Deborah.Frazzetta@wpt.com (ATTN: Deborah Frazzetta, VP, Finance. |
e. | Audit Rights. Zynga shall keep full, complete and accurate books of account and records (collectively “records”) covering all transactions relating to the subject matter of this Agreement in sufficient detail to enable the Royalties payable hereunder to be determined and verified. Zynga shall permit such records to be examined by authorized representatives of WPT, including such independent auditors as WPT may designate, during usual business hours, with advance notice, to verify to the extent necessary the Royalties paid hereunder, and WPT and its representatives shall use reasonable efforts to minimize disruptions to Zynga’s business. Prompt adjustment shall be made by Zynga to compensate for any errors or omissions disclosed by such examination. If the adjustment is more than $1,500 in favor, then out-of-pocket costs of such examination shall be borne by Zynga. |
f. | No Other Charges or Expenses. Neither party will be liable to pay the other party any other types of charges or expenses not agreed to in this Agreement or any related amendment signed by the Parties. |
4. | REPRESENTATIONS AND WARRANTIES; LIMITATIONS OF LIABILITY |
a. | Each party represents and warrants to the other as follows: (i) it is duly authorized under applicable law and has the authority to enter into and perform this Agreement; (ii) this Agreement constitutes a valid and binding obligation of such party enforceable in accordance with its terms; (iii) the making of this Agreement by such party does not violate any agreement, right or obligation existing between such party and any third party; (iv) the marketing and promotional activities in Exhibit A shall not infringe or misappropriate third party rights, including, without limitation, any patent, trade name, trademark, copyright or other intellectual property or proprietary right and shall not invade or violate any right of privacy, publicity, personal or proprietary right, or other common law or statutory right, nor defame any person or entity in the United States and European Union (the “Principal Territories”), and to the knowledge of such party, outside the Principal Territories; provided that such party makes no representations regarding the Licensed Property or any other materials provided by Licensor as contemplated under this Agreement. |
b. | DISCLAIMER. EXCEPT AS EXPRESSLY STATED IN THIS AGREEMENT, NEITHER PARTY MAKES ANY REPRESENTATIONS OR WARRANTIES OF ANY KIND WITH RESPECT TO THE SUBJECT MATTER HEREOF, INCLUDING BUT NOT LIMITED TO THE IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR ANY LEVEL OF BUSINESS OR SERVICE THAT MAY RESULT FROM THIS AGREEMENT, OR ANY WARRANTY OR CONDITION ARISING FROM ANY COURSE OF DEALING, COURSE OF PERFORMANCE OR USAGE IN THE INDUSTRY. |
c. | LIMITATIONS ON LIABILITY/NO INJUNCTIVE RELIEF. EXCEPT IN CASES OF GROSS NEGLIGENCE, WILLFUL MISCONDUCT OR FRAUD, INDEMNIFICATION CLAIMS UNDER SECTION 5 OR BREACHES OF SECTION 2 (TRADEMARKS), 8 (CONFIDENTIALITY), or 9 (NO AGENCY RELATIONSHIP), IN NO EVENT SHALL EITHER PARTY OR ITS OFFICERS, DIRECTORS, OR EMPLOYEES BE LIABLE TO THE OTHER PARTY IN CONNECTION WITH THE SUBJECT MATTER HEREOF, FOR ANY SPECIAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES OF ANY KIND, LOST PROFITS OR LOST REVENUE, WHETHER ARISING IN CONTRACT, TORT, NEGLIGENCE, STATUTE, OR OTHERWISE, EVEN IF ADVISED OF THE POSSIBILITY THEREOF. In no event shall the non-breaching party be entitled to equitable or injunctive relief of any kind. |
6 |
5. | INDEMNIFICATION |
a. | WPT shall indemnify, defend, and hold harmless Zynga and its Affiliates, and the respective directors, officers and employees of the foregoing (the “Zynga Indemnified Parties”) from and against any and all third party claims, actions, suits, costs, liabilities, judgments, obligations, losses, penalties, expenses or damages (including, without limitation, reasonable legal fees and expenses) of whatsoever kind and nature imposed on, incurred by or asserted against any of the Zynga Indemnified Parties arising out of: (i) any breach or alleged breach by WPT of any representation, warranty or covenant made, by WPT pursuant to this Agreement; or (ii) WPT’s non-compliance with any applicable federal, state or local laws or with any applicable regulations in connection with its performance of this Agreement. |
b. | Zynga shall indemnify, defend, and hold harmless WPT and its Affiliates, and the respective directors, officers and employees of the foregoing (the “WPT Indemnified Parties”) from and against any and all third party claims, actions, suits, costs, liabilities, judgments, obligations, losses, penalties, expenses or damages (including, without limitation, reasonable legal fees and expenses) of whatsoever kind and nature imposed on, incurred by or asserted against any of the WPT Indemnified Parties arising out: (i) any breach or alleged breach by Zynga of any representation, warranty or covenant made by Zynga pursuant to this Agreement; or (ii) Zynga’s non-compliance with any applicable federal, state or local laws or with any applicable regulations in connection with its performance of this Agreement. |
c. | In order to seek or receive indemnification hereunder in cases involving third-party claims the party seeking indemnification (the “Indemnified Party”) must have promptly notified the other (the “Indemnifying Party”) of any claim or litigation of which the Indemnified Party is aware and to which the indemnification relates; and the Indemnified Party must reasonably cooperate with Indemnifying Party in the defense or settlement of such claim or litigation. With regard to any claim or litigation to which the Indemnifying Party itself is not a party, the Indemnifying Party must have afforded the Indemnified Party the opportunity to participate in any compromise, settlement, litigation or other resolution or disposition of such claim or litigation. |
6. | TERMINATION |
a. | Each party shall have the right at any time to terminate this Agreement without prejudice to any rights which it may have, whether pursuant to the provisions of this Agreement or otherwise in law or in equity or otherwise, upon the occurrence of any one or more of the following events: |
i. | The other party breaches or fails to perform any of its material obligations provided for in this Agreement; |
ii. | The other party is unable to pay its debts when due, or makes any assignment for the benefit of creditors, or files any petition under the bankruptcy or insolvency laws of any jurisdiction, county or place, or has or suffers a receiver or trustee to be appointed for its business or property, or is adjudicated a bankrupt or an insolvent; or |
iii. | The other party asserts any rights in or to the terminating party’s intellectual property in violation of this Agreement. |
a. | In the event that any of these events of default should occur and a party elects to exercise its right to terminate this Agreement, such party shall give notice of termination in writing to the other party, which notice shall specify in reasonable detail the event(s) of default that give rise to such termination. The other party shall have thirty (30) days from the effective date of such notice in which to correct any such default(s) (except those which are not curable), and failing such correction by the end of such thirty (30) day cure period, this Agreement shall thereupon immediately terminate. |
7. | RIGHTS AND OBLIGATIONS UPON TERMINATION OR EXPIRATION. Upon expiration or termination of this Agreement: |
a. | All rights granted to WPT by Zynga shall immediately revert to Zynga, and WPT shall promptly cease any and all marketing and promotional activities using Zynga’s Licensed Property. |
b. | All rights granted to Zynga by WPT shall immediately revert to WPT, and Zynga shall promptly cease any and all marketing and promotional activities using WPT’s Licensed Property. |
c. | Notwithstanding the foregoing, for each end user that previously downloaded a Zynga game that includes WPT’s Licensed Property, and stored such Zynga game within such end user’s device, WPT grants a license and right to continue to use, activate, operate, perform, store, use and display that game on the end user’s device in perpetuity at no additional charge; provided, however, that Zynga shall use best efforts to offer end users updates to its games which no longer include WPT’s Licensed Property after the Term. |
d. | Notwithstanding any termination of this Agreement, nothing herein will obligate Zynga, any users of a Zynga game that includes WPT’s Licensed Property or any third party platform or distribution partners to remove from the publicly available content regarding Zynga services or any user accounts with Zynga, any of the references to user interactions, experience points, achievements, item purchases or other engagements or metrics in the Zynga game(s) that were generated prior to the expiration or termination of this Agreement. |
7 |
e. | Notwithstanding any termination of this Agreement, any Approved Content that includes Zynga’s Licensed Property may remain in perpetuity in any media in which such Licensed Property was integrated into during the Term (e.g., televised WPT Tournaments or WPT Invitational Tournaments, social media posts, repurposed integrations for “best of” television programs) or for historical purposes (e.g., reference on WPT’s website that Zynga-sponsored tour events took place as part of the tour). |
f. | Sections 1, 3-7, and 8-10 of the Additional Provisions shall survive termination or expiration of this Agreement. |
8. | CONFIDENTIALITY. The parties acknowledge and agree that the subject matter of this Agreement constitutes “Business Purpose” and this Agreement and any Exhibits hereunder are “Confidential Information” of the parties as defined as “Information” in the Non-Disclosure Agreement between the parties dated August 24, 2017, and accordingly the restrictions relating to confidentiality and use thereof provided in the Non-Disclosure Agreement apply to any party’s Confidential Information disclosed pursuant to this Agreement. In the event of a conflict between the Non-Disclosure Agreement and this Agreement, the terms of this Agreement will govern. |
9. | INDEPENDENT CONTRACTORS. The parties are independent contractors with respect to each other and nothing herein shall create any association, partnership, joint venture or agency relationship between them. Neither party shall have the right to obligate or bind the other party in any manner whatsoever, and nothing herein contained shall give, or is intended to give, any rights of any kind to any third persons. |
10. | MISCELLANEOUS |
a. | Insurance. Each party agrees to carry liability insurance sufficient to cover the risks posed under this Agreement. |
b. | Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original and all of which shall constitute together but one and the same document. |
c. | Notices. All notices and other communications given hereunder shall be in writing and shall be sent by courier service, express mail, personal delivery or mail to the respective addresses of the parties set forth above (or at such other address as such party may designate by notice to the other party). A copy of any notice to WPT shall also be sent to WPT Enterprises, Inc., ATTN: Legal, 1920 Main Street, Suite 1150, Irvine, CA 92614. A copy of any notice to Zynga shall also be sent to Office of the General Counsel, Zynga Inc., 699 8th Street, San Francisco, CA 94103 with a copy to legalnotices@zynga.com. Notice shall be deemed given as follows: upon delivery if sent by courier service, express mail or personal delivery; and five (5) days after the date of mailing, postage prepaid, certified or registered mail if sent by mail. |
d. | Entire Agreement. This Agreement contains the full and complete understanding between the parties hereto with respect to the license granted hereunder and supersedes all prior agreements and understandings, whether written or oral, pertaining thereto. This Agreement cannot be modified except by a written instrument signed by each party hereto. |
e. | Waiver. No waiver of any term or condition of this Agreement shall be construed as a waiver of any other term or condition and no waiver of any default under this Agreement shall be construed as a waiver of any other default. |
f. | Force Majeure. In the event that either party is prevented from engaging in the marketing and promotional activities in Exhibit A manufacturing, distributing or selling the Licensed Property because of any act of God; unavoidable accident; fire, epidemic; strike, lockout, or other labor dispute; war, riot or civil commotion; act of public enemy; enactment of any rule, law, order or act of government or governmental instrumentality (whether federal, state, local or foreign); or other cause beyond such party’s control, and such condition continues for a period of two (2) months or more, either party hereto shall have the right to terminate this Agreement effective at any time during the continuation of such condition by giving the other party at least thirty (30) days’ notice to such effect. In such event, all payments made shall become immediately due and payable and this Agreement shall be automatically terminated. |
g. | Governing Law and Forum. This Agreement will for all purposes be governed by and interpreted in accordance with the laws of the State of California without giving effect to any conflict of laws principles that require the application of the laws of a different state. Each of the parties hereto (i) irrevocably agrees that the federal and state courts in the Northern District of California shall have sole and exclusive jurisdiction over any suit or other proceeding arising out of or based upon this Agreement, (ii) submits to the venue and jurisdiction of such courts, and (iii) irrevocably consents to personal jurisdiction by such courts. |
h. | Assignment. This Agreement shall bind and inure to the benefit of each party, its successors and assigns. Without the prior written consent of the other party, neither party shall assign or transfer any of its rights or obligations hereunder, in whole or in part, to any third party, and any purported assignment without such prior written consent shall be null and void and of no force and effect; except that notice, but no consent shall be required for such assignment or transfer in connection with an internal reorganization or sale of the transferring party, including by merger or other business combination, or a sale of substantially all of the assets of the transferring party. None of either party’s rights hereunder shall devolve by operation of law or otherwise upon any receiver, liquidator, trustee or other party. |
i. | Severability. In case any one or more of the terms contained in this Agreement shall be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining terms shall not in any way be affected or impaired thereby. The parties shall endeavor in good faith negotiations to replace the invalid, illegal or unenforceable terms with valid terms the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable terms. |
8 |
EXHIBIT A
MARKETING AND PROMOTIONAL ACTIVITIES
(the parties mutually agree to provide additional details and commitments)
BY WPT:
WPT shall promote the Zynga brand in the following activities:
● | Prominent display of the Zynga or Zynga Poker brand in WPT Tournaments and WPT Invitational Tournaments, subject to venue approval, network approval and inventory space given existing sponsorship deals |
BY ZYNGA:
Zynga shall promote the WPT brand in the following activities:
● | Creation of a WPT-branded Zynga Poker Tournament Mode playable in the Zynga Poker game or other such use of the WPT brand on the Zynga platform as Zynga determines |
9 |
EXHIBIT B
LICENSED PROPERTY
(the parties mutually agree to provide additional details on allowable IP)
WPT MARKS:
● | WPT® |
● | WORLD POKER TOUR® |
ZYNGA MARKS:
● | ZYNGA® |
● | ZYNGA POKER® |
10 |
Exhibit 10.20
PROGRAM PRODUCTION AND TELEVISING AGREEMENT
This Program Production and Televising Agreement (this “Agreement”), dated as of July 25, 2008 (the “Effective Date”) is between WPTE ENTERPRISES, INC. (“WPTE”) with offices at 5700 Wilshire Boulevard, Suite 350, Los Angeles, California 90036 and NATIONAL SPORTS ProGRAMMING (“FSN”), owner and operator of the Fox Sports Net programming service with offices at 10201 West Pico Blvd., Building 103, Los Angeles, California 90035. For good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, and the mutual promises contained herein, WPTE and FSN (each a “Party” and collectively the “Parties”) agree to be bound by the following terms and conditions:
BACKGROUND
A. | WPTE is the owner of the website currently located at URL ClubWPT.com including all versions of such website (together with all software included therein, the “Website”). WPTE has also entered into agreements with various third parties by which such third parties have the right to create various “skin sites” that operate on the Website’s network software (“Skins”). For avoidance of doubt, any skin site in which WPTE has an ownership interest shall be considered to be part of the “Website”. |
B. | WPTE’s development of the Website business includes, as essential elements thereof, distribution of television programs containing Website promotion and branding and promotion of the Website on popular websites. |
C. | FSN produces, distributes, promotes and telecasts television programs including, but not limited to, sports related television programs. |
D. | WPTE, directly or through the services of a third party, is organizing, staging and promoting the Events (as defined below). |
E. | WPTE desires FSN’s assistance to film, co-produce and make television programs of the Events (the “Programs” as defined in Section 2 below), and telecast the Programs via FSN in the Domestic Territory (as defined below). |
F. | WPTE desires that FSN promote the Website and the Programs on FoxSports.com. |
1. | EVENTS. |
a. During the Test Period (as defined in Section 3), WPTE will organize, stage and promote poker tournaments (the “Events”) sufficient to provide enough programming consistent with FSN’s usual programming standards for at least thirteen (13) 1-hour television programs available for initial distribution over thirteen (13) consecutive weeks. During each Year of the Regular Term (as such terms are defined in Section 3), WPTE will organize, stage and promote Events sufficient to provide enough programming consistent with FSN’s usual programming standards for at least forty (40) hours of television programming; provided, however, if WPTE does not conduct such Events then Section 2(f) shall apply. WPTE and FSN shall mutually agree upon the format of the Events which is currently anticipated to be Texas Hold’em poker and may be changed from time to time. The Events will feature participants from the United States and around the world who have qualified on the Website or through other selection methods designed to increase viewer interest and allow viewer participation in the Events (each participant in an Event, a “Participant”). For purposes of the Agreement, “Events” includes all events and activities related to the applicable Event occurring at, or contiguous to, the Event site (a “Site”). WPTE must secure any and all necessary and required approvals and sanctions for the Events and the Sites. FSN shall not be liable for any costs or expenses in connection with the Events or the Sites.
b. WPTE may subcontract with third parties to organize, stage and promote the Events, provided, however, WPTE shall remain directly responsible for its obligations to FSN set forth herein. WPTE will stage the Events at such times as to provide FSN with sufficient time, as determined by FSN in good faith, to produce and distribute the Programs thereof as required pursuant to Section 7(a) of this Agreement.
c. The Sites for the Events will be chosen by WPTE after good faith consultation with FSN with consideration given to the Sites’ effect on production costs. Upon WPTE’s request, FSN shall evaluate the production issues related to prospective Sites and advise WPTE of potential additional costs related to the Sites.
1 |
2. | Engagement AND PRODUCTION BUDGET. |
a. WPTE hereby engages FSN to produce, and FSN hereby accepts such engagement to produce in accordance with the terms of this Agreement:
i. | During the Test Period, thirteen (13) 1-hour television programs featuring Events (the “Test Programs”); and |
ii. | During each Year of the Regular Term, forty (40) hours of television programming featuring Events (together with the Test Programs, “Programs”). |
FSN and WPTE may mutually agree to produce additional Programs beyond the number of hours set forth above.
b. WPTE shall be responsible for all costs of the filming, making and production of the Programs; and except as set forth herein with respect to certain overages, . FSN and WPTE shall jointly develop a mutually-approved budget for production of the Programs. Such budget shall be sufficient to produce programming consistent in quality with FSN’s programming of a similar nature. WPTE shall pay FSN all costs of production of the Programs as set forth in the budget prior to FSN committing to or incurring such costs (such paid and not refunded production costs together with overages paid by WPTE, if any, the “Production Costs”). FSN agrees that the budget shall not include any executive producer or similar fee payable to FSN or any of its employees or related parties. For purpose of clarification, under no circumstances may there be a profit margin for FSN in connection with the production of the Programs but WPTE acknowledges that third-party contractors will require compensation beyond direct costs and such third-party costs will be included in the budget. FSN shall not be obligated to begin production of a group of Programs prior to receipt of the Production Costs accrued for such group of Programs from WPTE.
c In cases of underages or overages, WPTE shall be refunded all underages and shall pay all overages that WPTE pre-approves in writing or any overages which are caused by a Force Majeure Event (as defined in Section 18), provided FSN uses reasonable efforts to mitigate the costs associated with such Force Majeure Event. FSN is responsible for the costs of all other overages.
d. FSN shall establish the mechanics for, and shall ensure that FSN accurately maintains throughout production of the Programs, at least the following records, in the English language, and fairly reflecting, in reasonable detail, all transactions and dispositions of funds expended, committed or received in connection with the production of the Programs: (1) a general ledger, together with all supporting documents (including without limitation receipts, invoices and contracts); (2) a running inventory of all property of whatever nature acquired or disposed of in the course of production; (3) a running inventory list of all outstanding commitments, together with all supporting documents (including without limitation invoices and contracts); (4) detailed records with respect to all applicable local, state and Federal withholding tax requirements (with which FSN hereby agrees to comply), including without limitation copies of all time cards; and (5) all other customary bookkeeping records maintained by FSN during the production of a television program intended for distribution by FSN.
e. WPTE shall have the right to audit the production expenses at any time prior to one (1) year after the end of production of the applicable group of Programs, at WPTE's sole cost and expense, including, without limitation, the right to assign an auditor(s) to be physically present at the production offices and on location on a full or part-time basis throughout production and post-production with respect to all aspects of production of the Programs, provided that such auditor(s) do not materially interfere with FSN’s day-to-day operations and/or production of the Programs, and FSN shall therefore maintain all information, agreements, documents, books and records relating thereto for and on behalf of WPTE and shall deliver all such items to WPTE upon WPTE's reasonable request.
f. Notwithstanding the foregoing, if during any Year of the Regular Term WPTE determines that it will either (i) not stage any Events or a number of Events insufficient to provide enough content for forty (40) hours of original programming, or (ii) not pay the Production Costs for the production of forty (40) hours of original programming, then (A) WPTE shall provide FSN with written notice of such determination at least ninety (90) days prior to the date the affected Programs would have been scheduled for initial air, (B) FSN shall be relieved of its obligations to produce or distribute the affected Programs (i.e., the Programs that were not produced because the underlying Events were not staged or the applicable Production Costs were not paid), (C) WPTE shall not be deemed to be in breach of this Agreement and (D) the other terms of this agreement, including payment of the Fee and the online promotion obligations set forth in Section 8(c), shall continue without disruption.
2 |
3. | TERM. |
a. Test Period. The “Test Period” shall be the period from the Effective Date until the earlier of (i) the date sixty (60) days after FSN’s initial airing of the 13th Test Program during the Test Period and (ii) the date specified by FSN in the Option Notice (as defined below).
b. Option and Regular Term. FSN shall have the option (the “Option”), exercisable in writing (the “Option Notice”) during the sixty (60) day period beginning immediately after the initial airing of the 13th Test Program during the Test Period (the “Option Exercise Period”), to (i) extend this Agreement through the Regular Term or (ii) end the Test Period and terminate the Agreement as of a date during the Option Exercise Period specified by FSN. If FSN does not deliver an Option Notice to WPTE then the Agreement shall terminate at the conclusion of the Test Period, provided that FSN shall not be relieved of its obligation to air the Test Programs pursuant to Section 7. If FSN exercises the Option, the “Regular Term” shall begin on the date specified by FSN in the Option Notice, but in no event later than sixty (60) days after initial airing of the 13th Test Program, and continue indefinitely until terminated pursuant to the terms of this Agreement. As used in this Agreement, “Years” shall be consecutive twelve (12) month periods during the Regular Term with the first Year commencing at the beginning of the Regular Term.
c. The “Term” shall mean the Test Period, and, if the Option is exercised, the Regular Term until terminated pursuant Sections 11, 12 or 19.
4. | PRODUCTION & EVENT ACCESS. |
a. Subject to the terms of this Agreement, FSN shall have the exclusive right, and the obligation, to produce the Programs.
b. Subject to the terms of this Agreement, FSN and WPTE shall exercise joint creative control over the production and format of the Programs. Each Program will contain the sponsorship elements set forth in Section 8(a). Notwithstanding anything in the Agreement to the contrary, each Program will be subject to FSN’s standards and practices review and requirements.
c. FSN and WPTE shall mutually agree upon all signage at the Events appearing within the televised area of the Site. Any and all signage (including Site-allotted signage), banners, mentions, or other promotion appearing within the televised area of the Events (e.g., on Participant bodies, hats, clothing, on the Event cards, the Event tables, in the Site background) must comply with all FSN standards and practices policies, including, without limitation, FSN’s prohibition of direct or indirect gambling website promotions. The Parties acknowledge Website signage shall appear at the Event.
d. WPTE shall be solely responsible to: (i) promptly pay any and all costs and fees in connection with the Events or the Sites (including, without limitation, costs and fees in connection with any personnel that WPTE or the Site provides in connection with an Event, worker’s compensation insurance, any other governmentally mandated insurance, andSite security, including without limitation, enforcing FSN’s prohibition of electronic equipment (e.g., cell phones, pagers, palm pilots, ear pieces, etc.) during Program production periods;any required compensation to the Participants and any officials involved in the Events, including, without limitation and as appropriate, all air travel for the Participants and the prize pool. As a material provision of the Agreement, WPTE shall ensure that all Site and Event arrangements accord with FSN’s rights under the Agreement. Upon request, WPTE will provide to FSN copies of the documents that confirm all Site and Event arrangements.
e. WPTE shall ensure that FSN receives access, without charge and without limitation, to all elements of the Events, including without limitation, suitable space and locations, as FSN may determine at the time of its advance technical survey of the Site, for its announcers and other personnel and related equipment to be used by FSN in connection with its production of the Programs. WPTE shall provide as many proper working credentials and parking spaces as close to the Site as possible as FSN reasonably requests. FSN shall be entitled to preferential locations (and the first and preferential right to choose such locations) for its cameras and other equipment as reasonably needed by FSN to produce each Program. FSN shall have the right to install, maintain and remove from the applicable Site and the surrounding premises such wires, cables and equipment as may be necessary for its coverage of the applicable Event. FSN shall have the right to bring on to, or adjacent to, the applicable Site mobile units for the transportation of equipment and personnel.
3 |
f. WPTE understands and agrees that FSN may subcontract out any and all of the production services to be provided by FSN to WPTE under this Agreement; provided, however, that FSN shall remain liable for its obligations to WPTE, and further provided that FSN shall secure documentation from any subcontractors, as necessary.
5. | RIGHTS & CLEARANCES. |
a. WPTE represents, warrants and covenants to FSN that it has obtained, or will obtain in a timely manner (together with FSN’s reasonable and timely assistance and cooperation where necessary and requested), any and all necessary worldwide rights, licenses, clearances and permissions in perpetuity for anything (i) related to the conduct of the Events to enable FSN to exercise its rights hereunder, including, without limitation, any and all required rights, clearances and permissions necessary to use all names, likenesses, trademarks, service marks or other intellectual property connected with the Sites, the Events, the Participants and all entities related thereto (including the inclusion thereof in the Programs) or (ii) requested by WPTE for inclusion in the Programs.
b. Subject to Section 5(a), FSN represents, warrants and covenants to FSN that it has obtained, or will obtain in a timely manner, any and all necessary worldwide rights, licenses, clearances and permissions in perpetuity for all elements related to the production and broadcast of the Programs.
c. Except as otherwise specifically provided in this Agreement or mutually agreed by the Parties, FSN shall not be obligated to make any payment of any nature whatsoever to WPTE or anyone else related to the Events.
d. With the prior consent of the other Party, which shall not be unreasonably withheld, the Parties may release, from time to time, press statements and marketing materials that mention both Parties. The Parties agree to cooperate in creation of such press statements and marketing material.
6. | OWNERSHIP AND LICENSE. |
a. WPTE shall be the sole and exclusive worldwide owner of all rights in the Programs and all elements thereof and all translations and localizations thereof except for FSN’s proprietary marks used in the Programs, if any, and FSN’s proprietary rights used in the production of the Programs; provided, however, FSN hereby grants WPTE a non-exclusive license to include such FSN proprietary rights as part of the Programs; provided, further, FSN acknowledges and agrees that WPTE has the non-exclusive right to use the Program format independently of the production of the Programs. FSN shall do all things and execute all documents, including procuring the doing of such things and the execution of such documents to ensure that the legal and beneficial title in the Programs and all elements thereof vest solely and exclusively in WPTE. Notwithstanding the above, WPTE may not use, televise or otherwise exploit any version of the Programs that contain FSN logos or FSN references unless WPTE receives FSN’s prior written consent or removes such FSN logos or FSN references from the Programs; provided, however, FSN shall provide WPTE with a version of the Programs that does not contain FSN logos or FSN references upon written request.
b. For the avoidance of doubt, each Party shall retain the sole and absolute ownership of its own intellectual property and proprietary rights and except as expressly provided herein, no other right of use or license is granted or implied.
7. | DISTRIBUTION AND EXHIBITION. |
a. Except as set forth in Section 7(c) below, FSN has the exclusive rights to use, televise and otherwise exploit the Programs in the United States and its territories, possessions, commonwealths and military installations (the “Domestic Territory”) during the Term. FSN shall use commercially reasonable efforts to initially telecast each Program produced pursuant to Section 2(a) (i.e., thirteen (13) Test Programs in the Test Period and forty (40) hours of Programs each Year of the Regular Term) in a minimum of fifty million (50,000,000) homes on regional sports networks carrying FSN programming (“Regionals”). FSN shall use commercially reasonable efforts to clear the initial telecast of each Program on the Regionals on Saturday nights between 11:00 p.m. and 1:00 a.m. (local time) with a tentative premiere date for the first Program in the Test Period during August or September, 2008. FSN will re-telecast each Program at least two (2) times in addition to the initial telecast. If a Regional that is clearing a Program is unable to clear such Program as set forth above, FSN shall use commercially reasonable efforts to ensure that such Regional clears such Program during a similar time period or as close to the time period as reasonably practicable. Such schedule may be preempted by prior Regionals commitments, live event programming, or other programming. For avoidance of doubt, FSN shall have the unlimited right, but no obligation, to re-telecast each Program, or any portion thereof, at various times, on any Fox-affiliated programming service or by any other means of distribution within the Domestic Territory. As used in this Section, “commercially reasonable efforts” shall not mean that FSN is relieved of its clearance or time placement obligations under this Section in order to take commercial advantage of the clearance and time slots anticipated for airing of the Programs (e.g., deal shopping).
4 |
b. FSN shall have the right to suspend the performance of its distribution obligations set forth in Section 7(a) at any time that WPTE is in breach of a material term or condition of this Agreement.
c. Notwithstanding FSN’s exclusive distribution rights in the Domestic Territory, WPTE shall have the right to distribute portions of the Programs in any and all media with the exception of any manner of television distribution in the Domestic Territory for purposes of promoting the Programs and the Website. For avoidance of doubt, WPTE retains its full rights to the Programs outside of the Domestic Territory. Except as expressly provided otherwise in this Agreement, during the Term WPTE will not cause, authorize, license or permit any distribution or exhibition of the Events, any programs created therefrom or any portion of either in any form or location by any means or media or any promotion thereof in the Domestic Territory without the prior written approval of FSN.
8. | PROMOTION. |
a. In-Program Promotion: The Website shall receive: (i) title sponsorship of each Program; (ii) two (2) billboards within each Program; (iii) four (4) sponsored elements (e.g., entitlements) within each Program; (iv) an average of four (4) audio mentions of the Website’s sponsorship of the Program each hour of each Program; (v) an average of four (4) video bumpers each hour of each Program; and (vi) the Website logo on the poker table (collectively, the “Promotional Elements”); all subject to the terms and conditions of this Agreement. FSN shall consult in good faith with WPTE on the implementation of the Promotional Elements. All Promotional Elements within each Program shall be exclusive to the Website.
b. Commercial Inventory:
i. | WPTE will receive four (4) thirty-second (:30) spots (a total of 2 minutes) of national commercial inventory in each hour of each Program during the distribution of each Program on the FSN Programming Service for the promotion of the Website. WPTE will receive national and regional commercial inventory exclusivity in each Program for poker or other casino or gaming membership websites (which the Parties acknowledge does not include tutorial or “.net” websites, including, without limitation, FullTiltPoker.net, PokerStars.net, UltimateBet.net, MansionPoker.net, PartyPoker.net, AbsolutePoker.net, etc. (“Tutorial Advertisers”), which are subject to Section 8(b)(ii) below), subject to ad inventory that is not controlled by FSN (i.e., local advertising inventory reserved for cable operators and other distributors of FSN programming). For each replay of an Episode edited to a shorter duration, the number of WPTE’s thirty-second (:30) spots will be reduced proportionately. The Parties shall mutually agree in advance upon the inclusion in any Program of any sponsorships, commercials, advertising, billboards and sponsored features of any kind or nature by any means now known or hereafter devised; provided, however, FSN has the right to insert elements such as a lower third graphic promoting FSN’s and FSN affiliates’ programming. |
ii. | With respect to each telecast of a Program, FSN shall not (A) provide national or regional commercial inventory to more than one (1) Tutorial Advertiser, and (B) provide more than four (4) thirty-second (:30) spots to such Tutorial Advertiser; provided, however, solely with respect to the initial telecast of each of the Test Programs, FSN agrees that such initial telecasts shall not contain any Tutorial Advertisers in national or regional commercial inventory. |
iii. | All use by WPTE of such commercial inventory and the content of all commercials, billboards, features, signage and promotions are subject to (A) Federal Communications Commission regulations and all other applicable federal and state regulations, (B) News Corporation and Fox Sports Net advertising regulations, and (C) FSN’s prior approval (which shall not be unreasonably withheld or withheld in a manner inconsistent with similar network programming). |
iv. | To ensure inclusion within the Program, all WPTE commercial inventory must (A) satisfy FSN’s technical delivery requirements, as such requirements may be revised from time to time, (B) be delivered to FSN at least ten (10) business days prior to the premiere of each Program on the FSN programming service, and (C) consist of an assortment of commercial advertisements appropriate for the number of spots to be aired. In the event that WPTE’s commercial advertisements are not properly delivered in a timely manner, FSN shall have no obligation to telecast such advertisements. |
5 |
c. Online Promotion: Beginning on or before the initial airing of the first Test Program and continuing throughout the Term, FSN shall place a banner advertisement or similar presence promoting the Website on the main page of the website located at URL FoxSports.com. To the extent that FoxSports.com determines that promotion of the Website is contrary to its business and legal affairs policy then the promotion of the Website may be replaced with promotion of the Programs. FSN represents that as of the Effective Date, promotion of the Website is not contrary to FoxSports.com business and legal affairs policy. During the Term, FoxSports.com will not operate a poker membership website nor promote any poker membership website other than the Website and shall use commercially reasonable efforts to prevent the display on FoxSports.com of any advertising for any poker membership website other than the Website.
d. FSN shall have the right to suspend the performance of its obligations set forth in this Section 8 at any time that WPTE is in breach of a material term or condition of this Agreement.
9. | EXCLUSIVITY. |
a. During the Term, FSN shall not engage, either on its own or by partnering with a third-party, in the operation or promotion of any paid subscription based, poker (which the parties acknowledge does not include the card game Tua La Ji sometimes referred to as “Traktor Poker” but does include all types and variations of poker) and/or blackjack membership website competitive with the Website (a “Competitive Site”), nationally distribute commercial inventory advertising a Competitive Site or nationally distribute programs sponsored by a Competitive Site. WPTE acknowledges that individual Regionals are not restricted from entering into separate agreements for the distribution of programming and individual Regionals and cable operators and other distributors of FSN programming are not restricted with respect to sales of their commercial inventory.
b. During the Term, WPTE shall not operate, either on its own or by partnering with a third-party, any Competitive Site that is available to players in the United States; provided, however, the Parties acknowledge that for purposes of this Agreement a “Competitive Site” or membership website shall not include any type of real-money wagering site or free entry site (whether or not poker or blackjack related) or any type of paid subscription site that does not involve playing poker and/or blackjack for prizes (e.g., a paid subscription for monthly poker tips on WorldPokerTour.com). If despite the foregoing restriction WPTE does operate a Competitive Site that is available to players in the United States other than Website then FSN shall participate in the Net Revenue (as defined in Section 10) of such website in the same (or equivalent) manner as set forth in Section 10 with respect to the Website.
10. | CONSIDERATION. |
a. | Defined Terms. |
i. | “Affiliate” means entities that are unrelated to WPTE (i.e., entities in which WPTE does not hold any direct or indirect equity or profits interest other than payment to the Affiliate in connection with the Website) that receive financial compensation for increasing the number of Website members. |
ii. | “Affiliate Cost” means the total amount of Gross Membership Revenue actually paid to Affiliates in connection with their involvement in the Website, plus all actual out-of-pocket set-up costs incurred and paid by WPTE to link the Affiliate to the Website. |
iii. | “Fee” means for a given month, Forty-Five percent (45%) of Net Revenue, if any. |
iv. | “Gross Membership Revenue” means all membership fees paid by users of the Website in a given month less (i) any applicable sales or services taxes; (ii) bad debt including credit card charge backs; and (iii) refunds. |
v. | “Gross Skin Revenue” means, for a given Skin, all revenue earned by WPTE in connection with such Skin. |
6 |
vi. | “Monthly Report” means a detailed monthly report of the operation of the Website and the Skins which shall include, at a minimum, the following information: (A) Gross Membership Revenue, (B) UBT Cost, (C) Affiliate Cost, (D) Other Club Revenue, (E) Net Other Club Revenue, (F) current Production and Event Cost (Test Programs only), (G) Production and Event Cost (Test Programs only) from prior months, if any, carried over to the current month, (H) Net Membership Revenue, (I) Gross Skin Revenue for each Skin, (J) Skin Cost for each Skin, (K) Net Skin Revenue for each Skin, (L) Net Revenue and (M) the Fee for the month. |
vii. | “Net Membership Revenue” means Gross Membership Revenue plus Net Other Club Revenue less UBT Cost and Affiliate Cost. |
viii. | “Net Other Club Revenue” means Other Club Revenue less actual third party merchandise manufacturing and agency costs. |
ix. | “Net Revenue” means Net Membership Revenue plus Net Skin Revenue for each Skin, if any. |
x. | “Net Skin Revenue” means, for a given Skin, Gross Skin Revenue after WPTE has recouped its Skin Cost. |
xi. | “Other Club Revenue” means all non-membership revenue earned by WPTE on or in connection with the Website (e.g., merchandise); provided, however, Other Club Revenue shall not include license fees received by WPTE for international distribution of the Programs or Production and Event Revenue. For avoidance of doubt, WPTE shall be entitled to collect and retain Production and Event Revenue (subject to Section 4(d)) and such Production and Event Revenue shall not be subject to FSN’s participation. |
xii. | “Skin Cost” means, for a given Skin, all actual out-of-pocket set-up costs incurred and paid by WPTE to establish and link such Skin to the Website’s network software that has not been recouped by WPTE out of Skin Gross Revenue. |
xiii. | “UBT Cost” means the total amount of Gross Membership Revenue actually paid to Ultimate Blackjack Tour, LLC (“UBT”) for operation of the Website (i.e., prize pool, club content, finance charges, compliance fees and UBT profit share). |
b. In consideration of FSN’s obligations hereunder, WPTE will (i) provide FSN with the Monthly Report within thirty (30) days of the end of each month and (ii) pay FSN the Fee for each month as set forth in this Section.
c. WPTE shall be entitled to recoup from Net Revenue the Production and Event Cost incurred by WPTE in connection with the production of the Test Programs and the staging of the Events underlying the Test Programs less any Production and Event Revenue received by WPTE. WPTE shall recoup such Production and Event Cost prior to the calculation and payment of the Fee. To the extent that Net Revenue during the Test Period is insufficient to recoup such Production and Event Cost, then the unpaid Production and Event Cost shall be recouped out of Net Revenue during the Regular Term. For avoidance of doubt, WPTE shall not be entitled to recoup from Net Revenue Production and Event Cost in connection with any Programs other than the Test Programs.
d. | The Fee shall be paid and remitted to: |
National Sports Programming
File 55434
Los Angeles, CA 90074-5434
or by electronic wire to:
Bank of America
1850 Gateway Blvd.
Concord, CA 94520
Bank Name..................................Bank of America
Account Name...........................National Sports Partners
Account Number........................12332-26465
Routing Number.........................121-000-358
7 |
FSN must receive payment of the Fee for a given month within thirty (30) days of WPTE’s receipt of the Net Revenue for such month, but in no event later than forty-five (45) days after the end of such month; provided, however, so long as WPTE uses commercially reasonable efforts to collect Net Revenue, to the extent WPTE has not received the Net Revenue attributable to such month, WPTE shall be allowed to delay payment of a pro rata portion of the Fee. Subject to the preceding sentence, if payment of any portion of the Fee is past due by more than fifteen (15) days, FSN may elect to suspend performance of its obligations in this Agreement or terminate this Agreement and, in such event, have no further obligations to WPTE.
11. | WEBSITE RESTRICTIONS: ANTI-GAMBLING. WPTE represents, warrants and covenants that: |
a. Neither the Website nor WPTE’s commercial inventory spots shall contain any reference, whether written or otherwise, to any entity, party or website (including, without limitation, any WPTE owned, controlled, affiliated and/or operated website or any website owned by any parent or affiliated entity of WPTE or under common control with WPTE or any third party website) that aids, abets, facilitates, promotes, provides an advertisement for and/or enables any form of wagering/gambling in the Domestic Territory or conducts or facilitates any activity that is in violation of any United States Federal, state or local law, rule or regulation.
b. The Website does not and will not aid, abet, facilitate, promote, provide an advertisement for or otherwise enable any wagering/gambling activities and does not and will not “link,” directly or indirectly, to or otherwise direct a viewer to any other website that enables wagering/gambling activities in the Domestic Territory. WPTE shall not make any material change to the Website without the prior written approval of FSN. For purpose of clarity, material changes do not include banner updates, graphical changes, or the addition of content of the same nature as currently exists on the Website.
c. WPTE’s commercial inventory spots, as delivered by WPTE, shall not make any reference to any website other than the Website and shall not in any way aid, abet, facilitate, promote or otherwise enable any wagering/gambling activities (e.g., by making any references to any online wagering/gambling site or by providing a telephone number to a wagering/gambling business, etc.).
d. Without limiting any other right reserved for FSN under this Agreement, in the event WPTE breaches any of the representations, warranties or covenants in this Section 11, FSN may immediately suspend its obligations pursuant to this Agreement, and if WPTE fails to cure such breach within forty-eight (48) hours of receiving written notice then FSN shall have the right to immediately terminate this Agreement upon notice to WPTE. If a prosecutor or other law enforcement official formally charges or alleges that the Website is an illegal gambling operation or in the event WPTE breaches this Section 11 twice within any twelve (12) month period, FSN shall have the right to immediately terminate this Agreement upon notice to WPTE. Without limiting FSN’s rights as set forth in this Agreement, at law or in equity, WPTE acknowledges and agrees that FSN shall be entitled to injunctive relief to enforce the restrictions set forth in this Section 11.
12. | WEBSITE RESTRICTIONS: SWEEPSTAKES COMPLIANCE. WPTE represents, warrants and covenants that: |
a. WPTE shall operate the Website in compliance with all applicable sweepstakes and anti-lottery laws in each jurisdiction in which it does business. WPTE shall at all times offer a free alternative method of entry (an “AMOE”) that is of “equal dignity” (as such term is commonly understood in the sweepstakes industry) with the subscription method of entry for each tournament that is available on the Website. The AMOE shall be clearly and conspicuously disclosed on the Website. In addition to being eligible to enter tournaments, members of the Website who pay the subscription fee will be offered member benefits in the form of a package of bona fide products or services that are comparable to or more favorable for the members than the member benefits offered on the Effective Date of this Agreement. WPTE will not market or otherwise attempt to convert AMOE players into members of the Website. For avoidance of doubt, FSN shall have no involvement in, or responsibility for, the operation of the Website, the implementation of the AMOE or the administration of any tournaments.
b. Without limiting any other right reserved for FSN under this Agreement, in the event WPTE breaches any of the representations, warranties, covenants or obligations under this Section 12, FSN may immediately suspend its obligations pursuant to this Agreement, and if WPTE fails to cure such breach within fifteen (15) days of receiving written notice then FSN shall have the right to immediately terminate this Agreement upon notice to WPTE. In the event WPTE breaches this Section 12 twice within any twelve (12) month period, FSN shall have the right to immediately terminate this Agreement upon notice to WPTE.
8 |
13. | REPRESENTATIONS, WARRANTIES AND COVENANTS. |
a. WPTE represents, warrants and covenants to FSN that (i) WPTE has the full power and authority to make and perform the Agreement and WPTE will perform its duties hereunder in compliance with all terms and conditions herewith; (ii) the making or performance of the Agreement does not violate any agreement between WPTE and any third party; (iii) the rights FSN has acquired, and its use of those rights, will not infringe on or violate any copyright, trademark, right of privacy, publicity or other literary or dramatic or any other right of any third party; (iv) WPTE will do nothing to interfere with or impair FSN’s rights in the Agreement; (v) WPTE shall operate the Website in compliance with all applicable laws and regulations in each jurisdiction in which it does business; (vi) the Events will be sanctioned by any applicable organizations and authorities having jurisdiction over such Events, and the Events will be conducted according to all applicable rules and regulations of such organizations and authorities; and (vii) WPTE (directly or through a third party, if applicable) has or will enter into agreements with each Participant (“Participant Agreements”) binding such Participant to all applicable terms of this Agreement, and making FSN express third party beneficiaries to the Participant Agreements in connection with the Programs. Additionally, WPTE represents, warrants and covenants to FSN that it has obtained, or will obtain, any and all necessary rights, clearances, permissions and local permits in connection with the Sites and the Events for FSN to exercise its rights and perform its obligations hereunder including but not limited to: (1) payment of any and all necessary fees to any entity involved in the organization of the Events; and (2) obtaining any and all rights, clearances and permissions necessary to use in the Programs all names, likenesses, trademarks, service marks or other intellectual property of the Sites, the Events and all entities related thereto. WPTE will provide to FSN upon request any documents that confirm WPTE has obtained the necessary rights to perform the Agreement.
b. Related Party Transaction. If WPTE acquires or plans to acquire an interest in UBT then WPTE shall not agree to any increase in fees payable to, or costs recoverable by UBT, either cumulatively or in any category (e.g., club member benefits, compliance, banking, finance, revenue share) other than costs which pass through directly to members (e.g., prize pool) without full disclosure to FSN and FSN’s prior written approval. If WPTE acquires a controlling interest or majority of the equity in the operator of a Skin created on or after the Effective Date, then such Skin shall be deemed to be included within the “Website” for purposes of calculating the Fee. If WPTE acquires a controlling interest or majority of the equity in the operator of a Skin created prior to the Effective Date, then the Gross Skin Revenue payments payable by such Skin to WPTE not shall not be reduced below the payments required as of the Effective Date.
c. FSN represents, warrants and covenants to WPTE that (i) FSN has the full power and authority to make and perform the Agreement and FSN will perform its duties hereunder in compliance with all terms and conditions herewith; (ii) the making or performance of the Agreement does not violate any agreement between FSN and any third party; and (iii) FSN will do nothing to interfere with or impair WPTE’s rights in the Agreement. FSN will provide to WPTE upon request any documents that confirm FSN has obtained the necessary rights to perform the Agreement.
14. | INDEMNIFICATION. |
a. WPTE shall at all times indemnify, defend and hold harmless FSN, its partners and all affiliated companies thereof and their respective officers, directors, partners, shareholders, employees, agents and representatives from and against any claim, demand, liability or judgment, including reasonable attorneys’ fees and court costs (i) arising out of any breach by WPTE of any representation, warranty or other obligation or provision hereof including, (ii) any distribution, licensing or sub-licensing of the Programs by WPTE except to the extent covered by FSN’s indemnification obligations, (iii) any material added by WPTE to the Programs unless requested by, or for the benefit of, FSN, or (iv) arising out of the operation or promotion of the Website or any Skin including, without limitation, WPTE’s commercial inventory promoting the Website or any Skin. This indemnity shall survive termination of the Agreement.
b. FSN shall at all times indemnify, defend and hold harmless WPTE, its partners and all affiliated companies thereof and their respective officers, directors, partners, shareholders, employees, agents and representatives from and against any claim, demand, liability or judgment, including reasonable attorneys’ fees and court costs, arising out of (i) any breach by FSN of any representation, warranty or other obligation or provision hereof including the distribution, licensing or sub-licensing of the Programs by FSN in violation of this Agreement or (ii) any material added by FSN to the Programs unless requested by, or for the benefit of, WPTE. This indemnity shall survive termination of the Agreement.
9 |
c. A Party seeking indemnification will give the indemnifying Party prompt notice of any claim or litigation to which indemnity may apply. Failure to give such prompt notice will relieve the indemnifying Party of its indemnification obligations to the extent that such failure has prejudiced the indemnifying Party’s defense of such claim or litigation. The indemnifying Party has the right to assume and fully control the defense of any potentially indemnified claim or litigation and the indemnified Party will cooperate fully (at the cost of the indemnifying Party) in any defense and in the settlement of such claim or litigation.
15. | INSURANCE. |
a. Subject to the laws applicable to the Site of the applicable Event, WPTE represents, warrants and covenants that it, the third party retained by WPTE to conduct the Event, if applicable, and/or the applicable Site, as appropriate, has, or will secure at least five (5) days prior to each Event:
i. | Workers compensation (or the appropriate equivalent in the applicable jurisdiction) coverage for all persons it or the applicable Site employs in connection with such Event and the Program applicable to such Event that suffices under the laws of the jurisdiction in which those persons render services; and |
ii. | General comprehensive liability insurance covering the applicable Site, including bodily injury and property damage, having a combined single limit of at least $1,000,000 for injuries to any one person and a limit of at least $2,000,000 in the aggregate with a $9,000,000 umbrella policy for injuries to any number of persons arising out of the same accident. |
b. All FSN required insurance will (i) be on an “occurrence” form, (ii) be issued by reputable insurers rated A or better by A.M. Best and Co., (iii) name Fox Entertainment Group, FSN, their parents, divisions, subsidiaries, affiliated companies, officers, directors, and employees as additional insured, (iv) be primary and not excess of or contributory to any other insurance provided for the benefit of or by FSN, and (v) provide that at least thirty (30) days advance written notice of any cancellations, non-renewal or other material change in the policy will be accorded FSN. WPTE will not make any revision, modification or cancellation of any such policy that may affect FSN’s rights without FSN’s prior written consent. Notices regarding insurance shall be sent to 10201 West Pico Blvd., Building 103, Los Angeles, California 90035, Attn: Vice President, Business & Legal Affairs, with a required copy to Fox Entertainment Group, Inc., Attn: Risk Management (FAB/120), P.O. Box 900, Beverly Hills, CA 90213 (fax: 310-369-2177). WPTE will deliver to FSN satisfactory evidence of such insurance at least five (5) days prior to the applicable Event.
c. FSN represents, warrants and covenants that it has, or will secure at least five (5) days prior to the initial telecast of each Program, and will maintain for at least three (3) years following the initial telecast of such Program, standard errors and omissions insurance (also known as media or broadcasters' liability insurance) covering such Program. Such insurance must have limits for damages and legal defense costs and fees of at least $5,000,000.00 for any single party's claim arising out of a single occurrence and $5,000,000.00 for all claims arising out of a single occurrence.
16. INDEPENDENT CONTRACTORS. Neither Party has the authority to bind the other Party to any agreement or other obligations, and will not attempt to do so. Nothing in this Agreement creates any partnership, joint venture or agency relationship between WPTE and FSN. Each Party is fully responsible for all persons and entities it employs or retains.
17. FINANCIAL DISCLOSURE. WPTE shall conform with 47 U.S.C.S. § 507 and 47 U.S.C.S. § 317 concerning broadcast matter and required disclosures, insofar as that section applies to persons furnishing material for television broadcasting. WPTE hereby certifies and agrees that it has no knowledge of any information relating to any Program that is required to be disclosed under § 507 or § 317, that it will promptly disclose to FSN any such information of which it hereafter acquires knowledge and that it will not, without FSN’s prior written approval, include in any Program any matter for which any money, service, or other valuable consideration (as such terms are used in § 507 or § 317) is directly or indirectly paid or promised by a third party, or accepted from or charged to a third party.
18. FORCE MAJEURE. If an Event is postponed or canceled, or the production or distribution of a Program in accordance with this Agreement is materially delayed, prevented or canceled, due to any act of God, fire, earthquake, flood, epidemic, inevitable accident, embargo, war, terrorism, strike or other labor dispute, fire, riot or civil commotion, government action or decree, including without limitation, action of any legally constituted authority, any judicial or executive order, or failure or delay of any transportation agency, inclement weather, failure of technical production or television equipment, or for any other reason beyond the control of WPTE or FSN, as applicable (a “Force Majeure Event”), then: (i) FSN and WPTE may determine the steps, if any, to be taken by the Parties to minimize the loss caused by such Force Majeure Event; and (ii) either Party may suspend the production, promotion and distribution obligations set forth in this Agreement and extend the Test Period, if applicable, while such Force Majeure Event continues and thereafter until normal business operations or the production or distribution of the Programs are resumed.
10 |
19. Termination.
a. | Either Party may terminate this Agreement upon written notice to the other Party if: |
i. | the other Party breaches any material term or condition of this Agreement (except a breach by WPTE of Section 11 or Section 12 in which case FSN’s termination rights shall be as set forth in such Section) and fails to correct or cure such breach within twenty (20) business days following written notice specifying such breach or if correction or cure is not reasonably possible within such period, the breaching Party receiving such notice has begun, and at all times diligently continues, to correct or cure such breach; |
ii. | the other Party applies for or consents to the appointment of a receiver, trustee or liquidator for substantially all of its assets, or such a receiver, trustee or liquidator is appointed for the other Party; |
iii. | the other Party has filed against it an involuntary petition for bankruptcy that has not been dismissed within sixty (60) days thereof; or |
iv. | the other Party files a voluntary petition for bankruptcy or a petition or answer seeking reorganization, becomes or is insolvent or bankrupt, admits in writing its inability to pay its debts as they mature, or makes an assignment for the benefit of creditors. |
b. In addition to the foregoing, WPTE may terminate this Agreement:
i. | Upon written notice to FSN sent within forty-five (45) days of the end of any six (6) month period during the Regular Term, if during each of such six (6) consecutive months the Net Revenue for each such month was less than One Hundred Twenty Thousand Dollars ($120,000); provided, however, WPTE shall continue to pay FSN twenty-five percent (25%) of Net Revenues for five (5) years following such termination subject to the reduction of expenses of the nature described in Section 10. If WPTE determines to terminate this Agreement pursuant to this Section 19(b)(i) then FSN shall be allowed to continue with any previously scheduled airings of the Programs unless either Party determines, in good faith, that such airings are deemed or are threatened to be deemed to be illegal under any United States municipal, state and/or federal law and/or regulation. |
ii. | Upon written notice to FSN if WPTE discontinues operation of the Website and its online paid subscription membership business; provided, however, WPTE shall pay FSN the Fee with respect to all operations of the Website prior to its complete shutdown and, if, in the twenty-four (24) months following such termination, WPTE operates, directly or through a third party, what would be a Competitive Site were the Website still in operation then FSN shall be entitled to the Fee with respect to such business (or, to the extent the Fee calculation is inapplicable to such business, forty-five percent (45%) of the revenue generated by such business actually received by WPTE subject to reduction for the expenses described in Section 10). This provision shall not prevent WPTE from replacing UBT with a different fulfillment provider. If WPTE determines to terminate this Agreement pursuant to this Section 19(b)(ii) then WPTE shall provide FSN with as much advance notice as possible and FSN shall be allowed to continue with any previously scheduled airings of the Programs unless either Party determines, in good faith, that such airings are deemed or are threatened to be deemed to be illegal under any United States municipal, state and/or federal law and/or regulation. |
iii. | In the event that WPTE’s Board of Directors reasonably determines in good faith upon advice of outside counsel that (a) one or more provisions of this Agreement related to WPTE’s relationship with FSN, (b) an affiliation with FSN, or (c) individuals employed by FSN (each, a “Defect”) materially increases the jeopardy that WPTE or Lakes Entertainment, Inc. will lose a material gaming regulatory license or permit held or applied for and such Defect remains uncured for ninety (90) days after FSN’s receipt of written notice of such Defect. |
c. In addition to the foregoing and FSN’s termination rights set forth in Sections 11 and 12, FSN may terminate this Agreement:
i. | Upon thirty (30) days prior written notice to WPTE; or |
ii. | Upon five (5) days prior written notice to WPTE if at any time during the Term, the provisions of this Agreement or the performance of any of the Parties hereunder conflict with FSN’s internal policies, as such policies may be revised from time to time as determined by FSN in its sole discretion. |
11 |
If FSN terminates the Agreement pursuant to Section 19(c)(i) or (ii) then upon termination (A) FSN shall immediately cease to telecast the Programs, (B) WPTE shall retain all rights to the Programs, provided, however, FSN shall remove all FSN-related references from the Programs, if any, and WPTE shall only distribute such “cleaned” versions of the Programs, (C) the exclusivity restrictions set forth in Section 9(a) shall remain in effect for two (2) years following the date of termination, and (D) WPTE shall no longer be required to pay the Fee.
d. Termination of this Agreement shall not relieve WPTE from any payment obligations accrued prior to the effective date of such termination.
20. REMEDIES. Except as specifically set forth herein (e.g., Section 11(d)), if either Party breaches any provision of the Agreement, the damage, if any, caused to the other thereby will not be irreparable or otherwise sufficient to entitle a Party to injunctive or other equitable relief. A Party’s rights and remedies in any such event shall be strictly limited to the rights set forth in this Agreement and the right, if any, to recover monetary damages in an action at law.
21. CONFIDENTIALITY. FSN and WPTE will keep the existence and terms of this Agreement strictly confidential, and will not disclose the existence or substance of such terms to any entity other than the partners, shareholders, members, officers, directors, attorneys, insurance agents, employees having a need to know, and accountants of the Parties hereto without the prior written consent of the other Party, except to the extent necessary to perform the obligations of the Parties set forth herein and in the following situations (and with the earliest possible prior written notice to the other Party): (a) to comply with governmental rule, regulation (including any applicable reporting requirements of the Securities and Exchange Commission) or law or with a valid court order, in each case with confidential treatment requested and such disclosure shall be limited to such information and such portions of the Agreement that the disclosing Party is advised by counsel as legally required to be disclosed; (b) to comply with its normal reporting or review procedure of its parent company or other owners, or its auditors or its attorneys; (c) to enforce its rights under this Agreement; and (d) to prospective purchasers of a material portion of its assets or beneficial ownership interests, with confidential treatment required. Notwithstanding the foregoing, FSN and WPTE may release one or more press statements regarding this Agreement with the other Party’s prior written consent (such consent not to be unreasonably withheld).
22. Non-Union. WPTE acknowledges that the Programs are non-union productions and that FSN is not a party to, and has no present intention of becoming a party to, any guild, collective bargaining or similar agreement that might apply to the production of the Programs.
23. MISCELLANEOUS.
a. Notices. All notices from either Party to the other must be given in writing and sent by registered or certified mail (postage prepaid and return receipt requested), by hand or messenger delivery, by overnight delivery service, by facsimile with receipt confirmed, to the respective addresses of WPTE and FSN listed in the Agreement. FSN’s notice shall provide duplicate notice to the attention of: Vice President, Business and Legal Affairs, c/o Fox Cable Networks, Building 103, 10201 West Pico Boulevard, Los Angeles, California 90035. WPTE’s notice shall provide duplicate notice to the attention of General Counsel, WPT Enterprises, Inc., 5700 Wilshire Boulevard, Suite 350, Los Angeles, California 90036. Any notice or report delivered in accordance with this Section will be deemed given on the date actually delivered; provided that any notice or report deemed given or due on a Saturday, Sunday or legal holiday will be deemed given or due on the next business day. If any notice or report is delivered to any Party in a manner which does not comply with this Section, such notice or report will be deemed delivered on the date, if any, such notice or report is received by the other Party.
b. Severability. In the event that any provision of the Agreement becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, the Agreement shall continue in full force and effect without said provision; provided that no such severance shall be effective if it materially changes the economic benefit of the Agreement to either Party.
c. Governing Law. Irrespective of the place of execution or performance, this Agreement is to be governed by and construed in accordance with the laws of the State of California applicable to contracts entered into and to be fully performed therein. Any court of competent jurisdiction sitting within the State of California, Los Angeles County, will be the exclusive jurisdiction and venue for any dispute arising out of or relating to the Agreement. The Parties irrevocably consent to the exclusive jurisdiction and venue of any such court, and waive any argument that such venue is not appropriate or convenient.
12 |
d. Assignments. Neither this Agreement nor any of the rights or obligations hereunder may be assigned by any Party without the prior written consent of the other Party; except that FSN may, without such consent, assign all such rights and obligations to its parent company, or any affiliate or subsidiary of FSN or in which the parent company has an ownership interest and either Party may assign all of its rights and obligations to another entity in connection with a merger, reorganization or sale of all or substantially all of the assets of such Party.
e. Survival. The provisions of the Agreement which by their nature would ordinarily be expected to survive termination of the Agreement (including without limitation all indemnity, representations and warranties, payment and confidentiality terms hereof) shall survive the execution, delivery, suspension or termination of the Agreement or any provision hereof.
f. Entire Agreement; Waiver; Amendments. This Agreement and any exhibits and schedules attached hereto, contains the full and complete understanding between the Parties hereto regarding the subject matter hereof and supersedes and abrogates all prior agreements and understandings, whether written or oral, pertaining thereto and cannot be modified except by a written instrument signed by each Party hereto. No waiver of any term or condition of the Agreement shall be construed as a waiver of any other term or condition; nor shall any waiver of any default under the Agreement be construed as a waiver of any other default.
g. Construction. The Parties have participated jointly in the negotiation and drafting of the Agreement. In the event an ambiguity or question of intent or interpretation arises, the Agreement shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions of the Agreement.
h. Counterparts; Facsimile. This Agreement may be signed and accepted in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. This Agreement may be delivered by facsimile and facsimile signatures shall be treated as original signatures for all applicable purposes.
i. No Third Party Beneficiaries. This Agreement shall not confer any rights or remedies upon any person other than the Parties hereto and their permitted successors and assigns, and only in accordance with the express terms of the Agreement.
13 |
IN WITNESS WHEREOF, WPTE and FSN hereto have caused this Agreement to be executed by their duly authorized representatives on the dates indicated below.
AGREED & ACcEptED BY: | AGREED & ACcEptED BY: |
WPT ENTERPRISES, INC. | NATIONAL SPORTS PROGRAMMING |
Signature:_______________ | Signature: _________________ |
Name: Adam Pliska | Name: ____________________ |
Title: General Counsel | Title: _____________________ |
14 |
Exhibit 10.21
AGREEMENT
This Agreement (this “Agreement”), dated as of May 10, 2013 (the “Effective Date”) is between WPT ENTERPRISES, INC. (“WPTE”) with offices at 5700 Wilshire Boulevard, Suite 350, Los Angeles, California 90036 and NATIONAL SPORTS ProGRAMMING (“Fox”), with offices at 10201 West Pico Blvd., Building 103, Los Angeles, California 90035. For good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, and the mutual promises contained herein, WPTE and Fox (each a “Party” and collectively the “Parties”) agree to be bound by the following terms and conditions:
RECITALS
WHEREAS, the Parties are parties to the following agreements: (i) the Program Production and Televising Agreement, dated as of July 25, 2008 (as amended from time to time, the “ClubWPT Agreement”); and (ii) the Agreement, dated August 13, 2010 (as amended from time to time, the “Season 9-11 Agreement”);
WHEREAS, the Parties desire to amend the ClubWPT Agreement;
WHEREAS, WPTE desires to produce, and Fox desires to distribute on the Fox Sports 1 programming service (“FS1”), Season One, Season Two and Season Three of the World Poker Tour Super High Roller television Series (the “SHR”); and
WHEREAS, WPTE desires to produce, and Fox desires to distribute on the Fuel programming service (or any successor) (“Fuel”) and the FSN programming service (“FSN”), Season Twelve, Season Thirteen and Season Fourteen of the World Poker Tour television Series (the “Tour”).
THEREFORE, in consideration of the premises contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:
SECTION I. AMENDMENTS.
1) | ClubWPT Amendment. WPTE and Fox agree Section 10(b) of the ClubWPT Agreement is amended and restated as follows: |
“In consideration of FSN’s obligations hereunder, WPTE will (i) provide FSN with the Monthly Report within thirty (30) days of the end of the each month and (ii) pay FSN the Fee for each month as set forth in this Section. Notwithstanding the foregoing:
February 1, 2012 through February 28, 2013: If WPTE provides written notice to FSN no later than June 30, 2012 that WPTE has made a binding, irrevocable commitment to spend Two Million Dollars ($2,000,000) on marketing for the Website (an “Additional Marketing Commitment”), at least One Million Five Hundred Thousand Dollars ($1,500,000) of which is in the form of traditional media buys, for the period between February 1, 2012 and February 28, 2013, FSN agrees (i) that the “Fee” on Net Revenue exceeding Four Million Dollars ($4,000,000) for the period between March 1, 2012 and February 28, 2013 (the “Season 10 Marketing Period”) shall be calculated as Twenty percent (20%) of such Net Revenue, and (ii) that the “Fee” on Net Revenue exceeding Five Million Dollars ($5,000,000) for the period between March 1, 2013 and February 28, 2014 (the “Season 11 Marketing Period”) shall be calculated as Twenty percent (20%) of such Net Revenue.
March 1, 2013 through February 28, 2014: If WPTE provides written notice to FSN no later than June 30, 2013 that WPTE has made a binding, irrevocable commitment to spend an Additional Marketing Commitment for the Season 11 Marketing Period, at least One Million Five Hundred Thousand Dollars ($1,500,000) of which is in the form of traditional media buys, FSN agrees (i) that the “Fee” on Net Revenue exceeding Five Million Dollars ($5,000,000) for the Season 11 Marketing Period shall be calculated as Twenty percent (20%) of such Net Revenue, and (ii) that the “Fee” on Net Revenue exceeding Six Million Dollars ($6,000,000) for the period between March 1, 2014 and February 28, 2015 shall be calculated as Twenty percent (20%) of such Net Revenue.
March 1, 2014 through February 28, 2017:For each of the three 12-month periods from March 1 through February 28 beginning March 1, 2014 and ending February 28, 2017 (each a “Marketing Cycle”), if WPTE provides written notice to FSN no later than June 30 of the applicable Marketing Cycle that WPTE has made a binding, irrevocable commitment to spend an Additional Marketing Commitment for such Marketing Cycle, at least One Million Five Hundred Thousand Dollars ($1,500,000) of which is in the form of traditional media buys, FSN agrees (i) that the “Fee” on Net Revenue exceeding Four Million Dollars ($4,000,000) for the applicable Marketing Cycle shall be calculated as Twenty percent (20%) of such Net Revenue, and (ii) that the “Fee” on Net Revenue exceeding Four Million Five Hundred Thousand Dollars ($4,500,000) for the 12-month period immediately following such Marketing Cycle shall be calculated as Twenty percent (20%) of such Net Revenue.
1 |
If WPTE provides notice to FSN that it will spend the Additional Marketing Commitment in a period described above and then fails to meet the Additional Marketing Commitment by the end of such period, WPTE will pay FSN the difference between the Fee paid to FSN for such period and the Fee that would have been due had WPTE not committed to the Additional Marketing Commitment. Such makeup payment shall be due to FSN no later than thirty (30) days following the end of such period and such makeup payment shall be FSN’s sole remedy for WPTE’s failure to spend the Additional Marketing Commitment.”
SECTION II. TOUR SEASONS 12-14; SHR SEASONS 1-3.
1) | Exhibit A attached hereto, including the Standard Terms & Conditions (collectively, the “Series Agreement”), sets forth the terms for the production and distribution of (a) the Tour series (the “Tour Series”) during each of the following periods: February 1, 2014 through August 31, 2015 (“Tour Season 12”); September 1, 2015 through August 31, 2016 (“Tour Season 13”) and September 1, 2016 through August 31, 2017 (“Tour Season 14” and with each of Tour Season 12 and Tour Season 13, each a “Tour Season” and collectively, the “Tour Seasons”), and (b) the SHR series (the “SHR Series” and along with the Tour Series, each a “Series”) during each of the following periods: February 1, 2014 through January 31, 2015 (“SHR Season 1”); February 1, 2015 through January 31, 2016 (“SHR Season 2”) and February 1, 2016 through January 31, 2017 (“SHR Season 3” and with each of SHR Season 1 and SHR Season 2, each a “SHR Season”, collectively, the “SHR Seasons” and, along with the Tour Seasons, “Seasons”). |
2) | WPTE shall produce, and Fox shall distribute, episodes of the Tour Series and the SHR Series for all of the respective Seasons pursuant to the terms of the Series Agreement. |
SECTION III. MISCELLANEOUS.
1) | Representations and Warranties. Each Party represents, warrants and covenants to the other Party that (a) it has the full power and authority to make and perform this Agreement; (b) the making or performance of this Agreement does not violate any of its agreements with any third party or any applicable law or court order; (c) it will do nothing to interfere with or impair the other Party’s rights in this Agreement |
2) | Indemnification. Each Party shall at all times indemnify, defend and hold harmless the other Party, its partners and all affiliated companies thereof and their respective officers, directors, partners, shareholders, employees, agents and representatives from and against any claim, demand, liability or judgment, including reasonable attorneys’ fees and court costs (“Claims”) arising out of the breach of any representation, warranty or other obligation or provision of this Agreement. A party seeking indemnification will give the indemnifying party prompt notice of any claim or litigation to which indemnity may apply. Failure to give such prompt notice will relieve the indemnifying party of its indemnification obligations to the extent that such failure has prejudiced the indemnifying party’s defense of such claim or litigation. The indemnifying party shall have the right to assume and fully control the defense of any or all claims or litigation to which its indemnity applies. The indemnified party will cooperate fully (at the cost of the indemnifying party) with the indemnifying party in such defense and in the settlement of such claim or litigation. |
3) | Notices. All notices from either Party to the other must be given in writing and sent by registered or certified mail (postage prepaid and return receipt requested), by hand or messenger delivery, by overnight delivery service, or by facsimile with receipt confirmed, to the respective addresses of WPTE and Fox listed in the Agreement. Fox’s notice shall provide duplicate notice to the attention of: Senior Vice President, Business and Legal Affairs, c/o Fox Cable Networks, Building 103, 10201 West Pico Boulevard, Los Angeles, California 90035. WPTE’s notice shall provide duplicate notice to the attention of President, WPT Enterprises, Inc., 1920 Main Street, Suite 1150, Irvine, California 92614. Any notice or report delivered in accordance with this Section will be deemed given on the date actually delivered; provided that any notice or report deemed given or due on a Saturday, Sunday or legal holiday will be deemed given or due on the next business day. If any notice or report is delivered to any Party in a manner which does not comply with this Section, such notice or report will be deemed delivered on the date, if any, such notice or report is received by the other Party. |
4) | Severability. In the event that any provision of the Agreement becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, the Agreement shall continue in full force and effect without said provision; provided that no such severance shall be effective if it materially changes the economic benefit of the Agreement to either Party. |
2 |
5) | Governing Law. Irrespective of the place of execution or performance, this Agreement is to be governed by and construed in accordance with the laws of the State of California applicable to contracts entered into and to be fully performed therein. Any court of competent jurisdiction sitting within the State of California, Los Angeles County, will be the exclusive jurisdiction and venue for any dispute arising out of or relating to the Agreement. The Parties irrevocably consent to the exclusive jurisdiction and venue of any such court, and waive any argument that such venue is not appropriate or convenient. |
6) | Assignments. Neither this Agreement nor any of the rights or obligations hereunder may be assigned by any Party without the prior written consent of the other Party; except that Fox may, without such consent, assign all such rights and obligations to its parent company, or any affiliate or subsidiary of Fox or in which the parent company has an ownership interest and either Party may assign all of its rights and obligations to another entity in connection with a merger, reorganization or sale of all or substantially all of the assets of such Party. |
7) | Survival. The provisions of the Agreement which by their nature would ordinarily be expected to survive termination of the Agreement (including without limitation all indemnity, representations and warranties, payment and confidentiality terms hereof) shall survive the execution, delivery, suspension or termination of the Agreement or any provision hereof. |
8) | Entire Agreement; Waiver; Amendments. This Agreement and any exhibits and schedules attached hereto, contains the full and complete understanding between the Parties hereto regarding the subject matter hereof and supersedes and abrogates all prior agreements and understandings, whether written or oral, pertaining thereto, other than the ClubWPT Agreement and the Season 9-11 Agreement, each as modified herein, and cannot be modified except by a written instrument signed by each Party hereto. No waiver of any term or condition of the Agreement shall be construed as a waiver of any other term or condition; nor shall any waiver of any default under the Agreement be construed as a waiver of any other default. |
9) | Construction. The Parties have participated jointly in the negotiation and drafting of the Agreement. In the event an ambiguity or question of intent or interpretation arises, the Agreement shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions of the Agreement. |
10) | Counterparts; Facsimile. This Agreement may be signed and accepted in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. This Agreement may be delivered by facsimile and facsimile signatures shall be treated as original signatures for all applicable purposes. |
11) | No Third Party Beneficiaries. This Agreement shall not confer any rights or remedies upon any person other than the Parties hereto and their permitted successors and assigns, and only in accordance with the express terms of the Agreement. |
ACKNOWLEDGED AND AGREED, as of the Effective Date of this Agreement specified above.
WPT ENTERPRISES, INC. | NATIONAL SPORTS PROGRAMMING |
owner and operator of the Fox Sports Net | |
programming service | |
By:_________________ | By: ____________________ |
Title: President | Title: ___________________ |
Date: ________________ | Date: ___________________ |
3 |
EXHIBIT A
TERMS FOR PRODUCTION AND DISTRIBUTION OF WORLD POKER TOUR PROGRAMMING
The following terms (the “WPT Terms”) and the attached Standard Terms & Conditions (the “STC”, and together with the WPT Terms, the “Series Agreement”) set forth the agreement between WPTE and Fox, regarding the Tour Series and the SHR Series. The WPT Terms must be interpreted in conjunction with the STC and is incomplete in isolation.
1) | Tour Series: In each Tour Season WPTE will supply to Fox a minimum of twenty-six (26) and a maximum of fifty-two (52) fully produced and broadcast quality sixty (60) minute (between forty-two minutes twenty-one seconds (42:21) and forty-four minutes twenty-one seconds (44:21) of content as determined by Fox) episodes of the Tour Series (the “Tour Episodes”) based on a 12-month Tour Season; provided that for Tour Season 12, the minimum number of Tour Episodes shall be 39 and the maximum number of Tour Episodes shall be 83 to reflect a pro rata increase based on Tour Season 12’s longer duration. If WPTE elects to supply less than the maximum number of new Tour Episodes in any Tour Season, in weeks during which WPTE is not providing new Tour Episodes WPTE may, upon reasonable prior notice, select previously aired episodes from such Tour Season (the “Second-Run Tour Episodes”) to be aired by Fox as if they were new Tour Episodes for the purposes of Sections 4, 5 and 6 below (i.e., such Second-Run Tour Episodes will receive the Ad Time (defined in Section 4 below) and be subject to the clearance requirements of Sections 5 and 6 below). The Tour Episodes will highlight action from the events of the applicable Tour Season of the World Poker Tour (“Tour Events”) presented by WPTE. |
SHR Series: In SHR Season 1, WPTE will supply to Fox sixteen (16) fully produced and broadcast quality sixty (60) minute (between forty-two minutes twenty-one seconds (42:21) and forty-four minutes twenty-one seconds (44:21) of content as determined by Fox) episodes of the SHR Series (the “SHR Episodes” and together with Tour Episodes, “Episodes”). In each of SHR Season 2 and SHR Season 3, WPTE will supply to Fox twenty (20) SHR Episodes. If WPTE desires to supply more than number of new SHR Episodes set forth herein during any SHR Season, Fox and WPTE agree to discuss in good faith increasing the number of new SHR Episodes and any financial amendments related thereto. The SHR Episodes will highlight action from the events of the applicable SHR Season of the World Poker Tour’s Super High Roller Tour (“SHR Events” and together with Tour Events, “Events”) presented by WPTE. In addition, Fox and WPTE will coordinate to telecast the final table to the SHR Event taking place on or about August 24, 2013 (the “August 2013 SHR Event”) on Fuel, the timing of which shall be subject to Fox’s scheduling concerns and Fox and WPTE will discuss in good faith the live telecast on Fuel of each subsequent SHR Event’s final table, for avoidance of doubt, WPTE would remain responsible for the production and delivery of such live telecasts and neither Fox nor WPTE shall have an obligation in connection therewith (other than for the August 2014 SHR Event) other than engaging in such good faith discussions.
As required for the production and delivery of all Episodes, WPTE will be responsible and pay for all associated costs and shall provide the production staff and all other personnel, facilities and services. Nothing in this Agreement shall restrict WPTE from the production or unrestricted exploitation of World Poker Tour events and programs other than the Events and the Episodes provided for under this Agreement and FSN acknowledges that such other programs are likely to be broadcast on other networks during the Term of this Agreement subject to any restrictions set forth in this Agreement.
2) | WPTE will submit each Episode in accordance with the requirements of the STC for approval at least ten (10) days prior to such Episode’s first Telecast date as scheduled by Fox (the “Approval Schedule”). Each Episode will be of consistent quality with the Tour Episodes produced by WPTE and distributed during the 2011 Tour season, provided Fox acknowledges that there will be certain changes to the presentation of the Episodes and the SHR Episodes shall include a new, modern set, different uses of hosts and commentators, differences in music, and differences in story presentation, including, but not limited to, greater focus on player profiles, prize amounts and each SHR Event’s location. |
3) | WPTE will submit each approved Episode at least five (5) business days prior to such Episode’s first Telecast date in accordance with the requirements of the STC (the “Delivery Schedule”). |
4 |
4) | For each Episode, WPTE will receive eight (8) thirty-second (:30) units of commercial inventory (the “Ad Time”) in the applicable Required Telecasts (as such term is defined in Section 6 below) and, if Fox schedules a rerun of such Season’s Episodes, then in any clearances that occur within seven (7) days of the first rerun of such Episode. WPTE shall have the sole right to include billboards, in-show sponsorships and entitlements in each Episode (“Integrations”) and to retain all revenues from such Integrations. The Ad Time and Integrations are subject to the terms of the Agreement including the STC. ClubWPT.com shall receive Poker E-Gaming (as defined below) category exclusivity for all commercial inventory and Integrations appearing within the Episodes (i.e., no other Poker E-Gaming advertiser or sponsor shall appear within an Episode or such Episode’s commercial inventory, whether controlled by WPTE or Fox), except that Incidental Appearances (as defined below) may appear within the Episodes. For purposes of this Agreement, “Poker E-Gaming” shall mean all play-for-money, membership, tutorial and play-for-free poker websites. Fox acknowledges that certain .net poker tutorial websites (“Tutorial Sites”) may appear incidentally in Episodes as a result of patches and hats worn by players, promotional acknowledgements in the credits, background signage not controlled by WPTE (if any), announcers’ descriptions of where players came from, and other appearances approved by Fox in its reasonable discretion, so long as neither WPTE nor any WPTE affiliate receives direct or indirect compensation for such incidental appearance (“Incidental Appearances”); provided, however, all Incidental Appearances shall be subject to the terms of the STC including, without limitation, Fox’s approval rights set forth in Section 1, Section 2 and Section 7 of the STC. Notwithstanding Fox’s approval rights set forth in Section 1, Section 2 and Section 7 of the STC, Fox shall not use such approval rights to extract commercial benefit for itself (e.g., refuse to approve an Incidental Appearance unless an entity purchases ad time on the network). Fox further acknowledges and agrees that in the event that the Fox Guidelines (as defined in Section 1 of the STC), requirements or policies change so as to preclude ClubWPT.com Ad Time and Integrations or all Incidental Appearances as currently contemplated under this Agreement, Fox’s exclusive rights to each Tour Episode during such Episode’s Broadcast Period (as defined in Section 8) shall become non-exclusive rights. WPTE shall use at least two (2) of WPTE’s eight (8) units of Ad Time in each Episode to advertise ClubWPT.com. Without limiting the foregoing, WPTE agrees that no Episode or unit of Ad Time, including promotions of ClubWPT.com and Incidental Appearances, shall: |
a. | Contain any reference, whether written or otherwise, to any entity, party or website (including, without limitation, any WPTE owned, controlled, affiliated and/or operated website or any website owned by any parent or affiliated entity of WPTE or under common control with WPTE or any third party website) that aids, abets, facilitates, promotes, provides an advertisement for and/or enables any form of wagering/gambling in the Territory (as defined below) or conducts or facilitates any activity that is in violation of any United States Federal, state or local law, rule or regulation; |
b. | Include or reference any website that aids, abets, facilitates, promotes, provides an advertisement for or otherwise enables any wagering/gambling activities or “links,” directly or indirectly, to or otherwise directs a viewer to any other website that enables wagering/gambling activities in the Territory; or |
c. | Aid, abet, facilitate, promote or otherwise enable any wagering/gambling activities (e.g., by making any references to any online wagering/gambling site or by providing a telephone number to a wagering/gambling business, etc.); |
provided, however; if (a) WPTE desires to promote a WPTE-affiliated legalized online real money gaming (“RMG”) site that has been licensed by the applicable state or federal government agency to conduct such business and is otherwise in compliance with all applicable laws and regulations, and (b) such promotion is not prevented by Fox policy (which promotion shall be deemed in accord with Fox policy to the extent Fox is nationally (i.e., on FS1, Fuel or the nationally controlled portion of the FSN service but not including inventory controlled by distributors of multi-channel programming services (“MVPDs”)) distributing commercial inventory advertising a RMG site or nationally distributing programs sponsored by a RMG site but not including incidental appearances of an RMG site for which Fox does not receive direct or indirect compensation such as branding on a race car in a race being televised by Fox or non-Fox signage in a venue hosting an event being televised by Fox), then WPTE shall provide Fox with notice of such desire. Within 15 days of receipt of such notice, Fox shall notify WPTE whether WPTE can include such RMG promotion in the Tour Series and SHR Series. If Fox rejects WPTE’s request to include such RMG promotions then WPTE shall have the right to immediately terminate this Agreement subject to Fox’s rights to fulfill any scheduled airings of Episodes in the 14 days following such termination. If Fox accepts WPTE’s request to include such RMG promotions then WPTE shall be allowed to promote such company-affiliated RMG site in show call outs (e.g., “go to ClubWPT or WPTpoker.com where applicable/offered with Code XYZ”) and/or in its ad inventory, provided both (i) the integration of such promotion into the programming shall comply with Fox telecast standards and practices requirements (e.g., state “where applicable” and other appropriate disclosures, if any); and (ii) Fox and WPTE agree upon the economic consideration payable to Fox which the parties shall negotiate in good faith. Fox agrees that if Fox changes its policy to allow Fox to nationally distribute commercial inventory advertising a RMG site or nationally distribute programs sponsored by a RMG site, then Fox shall provide WPTE with notice no later than five (5) days following the date such policy change goes into effect.
5 |
5) | Tour Series: Fox shall clear each Tour Episode in accordance with the terms of the STC as follows: (a) a main telecast (the “Main Tour Telecast”) on Fuel between 7:00 PM and 11:00 PM (EST); and (b) a second telecast on Fuel within seven (7) days of the Main Tour Telecast (the “Second Tour Telecast”). In addition, Fox will use commercially reasonable efforts to clear each Tour Episode in accordance with the terms of the STC as follows: (i) a telecast on FSN Sunday at 8:00 PM (local time), a telecast on FSN Sunday at 11:00 PM (local time), and a telecast on FSN Wednesday at 11:00 PM (local time) within seven (7) days of the Main Tour Telecast (the “FSN Tour Telecasts”); and (ii) three (3) additional clearances on FSN within seven (7) days of the Main Tour Telecast (the “Additional FSN Tour Telecasts” and together with the Main Tour Telecast, the Second Tour Telecast and the FSN Tour Telecasts, (the “Required Tour Telecasts”); provided, however, if Fox changes FSN’s late night week day programming strategy then Fox shall have the right to shift the 11:00 PM FSN Tour Telecasts to midnight (local time). In addition, during each Tour Season, Fox will telecast at least two “marathons” of Tour Episodes (“Tour Marathons”) consistent with World Poker Tour episode marathons telecast on FSN in the past. At least one Tour Marathon shall be telecast on FSN and the other Tour Marathon(s) may be telecast on FSN, FS1 or Fuel. Without limiting Fox’s rights set forth herein, Fox shall have the right, but not the obligation, to air Tour Episodes on FS1 and, subject to WPTE’s agreement which shall not be unreasonably withheld, the telecast of a Tour Episode on FS1 may be substituted for a comparable Required Tour Telecast. |
SHR Series: Fox shall clear each SHR Episode in accordance with the terms of the STC as follows: (a) a main telecast (the “Main SHR Telecast”) on FS1 between 7:00 PM and 11:00 PM (EST) that, for each SHR Season, is at a consistent time and on a consistent day of the week as specified in a notice from Fox to WPTE sent at least 90 days prior to the Main SHR Telecast of the first SHR Episode of the applicable SHR Season; (b) a second telecast on FS1 within seven (7) days of the Main SHR Telecast; (c) a telecast on Fuel within seven (7) days of the Main SHR Telecast; and (d) a telecast on FS1 after the initial run of the entire SHR Season has been completed on the same day of the week and timeslot as the Main SHR Telecasts during the same SHR Season unless a change in FS1’s programming strategy requires such second run be moved to a different consistent time between 7:00 PM and 11:00 PM (EST) on a consistent day of the week, such second run to be telecast regardless of whether or not the term of such SHR Season has ended (collectively, the “Required SHR Telecasts” and together with the Required Tour Telecasts, the “Required Telecasts”). In addition, during SHR Season 2, Fox will air at least two cycles of SHR Season 1 Episodes on Fuel and during SHR Season 3, Fox will air at least two cycles of SHR Season 2 Episodes on Fuel.
Fox represents and warrants that as of the Effective Date, it intends, prior to February 1, 2014, to launch a general multi-sport programming service which, Fox and WPTE agree, shall have the rights and responsibilities of Fuel set forth herein.
6) | Fox will use commercially reasonable efforts to clear the FSN Tour Telecasts of each Tour Episode in a minimum of 50 million homes (the “FSN Tour Clearance Threshold”) in accordance with the terms of the STC. In addition, Fox will use commercially reasonable efforts to clear the Additional FSN Tour Telecasts of each Episode, in the aggregate (i.e., cumulating the clearances for all three Additional Telecasts), in the FSN Tour Clearance Threshold in accordance with the terms of the STC. As used in this Agreement, “commercially reasonable efforts” shall not mean that Fox is relieved of its clearance or time placement obligations to WPTE in order to take commercial advantage of the clearance and time slots anticipated for airing of the Tour Episodes (e.g., deal shopping). |
7) | Distribution Fee: WPTE will pay FSN a distribution fee of $1,000,000 for each of the periods from February 1, 2014 through January 31, 2015 (“Year 1”), February 1, 2015 through January 31, 2016 (“Year 2”) and February 1, 2016 through January 31, 2017 (“Year 3”, and together with Year 1 and Year 2, each a “Payment Year” and collectively, the “Payment Years”) and a distribution fee of $580,000 for the period of February 1, 2017 through August 31, 2017 (the “Stub Year”) (such payments, collectively, the “Distribution Fee”). The Distribution Fee for each Payment Year shall be paid in five escalating installments as follows: $100,000 on May 15 of the applicable Payment Year, $150,000 on August 15 of the applicable Payment Year, $250,000 on November 15 of the applicable Payment Year, $250,000 on February 15 immediately following the applicable Payment Year and $250,000 on April 15 immediately following the applicable Payment Year. The Distribution Fee for the Stub Year shall be paid in four installments as follows: $100,000 on May 15, 2017, $150,000 on August 15, 2017, $250,000 on November 15, 2017 and $80,000 on February 15, 2018. All payments shall be in accordance with the requirements of the STC. |
ClubWPT Payment Offset: WPTE shall have the right to apply ClubWPT Payments (as defined below) attributable to months in the applicable Payment Year or the Stub Year towards payment of the Distribution Fee for such Payment Year or the Stub Year, as applicable. If the Distribution Fee due and payable is greater than the ClubWPT Payments available to be applied then WPTE shall be required to pay FSN the difference (the “Balance Payment”), provided, WPTE shall have the right to retain subsequent ClubWPT Payments attributable to months in the applicable Payment Year or the Stub Year to the extent WPTE has made Balance Payments. For example, if in Year 1 WPTE has made $50,000 in ClubWPT Payments at the time the first payment of $100,000 comes due, WPTE shall only be required to pay a Balance Payment of $50,000 and WPTE shall be entitled to deduct the Balance Payment from WPTE’s payment of the next ClubWPT Payment. For avoidance of doubt, WPTE cannot carry-forward ClubWPT Payments or Balance Payments from one Payment Year to the next Payment Year or the Stub Year, provided, however, that FSN acknowledges that ClubWPT Payments for a given month are made in the following months pursuant to Section 10 of the ClubWPT Agreement and therefore ClubWPT Payments for some months in a Payment Year or the Stub Year may be paid in the months following such Payment Year or the Stub Year, and such ClubWPT Payments shall be applied to the Distribution Fee for the recently completed Payment Year or the Stub Year, not the month in which such ClubWPT Payments are actually paid. For purposes of this Agreement, “ClubWPT Payments” shall mean payments of the Fee (as such term is used in the ClubWPT Agreement) made by WPTE pursuant to Section 10 of the ClubWPT Agreement.
6 |
WPTE Credit: WPTE shall receive a credit (the “Credit”) against its obligation to make ClubWPT Payments (including those applied against the Distribution Fee) on February 1st of each of 2014, 2015 and 2016 in consideration of WPTE’s ongoing improvements and maintenance of the ClubWPT business; provided, however, if WPTE fails to deliver any full SHR Season of SHR Episodes then the credit received at the beginning of the applicable SHR Season shall be retroactively reduced to proportionally reflect only the delivered SHR Episodes. The Credit for February 1, 2014 shall be in an amount equal to 45% of Net Other Club Revenue (as defined in the ClubWPT Agreement) derived from the sale of virtual goods during SHR Season 1 but in no event (a) shall such credit be less than $100,000 or (b) shall such credit be more than 45% of the Virtual Good Initial Development Cost (as defined below) (i.e., $202,500). Such Credit for February 1, 2014 may be applied based on WPTE’s good faith projections for Net Other Club Revenue derived from the sale of virtual goods during SHR Season 1 but shall be retroactively adjusted at the conclusion of SHR Season 1 to reflect any differences in actual performance compared to such projections. The Credit for each of February 1, 2015 and February 1, 2016 shall be $100,000. For purposes of this Agreement, “Virtual Good Initial Development Cost” is WPTE’s initial cost of developing the virtual good offering for ClubWPT.com which WPTE represents is $450,000.
8) | Fox is hereby granted the following Telecast (as defined in the STC) rights: |
Exclusive rights to each Tour Episode in the United States and its territories, possessions, commonwealths and military installations (the “Territory”), from the period beginning the Effective Date and ending on the earlier of (a) the one year anniversary of the Main Telecast of such Episode on the Fox programming service, and (b) the date fifteen (15) months after WPTE’s delivery of such approved Episode to Fox (the “Tour Broadcast Period”). WPTE shall not Telecast, and shall not permit any third party to Telecast, any Tour Episode in the Territory at the same time as the regularly scheduled Main Tour Telecast, the Second Tour Telecast and the Sunday 8:00 PM FSN Tour Telecast of any Tour Episode as such schedule exists at the time WPTE enters into an agreement with a third party to Telecast any Tour Episode.
Exclusive rights to each SHR Episode in the Territory, from the period beginning the Effective Date and ending at the conclusion of SHR Season 3; provided, however, Fox’s rights to SHR Season 1 shall expire at the conclusion of SHR Season 2 (the “SHR Broadcast Period” and together with the Tour Broadcast Period, “Broadcast Period”). WPTE shall not Telecast, and shall not permit any third party to Telecast, any SHR Episode in the Territory at the same time as any of the regularly scheduled airings of any SHR Episode described in items (a)-(c) for the SHR Series in Section 5 of the WPT Terms as such schedule exists at the time WPTE enters into an agreement with a third party to Telecast any SHR Episode.
Notwithstanding anything in this Agreement to the contrary, WPTE shall have the right to distribute separate and distinct Spanish-language productions (i.e., unique footage and not just dubs of the Episodes into Spanish) of action from the Events from a Season in the Territory via Telecast and otherwise beginning two (2) weeks after Fox’s debut Telecast of the final Episode of such Season. WPTE shall have the right to distribute each Tour Episode once on Sundays via Telecast and otherwise on the Fox Broadcasting Company affiliated stations during the Tour Broadcast Period in the following territories: New York City, Philadelphia, Chicago, Boston and Mid-Atlantic (Washington D.C.) (each a “Fox Broadcast Territory”) as long as Fox is able to obtain authorization for such distribution right from its non-owned and operated FSN affiliate in the relevant Fox Broadcast Territory. Fox agrees to use commercially reasonable efforts to obtain such authorization from its non-owned and operated affiliates. In the event that any non-owned and operated FSN affiliate that receives the right to Telecast Tour Episodes from Fox fails to air the Tour Episodes an average of three (3) times per week over any four (4) week period (a “Non-Compliant RSN”), WPTE shall have the right to revoke such Non-Compliant RSN’s right to Telecast Tour Episodes if WPTE is able to directly secure clearance obligations for Tour Episodes on another regional network within such Non-Compliant RSN’s territory that exceeds the clearance (i.e., more airings) being provided by the Non-Compliant RSN; provided that carriage on such replacement regional network shall be included in Fox’s obligation to meet the FSN Tour Clearance Threshold.
In addition to Fox’s Telecast rights, Fox shall have the exclusive right to distribute Episodes during such Episode’s Broadcast Period in all digital media including, without limitation, online streaming, on-demand, and mobile application distribution on digital platforms owned and operated by Fox or any MVPD distributing the applicable linear network; provided that Fox shall use commercially reasonable efforts to ensure that such digital distribution is limited to the Territory and that Fox’s obligation to include the Ad Time in such digital distribution shall be relieved to the extent advertising inventory is limited or not performed or controlled by Fox. Notwithstanding the foregoing, Fox’s exclusivity shall be subject to WPTE’s right to offer Episodes to ClubWPT subscribers on ClubWPT digital platforms at any time seven (7) days after the initial distribution of such Episode on Fox. Fox may also distribute portions of the Episodes not to exceed two (2) minutes for any single clip or three (3) minutes in the aggregate from any Episode online without territorial restriction solely for purposes of promoting Fox’s distribution of the Episodes on FSN, FS1, Fuel and Fox’s digital platforms.
7 |
WPTE reserves all rights not granted to Fox herein within and outside the Territory. Nothing herein shall prevent WPTE from providing live online coverage or live online streaming of the Events. In addition, WPTE may also distribute portions of the Episodes not to exceed two (2) minutes for any single clip or three (3) minutes in the aggregate from any Episode online without territorial restriction solely for purposes of promoting WPTE, the Tour Events or the SHR Events.
9) | Fox shall have the right to use footage from Episodes not to exceed two (2) minutes for any single clip or three (3) minutes in the aggregate from any Episode (which may be increased by email confirmation from WPTE) for use in Fox Sports Media Group’s other sports and entertainment programming (e.g., editing and repackaging the footage from an Event for use in sports magazine-style programming) without territorial restriction. |
10) | Fox will provide promotion for the Tour Series and SHR Series on FSN, FS1 and Fuel in national commercial inventory promoting the Series and ClubWPT.com (the “Promotional Ads”) with an annual average value of at least $1,500,000 (based on Fox’s rate card for such networks) during each twelve-month period between February 1, 2014 and August 31, 2017, prorated for partial twelve-month periods and with a minimum annual value of at least $1,000,000 during each such full twelve-month period, the allocation of such media to be determined by Fox in its sole discretion. WPTE shall be responsible for producing and delivering the Promotional Ads to Fox. The Parties will mutually agree upon the allocation of the Promotional Ads between the Series and ClubWPT.com. |
11) | Fox must provide WPTE on a weekly basis available ratings information for the Telecasts of each Tour Episode. Fox must provide WPTE with overnight ratings information for the Telecasts of each SHR Episode. |
12) | The parties shall negotiate for future rights to the Series during the period from December 15, 2016 to February 15, 2017 (the “Negotiation Period”) in accordance with the requirements of the STC. |
8 |
STANDARD TERMS & CONDITIONS
WPTE agrees to produce and license to Fox all rights and furnish all services in connection with the Series as described in the Agreement of which this STC forms a part. Defined Terms not defined in this STC shall have the meaning set forth in the WPT Terms.
1. PRODUCTION. WPTE will produce and deliver, at its sole cost, each Episode to Fox, complete and suitable for broadcasting. Each Episode will conform to all Fox approvals, as set forth below, and to all applicable Fox creative, format, commercial and technical standards and guidelines including those set forth in the Fox Supplier Information Booklet provided by Fox to WPTE, as may be revised from time to time (collectively, “Fox Guidelines”). At all times, Fox has the right of prior approval over all key elements of each Episode, including, without limitation, approval over: content; video; audio; graphic elements; special effects; talent; format; title; music; sequence; size and placement of program credits; and the dismissal or replacement of any key element. Furthermore, all drop-ins, promos, sponsorship elements, commercial mentions and/or product placements within any Episodes are subject to Fox prior written approval. Fox will exercise its right of approval in a good faith manner and consistent with similar network programming. WPTE will provide access to and information about the production of the Episodes to the Fox programming executive designated to oversee the production of the Episodes (“Programming Executive”). The Episodes, as supplied by WPTE, will not constitute infomercial programming nor contain any infomercials within such Episodes. WPTE may not alter, edit, change or adjust any Fox-supplied graphics, if any, without prior written approval from Fox. At the request of WPTE, Fox may also provide, in its discretion, music, special effects and Fox microphone flags. Fox retains all ownership rights to such materials and elements, including, but not limited to, all copyrights and trademarks. WPTE will not use any material or elements provided by Fox in any way or for any purpose other than as authorized by Fox. Fox has the unlimited right to edit, augment and otherwise adapt the Episodes solely for format purposes and as otherwise provided herein, subject to the rights granted to WPTE herein to have included in the Episodes WPTE-designated Ad Time. WPTE will provide closed-captioned text on line 21 of each Episode, as required by Federal law.
2. APPROVAL. WPTE shall submit each Episode, including all Ad Time to be included by WPTE as set forth in Section 7 of this STC, for review and approval, on DVD, to the Fox Programming Department at 10201 W. Pico Blvd., Building 103, Suite 4252, Los Angeles, CA 90035, no later than as required in the Approval Schedule. Fox shall examine each of the delivered Episodes to determine if each complies with all applicable Fox Guidelines. In the event Fox determines, in its sole discretion, that any Episode does not meet the Fox Guidelines in any respect, Fox shall, without waiver of any other remedy, have the right, in its sole discretion, to: (i) refuse to broadcast such Episode; (ii) inform WPTE of any and all deficiencies in detail, and, if time permits, WPTE shall rectify such problems at WPTE’s sole cost and resubmit for Fox’s approval, within the time advised by Fox, an acceptable revised Episode complying with Fox’s requested changes; or (iii) if WPTE has been afforded the opportunity to correct problems as set forth in (ii) above and has failed to do so or if time constraints do not allow enough time for WPTE to attempt to correct such problems, then Fox |
may attempt to correct the problem and bill WPTE for any reasonable costs incurred in connection with any such attempt and/or correction, such costs to be reimbursed by WPTE within fourteen (14) days of receipt of an appropriate invoice. All costs of delivering the Episodes to Fox in the required form and at the specified location shall be the sole cost and expense of WPTE. Any use by WPTE of the Fox logo in connection with any Episode or any use of the Fox name in connection with any publicity or marketing of the Series including, without limitation, for all press releases, must receive Fox prior approval. Notwithstanding Fox’s approvals at its “sole discretion” where indicated, Fox acknowledges and agrees that all approvals shall be made in good faith and in a manner consistent with general policy applied to similar network programming.
3. DELIVERY. Once approved by Fox, WPTE shall deliver each approved Episode to Fox at FS1 Media Center, 10201 W. Pico Boulevard. Building 101, Room 105, Los Angeles, California 90064, Attention: Adriana Becerra on Beta SP (via Federal Express or other overnight delivery service) or satellite feed - NTSC (as requested by Fox) with an accompanying email toFDMediaCenter@fox.com no later than as set forth in the Delivery Schedule. Upon Fox’s request, WPTE will concurrently deliver a DVD copy of each Episode to the Programming Executive. WPTE acknowledges that Fox will permanently retain all Episode tapes and copies of satellite feeds delivered by WPTE in the Fox library vaults. WPTE will deliver, along with the delivery of each Episode, the Fox standard delivery requirements delineated in the Fox Guidelines. Such delivery requirements will include, without limitation, title elements, music cue sheets, and all promotional material required by Fox.
4. EXPENSES AND CLEARANCES. WPTE is solely responsible for all costs and expenses related to every Episode including, but not limited to: (i) all costs for materials, sponsored elements, the production staff, the personnel, the facilities, the services and all other costs required to produce each Episode; (ii) all necessary fees payable to any participants or owners of footage used within any Episode; (iii) all releases for the use of the names, likenesses, trademarks, service marks or other intellectual property of the individuals, entities and Events depicted in the Episodes; (iv) acquiring the necessary exclusive rights and licenses for production and distribution of the Episodes; and (v) obtaining all necessary rights, underlying rights, and all music licenses (including without limitation any and all master recording and synchronization rights) for music contained within the Episodes. Fox shall not be obligated to make any payment to WPTE or anyone else related to any Episode, its underlying material or on account of Fox’s exploitation of the Episodes as permitted herein.
5. RIGHTS. Fox’s rights to the Episodes within the Territory during the applicable Broadcast Period shall be to distribute, transmit, exhibit, license, advertise, duplicate, promote, perform, telecast and otherwise exploit, and to permit the distribution and other exploitation of, each Episode |
1 |
and its constituent elements, by all means of Telecast (as defined below) on the Fox programming services, without limitation as to the number of exhibitions and uses unless specified in the Agreement. “Telecast” shall mean any means of distribution on a “linear programming service” via standard or non-standard television technology, whether presently existing or hereafter developed, including, without limitation, via free over-the-air television, basic, tier and/or premium cable distribution, direct broadcast satellite television (“DBS”), subscription television (“STV”), multi-point distribution systems (“MDS”), multiple multi-point distribution systems (“MMDS”), local multi-point distribution systems (“LMDS”), satellite master antennae television systems (“SMATV”), open video system (“OVS”), television receive-only (“TVRO”), closed circuit television, and, to the extent similar to the cable distribution business model of the Fox programming service, interactive TV, airline, cruise ships, restaurant and hotel/motel distribution, narrow and broadband services, video dial tone, and via Fox Sports Net’s video programming service currently known as “Fox Deportes” (or any successor network), and by any manner or system of payment. The foregoing shall include, without limitation, Fox’s right to Telecast Episodes, from time to time, as filler programming (an Episode Telecast in less than its entirety (but not re-edited)); provided, however, any cost or expense incurred in connection with such Episode modification or re-purposing shall be assumed by Fox. In connection with filler programming, Fox shall have no obligation to WPTE with regard to Ad Time. The exclusivity, if any, granted to Fox herein shall preclude WPTE from licensing or otherwise granting to any person, corporation, partnership, or other entity, any right to Telecast any Episode, portion thereof or any specific Event featured in an Episode, within the Territory during the applicable Broadcast Period, except as may be specifically set forth in the Agreement. Fox, its assignees and affiliates, shall have the right, without any payment, and may grant others the right, to reproduce, print, publish or disseminate in all manners and media now known or subsequently developed without regard to territory limitations, promotion for the Series, the name, likeness, voice and biographical information concerning each person appearing in or connected with the Series, brief portions of Episodes, as well as the names, logos, trademarks and other identities of WPTE, and of any other entities associated with WPTE to advertise, promote, publicize and distribute the Series and Fox’s exploitation thereof, as well as to advertise, promote and publicize Fox’s programming services, but not as a direct endorsement of any other product or services; provided, however, should WPTE be subject to any restrictions in connection with the use of specific materials (e.g., images to which WPTE does not have promotional usage rights), Fox will observe such restrictions provided it receives reasonable advance written notice thereof. WPTE, at Fox’s request, will deliver at no charge existing slides, photos and other publicity and promotional materials reasonably available to or under the control of WPTE. Except as set forth in Section 1 of the STC with respect to Fox materials and elements and subject to the rights granted in this Agreement, the Episodes, including all elements thereof and rights contained therein, are and shall remain the exclusive property of WPTE under United States copyright, trademark and all other applicable laws and any rights not granted herein shall be reserved by WPTE. |
6. DISTRIBUTION. Fox shall use commercially reasonable efforts to Telecast the FSN Tour Telecasts and, in the aggregate, the Additional FSN Tour Telecasts, of each Episode in the FSN Tour Clearance Threshold on regional sports networks carrying FSN programming (“Regionals”). Fox shall use commercially reasonable efforts to clear the Required Telecasts during the applicable telecast timeslots, if any. If Fox does not achieve the FSN Tour Clearance Threshold, then Fox shall use commercially reasonable efforts to provide additional Telecasts for the particular Tour Episode within seven days of the originally scheduled Telecast for such Tour Episode at no charge to WPTE until the FSN Tour Clearance Threshold is met and, if such Telecast that did not achieve the FSN Tour Clearance Threshold was required to be cleared during a particular timeslot, then Fox shall use commercially reasonable efforts to provide such additional Telecasts during a time period similar to such timeslot or as close to such timeslot as reasonably practicable. The Required Telecasts schedule may be preempted by exceptional, non-recurring programming commitments imposed by third parties that are part of broader high priority programming packages of the applicable Fox network, or live event programming. If the Main Tour Telecast or a Required SHR Telecast is preempted, Fox shall use commercially reasonable efforts to provide additional Telecasts of such Episode during a time period similar to or as close to the Main Tour Telecast timeslot or the Required SHR Telecast timeslot as the case may be for the particular preempted Episode within seven days of the originally scheduled Telecast for such Episode at no charge to WPTE. Fox has the right to replay each Episode on the Regionals, FS1 and/or Fuel at various times without restriction as to the number of airings.
7. SPONSORSHIP/ADVERTISING INVENTORY. In consideration of all rights and duties granted in this Agreement, WPTE will receive the Ad Time in the Telecast of each Episode for the promotion of ClubWPT.com and products and services of advertisers solicited by WPTE. All solicitations and sales proposed by WPTE of Ad Time and the content of all Integrations, Incidental Appearances, Promotional Ads commercials, billboards, features, signage and promotions (including, without limitation, ClubWPT.com advertising and signage, banners, mentions, and other promotion that WPTE is permitted to insert in any Episode (e.g., on persons’ bodies featured in the Episodes, hats, clothing, in the site background, etc.)) are subject to (i) Federal Communications Commission regulations and all other applicable federal and state regulations, (ii) News Corporation and Fox advertising regulations, telecast standards and practices policies, and (iii) Fox’s prior approval, which shall be exercised in a good faith manner and consistent with similar network programming. WPTE is prohibited from including within the Episodes any tobacco advertising. Unless otherwise set forth in this Agreement, WPTE may not include within the Episodes or the Ad Time (1) any hard liquor/spirits/distilled beverages advertising or promotion, (2) any casino, sports book, online gambling, lottery or any other gambling advertising or promotion or any poker or other casino, gaming or gambling tutorial advertising or promotion, other than Fox-approved Integrations for the casino hosting each Event, (3) any advertisements or promotions that may constitute “calls to action” for cable or satellite subscribers to demand carriage of any programming |
2 |
service from their cable operator or satellite provider, (4) any advertisements or promotions for any cable or broadcast entity, including, without limitation, ABC, TNT, CSTV, ESPN, ESPN2, ESPN.com, or ESPN Radio, or any affiliated entities, or (5) any per inquiry and/or direct response spots, without Fox’s prior written approval, which Fox may withhold in its sole discretion. Fox agrees that as of the Effective Date, casino Integrations that are similar to the casino Integrations contained in Season 8 of the Series are deemed Fox-approved Integrations. All WPTE-proposed Integrations, advertisements, sponsors, promotions, billboards and features for inclusion within any Episode must be submitted in writing to and approved in writing by Fox in a timely manner prior to the first Telecast of such Episode. To ensure inclusion within the Episodes, all WPTE advertisements must (A) satisfy Fox’s technical delivery requirements delineated in the Fox Guidelines, (B) be delivered in position on the master Beta SP tapes delivered to Fox for Telecast with full program audio on channels 1 and 2, unless an alternative video/audio source is agreed to by Fox and WPTE, and (C) consist of an assortment of commercial advertisements appropriate for the number of spots to be aired. In the event that WPTE advertisements are not properly delivered in a timely manner (unless due to Fox’s negligence (e.g., untimely approvals)), Fox shall have no obligation to Telecast such advertisements. WPTE must fill all the Ad Time. WPTE may not authorize any third party to sell any Ad Time without Fox’s prior written approval, such approval not to be unreasonably withheld, although Fox acknowledges that WPTE may hire an agent to approach sponsors about purchasing the Ad Time. WPTE shall communicate to Fox those commercial sponsors sold so as to avoid any duplication in the sales effort.
8.. PAYMENT. Except to the extent offset by ClubWPT Payments, the Distribution Fee shall be remitted to the following location, with written notice of payment faxed to Fox, attention Josh Oakley (fax no. (310) 969-8153), on the date of payment: National Sports Programming File #55434 Los Angeles, CA 90012
Fox must receive payment of the Distribution Fee pursuant to the dates set forth in the Agreement regardless of the date WPTE receives an invoice from Fox. If any payment of the Distribution Fee is not received on or before the specified due date, Fox may elect to suspend future Telecasts of any and all Episodes.
9. RIGHT OF NEGOTIATION. During the Negotiation Period WPTE will negotiate in good faith with Fox for WPTE’s grant of rights to episodes of the Series in the following year using commercially reasonable efforts to reach an agreement as soon as practicable. The obligations of WPTE under this Section will survive any termination of this Agreement by Fox as a result of a breach by WPTE. Nothing in this Section is meant to imply nor shall be construed to create an exclusive right of negotiation during the Negotiation Period.
10. REPRESENTATIONS AND WARRANTIES. WPTE acknowledges that Fox’s rights in this Agreement are |
valuable and unique. WPTE represents, warrants and covenants to Fox that: (i) (a) it has the full power and authority to make and perform this Agreement; (b) it has (or will have when the relevant programming is made available to Fox) the right to grant the license to distribute the Series, the Ad Time and the Promotional Ads purported to be granted in this Agreement; (c) the making or performance of this Agreement does not violate any of its agreements with any third party or any applicable law or court order; (d) the rights acquired by Fox, and its use of those rights, will not infringe on or violate any copyright, trademark, right of privacy, publicity or other literary or dramatic or any other right of any third party; (e) it will do nothing to interfere with or impair Fox’s rights in this Agreement; and (f) it will provide to Fox upon request any documents (such as agreements with participants and sites) that confirm WPTE has obtained the necessary rights to perform this Agreement; (ii) neither the Ad Time, the Promotional Ads, the Series nor any of the elements or material contained within specific Episodes thereof will: (a) infringe on or violate any person’s or entity’s right of privacy or publicity or other personal property right of any third party; (b) libel, slander or otherwise defame or disparage any third party, or violate any of their copyright, trademark, service mark or moral rights; or (c) violate any applicable law; and (iii) WPTE will not grant any rights inconsistent with the rights granted to Fox by this Agreement.
Fox represents and warrants to WPTE that it has the right to enter into this Agreement and to perform all of its obligations hereunder.
11. INDEMNIFICATION.
(a) WPTE shall at all times indemnify, defend and hold harmless Fox, its partners and all affiliated companies thereof and their respective officers, directors, partners, shareholders, employees, agents and representatives from and against any claim, demand, liability or judgment, including reasonable attorneys’ fees and court costs (“Claims”) arising out of the breach of any representation, warranty or other obligation or provision of this Agreement or arising out of the use, distribution, licensing or sublicensing of the Series, the Promotional Ads or the Ad Time in accordance with this Agreement, arising out of the ClubWPT.com business and the promotion thereof, arising out of the content of the Series to the extent that such Claim is based upon alleged libel, slander, defamation, invasion of the right of privacy, or violation or infringement of copyright, literary or music rights or otherwise arising out of the content of the Series as furnished by WPTE to Fox. This indemnity shall survive termination of this Agreement.
(b) Fox shall at all times indemnify, defend and hold harmless WPTE, its partners and all affiliated companies thereof and their respective officers, directors, partners, shareholders, employees, agents and representatives from and against any Claim arising out of any breach of representation, warranty or other obligation or provision hereof, arising out of the use, distribution, licensing or sublicensing of the Series by Fox not in accordance with this Agreement, resulting from the editing or repackaging of footage from the Episodes pursuant to Section 9 or arising |
3 |
out of any material added by Fox to the Series. This indemnity shall survive termination of this Agreement. (c) A party seeking indemnification will give the indemnifying party prompt notice of any claim or litigation to which indemnity may apply. Failure to give such prompt notice will relieve the indemnifying party of its indemnification obligations to the extent that such failure has prejudiced the indemnifying party’s defense of such claim or litigation. The indemnifying party shall have the right to assume and fully control the defense of any or all claims or litigation to which its indemnity applies. The indemnified party will cooperate fully (at the cost of the indemnifying party) with the indemnifying party in such defense and in the settlement of such claim or litigation. (d) WPTE represents, warrants and covenants that it has or will secure prior to delivery of the initial Episode the following insurance: (i) Commercial General Liability: Such insurance shall be on an occurrence basis providing single limit coverage in an amount of not less than $1,000,000 per occurrence and shall include coverage for, but not limited to premises/operations, products/completed operations, contractual, independent contractors, broad form property damage, personal injury and fire legal liability. The policy shall not contain any intra-insured exclusion as between insured persons or organizations but shall include coverage for liability assumed under this Agreement as an “insured contract.” The Certificate Holders (as defined below) shall be added as additional insureds and coverage shall be primary to and not contributory with any similar insurance carried by Certificate Holders; (ii) Umbrella/Excess Liability: Limits of liability of at least $4,000,000 per occurrence for a total limit of not less than $5,000,000 including primary commercial general liability; (iii) Worker’s Compensation: Worker’s compensation and employers liability insurance with a limit of liability for “Coverage B” of at least $1,000,000 each occurrence, covering all personnel employed either directly or by way of contract from any payroll service provider utilized. All statutory limits must be provided. Such policy of insurance shall contain a waiver of subrogation in favor of the Certificate Holders; and (iv) Errors & Omissions Liability: Limits of liability of at least $5,000,000 per occurrence and $5,000,000 annual aggregate for a period of three years with a deductible not to exceed $100,000 or such reasonable and customary deductible amounts to be approved by Fox. Such Errors & Omissions Liability insurance policy shall add the Certificate Holders as additional insureds. Such Errors & Omissions Liability insurance will respond to any claims arising from the production or exhibition of any Series episode including without limitation, liabilities for infringement or misappropriation of any persons intellectual property rights (including without limitation, copyright, trademarks, patents, trade secrets, know-how and other present and future property and/or proprietary rights of a similar nature), rights of publicity or rights of privacy, and false advertising. The insurance certificate should read as follows: Fox Sports Net, Inc., Fox Sports 1, LLC, Fox Entertainment Group, Inc., Twentieth Century Fox Film Corporation, News America, Inc., Fox Broadcasting Co., Twentieth Century Fox Home Entertainment, their parents, divisions, subsidiaries, affiliated companies, officers, directors, and employees (collectively, the “Certificate Holders”) are included as additional insureds. All insurance required above shall be with companies duly licensed to transact business in California, and maintaining during the policy term a “general policy holders rating” of at |
least an A or better, V, or such other rating, as may be required by Fox. No such policy shall be cancelable or subject to modification except after thirty (30) days prior written notice to Fox. A copy of the certificate of insurance may be faxed directly to the Fox Risk Management department at (310) 369-2177. The telephone number for the Risk Management Department is (310)-369-1025. However, an original must be mailed to Fox Entertainment Group, Inc., P.O. Box 900, Beverly Hills, California 90213, Attention: Risk Management (FAB/120).
12. MISCELLANEOUS. (a) WPTE has no authority to bind Fox to any agreements or other obligations, and will not attempt to do so. WPTE and Fox are independent contractors, and nothing in this Agreement shall be deemed to create any partnership, joint venture or agency relationship. As between each other, each party is fully responsible for all persons and entities it employs or retains, except as otherwise specifically provided in this Agreement. (b) WPTE shall conform with Title 47 of the United States Code Sections 507 and 317 concerning broadcast matter and disclosures required thereunder, insofar as those Sections apply to persons furnishing program material for television broadcasting, including the requirements set forth in the Fox Guidelines. Without limiting the foregoing, WPTE hereby certifies and agrees that it has no knowledge of any information relating to the Series that requires disclosure under Sections 507 and/or 317, that it will promptly disclose to Fox any such information of which it hereafter acquires knowledge and that it shall not, without Fox’s prior written approval, include in any Episode any matter for which any money, service, or other valuable consideration (as such terms are used in Sections 507 and/or 317) is directly or indirectly paid, accepted from, charged to or promised by a third party. (c) If the delivery or Telecast of any Episode should be prevented or canceled due to any act of God, threat or act of terrorism, inevitable accident, strike or other labor dispute, fire, riot or civil commotion, government action or decree, inclement weather, failure of technical, production or television equipment or for any other reason beyond the control of WPTE or Fox, then neither WPTE nor Fox shall be obligated in any manner to the other with respect to such Episode(s), but all other rights Fox may have in this Agreement shall remain in effect and shall not be affected in any manner. (d) Fox may terminate this Agreement if WPTE: (i) makes or has made a material misrepresentation; (ii) breaches a material obligation and such breach is not cured within a reasonable period of time; provided, however, that in no event shall the time to cure exceed five (5) days after receipt of written notice from Fox; or (iii) seeks relief under any bankruptcy statute, is placed in receivership or makes any assignment for the benefit of creditors. Fox’s right to terminate this Agreement in any such instance shall be in addition to any other rights or remedies it may have under this Agreement or at law. In the event Fox terminates this Agreement pursuant to this Section, Fox may continue to Telecast the Episodes during the applicable Broadcast Period with no obligation to Telecast WPTE-designated commercial inventory. (e) WPTE may terminate this Agreement if Fox: (i) makes or has made a material misrepresentation; (ii) breaches a |
4 |
material obligation and such breach is not cured within a reasonable period of time; provided, however, that in no event shall the time to cure exceed five (5) days after receipt of written notice from WPTE; or (iii) seeks relief under any bankruptcy statute, is placed in receivership or makes any assignment for the benefit of creditors. WPTE’s right to terminate this Agreement in any such instance shall be in addition to any other rights or remedies it may have under this Agreement or at law. (f) Except as specifically set forth herein, if either party breaches any provision of the Agreement, the damage, if any, caused to the other thereby will not be irreparable or otherwise sufficient to entitle a party to injunctive or other equitable relief. A party’s rights and remedies in any such event shall be strictly limited to the rights set forth in this Agreement and the right, if any, to recover monetary damages in an action at law. (g) All notices from either party to the other must be given in writing and sent by registered or certified mail (postage prepaid and return receipt requested), by hand or messenger delivery, by overnight delivery service, by facsimile with receipt confirmed, to the respective addresses of WPTE and Fox listed in this Agreement. Fox’s notice shall provide duplicate notice to the attention of: Senior Vice President, Business and Legal Affairs, c/o Fox Cable Networks, Building 103, 10201 West Pico Boulevard, Los Angeles, California 90035. Any notice or report delivered in accordance with this Section will be deemed given on the date actually delivered; provided that any notice or report deemed given or due on a Saturday, Sunday or legal holiday will be deemed given or due on the next business day. If any notice or report is delivered to any party in a manner which does not comply with this Section, such notice or report will be deemed delivered on the date, if any, such notice or report is received by the other party. (h) Each party hereby agrees to execute any and all further documents that are necessary and proper to carry out the purposes of this Agreement. (i) The failure or inability of either party to enforce any right hereunder will not waive any right with respect to other or future rights or occurrences. (j) This Agreement contains the entire understanding of the parties. It supersedes all prior written or oral agreements and understandings pertaining to the subject matter of this Agreement and cannot be modified except by a written instrument signed by both parties. (k) This Agreement and the rights and obligations of the parties under this Agreement shall be governed by and construed in accordance with the internal laws of the State of California, without reference to conflict of law provisions. Each party irrevocably and unconditionally: (i) submits to the general jurisdiction of the federal and state courts located in Los Angeles County, California; (ii) agrees that any action or proceeding concerning this Agreement will be brought exclusively in such courts; and (iii) waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding in any such court was brought in an inconvenient court and agrees not to claim or plead the same. (l) Neither this Agreement nor any of the rights or obligations hereunder may be assigned by either party without the prior written consent of the other party; except that Fox may, without such consent, assign this Agreement or any or all of its rights or obligations hereunder to its parent |
a company, or any affiliate, subsidiary, or partnership in which itself or the parent company has an ownership interest (e.g., Fox may assign all rights related to the SHR Series to Fox Sports 1, LLC), and either Party may assign this Agreement or any or all of its rights or obligations hereunder to another entity in connection with a merger, reorganization or sale of all or substantially all of the assets of such Party. Subject to the foregoing, this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns, and no other person shall have any right, benefit or obligation under this Agreement as a third party beneficiary or otherwise. (m) Any provisions in this Agreement found by a court to be void or unenforceable shall not affect the validity or enforceability of any other provisions in this Agreement. (n) Except as required by law (in each case with confidential treatment requested and such disclosure limited to such information and such portions of the Agreement that the disclosing party is advised by counsel as legally required to be disclosed), each party to this Agreement shall keep this Agreement confidential and neither party shall promulgate, publish, or otherwise disseminate the terms, provisions, or substance of this Agreement other than to the officers, directors, attorneys, insurance agents, and accountants of the parties hereto. (o) This Agreement may be executed in any number of counterparts, each of which shall be an original and all of which shall constitute together one and the same document. Any signature page of any such counterpart, or any electronic facsimile thereof, may be attached or appended to any other counterpart to complete a fully executed counterpart of this Agreement, and any telecopy or other facsimile transmission of any signature shall be deemed an original and shall bind such party. |
5 |
Exhibit 10.22
AGREEMENT
This Agreement (this “Agreement”), dated as of May 24, 2016 (the “Effective Date”) is between WPT ENTERPRISES, INC. (“WPTE”) with offices at 1920 Main Street, Suite 1150, Irvine, California 92614 and NATIONAL SPORTS ProGRAMMING (“Fox”), with offices at 10201 West Pico Blvd., Building 103, Los Angeles, California 90035. For good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, and the mutual promises contained herein, WPTE and Fox (each a “Party” and collectively the “Parties”) agree to be bound by the following terms and conditions:
RECITALS
WHEREAS, the Parties are parties to the following agreements: (i) the Program Production and Televising Agreement, dated as of July 25, 2008 (as amended from time to time, the “ClubWPT Agreement”); (ii) the Agreement, dated August 13, 2010 (as amended from time to time, the “Season 9-11 Agreement”) and (iii) the Agreement, dated May 10, 2013 (as amended from time to time, the “Tour-Alpha8 Agreement”);
WHEREAS, the Parties desire to amend the ClubWPT Agreement and the Tour-Alpha8 Agreement;
WHEREAS, WPTE desires to produce, and Fox desires to distribute on the FSN programming service (“FSN”), Season Fifteen, Season Sixteen, Season Seventeen, Season Eighteen and Season Nineteen of the World Poker Tour television Series (the “Tour”); and
WHEREAS, WPTE desires to produce, and Fox desires to distribute on FSN five seasons of original programming (the “TBD Programming”).
THEREFORE, in consideration of the premises contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:
SECTION I. AMENDMENTS.
1) | ClubWPT Amendment. WPTE and Fox agree Section 10(b) of the ClubWPT Agreement is amended and restated as follows: |
“In consideration of FSN’s obligations hereunder, WPTE will (i) provide FSN with the Monthly Report within thirty (30) days of the end of the each month and (ii) pay FSN the Fee for each month as set forth in this Section. Notwithstanding the foregoing:
February 1, 2012 through February 28, 2013: If WPTE provides written notice to FSN no later than June 30, 2012 that WPTE has made a binding, irrevocable commitment to spend Two Million Dollars ($2,000,000) on marketing for the Website (an “Additional Marketing Commitment”), at least One Million Five Hundred Thousand Dollars ($1,500,000) of which is in the form of traditional media buys, for the period between February 1, 2012 and February 28, 2013, FSN agrees (i) that the “Fee” on Net Revenue exceeding Four Million Dollars ($4,000,000) for the period between March 1, 2012 and February 28, 2013 (the “Season 10 Marketing Period”) shall be calculated as Twenty percent (20%) of such Net Revenue, and (ii) that the “Fee” on Net Revenue exceeding Five Million Dollars ($5,000,000) for the period between March 1, 2013 and February 28, 2014 (the “Season 11 Marketing Period”) shall be calculated as Twenty percent (20%) of such Net Revenue.
March 1, 2013 through February 28, 2014: If WPTE provides written notice to FSN no later than June 30, 2013 that WPTE has made a binding, irrevocable commitment to spend an Additional Marketing Commitment for the Season 11 Marketing Period, at least One Million Five Hundred Thousand Dollars ($1,500,000) of which is in the form of traditional media buys, FSN agrees (i) that the “Fee” on Net Revenue exceeding Five Million Dollars ($5,000,000) for the Season 11 Marketing Period shall be calculated as Twenty percent (20%) of such Net Revenue, and (ii) that the “Fee” on Net Revenue exceeding Six Million Dollars ($6,000,000) for the period between March 1, 2014 and February 28, 2015 shall be calculated as Twenty percent (20%) of such Net Revenue.
1 |
March 1, 2014 through February 28, 2022:For each of the eight 12-month periods from March 1 through February 28 beginning March 1, 2014 and ending February 28, 2022 (each a “Marketing Cycle”), if WPTE provides written notice to FSN no later than June 30 of the applicable Marketing Cycle that WPTE has made a binding, irrevocable commitment to spend an Additional Marketing Commitment for such Marketing Cycle, at least One Million Five Hundred Thousand Dollars ($1,500,000) of which is in the form of traditional media buys, FSN agrees (i) that the “Fee” on Net Revenue exceeding Four Million Dollars ($4,000,000) for the applicable Marketing Cycle shall be calculated as Twenty percent (20%) of such Net Revenue, and (ii) that the “Fee” on Net Revenue exceeding Four Million Five Hundred Thousand Dollars ($4,500,000) for the 12-month period immediately following such Marketing Cycle shall be calculated as Twenty percent (20%) of such Net Revenue.
If WPTE provides notice to FSN that it will spend the Additional Marketing Commitment in a period described above and then fails to meet the Additional Marketing Commitment by the end of such period, WPTE will pay FSN the difference between the Fee paid to FSN for such period and the Fee that would have been due had WPTE not committed to the Additional Marketing Commitment. Such makeup payment shall be due to FSN no later than thirty (30) days following the end of such period and such makeup payment shall be FSN’s sole remedy for WPTE’s failure to spend the Additional Marketing Commitment.”
2) | Tour-Alpha8 Amendment – Stub Period. WPTE and Fox agree Section 7 of Exhibit A of the Tour-Alpha8 Agreement is amended to remove WPTE’s obligation to pay the Distribution Fee of $580,000 during the Stub Year; provided, however, such obligation shall be reinstated if WPTE does not meet its obligations to pay the Distribution Fee during Season 15 pursuant to Section 7 of Exhibit A of this Agreement. |
3) | Tour-Alpha8 Amendment – Promotional Ad Obligation. WPTE and Fox agree Section 10 of Exhibit A of the Tour-Alpha8 Agreement is amended to end Fox’s obligation to provide Promotional Ads for WPT Season XIV (defined as the Tour Series under the Tour-Alpha8 Agreement) and WPT Alpha8 Season III (defined as the SHR Series under the Tour-Alpha8 Agreement) on February 1, 2017. |
SECTION II. TOUR SEASONS 15-19 AND TBD PROGRAMMING.
1) | Exhibit A attached hereto, including the Standard Terms & Conditions (collectively, the “Series Agreement”), sets forth the terms for the production and distribution of the Tour series (the “Tour Series”) and the TBD Programming (along with the Tour Series, each a “Series”) during each of the following periods: February 1, 2017 through January 31, 2018 (“Season 15”); February 1, 2018 through January 31, 2019 (“Season 16”), February 1, 2019 through January 31, 2020 (“Season 17”); February 1, 2020 through January 31, 2021 (“Season 18”) and February 1, 2021 through August 31, 2022 (“Season 19” and with each of Season 15, Season 16, Season 17 and Season 18, each a “Season” and collectively, the “Seasons”). |
2) | WPTE shall produce, and Fox shall distribute, episodes of the Tour Series and TBD Programming for all of the respective Seasons pursuant to the terms of the Series Agreement. |
SECTION III. MISCELLANEOUS.
1) | Representations and Warranties. Each Party represents, warrants and covenants to the other Party that (a) it has the full power and authority to make and perform this Agreement; (b) the making or performance of this Agreement does not violate any of its agreements with any third party or any applicable law or court order; and (c) it will do nothing to interfere with or impair the other Party’s rights in this Agreement |
2) | Indemnification. Each Party shall at all times indemnify, defend and hold harmless the other Party, its partners and all affiliated companies thereof and their respective officers, directors, partners, shareholders, employees, agents and representatives from and against any claim, demand, liability or judgment, including reasonable attorneys’ fees and court costs (“Claims”) arising out of the breach of any representation, warranty or other obligation or provision of this Agreement. A party seeking indemnification will give the indemnifying party prompt notice of any claim or litigation to which indemnity may apply. Failure to give such prompt notice will relieve the indemnifying party of its indemnification obligations to the extent that such failure has prejudiced the indemnifying party’s defense of such claim or litigation. The indemnifying party shall have the right to assume and fully control the defense of any or all claims or litigation to which its indemnity applies. The indemnified party will cooperate fully (at the cost of the indemnifying party) with the indemnifying party in such defense and in the settlement of such claim or litigation. |
2 |
3) | Notices. All notices from either Party to the other must be given in writing and sent by registered or certified mail (postage prepaid and return receipt requested), by hand or messenger delivery, by overnight delivery service, or by facsimile with receipt confirmed, to the respective addresses of WPTE and Fox listed in the Agreement. Fox’s notice shall provide duplicate notice to the attention of: FSMG General Counsel, Business and Legal Affairs, c/o Fox Cable Networks, 2121 Avenue of the Stars, 9th Floor, Los Angeles, California 90035. WPTE’s notice shall provide duplicate notice to the attention of President, WPT Enterprises, Inc., 1920 Main Street, Suite 1150, Irvine, California 92614. Any notice or report delivered in accordance with this Section will be deemed given on the date actually delivered; provided that any notice or report deemed given or due on a Saturday, Sunday or legal holiday will be deemed given or due on the next business day. If any notice or report is delivered to any Party in a manner which does not comply with this Section, such notice or report will be deemed delivered on the date, if any, such notice or report is received by the other Party. |
4) | Severability. In the event that any provision of the Agreement becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, the Agreement shall continue in full force and effect without said provision; provided that no such severance shall be effective if it materially changes the economic benefit of the Agreement to either Party. |
5) | Governing Law. Irrespective of the place of execution or performance, this Agreement is to be governed by and construed in accordance with the laws of the State of California applicable to contracts entered into and to be fully performed therein. Any court of competent jurisdiction sitting within the State of California, Los Angeles County, will be the exclusive jurisdiction and venue for any dispute arising out of or relating to the Agreement. The Parties irrevocably consent to the exclusive jurisdiction and venue of any such court, and waive any argument that such venue is not appropriate or convenient. |
6) | Assignments. Neither this Agreement nor any of the rights or obligations hereunder may be assigned by any Party without the prior written consent of the other Party; except that Fox may, without such consent, assign all such rights and obligations to its parent company, or any affiliate or subsidiary of Fox or in which the parent company has an ownership interest and either Party may assign all of its rights and obligations to another entity in connection with a merger, reorganization or sale of all or substantially all of the assets of such Party. |
7) | Survival. The provisions of the Agreement which by their nature would ordinarily be expected to survive termination of the Agreement (including without limitation all indemnity, representations and warranties, payment and confidentiality terms hereof) shall survive the execution, delivery, suspension or termination of the Agreement or any provision hereof. |
8) | Entire Agreement; Waiver; Amendments. This Agreement and any exhibits and schedules attached hereto, contains the full and complete understanding between the Parties hereto regarding the subject matter hereof and supersedes and abrogates all prior agreements and understandings, whether written or oral, pertaining thereto, other than the ClubWPT Agreement, the Season 9-11 Agreement and the Tour-Alpha8 Agreement, each as modified herein, and cannot be modified except by a written instrument signed by each Party hereto. No waiver of any term or condition of the Agreement shall be construed as a waiver of any other term or condition; nor shall any waiver of any default under the Agreement be construed as a waiver of any other default. |
3 |
9) | Construction. The Parties have participated jointly in the negotiation and drafting of the Agreement. In the event an ambiguity or question of intent or interpretation arises, the Agreement shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions of the Agreement. |
10) | Counterparts; Facsimile. This Agreement may be signed and accepted in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. This Agreement may be delivered by facsimile and facsimile signatures shall be treated as original signatures for all applicable purposes. |
11) | No Third Party Beneficiaries. This Agreement shall not confer any rights or remedies upon any person other than the Parties hereto and their permitted successors and assigns, and only in accordance with the express terms of the Agreement. |
[Signature Page Follows]
4 |
ACKNOWLEDGED AND AGREED, as of the Effective Date of this Agreement specified above.
WPT ENTERPRISES, INC. | NATIONAL SPORTS PROGRAMMING owner and operator of the FSN programming service | |||
By: | By: | |||
Title: | Title: | |||
Date: | Date: |
5 |
EXHIBIT A
TERMS FOR PRODUCTION AND DISTRIBUTION OF WORLD POKER TOUR PROGRAMMING
The following terms (the “WPT Terms”) and the attached Standard Terms & Conditions (the “STC”, and together with the WPT Terms, the “Series Agreement”) set forth the agreement between WPTE and Fox, regarding the Tour Series and the TBD Programming. The WPT Terms must be interpreted in conjunction with the STC and is incomplete in isolation.
1) | Tour Series: In each Season WPTE will supply to Fox a minimum of twenty-six (26) and a maximum of fifty-two (52) fully produced and broadcast quality sixty (60) minute (between forty-two minutes twenty-one seconds (42:21) and forty-four minutes twenty-one seconds (44:21) of content as determined by Fox) episodes of the Tour Series (the “Tour Episodes”) based on a 12-month Season. If WPTE elects to supply less than the maximum number of new Tour Episodes in any Season, in weeks during which WPTE is not providing new Tour Episodes WPTE may, upon reasonable prior notice, select previously aired episodes from such Season (the “Second-Run Tour Episodes”) to be aired by Fox as if they were new Tour Episodes for the purposes of Sections 4, 5 and 6 below (i.e., such Second-Run Tour Episodes will receive the Ad Time (defined in Section 4 below) and be subject to the clearance requirements of Sections 5 and 6 below). The Tour Episodes will highlight action from the events of the applicable Season of the World Poker Tour (“Events”) presented by WPTE. |
TBD Programming: In each Season, WPTE will supply to Fox thirteen (13) fully produced and broadcast quality sixty (60) minute (between forty-two minutes twenty-one seconds (42:21) and forty-four minutes twenty-one seconds (44:21) of content as determined by Fox) episodes of original programming (the “TBD Episodes” and together with Tour Episodes, “Episodes”). The TBD Episodes will be composed of mutually agreed upon content connected with WPTE.
As required for the production and delivery of all Episodes, WPTE will be responsible and pay for all associated costs and shall provide the production staff and all other personnel, facilities and services. Nothing in this Agreement shall restrict WPTE from the production or unrestricted exploitation of World Poker Tour events and programs other than the Events and the Episodes provided for under this Agreement and FSN acknowledges that such other programs are likely to be broadcast on other networks during the Seasons subject to any restrictions set forth in this Agreement.
2) | WPTE will submit each Episode in accordance with the requirements of the STC for approval at least ten (10) days prior to such Episode’s first Telecast date as scheduled by Fox (the “Approval Schedule”). Each Episode will be of consistent quality with the Episodes produced by WPTE and distributed during the 2015 Tour season, provided Fox acknowledges that there will be certain changes to the presentation of the Episodes. |
3) | WPTE will submit each approved Episode at least five (5) business days prior to such Episode’s first Telecast date in accordance with the requirements of the STC (the “Delivery Schedule”). |
4) | For each Episode, WPTE will receive eight (8) thirty-second (:30) units of commercial inventory (the “Ad Time”) in the applicable Required Telecasts (as such term is defined in Section 5 below) and, if Fox schedules a rerun of such Season’s Episodes, then in any clearances that occur within seven (7) days of the first rerun of such Episode. WPTE shall have the sole right to include billboards, in-show sponsorships and entitlements in each Episode (“Integrations”) and to retain all revenues from such Integrations. The Ad Time and Integrations are subject to the terms of the Agreement including the STC. ClubWPT.com shall receive Poker E-Gaming (as defined below) category exclusivity for all commercial inventory and Integrations appearing within the Episodes (i.e., no other Poker E-Gaming advertiser or sponsor shall appear within an Episode or such Episode’s commercial inventory, whether controlled by WPTE or Fox), except that Incidental Appearances (as defined below) may appear within the Episodes. For purposes of this Agreement, “Poker E-Gaming” shall mean all real money gaming (“RMG”) and membership poker websites, and play-for-free tutorial poker websites (e.g., as known in the industry, the .net version of the .com RMG site) (“Tutorial Sites”). Fox acknowledges that certain Tutorial Sites may appear incidentally in Episodes as a result of patches and hats worn by players, promotional acknowledgements in the credits, background signage not controlled by WPTE (if any), announcers’ descriptions of where players came from, and other appearances approved by Fox in its reasonable discretion, so long as neither WPTE nor any WPTE affiliate receives direct or indirect compensation for such incidental appearance (“Incidental Appearances”); provided, however, all Incidental Appearances shall be subject to the terms of the STC including, without limitation, Fox’s approval rights set forth in Section 1, Section 2 and Section 7 of the STC. Notwithstanding Fox’s approval rights set forth in Section 1, Section 2 and Section 7 of the STC, Fox shall not use such approval rights to extract commercial benefit for itself (e.g., refuse to approve an Incidental Appearance unless an entity purchases ad time on the network). Fox further acknowledges and agrees that in the event that the Fox Guidelines (as defined in Section 1 of the STC), requirements or policies change so as to preclude ClubWPT.com Ad Time and Integrations or all Incidental Appearances as currently contemplated under this Agreement, Fox’s exclusive rights to each Episode during such Episode’s Broadcast Period (as defined in Section 8) shall become non-exclusive rights. WPTE shall use at least two (2) of WPTE’s eight (8) units of Ad Time in each Episode to advertise ClubWPT.com. Without limiting the foregoing, WPTE agrees that no Episode or unit of Ad Time, including promotions of ClubWPT.com and Incidental Appearances, shall: |
6 |
a. | Contain any reference, whether written or otherwise, to any entity, party or website (including, without limitation, any WPTE owned, controlled, affiliated and/or operated website or any website owned by any parent or affiliated entity of WPTE or under common control with WPTE or any third party website) that aids, abets, facilitates, promotes, provides an advertisement for and/or enables any form of wagering/gambling in the Territory (as defined below) or conducts or facilitates any activity that is in violation of any United States Federal, state or local law, rule or regulation; |
b. | Include or reference any website that aids, abets, facilitates, promotes, provides an advertisement for or otherwise enables any wagering/gambling activities or “links,” directly or indirectly, to or otherwise directs a viewer to any other website that enables wagering/gambling activities in the Territory; or |
c. | Aid, abet, facilitate, promote or otherwise enable any wagering/gambling activities (e.g., by making any references to any online wagering/gambling site or by providing a telephone number to a wagering/gambling business, etc.); |
provided, however; if (a) WPTE desires to accept advertising or sponsorship from, or allow Incidental Appearances of, a legalized online RMG site that has been licensed by the applicable state or federal government agency to conduct such business and is otherwise in compliance with all applicable laws and regulations, and (b) such advertising, sponsorship or Incidental Appearance is not prevented by Fox policy (which promotion shall be deemed in accord with Fox policy to the extent Fox is nationally (i.e., on FS1, FS2 or the nationally controlled portion of the FSN service but not including inventory controlled by distributors of multi-channel programming services (“MVPDs”)) distributing commercial inventory advertising a RMG site or nationally distributing programs sponsored by a RMG site but not including incidental appearances of an RMG site for which Fox does not receive direct or indirect compensation such as branding on a race car in a race being televised by Fox or non-Fox signage in a venue hosting an event being televised by Fox), then WPTE shall provide Fox with notice of such desire. Fox shall notify WPTE whether WPTE can include such RMG appearances in the Series. If Fox accepts WPTE’s request to include such RMG appearances within the Series then such appearance in the programming shall comply with limitations set by Fox on the prevalence and presentation of such appearances and Fox telecast standards and practices requirements (e.g., state “where applicable” and other appropriate disclosures, if any).
7 |
5) | Tour Series: Fox will use commercially reasonable efforts to clear each Tour Episode in accordance with the terms of the STC as follows: (i) a telecast on FSN Sunday at 8:00 PM (local time) (the “Main Tour Telecast”), (ii) a telecast on FSN Sunday at 11:00 PM (local time), and a telecast on FSN Wednesday at 11:00 PM (local time) (the “FSN Tour Telecasts”); and (ii) three (3) additional clearances on FSN within seven (7) days of the Main Tour Telecast (the “Additional FSN Tour Telecasts” and together with the Main Tour Telecast and the FSN Tour Telecasts, the “Required Tour Telecasts”); provided, however, if Fox changes FSN’s late night week day programming strategy then Fox shall have the right to shift the 11:00 PM FSN Tour Telecasts to midnight (local time). In addition, during each Season, Fox will telecast at least two “marathons” of Tour Episodes (“Tour Marathons”) consistent with World Poker Tour episode marathons telecast on FSN in the past. At least one Tour Marathon shall be telecast on FSN and the other Tour Marathon(s) may be telecast on FSN, the Fox Sports 1 programming service (“FS1”) or the Fox Sports 2 programming service (“FS2”). |
TBD Programming: Fox shall clear each TBD Episode in accordance with the terms of the STC at least three times on FSN (collectively, the “Required TBD Telecasts” and together with the Required Tour Telecasts, the “Required Telecasts”) without restriction as to time period except that Fox shall use commercially reasonable efforts to schedule one such airing at a consistent time and on a consistent day of the week as specified in a notice from Fox to WPTE sent at least 90 days prior to the first airing of the first TBD Episode of the applicable Season.
Without limiting Fox’s rights set forth herein, Fox shall have the right, but not the obligation, to air Episodes on FS1 and FS2.
6) | Fox will use commercially reasonable efforts to clear each of the Main Tour Telecast and the FSN Tour Telecasts of each Tour Episode in a minimum of 50 million homes (the “Clearance Threshold”) in accordance with the terms of the STC. In addition, Fox will use commercially reasonable efforts to clear in the aggregate, in the Clearance Threshold in accordance with the terms of the STC (i) the Additional FSN Telecasts of each Episode (i.e., cumulating the clearances for all three Additional Telecasts), and (ii) the Required TBD Telecasts (i.e., cumulating the clearances for all three Required TBD Telecasts). As used in this Agreement, “commercially reasonable efforts” shall not mean that Fox is relieved of its clearance or time placement obligations to WPTE in order to take commercial advantage of the clearance and time slots anticipated for airing of the Episodes (e.g., deal shopping). |
7) | Distribution Fee: WPTE will pay FSN a distribution fee of $1,000,000 for Season 15 increasing by 3% over the prior Season’s distribution fee in each of Season 16 (i.e., $1,030,000), Season 17 (i.e., $1,060,900) and Season 18 (i.e., $1,092,727). WPTE will pay FSN a distribution fee of $1,125,508 during the initial twelve month period of Season 19 and $656,547 during the final seven month period of Season 19 (such payments, collectively, the “Distribution Fee”). The Distribution Fee for each of Season 15, Season 16, Season 17, Season 18 and the initial twelve months of Season 19 shall be paid in five escalating installments equal to a percentage of the total payment for such period as follows: Ten Percent (10%) on May 15 of the applicable Season, Fifteen Percent (15%) on August 15 of the applicable Season, Twenty-Five Percent (25%) on November 15 of the applicable Season, Twenty-Five Percent (25%) on February 15 immediately following the applicable Season and Twenty-Five Percent (25%) on April 15 immediately following the applicable Season. The Distribution Fee for the final seven month period of Season 19 shall be paid in four installments as follows: $100,000 on May 15, 2022, $150,000 on August 15, 2022, $250,000 on November 15, 2022 and $156,547 on February 15, 2023. All payments shall be in accordance with the requirements of the STC. |
ClubWPT Payment Offset: WPTE shall have the right to apply ClubWPT Payments (as defined below) attributable to months in the applicable Season towards payment of the Distribution Fee for such Season. If the Distribution Fee due and payable is greater than the ClubWPT Payments available to be applied then WPTE shall be required to pay FSN the difference (the “Balance Payment”), provided, WPTE shall have the right to retain subsequent ClubWPT Payments attributable to months in the applicable Season to the extent WPTE has made Balance Payments. For example, if in Season 15 WPTE has made $50,000 in ClubWPT Payments at the time the first payment of $100,000 comes due, WPTE shall only be required to pay a Balance Payment of $50,000 and WPTE shall be entitled to deduct the Balance Payment from WPTE’s payment of the next ClubWPT Payment. For avoidance of doubt, WPTE cannot carry-forward ClubWPT Payments or Balance Payments from one Season to the next Season, provided, however, that FSN acknowledges that ClubWPT Payments for a given month are made in the following months pursuant to Section 10 of the ClubWPT Agreement and therefore ClubWPT Payments for some months in a Season may be paid in the months following such Season, and such ClubWPT Payments shall be applied to the Distribution Fee for the recently completed Season, not the month in which such ClubWPT Payments are actually paid. For purposes of this Agreement, “ClubWPT Payments” shall mean payments of the Fee (as such term is used in the ClubWPT Agreement) made by WPTE pursuant to Section 10 of the ClubWPT Agreement.
8 |
WPTE Credit: WPTE shall receive a credit (the “Credit”) against its obligation to make ClubWPT Payments (including those applied against the Distribution Fee) on February 1st of each of 2017, 2018, 2019, 2020 and 2021 in consideration of WPTE’s ongoing improvements and maintenance of the ClubWPT business; provided, however, if WPTE fails to deliver the required number of TBD Episodes then the credit received at the beginning of the applicable Season shall be retroactively reduced to proportionally reflect only the delivered TBD Episodes. The Credit for February 1, 2017, February 1, 2018, February 1, 2019, February 1, 2020 and February 2021 shall be $100,000 such year.
8) | Fox is hereby granted the following Telecast (as defined in the STC) rights: |
Exclusive rights to each Episode in the United States and its territories, possessions, commonwealths and military installations (the “Territory”), from the period beginning the Effective Date and ending on the earlier of (a) the one year anniversary of the first airing of such Episode on FSN, FS1 or FS2, and (b) the date fifteen (15) months after WPTE’s delivery of such approved Episode to Fox (the “Broadcast Period”). WPTE shall not Telecast, and shall not permit any third party to Telecast, any Episode in the Territory at the same time as the regularly scheduled Main Tour Telecast, FSN Tour Telecasts or the initial Required TBD Telecast as such schedule exists at the time WPTE enters into an agreement with a third party to Telecast any Episode.
Notwithstanding the foregoing exclusive Telecast rights:
a. | Upon written notice from WPTE that WPTE is party to an applicable agreement, the television network branded Poker Central (or a substitute network that has been approved in writing by Fox) shall have the right to Telecast all Episodes from each Season one week after Fox premieres the final Episode of the applicable Season. The Poker Central television network (or such substitute network that has been approved in writing by Fox) shall be prohibited from broadcasting Episodes on Fox’s regularly scheduled initial airing night for Episodes (currently Sundays) during the Broadcast Period via Poker Central’s linear television network; WPTE may permit Poker Central to make Episodes available on Fox’s regularly scheduled initial airing dates via Poker Central’s non-linear video applications (e.g., via Video On Demand). |
b. | Upon written notice to Fox from WPTE that WPTE is party to an applicable agreement, the network branded PlutoTV.com (or a substitute network that has been approved in writing by Fox) shall have the right to Telecast all Episodes from each Season thirty (30) days after Fox premieres the final Episode of the applicable Season. The PlutoTV.com network (or such substitute network that has been approved in writing by Fox) shall be prohibited from broadcasting Episodes on Fox’s regularly scheduled initial airing night for Episodes (currently Sundays) during the Broadcast Period via PlutoTV.com’s network which has a linear look-and-feel (e.g., regularly scheduled airings); WPTE may permit PlutoTV.com to make Episodes available on Fox’s regularly scheduled initial airing dates via PlutoTV.com non-linear video applications (e.g., via Video On Demand). |
9 |
c. | WPTE shall have the right to offer Episodes to ClubWPT subscribers on ClubWPT digital platforms at any time seven (7) days after the initial distribution of such Episode on Fox. |
d. | The restriction that prevents WPTE from Telecasting Episodes at certain regularly scheduled Fox airing/Telecast times shall not require WPTE to make such Episodes unavailable on WPTE’s YouTube channel at such times. |
e. | Notwithstanding anything in this Agreement to the contrary, WPTE shall have the right to distribute separate and distinct Spanish-language productions (i.e., unique footage and not just dubs of the Episodes into Spanish) of action from the Events from a Season in the Territory via Telecast and otherwise beginning two (2) weeks after Fox’s debut Telecast of the final Episode of such Season. WPTE shall have the right to distribute each Episode once on Sundays via Telecast and otherwise on the Fox Broadcasting Company affiliated stations during the Tour Broadcast Period in the following territories: New York City, Philadelphia, Chicago, Boston and Mid-Atlantic (Washington D.C.) (each a “Fox Broadcast Territory”) as long as Fox is able to obtain authorization for such distribution right from its non-owned and operated FSN affiliate in the relevant Fox Broadcast Territory. Fox agrees to use commercially reasonable efforts to obtain such authorization from its non-owned and operated affiliates. In the event that any non-owned and operated FSN affiliate that receives the right to Telecast Tour Episodes from Fox fails to air the Tour Episodes an average of three (3) times per week over any four (4) week period (a “Non-Compliant RSN”), WPTE shall have the right to revoke such Non-Compliant RSN’s right to Telecast Tour Episodes if WPTE is able to directly secure clearance obligations for Tour Episodes on another regional network within such Non-Compliant RSN’s territory that exceeds the clearance (i.e., more airings) being provided by the Non-Compliant RSN; provided that carriage on such replacement regional network shall be included in Fox’s obligation to meet the Clearance Threshold. |
f. | WPTE shall have the right to license Episodes to Comcast SportsNet Chicago, Comcast SportsNet Bay Area, Comcast SportsNet Philadelphia and such other television programming services as may be approved by Fox from time to time in its sole discretion (the “Permitted Third Party RSNs”) on the following conditions: |
a. | WPTE shall only license those Episodes as currently being distributed on FSN pursuant to the Agreement; |
b. | WPTE shall consult with Fox prior to entering into any license with a Permitted Third Party RSN, including, without limitation, any renewal of a license; |
c. | Fox shall allow the Permitted Third Party RSNs to access the Episodes from the FSN satellite feed provided that any incremental costs of Fox or such Permitted Third Party RSN shall be paid by such Permitted Third Party RSN; |
d. | If Fox is able to secure carriage of FSN on a television programming service in the home territory of the Permitted Third Party RSN (other than as part of an out-of-market package), then, at Fox’s election, WPTE shall terminate the license of the Episodes to such Permitted Third Party RSN as soon as practical after such triggering event takes effect; provided, however, Fox acknowledges that the license may include terms of up to three months and WPTE may not have the right to terminate such license until the expiration of such license’s term; provided, further, if Fox secures carriage of FSN on the Permitted Third Party RSN then WPTE’s license shall terminate immediately upon the effectiveness of Fox’s agreement with such Permitted Third Party RSN; |
e. | WPTE shall not grant any exclusive distribution rights to the Permitted Third Party RSNs. For avoidance of doubt, Episodes may be distributed nationally on FS1 and FS2 and in regional sports network out-of-market packages; |
f. | The household reach of any Permitted Third Party RSN that is licensing Episodes shall be included in Fox’s obligation to meet the Clearance Threshold; and |
g. | The grant of rights from WPTE to any Permitted Third Party RSN shall be subject to Fox’s rights set forth in this Agreement. |
10 |
In addition to Fox’s Telecast rights, Fox shall have the exclusive (subject to WPTE’s rights in this Section 8) right to distribute Episodes during such Episode’s Broadcast Period in all digital media including, without limitation, online streaming, on-demand (including, without limitation, start-over and look-back functionality), and mobile application distribution on digital platforms owned and operated by Fox or any distributor (e.g., MVPDs and over-the-top distributors) distributing the applicable linear network or programming from such network in a non-linear format; provided that Fox shall use commercially reasonable efforts to ensure that such digital distribution is limited to the Territory and that Fox’s obligation to include the Ad Time in such digital distribution shall be relieved to the extent advertising inventory is limited, not reasonably customizable or not performed or controlled by Fox. Fox may also distribute portions of the Episodes not to exceed two (2) minutes for any single clip or three (3) minutes in the aggregate from any Episode online without territorial restriction solely for purposes of promoting Fox’s distribution of the Episodes on FSN, FS1, FS2 and Fox’s digital platforms.
WPTE reserves all rights not granted to Fox herein within and outside the Territory. Nothing herein shall prevent WPTE from providing live online coverage or live online streaming of the Events. In addition, WPTE may also distribute portions of the Episodes not to exceed two (2) minutes for any single clip or seven (7) minutes in the aggregate from any Episode without territorial restriction solely for purposes of promoting WPTE or the Events.
9) | Fox shall have the right to use footage from Episodes not to exceed two (2) minutes for any single clip or three (3) minutes in the aggregate from any Episode (which may be increased by email confirmation from WPTE) for use in Fox Sports Media Group’s other sports and entertainment programming (e.g., editing and repackaging the footage from an Event for use in sports magazine-style programming) without territorial restriction. |
10) | Fox will provide promotion for the Tour Series and TBD Programming on FSN, FS1 and FS2 in national commercial inventory promoting the Series and ClubWPT.com (the “Promotional Ads”) with an annual average value of at least $1,500,000 (based on Fox’s rate card for such networks) during each Season, prorated for partial twelve-month periods and with a minimum annual value of at least $1,000,000 during each such full Season, the allocation of such media to be determined by Fox in its sole discretion. WPTE shall be responsible for producing and delivering the Promotional Ads to Fox. The Parties will mutually agree upon the allocation of the Promotional Ads between the Series and ClubWPT.com. |
11) | Fox must provide WPTE on a weekly basis available ratings information for the Telecasts of each Episode. |
12) | The parties shall negotiate for future rights to the Series during the period from December 15, 2021 to February 15, 2022 (the “Negotiation Period”) in accordance with the requirements of the STC. |
11 |
STANDARD TERMS & CONDITIONS
WPTE agrees to produce and license to Fox all rights and furnish all services in connection with the Series as described in the Agreement of which this STC forms a part. Defined Terms not defined in this STC shall have the meaning set forth in the WPT Terms.
1. PRODUCTION. WPTE will produce and deliver, at its sole cost, each Episode to Fox, complete and suitable for broadcasting. Each Episode will conform to all Fox approvals, as set forth below, and to all applicable Fox creative, format, commercial and technical standards and guidelines including those set forth in the Fox Supplier Information Booklet provided by Fox to WPTE, as may be revised from time to time (collectively, “Fox Guidelines”). At all times, Fox has the right of prior approval over all key elements of each Episode, including, without limitation, approval over: content; video; audio; graphic elements; special effects; talent; format; title; music; sequence; size and placement of program credits; and the dismissal or replacement of any key element. Furthermore, all drop-ins, promos, sponsorship elements, commercial mentions and/or product placements within any Episodes are subject to Fox prior written approval. Fox will exercise its right of approval in a good faith manner and consistent with similar network programming. WPTE will provide access to and information about the production of the Episodes to the Fox programming executive designated to oversee the production of the Episodes (“Programming Executive”). The Episodes, as supplied by WPTE, will not constitute infomercial programming nor contain any infomercials within such Episodes. WPTE may not alter, edit, change or adjust any Fox-supplied graphics, if any, without prior written approval from Fox. At the request of WPTE, Fox may also provide, in its discretion, music, special effects and Fox microphone flags. Fox retains all ownership rights to such materials and elements, including, but not limited to, all copyrights and trademarks. WPTE will not use any material or elements provided by Fox in any way or for any purpose other than as authorized by Fox. Fox has the unlimited right to edit, augment and otherwise adapt the Episodes solely for format purposes and as otherwise provided herein, subject to the rights granted to WPTE herein to have included in the Episodes WPTE-designated Ad Time. WPTE will provide closed-captioned text on line 21 of each Episode, as required by Federal law.
2. APPROVAL. WPTE shall submit each Episode, including all Ad Time to be included by WPTE as set forth in Section 7 of this STC, for review and approval, on DVD, to the Fox |
Programming Department at 10201 W. Pico Blvd., Building 103, Suite 2273, Los Angeles, CA 90035, no later than as required in the Approval Schedule. Fox shall examine each of the delivered Episodes to determine if each complies with all applicable Fox Guidelines. In the event Fox determines, in its sole discretion, that any Episode does not meet the Fox Guidelines in any respect, Fox shall, without waiver of any other remedy, have the right, in its sole discretion, to: (i) refuse to broadcast such Episode; (ii) inform WPTE of any and all deficiencies in detail, and, if time permits, WPTE shall rectify such problems at WPTE’s sole cost and resubmit for Fox’s approval, within the time advised by Fox, an acceptable revised Episode complying with Fox’s requested changes; or (iii) if WPTE has been afforded the opportunity to correct problems as set forth in (ii) above and has failed to do so or if time constraints do not allow enough time for WPTE to attempt to correct such problems, then Fox may attempt to correct the problem and bill WPTE for any reasonable costs incurred in connection with any such attempt and/or correction, such costs to be reimbursed by WPTE within fourteen (14) days of receipt of an appropriate invoice. All costs of delivering the Episodes to Fox in the required form and at the specified location shall be the sole cost and expense of WPTE. Any use by WPTE of the Fox logo in connection with any Episode or any use of the Fox name in connection with any publicity or marketing of the Series including, without limitation, for all press releases, must receive Fox prior approval. Notwithstanding Fox’s approvals at its “sole discretion” where indicated, Fox acknowledges and agrees that all approvals shall be made in good faith and in a manner consistent with general policy applied to similar network programming.
3. DELIVERY. Once approved by Fox, WPTE shall deliver each approved Episode to Fox at Fox Network Center – Houston, 4000 Technology Forest Blvd., The Woodlands, TX 77381 attn: Media Vault on HDCam or D5 (via Federal Express or other overnight delivery service) or satellite feed - NTSC (as requested by Fox) with an accompanying email to HoustonMediaServicesManagement@foxsports.net no later than as set forth in the Delivery Schedule. Upon Fox’s request, WPTE will | |
12 |
concurrently deliver a DVD copy of each Episode to the Programming Executive. WPTE acknowledges that Fox will permanently retain all Episode tapes and copies of satellite feeds delivered by WPTE in the Fox library vaults. WPTE will deliver, along with the delivery of each Episode, the Fox standard delivery requirements delineated in the Fox Guidelines. Such delivery requirements will include, without limitation, title elements, music cue sheets, and all promotional material required by Fox.
4. EXPENSES AND CLEARANCES. WPTE is solely responsible for all costs and expenses related to every Episode including, but not limited to: (i) all costs for materials, sponsored elements, the production staff, the personnel, the facilities, the services and all other costs required to produce each Episode; (ii) all necessary fees payable to any participants or owners of footage used within any Episode; (iii) all releases for the use of the names, likenesses, trademarks, service marks or other intellectual property of the individuals, entities and Events depicted in the Episodes; (iv) acquiring the necessary exclusive rights and licenses for production and distribution of the Episodes; and (v) obtaining all necessary rights, underlying rights, and all music licenses (including without limitation any and all master recording and synchronization rights) for music contained within the Episodes. Fox shall not be obligated to make any payment to WPTE or anyone else related to any Episode, its underlying material or on account of Fox’s exploitation of the Episodes as permitted herein.
5. RIGHTS. Fox’s rights to the Episodes within the Territory during the applicable Broadcast Period shall be to distribute, transmit, exhibit, license, advertise, duplicate, promote, perform, telecast and otherwise exploit, and to permit the distribution and other exploitation of, each Episode and its constituent elements, by all means of Telecast (as defined below) on the Fox programming services, without limitation as to the number of exhibitions and uses unless specified in the Agreement. For avoidance of doubt, Fox’s rights also include those additional rights set forth in Section 8 of Exhibit A (e.g., digital media rights such as on-demand and streaming rights). “Telecast” shall mean any means of distribution on a “linear programming service” via standard or non-standard television technology, whether presently existing or |
hereafter developed, including, without limitation, via free over-the-air television, basic, tier and/or premium cable distribution, direct broadcast satellite television (“DBS”), subscription television (“STV”), multi-point distribution systems (“MDS”), multiple multi-point distribution systems (“MMDS”), local multi-point distribution systems (“LMDS”), satellite master antennae television systems (“SMATV”), open video system (“OVS”), television receive-only (“TVRO”), closed circuit television, and, to the extent similar to the cable distribution business model of the Fox programming service, interactive TV, airline, cruise ships, restaurant and hotel/motel distribution, narrow and broadband services, video dial tone, and via Fox Sports Net’s video programming service currently known as “Fox Deportes” (or any successor network), and by any manner or system of payment. The foregoing shall include, without limitation, Fox’s right to Telecast Episodes, from time to time, as filler programming (an Episode Telecast in less than its entirety (but not re-edited)); provided, however, any cost or expense incurred in connection with such Episode modification or re-purposing shall be assumed by Fox. In connection with filler programming, Fox shall have no obligation to WPTE with regard to Ad Time. The exclusivity, if any, granted to Fox herein shall preclude WPTE from licensing or otherwise granting to any person, corporation, partnership, or other entity, any right to Telecast any Episode, portion thereof or any specific Event featured in an Episode, within the Territory during the applicable Broadcast Period, except as may be specifically set forth in the Agreement. Fox, its assignees and affiliates, shall have the right, without any payment, and may grant others the right, to reproduce, print, publish or disseminate in all manners and media now known or subsequently developed without regard to territory limitations, promotion for the Series, the name, likeness, voice and biographical information concerning each person appearing in or connected with the Series, brief portions of Episodes, as well as the names, logos, trademarks and other identities of WPTE, and of any other entities associated with WPTE to advertise, promote, publicize and distribute the Series and Fox’s exploitation thereof, as well as to advertise, promote and publicize Fox’s programming services, but not as a direct endorsement of any other product or services; provided, however, should WPTE be subject to any restrictions in connection with the use of | |
13 |
specific materials (e.g., images to which WPTE does not have promotional usage rights), Fox will observe such restrictions provided it receives reasonable advance written notice thereof. WPTE, at Fox’s request, will deliver at no charge existing slides, photos and other publicity and promotional materials reasonably available to or under the control of WPTE. Except as set forth in Section 1 of the STC with respect to Fox materials and elements and subject to the rights granted in this Agreement, the Episodes, including all elements thereof and rights contained therein, are and shall remain the exclusive property of WPTE under United States copyright, trademark and all other applicable laws and any rights not granted herein shall be reserved by WPTE.
6. DISTRIBUTION. Fox shall use commercially reasonable efforts to Telecast the FSN Tour Telecasts and, in the aggregate, each of the Additional FSN Tour Telecasts and the Required TBD Telecasts, of each Episode in the Clearance Threshold on regional sports networks carrying FSN programming (“Regionals”). Fox shall use commercially reasonable efforts to clear the Required Telecasts during the applicable telecast timeslots, if any. If Fox does not achieve the Clearance Threshold as required for an Episode, then Fox shall use commercially reasonable efforts to provide additional Telecasts for the particular Episode within seven days of the originally scheduled Telecast for such Episode at no charge to WPTE until the Clearance Threshold is met and, if such Telecast that did not achieve the Clearance Threshold was required to be cleared during a particular timeslot, then Fox shall use commercially reasonable efforts to provide such additional Telecasts during a time period similar to such timeslot or as close to such timeslot as reasonably practicable. The Required Telecasts schedule may be preempted by exceptional, non-recurring programming commitments imposed by third parties that are part of broader high priority programming packages of the applicable Fox network, or live event programming. If a Required Telecast is preempted, Fox shall use commercially reasonable efforts to provide additional Telecasts of such Episode during a time period similar to or as close to the Required Telecast timeslot for the particular preempted Episode within seven days of the originally scheduled Telecast for such Episode at no charge to |
WPTE. Fox has the right to replay each Episode on the Regionals, FS1 and/or FS2 at various times without restriction as to the number of airings.
7. SPONSORSHIP/ADVERTISING INVENTORY. In consideration of all rights and duties granted in this Agreement, WPTE will receive the Ad Time in the Telecast of each Episode for the promotion of ClubWPT.com and products and services of advertisers solicited by WPTE. All solicitations and sales proposed by WPTE of Ad Time and the content of all Integrations, Incidental Appearances, Promotional Ads commercials, billboards, features, signage and promotions (including, without limitation, ClubWPT.com advertising and signage, banners, mentions, and other promotion that WPTE is permitted to insert in any Episode (e.g., on persons’ bodies featured in the Episodes, hats, clothing, in the site background, etc.)) are subject to (i) Federal Communications Commission regulations and all other applicable federal and state regulations, (ii) News Corporation and Fox advertising regulations, telecast standards and practices policies, and (iii) Fox’s prior approval, which shall be exercised in a good faith manner and consistent with similar network programming. WPTE is prohibited from including within the Episodes any tobacco advertising. Unless otherwise set forth in this Agreement, WPTE may not include within the Episodes or the Ad Time (1) any hard liquor/spirits/distilled beverages advertising or promotion, (2) any casino, sports book, online gambling, lottery or any other gambling advertising or promotion or any poker or other casino, gaming or gambling tutorial advertising or promotion, other than Fox-approved Integrations for the casino hosting each Event, (3) any advertisements or promotions that may constitute “calls to action” for cable or satellite subscribers to demand carriage of any programming service from their cable operator or satellite provider, (4) any advertisements or promotions for any cable or broadcast entity, including, without limitation, ABC, TNT, CSTV, ESPN, ESPN2, ESPN.com, or ESPN Radio, or any affiliated entities, or (5) any per inquiry and/or direct response spots, without Fox’s prior written approval, which Fox may withhold in its sole discretion. Fox agrees that as of the Effective Date, casino Integrations that are similar to the casino Integrations contained in Season 14 of the Series are deemed Fox-approved Integrations. All WPTE- | |
14 |
proposed Integrations, advertisements, sponsors, promotions, billboards and features for inclusion within any Episode must be submitted in writing to and approved in writing by Fox in a timely manner prior to the first Telecast of such Episode. To ensure inclusion within the Episodes, all WPTE advertisements must (A) satisfy Fox’s technical delivery requirements delineated in the Fox Guidelines, (B) be delivered in position on the master Beta SP tapes delivered to Fox for Telecast with full program audio on channels 1 and 2, unless an alternative video/audio source is agreed to by Fox and WPTE, and (C) consist of an assortment of commercial advertisements appropriate for the number of spots to be aired. In the event that WPTE advertisements are not properly delivered in a timely manner (unless due to Fox’s negligence (e.g., untimely approvals)), Fox shall have no obligation to Telecast such advertisements. WPTE must fill all the Ad Time. WPTE may not authorize any third party to sell any Ad Time without Fox’s prior written approval, such approval not to be unreasonably withheld, although Fox acknowledges that WPTE may hire an agent to approach sponsors about purchasing the Ad Time. WPTE shall communicate to Fox those commercial sponsors sold so as to avoid any duplication in the sales effort.
8. PAYMENT. Except to the extent offset by ClubWPT Payments, the Distribution Fee shall be remitted to the following location, attention Josh Oakley, on the date of payment:
National Sports Programming File #55434 Los Angeles, CA 90012
Fox must receive payment of the Distribution Fee pursuant to the dates set forth in the Agreement regardless of the date WPTE receives an invoice from Fox. If any payment of the Distribution Fee is not received on or before the specified due date, Fox may elect to suspend future Telecasts of any and all Episodes.
9. RIGHT OF NEGOTIATION. During the Negotiation Period WPTE will negotiate in good faith with Fox for WPTE’s grant of rights to episodes of the Series in the following year using commercially reasonable efforts to reach an agreement as soon as practicable. The |
obligations of WPTE under this Section will survive any termination of this Agreement by Fox as a result of a breach by WPTE. Nothing in this Section is meant to imply nor shall be construed to create an exclusive right of negotiation during the Negotiation Period.
10. REPRESENTATIONS AND WARRANTIES. WPTE acknowledges that Fox’s rights in this Agreement are valuable and unique. WPTE represents, warrants and covenants to Fox that:
(i) (a) it has the full power and authority to make and perform this Agreement; (b) it has (or will have when the relevant programming is made available to Fox) the right to grant the license to distribute the Series, the Ad Time and the Promotional Ads purported to be granted in this Agreement; (c) the making or performance of this Agreement does not violate any of its agreements with any third party or any applicable law or court order; (d) the rights acquired by Fox, and its use of those rights, will not infringe on or violate any copyright, trademark, right of privacy, publicity or other literary or dramatic or any other right of any third party; (e) it will do nothing to interfere with or impair Fox’s rights in this Agreement; and (f) it will provide to Fox upon request any documents (such as agreements with participants and sites) that confirm WPTE has obtained the necessary rights to perform this Agreement;
(ii) neither the Ad Time, the Promotional Ads, the Series nor any of the elements or material contained within specific Episodes thereof will: (a) infringe on or violate any person’s or entity’s right of privacy or publicity or other personal property right of any third party; (b) libel, slander or otherwise defame or disparage any third party, or violate any of their copyright, trademark, service mark or moral rights; or (c) violate any applicable law; and
(iii) WPTE will not grant any rights inconsistent with the rights granted to Fox by this Agreement.
Fox represents and warrants to WPTE that it has the right to enter into this Agreement and to perform all of its obligations hereunder.
11. INDEMNIFICATION.
(a) WPTE shall at all times indemnify, defend and hold harmless Fox, its partners and all affiliated companies thereof and their respective officers, directors, partners, shareholders, | |
15 |
employees, agents and representatives from and against any claim, demand, liability or judgment, including reasonable attorneys’ fees and court costs (“Claims”) arising out of the breach of any representation, warranty or other obligation or provision of this Agreement or arising out of the use, distribution, licensing or sublicensing of the Series, the Promotional Ads or the Ad Time in accordance with this Agreement, arising out of the ClubWPT.com business and the promotion thereof, arising out of the content of the Series to the extent that such Claim is based upon alleged libel, slander, defamation, invasion of the right of privacy, or violation or infringement of copyright, literary or music rights or otherwise arising out of the content of the Series as furnished by WPTE to Fox. This indemnity shall survive termination of this Agreement.
(b) Fox shall at all times indemnify, defend and hold harmless WPTE, its partners and all affiliated companies thereof and their respective officers, directors, partners, shareholders, employees, agents and representatives from and against any Claim arising out of any breach of representation, warranty or other obligation or provision hereof, arising out of the use, distribution, licensing or sublicensing of the Series by Fox not in accordance with this Agreement, resulting from the editing or repackaging of footage from the Episodes pursuant to Section 9 or arising out of any material added by Fox to the Series. This indemnity shall survive termination of this Agreement.
(c) A party seeking indemnification will give the indemnifying party prompt notice of any claim or litigation to which indemnity may apply. Failure to give such prompt notice will relieve the indemnifying party of its indemnification obligations to the extent that such failure has prejudiced the indemnifying party’s defense of such claim or litigation. The indemnifying party shall have the right to assume and fully control the defense of any or all claims or litigation to which its indemnity applies. The indemnified party will cooperate fully (at the cost of the indemnifying party) with the indemnifying party in such defense and in the settlement of such claim or litigation.
(d) WPTE represents, warrants and covenants that it has or will secure prior to delivery of the initial Episode the following insurance: (i) Commercial General Liability: Such insurance shall be on an occurrence basis providing single limit coverage in an amount of |
not less than $1,000,000 per occurrence and shall include coverage for, but not limited to premises/operations, products/completed operations, contractual, independent contractors, broad form property damage, personal injury and fire legal liability. The policy shall not contain any intra-insured exclusion as between insured persons or organizations but shall include coverage for liability assumed under this Agreement as an “insured contract.” The Certificate Holders (as defined below) shall be added as additional insureds and coverage shall be primary to and not contributory with any similar insurance carried by Certificate Holders; (ii) Umbrella/Excess Liability: Limits of liability of at least $4,000,000 per occurrence for a total limit of not less than $5,000,000 including primary commercial general liability; (iii) Worker’s Compensation: Worker’s compensation and employers liability insurance with a limit of liability for “Coverage B” of at least $1,000,000 each occurrence, covering all personnel employed either directly or by way of contract from any payroll service provider utilized. All statutory limits must be provided. Such policy of insurance shall contain a waiver of subrogation in favor of the Certificate Holders; and (iv) Errors & Omissions Liability: Limits of liability of at least $5,000,000 per occurrence and $5,000,000 annual aggregate for a period of three years with a deductible not to exceed $100,000 or such reasonable and customary deductible amounts to be approved by Fox. Such Errors & Omissions Liability insurance policy shall add the Certificate Holders as additional insureds. Such Errors & Omissions Liability insurance will respond to any claims arising from the production or exhibition of any Series episode including without limitation, liabilities for infringement or misappropriation of any person’s intellectual property rights (including without limitation, copyright, trademarks, patents, trade secrets, know-how and other present and future property and/or proprietary rights of a similar nature), rights of publicity or rights of privacy, and false advertising. The insurance certificate should read as follows: Fox Sports Net, Inc., Fox Sports 1, LLC, Fox Entertainment Group, LLC, Twentieth Century Fox Film Corporation, Twenty First Century Fox, Inc., their parents, divisions, subsidiaries, affiliated companies, officers, directors, and employees (collectively, the “Certificate Holders”) are included as additional insureds. All insurance required above shall be with companies duly licensed to transact | |
16 |
business in California, and maintaining during the policy term a “general policy holders rating” of at least an A or better, V, or such other rating, as may be required by Fox. No such policy shall be cancelable or subject to modification except after thirty (30) days prior written notice to Fox. Notwithstanding the foregoing, the WPTE must maintain insurance coverage and limits that meets or exceeds the requirements set forth above during the Seasons and with respect to Errors & Omissions Liability, for one (1) year thereafter. A copy of the certificate of insurance may be faxed directly to the Fox Risk Management department at (310) 369-2177. The telephone number for the Risk Management Department is (310)-369-1025. However, an original must be mailed to Fox Entertainment Group,LLC, P.O. Box 900, Beverly Hills, California 90213, Attention: Risk Management (2121/2252).
12. MISCELLANEOUS.
(a) WPTE has no authority to bind Fox to any agreements or other obligations, and will not attempt to do so. WPTE and Fox are independent contractors, and nothing in this Agreement shall be deemed to create any partnership, joint venture or agency relationship. As between each other, each party is fully responsible for all persons and entities it employs or retains, except as otherwise specifically provided in this Agreement.
(b) WPTE shall conform with Title 47 of the United States Code Sections 507 and 317 concerning broadcast matter and disclosures required thereunder, insofar as those Sections apply to persons furnishing program material for television broadcasting, including the requirements set forth in the Fox Guidelines. Without limiting the foregoing, WPTE hereby certifies and agrees that it has no knowledge of any information relating to the Series that requires disclosure under Sections 507 and/or 317, that it will promptly disclose to Fox any such information of which it hereafter acquires knowledge and that it shall not, without Fox’s prior written approval, include in any Episode any matter for which any money, service, or other valuable consideration (as such terms are used in Sections 507 and/or 317) is directly or indirectly paid, accepted from, charged to or promised by a third party.
(c) If the delivery or Telecast of any Episode should be prevented or canceled due to any act of God, threat or act of terrorism, inevitable accident, strike or other labor dispute, fire, riot |
or civil commotion, government action or decree, inclement weather, failure of technical, production or television equipment or for any other reason beyond the control of WPTE or Fox, then neither WPTE nor Fox shall be obligated in any manner to the other with respect to such Episode(s), but all other rights Fox may have in this Agreement shall remain in effect and shall not be affected in any manner.
(d) Fox may terminate this Agreement if WPTE: (i) makes or has made a material misrepresentation; (ii) breaches a material obligation and such breach is not cured within a reasonable period of time; provided, however, that in no event shall the time to cure exceed five (5) days after receipt of written notice from Fox; or (iii) seeks relief under any bankruptcy statute, is placed in receivership or makes any assignment for the benefit of creditors. Fox’s right to terminate this Agreement in any such instance shall be in addition to any other rights or remedies it may have under this Agreement or at law. In the event Fox terminates this Agreement pursuant to this Section, Fox may continue to Telecast the Episodes during the applicable Broadcast Period with no obligation to Telecast WPTE-designated commercial inventory.
(e) WPTE may terminate this Agreement if Fox: (i) makes or has made a material misrepresentation; (ii) breaches a material obligation and such breach is not cured within a reasonable period of time; provided, however, that in no event shall the time to cure exceed five (5) days after receipt of written notice from WPTE; or (iii) seeks relief under any bankruptcy statute, is placed in receivership or makes any assignment for the benefit of creditors. WPTE’s right to terminate this Agreement in any such instance shall be in addition to any other rights or remedies it may have under this Agreement or at law.
(f) Except as specifically set forth herein, if either party breaches any provision of the Agreement, the damage, if any, caused to the other thereby will not be irreparable or otherwise sufficient to entitle a party to injunctive or other equitable relief. A party’s rights and remedies in any such event shall be strictly limited to the rights set forth in this Agreement and the right, if any, to recover monetary damages in an action at law.
(g) All notices from either party to the other must be given in writing and sent by registered or certified mail (postage prepaid and return receipt requested), by hand or messenger | |
17 |
delivery, by overnight delivery service, by facsimile with receipt confirmed, to the respective addresses of WPTE and Fox listed in this Agreement. Fox’s notice shall provide duplicate notice to the attention of: Senior Vice President, Business and Legal Affairs, c/o Fox Cable Networks, Building 103, 10201 West Pico Boulevard, Los Angeles, California 90035. Any notice or report delivered in accordance with this Section will be deemed given on the date actually delivered; provided that any notice or report deemed given or due on a Saturday, Sunday or legal holiday will be deemed given or due on the next business day. If any notice or report is delivered to any party in a manner which does not comply with this Section, such notice or report will be deemed delivered on the date, if any, such notice or report is received by the other party.
(h) Each party hereby agrees to execute any and all further documents that are necessary and proper to carry out the purposes of this Agreement.
(i) The failure or inability of either party to enforce any right hereunder will not waive any right with respect to other or future rights or occurrences.
(j) This Agreement contains the entire understanding of the parties. It supersedes all prior written or oral agreements and understandings pertaining to the subject matter of this Agreement and cannot be modified except by a written instrument signed by both parties.
(k) This Agreement and the rights and obligations of the parties under this Agreement shall be governed by and construed in accordance with the internal laws of the State of California, without reference to conflict of law provisions. Each party irrevocably and unconditionally: (i) submits to the general jurisdiction of the federal and state courts located in Los Angeles County, California; (ii) agrees that any action or proceeding concerning this Agreement will be brought exclusively in such courts; and (iii) waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding in any such court was brought in an inconvenient court and agrees not to claim or plead the same.
(l) Neither this Agreement nor any of the rights or obligations hereunder may be assigned by either party without the prior written consent of the other party; except that Fox may, without such consent, assign this Agreement or any or |
all of its rights or obligations hereunder to its parent company, or any affiliate, subsidiary, or partnership in which itself or the parent company has an ownership interest, and either Party may assign this Agreement or any or all of its rights or obligations hereunder to another entity in connection with a merger, reorganization or sale of all or substantially all of the assets of such Party. Subject to the foregoing, this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns, and no other person shall have any right, benefit or obligation under this Agreement as a third party beneficiary or otherwise.
(m) Any provisions in this Agreement found by a court to be void or unenforceable shall not affect the validity or enforceability of any other provisions in this Agreement.
(n) Except as required by law (in each case with confidential treatment requested and such disclosure limited to such information and such portions of the Agreement that the disclosing party is advised by counsel as legally required to be disclosed), each party to this Agreement shall keep this Agreement confidential and neither party shall promulgate, publish, or otherwise disseminate the terms, provisions, or substance of this Agreement other than to the officers, directors, attorneys, insurance agents, and accountants of the parties hereto.
(o) This Agreement may be executed in any number of counterparts, each of which shall be an original and all of which shall constitute together one and the same document. Any signature page of any such counterpart, or any electronic facsimile thereof, may be attached or appended to any other counterpart to complete a fully executed counterpart of this Agreement, and any telecopy or other facsimile transmission of any signature shall be deemed an original and shall bind such party. | |
18 |
Exhibit 10.23
August 26, 2016
Adam Pliska
CEO/President
WPT Enterprises, Inc.
1920 Main Street, Suite 1150
Irvine, California 92614
Re: | World Poker Tour Season Fourteen etc. – Exception to Exclusive Rights |
Dear Adam:
We refer to the agreements, dated as of May 10, 2013 (as amended) and May 24, 2016 (collectively the “Agreements”), between WPT Enterprises, Inc. (“WPTE”) and National Sports Programming (“Fox”), pursuant to which Fox will distribute episodes of the World Poker Tour television series. Any defined terms used but not defined herein shall have the meaning set forth in the applicable Agreement.
WPTE and Fox hereby agree that Section 8 of Exhibit A of each Agreement shall be amended by inserting the following paragraph (i) after the fourth full paragraph of Section 8 of Exhibit A of the May 10, 2013 Agreement, and (ii) after subparagraph 8(b) as a new subparagraph (8(b1) in Section 8 of Exhibit A of the May 24, 2016 Agreement:
“Notwithstanding the foregoing exclusive Telecast rights, WPTE shall have the right to offer for Telecast all Episodes of each season of the (Tour) Series on a subscription video-on-demand (SVOD) basis on World Poker Tour-branded applications powered by Zype delivered to OTT enabled devices (e.g., Roku, Apple TV) beginning one week after Fox premieres the final Episode of such season. Once initially available pursuant to the preceding sentence, WPTE shall not be required to restrict the availability of Episodes on such applications on dates that Fox premieres the then current season of the (Tour) Series (i.e., currently Sunday nights).”
Except as set forth herein, the Agreement will not otherwise be changed, altered or amended and remains in full force and effect. This letter agreement, together with the Agreements, constitutes the entire understanding and agreement between the parties with respect to the subject matter of the Agreements. If the above confirms your understanding, please signify your acceptance by signing below.
Sincerely,
NATIONAL SPORTS PROGRAMMING
By: __________________________
Name: ________________________
Title: _________________________
Agreed and Accepted by:
WPT ENTERPRISES, INC.
By: __________________________
Name: ________________________
Title: _________________________
Exhibit 10.24
January 23, 2017
Adam Pliska
CEO & President
WPT Enterprises, Inc.
1920 Main Street, Suite 1150
Irvine, California 92614
Re: World Poker Tour TBD Programming – Number of Episodes to be Supplied
Dear Adam:
We refer to the agreement, dated as of May 24, 2016 (as amended, the “Agreement”), between WPT Enterprises, Inc. (“WPTE”) and National Sports Programming (“Fox”), pursuant to which Fox will distribute episodes of the World Poker Tour television series and TBD Programming. Any defined terms used but not defined herein shall have the meaning set forth in the Agreement.
WPTE and Fox hereby agree that the second full paragraph of Section 1 of Exhibit A of the Agreement is amended and restated as follows:
“TBD Programming: In each Season, WPTE will supply to Fox eight (8) fully produced and broadcast quality sixty (60) minute (between forty-two minutes twenty-one seconds (42:21) and forty-four minutes twenty-one seconds (44:21) of content as determined by Fox) episodes of original programming (the “TBD Episodes” and together with the Tour Episodes, “Episodes”). The TBD Episodes will be composed of mutually agreed upon content connected with WPTE.”
Except as set forth herein, the Agreement will not otherwise be changed, altered or amended and remains in full force and effect. This letter agreement, together with the Agreement, constitutes the entire understanding and agreement between the parties with respect to the subject matter of the Agreement.
[Signature Page Follows]
1 |
If the above confirms your understanding, please signify your acceptance by signing below.
Sincerely,
NATIONAL SPORTS PROGRAMMING
By: _______________________________
Name: _____________________________
Title: ______________________________
Agreed and Accepted by:
WPT ENTERPRISES, INC.
By: ________________________________
Name: _____________________________
Title: ______________________________
2 |
Exhibit 10.25
June 1, 2017
Adam Pliska
CEO & President
WPT Enterprises, Inc.
1920 Main Street, Suite 1150
Irvine, California 92614
Re: World Poker Tour Corporate Restructure & Change of Ownership of Episodes
Dear Adam:
We refer to the Program Production and Televising Agreement, dated as of July 25, 2008 (as amended from time to time, the “ClubWPT Agreement”) and the Agreement, dated as of May 24, 2016 (as amended, the “Network Agreement”, and together with the ClubWPT Agreement, the “Agreements”), between WPT Enterprises, Inc. (“WPTE”) and National Sports Programming (“Fox”), pursuant to which Fox will distribute episodes of the World Poker Tour television series and TBD Programming. Any defined terms used but not defined herein shall have the meaning set forth in the Agreements.
Fox acknowledges that due to changes in WPTE’s corporate structure, WPTE will assign any and all ownership of the Programs as referenced in the ClubWPT Agreement and any and all ownership of the Episodes as referenced in the Network Agreement to WPT Studios USA, Inc., a new Nevada corporation under the same common ownership as WPTE.
WPTE and Fox hereby agree that the first sentence of Section 6 of the ClubWPT Agreement is amended and restated as follows:
“a. WPT Studios USA, Inc. shall be the sole and exclusive worldwide owner of all rights in the Programs and all elements thereof and all translations and localizations thereof except for FSN’s proprietary marks used in the Programs, if any, and FSN’s proprietary rights used in the production of the Programs; provided, however, FSN hereby grants WPT Studios USA, Inc. a non-exclusive license to include such FSN proprietary rights as part of the Programs; provided, further, FSN acknowledges and agrees that WPT Studios USA, Inc. has the non-exclusive right to use the Program format independently of the production of the Programs.”
WPTE and Fox hereby agree that the last sentence of Section 5 of the Standard Terms & Conditions in Exhibit A of the Network Agreement is amended and restated as follows:
“Except as set forth in Section 1 of the STC with respect to Fox materials and elements and subject to the rights granted in this Agreement, the Episodes, including all elements thereof and rights contained therein, are and shall remain the exclusive property of WPT Studios USA, Inc. under United States copyright, trademark and all other applicable laws and any rights not granted herein shall be reserved by WPT Studios USA, Inc.”
Except as set forth herein, the Agreements will not otherwise be changed, altered or amended and remains in full force and effect. This letter agreement, together with the Agreements, constitutes the entire understanding and agreement between the parties with respect to the subject matter of the Agreements.
1 |
If the above confirms your understanding, please signify your acceptance by signing below.
Sincerely,
NATIONAL SPORTS PROGRAMMING
By: ________________________________
Name: _____________________________
Title: ______________________________
Agreed and Accepted by:
WPT ENTERPRISES, INC.
By: ________________________________
Name: _____________________________
Title: ______________________________
2 |
Exhibit 10.26
May 26, 2017
Adam Pliska
CEO/President
WPT Enterprises, Inc.
1920 Main Street, Suite 1150
Irvine, California 92614
Re: | World Poker Tour Season Fifteen etc. – Exception to Exclusive Rights |
Dear Adam:
We refer to the agreements, dated as of May 10, 2013 (as amended) and May 24, 2016 (collectively the “Agreements”), and the Exception to Exclusive Rights letter agreement dated as of August 29, 2016 (the “Letter”) between WPT Enterprises, Inc. (“WPTE”) and National Sports Programming (“Fox”), pursuant to which Fox will distribute episodes of the World Poker Tour television series. Any defined terms used but not defined herein shall have the meaning set forth in the applicable Agreement.
WPTE and Fox hereby agree that the Letter shall be restated and replaced with this letter agreement and that Section 8 of Exhibit A of each Agreement shall be amended by inserting the following paragraph (i) after the fourth full paragraph of Section 8 of Exhibit A of the May 10, 2013 Agreement, and (ii) after subparagraph 8(b) as a new subparagraph (8(b1) in Section 8 of Exhibit A of the May 24, 2016 Agreement:
“Notwithstanding the foregoing exclusive Telecast rights, WPTE shall have the right to offer for Telecast all Episodes of each season of the (Tour) Series on a subscription video-on-demand (SVOD) and an advertising video-on-demand (AVOD) basis on World Poker Tour-branded applications powered by Zype delivered to OTT enabled devices (e.g., Roku, Apple TV) beginning one week after Fox premieres the final Episode of such season. Once initially available pursuant to the preceding sentence, WPTE shall not be required to restrict the availability of Episodes on such applications on dates that Fox premieres the then current season of the (Tour) Series (i.e., currently Sunday nights). WPTE agrees and acknowledges that Fox shall have the right to revoke such AVOD rights with written notice to WPTE.”
Except as set forth herein, the Agreement will not otherwise be changed, altered or amended and remains in full force and effect. This letter agreement, together with the Agreements, constitutes the entire understanding and agreement between the parties with respect to the subject matter of the Agreements. If the above confirms your understanding, please signify your acceptance by signing below.
Sincerely,
NATIONAL SPORTS PROGRAMMING
By: _________________________
Name: _______________________
Title: ________________________
Agreed and Accepted by:
WPT ENTERPRISES, INC.
By: _________________________
Name: _______________________
Title: ________________________
Exhibit 10.27
September 6, 2017
Adam Pliska
CEO/President
WPT Enterprises, Inc.
1920 Main Street, Suite 1150
Irvine, California 92614
Re: | World Poker Tour Season Fifteen etc. – Exception to Exclusive Rights |
Dear Adam:
We refer to the agreements, dated as of May 10, 2013 (as amended) and May 24, 2016 (collectively the “Agreements”), between WPT Enterprises, Inc. (“WPTE”) and National Sports Programming (“Fox”), pursuant to which Fox will distribute episodes of the World Poker Tour television series. Any defined terms used but not defined herein shall have the meaning set forth in the applicable Agreement.
WPTE and Fox hereby agree that Section 8 of Exhibit A of each Agreement shall be amended by inserting the following paragraph (i) after the fourth full paragraph of Section 8 of Exhibit A of the May 10, 2013 Agreement, and (ii) after subparagraph 8(g) as a new subparagraph (8(h)) in Section 8 of Exhibit A of the May 24, 2016 Agreement:
“Notwithstanding the foregoing exclusive Telecast rights, WPTE shall have the right to offer for Telecast all Episodes of each season of the (Tour) Series on an advertising video-on-demand (AVOD) basis powered by Tubi TV delivered to OTT enabled devices (e.g., Roku, Apple TV) beginning one week after Fox premieres the final Episode of such season. Once initially available pursuant to the preceding sentence, WPTE shall not be required to restrict the availability of Episodes on such applications on dates that Fox premieres the then current season of the (Tour) Series (i.e., currently Sunday nights). WPTE agrees and acknowledges that Fox shall have the right to revoke such AVOD rights with written notice to WPTE.”
Except as set forth herein, the Agreement will not otherwise be changed, altered or amended and remains in full force and effect. This letter agreement, together with the Agreements, constitutes the entire understanding and agreement between the parties with respect to the subject matter of the Agreements. If the above confirms your understanding, please signify your acceptance by signing below.
Sincerely,
NATIONAL SPORTS PROGRAMMING
By: _________________________
Name: _______________________
Title: ________________________
Agreed and Accepted by:
WPT ENTERPRISES, INC.
By: _________________________
Name: _______________________
Title: ________________________
Exhibit 10.28
OFFICE LEASE
WILSHIRE COURTYARD
WILSHIRE COURTYARD L.L.C.,
a Delaware limited liability company,
as Landlord,
and
WPT ENTERPRISES, INC.,
a Delaware corporation
as Tenant.
TABLE OF CONTENTS
Page | ||
1. | Premises, Building, Project, And Common Areas; Rentable Square Footage. | 4 |
2. | Lease Term. | 6 |
3. | Rent. | 9 |
4. | Additional Rent. | 9 |
5. | Use of Premises. | 16 |
6. | Services and Utilities. | 17 |
7. | Repairs. | 19 |
8. | Additions and Alterations. | 20 |
9. | Covenant Against Liens. | 21 |
10. | Insurance. | 22 |
11. | Damage and Destruction. | 24 |
12. | Nonwaiver. | 25 |
13. | Condemnation. | 26 |
14. | Assignment And Subleting. | 26 |
15. | Surrender Of Premises; Ownership And Removal Of Trade Fixtures. | 30 |
16. | Holding Over. | 31 |
17. | Estoppel Certificates. | 31 |
18. | Subordination. | 31 |
19. | Defaults; Remedies. | 32 |
20. | Covenant Of Quiet Enjoyment. | 34 |
21. | Security Deposit. | 34 |
i |
TABLE OF CONTENTS
Page | ||
22. | Credit. | 35 |
23. | Signs. | 37 |
24. | Compliance With Law. | 37 |
25. | Late Charges. | 37 |
26. | Landlord's Right To Cure Default; Payments By Tenant. | 38 |
27. | Entry By Landlord. | 38 |
28. | Tenant Parking. | 38 |
29. | Miscellaneous Provisions. | 39 |
EXHIBITS | ||
A | OUTLINE OF PREMISES | |
B | TENANT WORK LETTER | |
C | FORM OF NOTICE OF LEASE TERM DATES | |
D | RULES AND REGULATIONS | |
E | FORM OF TENANT'S ESTOPPEL CERTIFICATE | |
F | FORM OF SUBORDINATION, NONDISTURBANCE AND ATTORNMENT AGREEMENT | |
G | FORM OF CONSENT TO TRANSFER | |
I-f | FORM OF LETTER OF CREDIT |
ii |
1
WILSHIRE COURTYARD OFFICE LEASE This Office Lease (the ''Lease''), dated as of the date set forth in Section 1 of the Summary of Basic Lease Information (the ''Summary''), below, is made by and between WILSHIRE COURTYARD L.L.C., a Delaware limited liability company (''Landlord''), and WPT ENTERPRISES, INC., a Delaware corporation (''Tenant''). • TERMS OF LEASE SUMMARY OF BASIC LEASE INFORMATION . DESCRIPTION 1. Date: September 24, 2004 2. Premises (Article 1). 2.1 Building: 5700 Wilshire Boulevard, Los Angeles, California 90036, containing 536,027 rentable square feet. 2.2 Premises: 15,901 rentable square feet of space located on the third (3 rd ) floor of the Building, as further set forth in Exhibit - A to the Office Lease. 3. Lease Te1111 (Article 2). 3.1 3.2 Length ofTe1m: Lease Commencement Date: 3.3 Lease Expiration Date: Seventy - five (75) months. The earlier of(a) the date which is ten (10) days after Substantial Completion of the Premises (defined in Lease Section 2.1), and (b) the date on which Tenant first occupies the Premises for the conduct of business therefrom. Seventy - five (75) months following the Lease Commencement Date. 4. Base Rent (Article 3): Period Following Lease Commencement Date Month s 1 - 3 [JSG:se/102994_5.DOC/092404/4040.039] Monthly Installment of Base Rent Monthly Rental Rate per Rentable Square Foot $ 0.00 Months 4 - 15 $37,844.38 Months 16 - 27 $39,116.46 Months 28 - 39 $40,388.54 Months 40 - 51 $41,660.62 Months 52 - 63 $43,091.71 Months 64 - 75 $44,522.80 $ 0.00 $ 2.38 $ 2.46 $ 2.54 $ 2.62 $ 2.71 $ 2.80 - 1 -
5. Base Year (Article 4): Calendar year 2004. 6. Tenant's Share (Article 4): . Approximately 2.966o/o. 7. Permitted Use (Article 5): 8. 9. Security Deposit Parking Pass Ratio (Article 28): General office use consistent with a first - class office building, including, without limitation, entertainment and television production and post - production facilities and related activities consistent with a first - class office building $44,522.80 Up to three and one half (3.5), but no less than two and one - half (2.5) umeserved parking passes for every 1,000 rentable square feet of the Premises. Subject to the terms of Article 28 of the Lease, Tenant may elect to convert up to two (2) umeserved parking passes to reserved parking passes. 10. Address of Tenant (Section 29.18): 11. Address of Landlord (Section 29.18): 1041 N. Formosa Formosa Building, Suite 99 Hollywood, CA 90045 Attention: Adam Pliska, Director of Business a11d Legal Affairs (Prior to Lease Commencement Date) and 5700 Wilshire Boulevard Suite 350 Los Angeles, CA 90036 Attention: Adam Pliska, Director of Business and Legal Affairs (After Lease Commencement Date) with a copy to: Sonnenschein Nath & Rosenthal LLP 601 South Figueroa Street, Suite 1500 Los Angeles, CA 90017 Attention: Robert M. Johnson, Esq. See Section 29.18 of the Lease. (JSG:se/102994_5.DOC/092404/4040.039] - 2 -
- 3 - [JSG:se/102994_5.DOC/092404/4040.039] 12. Broker(s) (Section 29.24): McCarthy Coolc & Co. LLC Wilshire Courtyard 5750 Wilshire Boulevard Los Angeles, California 90036 and Julien J. Studley, Inc. 10960 Wilshire Boulevard, 17 th Floor Los Angeles, California 90024 Attu: Janice Cimbalo Robert Cavaiola •
- 4 - [JSG:se/102994_5.DOC/092404/4040.039] 1. Premises, Building. Project, And Common Areas; Rentable Square Footage. 1. Premises, Building. Project and Common Areas. (a) The Premises. Landlord hereby leases to Tenant and Tenant hereby leases from Landlord the premises set forth in Section 2.2 of the Summary (the ''Premises''). The outline oftl1e Prenlises is set forth in Exhibit A attached hereto and each floor or floors of the Premises has the number ofrentable square feet as set forth in Section 2.2 of the Summary. The parties hereto agree that the lease of the Premises is upon and subject to the terms, covenants and conditions herein set forth, and Tenant covenants as a material part of the consideration for this Lease to keep and perform each and all of such terms, covenants and conditions by it to be kept and performed and that this Lease is made upon the condition of such performance. The parties hereto her·eby acknowledge that the purpose of Exhibit A is to show the approximate location of the Premises in the ''Building," as that ter1n is defined in Section 1.1(b), below, only, and such Exhibit is not meant to constitute an agreement, representation or warranty as to the construction of the Premises, the precise area thereof, or the specific location of the ''Common Areas," as that te1m is defined in Section 1 . l(c), below, or the elements thereof or of the accessways to the Premises or the ''Project," as that term is defined in Section l.l(b}, below. Except as specifically set forth in this Lease and in the Tenant Work Letter attached hereto as Exhibit B (the ''Tenant Work Letter''), Landlord shall not be obligated to provide or pay for any improvement work or services related to the improvement of the Prenlises. Tenant also acknowledges that neither Landlord nor any agent of Landlord has made any representation or warranty regarding the condition of the Prenlises, the Building or the Project or witl1 respect to the suitability of any of the foregoing for the conduct of Tenant's business, except as specifically set forth in this Lease and the Tenant Work Letter. The talcing of possession of the Premises by Tenant shall conclusively establish that the Premises and the Building were at such time in good and sanitary order, condition and repair. (b) The Building and The Project. The Prenlises are a part of the building set forth in Section 2.1 of the Summary (the ''Building''). The Building is part of an office project known as ''Wilshire Courtyard." The term ''Project," as used in this Lease, shall mean (i) the Building and the Conlillon Areas, (ii) the land (which is improved with landscaping, subterranean parking facilities and other improvements) upon whicl1 tl1e Building and the Common Areas are located, and (iii) the other office building located adjacent to the Building and the land upon which such adjacent office building is located, and (iv) at Landlord's discretion, any additio11al real property, areas, land, buildings or other improvements added thereto outside of the Project. (c) Common Areas. Tenant shall have the non - exclusive right to use in comn1on with other tenants in the Project, and subject to the rules and regulations referred to in Article 5 of this Lease, those portions of the Project which are provided, from time to time, for use in common by Landlord, Tenant and any other tenants of the Project (such areas, together with such other portions of the Project designated by Landlord, in its discretion, including certain areas designated for the exclusive use of certain tenants, or to be shared by Landlord and certain tenants, are collectively referred to herein as the ''Common Areas''). The Co1nmon Areas shall consist of the ''Project Common Areas'' and the ''Building Common Areas." The terrn ''Project Common Areas," as used in this Lease, shall mean the portion of the Project designated as such by Landlord. The term ''Building Common An·eas," as used in this Lease, shall mean the portions of the Common Areas located within the Building designated as such by Landlord. The manner in which the Common Areas are maintained and operated shall be at the sole discretio11 of Landlord, provided that Landlord shall maintain and operate same in a manner consistent with that of other first class, high - rise office buildings in the vicinity of the Building (the ''Comparable Buildings'') and the use thereof shall be subject to such reasonable rules, regulations and restrictions as Landlord may malce from time to ti1ne. Landlord reserves the right to close temporarily, make alterations or additions to, or change the location of elements of the Project and the Common Areas, provided such alterations, additions or changes do not adversely affect access to or Tenants normal business operations in the Premises. 2. Square Footages. The parties stipulate to the rentable area of the Prenlises and the Building set forth in Section 2 of the Summary, and such areas shall not be subject to remeasurement by either party. 3. Right_ of First Offer for Additional Space. (a) Proposal to Lease. Subject to the other provisions of this Section 1.3 , and pr·ovided Tenant is not in default hereunder (after any applicable notice and lapse of applicable cure periods), if any por·tion of
- 5 - [JSG:se/102994_5.DOC/092404/4040.039] the third (3 rd ) floor of the Building containing 5,000 to 10,000 rentable square feet and which is immediately adjacent to the Premises, becomes available for lease to others (the ''Available Space'') during the Lease Te•nrx"'n, Tenant shall have an ongoing right of first offer to lease such Available Space that becomes available as set forth herein. For purposes of this Section 1.3 , Available Space shall not include (i) space for which existing leases are being renewed, or (ii) space which is the subject of options to expand or rights of first offer granted to any othe1· person or tenant, which rights are existing on the date hereof or are granted hereafter without violation of Tenant's rights hereunder in connection with a lease of Available Space to any other Person for which Tenant has been given an opportunity to lease such Available Space hereunder. (b) Offer Notice. Until the termination of Tenant's rights under this Section 1.3 , provided Tenant has given Landlord notice of Tenant's interest in leasing Available Space (an ''Interest Notice'') (except as set forth below), Landlord shall not, within one hundred twenty (120) days after receipt of such notice, enter into or commit to enter into any lease of Available Space without first giving Tenant a notice (''Offer Notice'') offering to lease such Available Space to Tenant on the following tern1s and conditions: (A) the term of this Lease as to such Available Space shall commence on the date on which Landlord delivers possession thereof to Tenant and shall continue (i) with respect to any lease of Available Space entered into on or before the third (3' d ) anniversary of the Commencement Date, until the end of the Lease Term as to the balance of the Premises, and (ii) with respect to any lease of Available Space entered into after the third (3 rd ) anniversary of the Commencement Date, until the end of the Renewal Term as if the frrst Renewal Option were exercised (whether or not the first Renewal Option is, in fact, exercised by Tena11t); (B) the Base Rent payable by Tenant for the Available Space shall be the Market Rent (as defined in Section 2.2 below) and the Base Year with respect to the Available Space leased by Tenant shall be adjusted in accordance with such Market Rent, (C) Tenant shall pay Additional Rent for the Available Space in accordance with the provisions of Article 4 of this Lease; (D) Tenant shall receive the applicable improvement allowance and other applicable concessions as determined in connection with the determination of the Market Rent for the Available Space to the extent any such allowance is then being given in the Comparable Transactions used in the determination of such Market Rent; and (E) the Available Space shall be added to the Premises for all other purposes of this Lease and all of the other terms and conditions of this Lease shall apply to such Available Space that is leased by Tenant during the term of this Lease witl1 respect thereto. Tenant shall not be obligated to give Landlord an Interest Notice unless Landlord has previously given Tenant written notice specifying the current availability of the Available Space for lease to others and the dates the Available Space, if not currently available, will become available for lease to others (the ''Available Space Notice'') and the information contained in any Available Space Notice most recently given to Tenant remains accurate. If Landlord has not given Tenant an Available Space Notice which remains accurate, Landlord shall give Tenant an Offer Notice as set forth above, even without receipt of an Interest Notice from Tenant, prior to Landlord's entering into or committing to enter i11to any lease of Available Space, after which the other provisions of this Section 1.3 shall apply. (c) No Acceptance. If Tenant does not accept the Available Space offered by Landlord by giving Landlord written notice of such acceptance (the ''Acceptance Notice'') within ten (10) business days after receipt of such Offer Notice, then Landlord_ shall be free to lease such space to any other Person and Tenant shall not have any rights under this Section 1.3 with respect to such Available Space for a period of one hundred fifty (150) days after expiration of said ten (10) business day period, and only upon Tenant's delivery of another Interest Notice. Tenant also shall have its rights under this Section 1.3 with respect to such space not accepted by Tenant, when such space again becomes Available Space after the expiration of a lease thereof to a third party. (d) Market Rent. If Tenant timely accepts the Available Space offered by Landlo1·d, Tenant shall lease the same from Landlord on the terms and co11ditions described in Paragraph l .3(b) and at the Market Rent determined as follows. Landlord and Tenant shall attempt to agree on the Market Rent for a period often (10) business days after the after the date on which Tenant accepts the Available Space offered by Landlord in the Offer Notice. In the event that Landlord and Tenant do not agree upon such rent within said ten (10) business day period, on the fifth (5th) business day after the expiration of said ten (10) business day period, Landlord and Tenant shall each simultaneously submit to the other in writing its good faith estimate of the Market Rent. If the higher of said estimates is not more than one hundred and five percent (105%) of the lower of such estimates, the Market Rent in question shall be deemed to be the average of the submitted rates. If otherwise, then the rate shall be set by arbitration to be held in Los Angeles County, California in accordance with the Real Estate Valuation Arbitration Rules of the American Arbitration Association, as follows. Landlord and Tenant shall within five (5) business days after submittal of their estimates, each appoint a reco3nized real estate expert who is a member ofM.A.I., who has
- 6 - [JSG:se/102994_5.DOC/092404/4040.039] 10 years of professional real estate experience in the market where the Premises are located and who shall have generally recognized current competence in the valuation of rental properties similar to the Building and Project which are located in the vicinity of the Project. The two experts so appointed shall appoint a third recognized real estate expert possessing the aforesaid qualifications. If the three experts to be so appointed are not appointed within ten (10) business days of the date the appraisal procedure is invoked, then the expert or experts, if any, who have been selected shall proceed to carry out the appraisal using the definition of Market Rent set forth in Paragraph 2.2(c) below. The expert or experts shall determine the Market Rent in accordance with the terms of this Lease and pick one of the two rates submitted, being the rate that is closer to the Market Rent as deter1nined by the a1·bitrator using the definition set forth in Section 2.2. Any such selection shall be signed by a majority of the experts if more than two have been selected. If only two experts have been selected and they are unable to agree, then eithe1· Landlord or Tenant shall be entitled to apply to the presiding judge of the Superior Court of The County of Los Angeles, California for the selection of a third expert who shall then participate in such appraisal proceedings, and who shall be selected from a list of names of experts possessing the aforesaid qualifications submitted by Landlord and/or from a list of names of experts possessing the aforesaid qualifications submitted by Tenant. Each party shall pay the cost of the appraiser selected by such party, and shall equally share the cost of the third appraiser. The parties agree to be bound by the decision of the arbitrators, which shall be final and non - appealable, and judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction thereof. Within fifteen (15) business days after the determination of the Rent under this Section, Tenant and Landlord shall execute an appropriate lease amendment reflecting Tenant's acceptance of the Offer Notice as to specific Available Space and setting forth the Rent therefor. (e) Termination of Right. Tenant's rights under this Section 1.3 shall expire (i) if Tenant exercises the Renewal Option, on the eighth (8 th does not timely exercise the Renewal Option set forth in Section 2.2 below, upon the lapse of Renewal Option on the date which is twelve (12) months prior to the expiration of the initial Lease Term, or (ii) if Tenant timely ) anniversary of the Lease Commencement Date. (f) Same Terms and Conditions. During the term of this Lease with respect to any Available Space leased by Tenant, such Available Space shall become part of the Premises and, except as otherwise provided in this Section 1.3 , shall be leased upon the same terms and conditions as the original Premises. (g) Personal Right. Tenant's right to lease Available Space as set forth in this Sectio11 1.3 is personal to Tenant and may not be assigned, transferred or conveyed to any party, except to an entity to which this Lease has been assigned (as permitted pursuant to Article 14 below) in its entirety which (i) has succeeded to the entire business and assets (by merger, reorganization or otherwise) of the original Tenant hereunder, or (ii) which is owned or controlled by Tenant or is under common ownership or control with Tenant. For purposes hereof, the words ''control," and ''Person'' shall have the meanings ascribed to them in Paragraph 2.2(d) below. The foregoi11g shall not be construed to limit Tenant's ability to exercise its rights under this Section 1.3 for the benefit of any other assignee of the Lease permitted pursuant to Article 14 below. • 2. Lease Term. 2.1 Initial Term. The terms and provisions of this Lease shall be effective as of tl1e date of this Lease. The term of this Lease (the ''Lease Term'') shall be as set forth in Section 3.1 of the Summary, shall commence on the date set forth in Section 3.2 of the Summary (the ''Lease Commencement Date''), and sl1all terminate on the date set forth in Section 3.3 of the Summary (the ''Lease Expiration Date'') unless this Lease is sooner terminated as hereinafter provided. For purposes of this Lease, the term ''Lease Year'' shall mean each consecutive twelve (12) month period during the Lease Term; provided, however, that the first Lease Year sl1all commence on the Lease Commencement Date and end on the last day of the eleventh month thereafter and the second and each succeeding Lease Year shall commence on the first day of the next calendar month; and further provided that the last Lease Year shall end on the Lease Expiration Date. For purposes of this Lease, ''Substantial Completion'' of the Premises shall occur upon (i) the completion of construction <>fthe ''Tenant Improven1ents," as that term is defined in Section 2.1 of the Tenant Work Letter, in the Premises pursLiant to the plans and drawings which were prepared pursuant to the terms of the Tenant Work Letter, with the ex1;eption of any minor punch list items which do not adversely affect the ability of Tenant to utilize the Premises (s11ch as minor items of decoration) and (ii) Tenant has had unrestricted access to the Premises and the Building (including common areas) in accordance with the terms of this Lease. Subject to Section 2.4 below, this Lease shall not be void, voidable or subject to
- 7 - [JSG:se/102994_5.DOC/092404/4040.039] termination, nor shall Landlord be liable to Tenant for any loss or damage resulting from Landlord's i11ability to deliver the Premises to Tenant, but no Rent hereunder shall be payable hereunder with respect to any delay in delivery of the Premises to the extent caused by Landlord. At any time during the Lease Tt:1111 and upon the Substantial Completion of the Premises, Landlord shall deliver to Tenant a notice of Lease Tt11n dates in the forxn as set forth in Exhibit ''C," attached hereto, which notice Tenant shall execute and return to Landlord within five (5) business days of receipt thereof. 2. Renewal Term. (a) Option. Provided Tenant is not in default under this Lease (after any applicable notice and lapse of applicable cure periods) as of the date of exercise, Tenant shall have one option to renew this Lease (''Renewal Option'') for the entire Premises for a period of five (5) years (''Renewal Term''), exercisable by giving written notice thereof (''Renewal Notice'') to Landlord of its exercise of the Renewal Option not later than twelve (12) months prior to the Lease Expiration Date. (b) Renewal Term Rent. The rent payable hereunder for the Premises during the Renewal Terrr1 shall be adjusted to the Market Rent (as defined in Paragraph 2.2(c) below) as of the commencement of the Renewal Ter1n (the ''Renewal Term Commencement Date''). In order to determine the Market Rent for the Renewal Tenn, Landlord and Tenant, ten (10) business days after the date on which the Renewal Notice is given by Tenant (but not earlier than fifteen (15) months prior to the expiration of the initial Tenn), shall commence discussions to endeavor to agree upon the applicable Market Rent. In the event that Landlord and Tenant do not agree upon such rent within twenty (20) business days after the expiration of said ten (10) business day period, on the twenty - fifth (25th) business day after the expiration of said ten (10) business day period, Landlord and Tenant shall each simultaneously submit to the other in writing its good faith estimate of the Market Rent. If the highe1· of said estimates is not more than one hundred and five percent (105%) of the lower of such estimates, tl1e Market Rent in question shall be deemed to be the average of the submitted rates. If otherwise, then the rate shall be set by arbitration to be held in Los Angeles, California in accordance with the Real Estate Valuation Arbitration Rules of the American Arbitration Association, as follows. Landlord and Tenant shall within five (5) business days after submittal of their estimates, each appoint a recognized real estate expert who is a member ofM.A.I. and who shall have generally recognized current competence in the valuation of rental properties similar to the Building and Project which are located in the vicinity of the Project. The two experts so appointed shall appoint a third recognized real estate expert possessing the aforesaid qualifications. If the three experts to be so appointed a1·e not appointed within ten (10) business days of the date the appraisal procedure is invoked, then the expert or experts, if any, who have been selected shall proceed to carry out the appraisal using the definition of Market Rent set fo1ih in Paragraph 2.2(c) below. The expert or experts shall determine the Market Rent in accordance with the tenns of this Lease and pick one of the two rates submitted, being the rate that is closer to the Market Rent as dete111lined by the arbitrator using the definition set forth in Paragraph 2.2(c). Any such selection shall be signed by a majority of the experts if more than two have been selected. If only two experts have been selected and they are unable to agree, then either Landlord or Tenant shall be entitled to apply to the presiding judge of the Superior Court of The County of Los Angeles, California for the selection of a third expert who shall then participate in such appraisal proceedings, and who shall be selected from a list of names of experts possessing the aforesaid qualifications submitted by Landlord and/or from a list of names of experts possessing the aforesaid qualifications submitted by Tenant. Each party shall pay the cost of the appraiser selected by such party, and shall equally share the cost of the third appraiser. The parties agree to be bound by the decision of the arbitrators, which shall be final and non appealable, and judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction thereof. (c) Market Rent. The ''Market Rent," shall be equal to the rent (including additional re11t and considering any ''base year'' or ''expense stop'' applicable thereto), including all escalations, of leases which . have been entered into during the nine (9) month period prior to the commencement of the applicable option tenn, at which tenants are leasing non - renewal, non - encumbered, non - expansion, non - equity space (''Comparable Transactions'') comparable in size, floor height and quality to the Premises for a similar lease tenn, which comparable space is located in the Project as well as what a comparable landlord of other first - class office buildings of comparable quality, age, size (with at least five (5) floors), quality of location, services and amenities (''Comparable Buildings'') would accept in Comparable Transactions. For such purposes, Landlord and Tenant stipulate the Comparable Buildings include only the following: Colorado Center in Santa Monica and 6300
0 Wilshire Boulevard, 6500 Wilshire Boulevard and 5670 Wilshire Boulevard in Los Angeles. The detennination of the Market Rent shall take into consideration only the following concessions (the ''Concessions''): (i) rental abatement concessions, if any, being granted such tenants in connection with such comparable space including, if applicable, periods of free rent for construction of improvements, (ii) tenant improvements or allowances provided or to be provided for such comparable space, taking into account the value of the existing improvements in such comparable space and in the Premises which can be re - used by Tenant, such value to be based upon the age, quality and layout of the improvements and the extent to which the same could be utilized by Tenant, and with respect to the Market Rent determination for the Renewal Tenn, based upon the fact that the precise Tenant Improvements existing in the Premises are specifically suitable to Tenant, but Tenant shall be entitled to repai1· a11d refurbishment of such existing Tenant Improvements (and any applicable allowances with respect thereto) to the extent such repair or refurbishment is available in Comparable Transactions and the Premises require the same, and (iii) all other reasonable monetary and other economic concessions, if any, being granted such tenants in connection with such comparable space; and provided further that in calculating the rent for the Renewal Tenn, no consideration shall be given to the fact that Landlord is or is not required to pay a real estate brokerage commission in connection with Tenant's lease of the Premises during the Renewal Term or the fact that Landlord or such other landlo1·ds are or are not required to pay real estate brokerage commissions in connection with such comparable space. The Market Rent shall additionally include a determination based on the concession package being offered by Landlord as to whetl1er, and if so to what extent, Tenant must provide Landlord with additional financial secm·ity, such as a letter of credit or guaranty, for Tenant's Rent obligations. Such dete1mination (if applicable) shall be made by reviewing the extent of financial security then generally being imposed in Comparable Transactions from tenants of compa1·able financial condition and credit history to the then existing financial condition and credit history of Tenant (with appropriate adjustments to account for differences in the then - existing financial condition of Tenant and such other tenants). (d) Transfer. The Renewal Option is personal to Tenant and may not be assigned, transferred or conveyed to any party, except to an entity to which this Lease has been assigned (as pennitted pursuant to Article 14 below) in its entirety which (i) has succeeded to the entire business and assets (by merger, reorganization or otherwise) of the original Tenant hereunder, or (ii) which is owned or controlled by Tenant or is under common ownership or control with Tenant. For purposes hereof, the word ''control," as used above, mea11s with respect to a Person that is corporation, the right to exercise, directly or indirectly, more tha11 fifty percent (50%) of the voting rights attributable to the shares of the controlled corporation and, with respect to a Person that is not a corporation, the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of the controlled Person. The word ''Person'' means an individual, partnership, trust, corporation, firrn or other entity. The foregoing shall not be construed to limit Tenant's ability to exercise its rights under· this Section 2.2 for the benefit of any other Transferee permitted pursuant to Article 14 below. 3. Option to Cancel. (a) Option. Subject to Tenant's payment of the Termination Fee (as defined in Paragraph 2.3(b) below) and the other conditions set forth herein, Tenant shall have the option (the ''Termination Option'') to terminate this Lease (and all rights and obligations of the parties hereunder, except for accrued and unpaid or unperformed obligations and liabilities) effective on the fourth (4 th ) anniversary of the Rent Commencement Date (the ''Termination Date''). The Termination Option may be exercised by written notice (the ''Termination Notice'') given to Landlord at least nine (9) months prior to the Termination Date. Any such notice of termination shall be irrevocable when received by Landlord. (b) Fee. Within thirty (30) days after Tenant's notice of exercise of the Temlination Option under this Section 2.3 and in order for such tennination to be effective, Tenant shall pay to Landlord the ''Termination Fee," which shall equal the sum of(a) three (3) monthly installments of Base Rent (calculated using the monthly installment amount due during months 49 through 51 following the Lease Commencen1ent Date), plus (b) the unamortized amount of Landlord's Lease Costs (defined below) as of the Termination Date, with Landlord's Lease Costs amortized from the Rent Commencement Date over the Tern1 at an annual interest rate equal to the interest rate on five - year United States Treasury Bills issued on the date the Ter11iination Notice is given, plus two hundred (200) basis points. ''Landlord's Lease Costs'' are defined as the sum of(i) the amount of the Tenant Improvement Allowance expended by Landlord pursuant to Exhibit B attached hereto, plus (ii) the amount of brokerage commissions paid by Landlord in connection with this Lease, plus (iii) the Base Rent that would have been payable by Tenant during the first three (3) months after the Lease Commencement Date if the monthly rent for [JSG:se/102994_5.DOC/092404/4040.039) - 8 -
- 9 - [JSG:se/102994_5.DOC/092404/4040.039] the fourth (4 th ) month of the Lease Term had been payable for each of said three (3) months, plus (iv) attorneys' fees and costs incurred by Landlord in the preparation and negotiation of this Lease. (c) Good Faith Exercise. Tenant may not exercise, nor announce any intention to exercise the Termination Option, in order to re - negotiate or improve for Tenant's benefit any of the terms of this Lease, including, without limitation, the Rent payable hereunder. This provision shall not be construed to limit Tenant's ability to initiate discussions of the same type and similar timing that other tenants in the market would be likely to initiate. 2.4 Tenant Cancellation for Failure to Complete. Tenant shall have the right to cancel and terminate this Lease (and the rights and obligations of the parties hereunder) if, on or before September 1, 2005, (the ''Outside Completion Date''), Substantial Completion (defined in Section 2.1 above) has failed to occur. The Outside Completion Date shall be postponed, on a day - for - day basis by any Tenant Delays (defined, determined and adjusted as set forth in Section 5 of Exhibit B hereto) but not due to any delays due to Force Majeure events described in Section 29.16 below. Said right to cancel and ter11u11ate this Lease must be exercised by a written notice to Landlord given within thirty (30) days after the Outside Completion Date. 3. Rent. 1. Base Rent. Commencing on the date (the ''Rent Commencement Date'') which is three (3) months following the Lease Commencement Date, Tenant shall pay, without prior notice or demand, to Landlord or Landlord's agent at the management office of the Project, or, at Landlord's option, at such other place as Landlord may from time to time designate in writing, by a check (drawn on a bank having a branch office in Los Angeles, California) for currency which, at the time of payment, is legal tender for private or public debts in the United States of America, base rent (''Base Rent'') as set forth in Section 4 of the Summary, payable in equal monthly installments as set forth in Section 4 of the Summary in advance, on or before the first day of each and every calendar month during the Lease Term, commencing on the Rent Commencement Date, without any setoff or deduction whatsoever. The Base Rent for the first full month of the Lease Term which occurs after the expiration of any free rent period shall be paid at the time of Tenant's execution of this Lease. If any Rent payment date (including the Rent Commencement Date) falls on a day of the month other than the first day of such month or if any payment of Rent is for a period which is shorter than one month, the Rent for any fractional month shall accrue on a daily basis for the period from the date such payment is due to the end of such calendar month or to the end of the Lease Terrn at a rate per day which is equal to 1/365 of the applicable annual Rent. All other payments or adjustments required to be made under the terms of this Lease that require proration on a time basis shall be prorated on the same basis. 2. Initial Three Month Period. Tenant may occupy the Premises for the conduct of business after the Lease Commencement Date and prior to the Rent Commencement Date, and all of the provisions oftl1is Lease shall be in full force and effect upon such occupancy, except that no Base Rent or additional rent for Direct Expenses pursuant to Article 4 shall be payable for the Premises for the period prior to the Rent Commencement Date; provided, however, that Tenant shall pay any parking charges due hereunder for parking for such Premises and other sundry expenses due and payable hereunder as of the date that Tenant occupies the Premises, or any portion thereof, for the conduct of business. 4. Additional Rent. 1. General Terms. In addition to paying the Base Rent specified in Article 3 of this Lease, commencing on the Rent Commencement Date, Tenant shall pay ''Tenant's Share'' oftl1e annual ''Direct Expenses," as those terms are defined in Sections 4.2(f} and 4.2(b) of this Lease, respectively, which are in excess of the amount of Direct Expenses applicable to the ''Base Year," as that term is defmed in Section 4.2(a), below; provided, however, that in no event shall any decrease in Direct Expenses for any ''Expense Year," as that it:1111 is defined in Section 4.2(c) below, below Direct Expenses for the Base Year entitle Tenant to any decrease in Base Rent 01· any credit against sums due under this Lease. Such payments by Tenant, together with any and all other amounts payable by Tenant to Landlord pursuant to the terms of this Lease, are hereinafter collectively referred to as the ''Additional Rent'', and the Base Rent and the Additional Rent are herein collectively referred to as ''Rellllt." All amounts due under this Article 4 as Additional Rent shall be payable for the same periods and in the same manner as the Base Rent. Without limitation on other obligations of Tenant which survive the expiration of the Lease Term,
- 10 - [JSG:se/102994_5.DOC/092404/4040.039] the obligations of Tenant to pay the Additional Rent provided for in this Article 4 that accrue prior to the expiration of the Lease Terrn shall survive the expiration of the Lease Te1rn. 2. Definitions of Key Terms Relating to Additional Rent. As used in this Article 4, the following terms shall have the meanings hereinafter set forth: (a) ''Base Year'' shall mean the period set forth in Section 5 of the Summary. (b) ''Direct Expenses'' shall mean ''Operating Expenses'' and ''Tax Expenses." (c) ''Expense Year'' shall mean each calendar year in which any portion of the Lease Term falls, through and including the calendar year in which the Lease Term expires, provided that Landlord, upon notice to Tenant, may change the Expense Year from time to time to any other twelve (12) consecutive month period, and, in the event of any such change, Tenant's Share of Direct Expenses shall be equitably adjusted for any Expense Year involved in any such change. (d) ''Operating Expenses'' shall mean all expenses, costs and amounts of every kind and nature which Landlord pays or accrues during any Expense Year because of or in connection with the ownership, management, maintenance, security, repair, replacement, restoration or operation of the Project, or any portion thereof. Without limiting the generality of the foregoing, Operating Expenses shall specifically include any and all of the following: (i) the cost of supplying all utilities, the cost of operating, repairing, maintaining, and renovating the utility, telephone, mechanical, sanitary, storm drainage, and elevator systems, and the cost of maintenance and service contracts in connection therewith; (ii) the cost of licenses, certificates, permits and inspections and the cost of contesting any governmental enactments which may affect Operating Expenses, and the costs incurred in connection with a governmentally mandated transportation system management program or similar program; (iii) the cost of all insurance carried by Landlord in connection with the Project; (iv) the cost of landscaping, relamping, and all supplies, tools, equipment and materials used in the operation, repair and maintena11ce oftl1e Project, or· any portion thereof; (v) costs incurred in connection with the parking areas servicing the Building (subject to tl1e exclusion of expenses set forth in Subparagraph 4.2(d)(l0) below); (vi) fees and other costs, including management fees, consulting fees, legal fees and accounting fees, of all contractors and consultants in connection with the management, operation, maintenance and repair of the Project; (vii) payments under any equiprnent rental agreements and the fair rental value of any management office space; (viii) subject to item (6), below, wages, salaries and other compensation and benefits, including taxes levied thereon, of all persons engaged in the operation, management, maintenance and security of the Project; (ix) costs under any instrument pertaining to the sharing of costs by the Project; (x) operation, repair, maintenance and replacement of all systems and equipment and components thereof of the Building; (xi) the cost of janitorial, alartn, security and other services, replacement of wall and floor coverings, ceiling tiles and fixtures in common areas, maintenance and replacen1ent of curbs and walkways, repair to roofs and re - roofing; (xii) amortization (including interest on the unamortized cost) over the useful life as Landlord shall reasonably determine, of the cost of acquiring or the rental expense of personal property used in the maintenance, operation and repair of the Project, or any portion thereof; (xiii) the cost of capital improvements or other costs incurred in connection with the Project (A) which are intended to effect economies in the operation or maintenance of the Project, or any portion thereof, (B) that are required under applicable laws to comply with conservation programs, (C) which are replacements or modifications of nonstructural items located in the Common Areas required to keep the Common Areas in good order or condition (provided that the costs for the same are properly expensed, and not a capital item, as determined in accordance with generally accepted accounting and management practices consistently applied), or (D) that are required under any gove1nmental law 01· regulation by a federal, state or local governmental agency, except for capital repairs, replacements or other improvements to remedy a condition existing prior to the Lease Commencement Date which an applicable governmental authority, if it had knowledge of such condition prior to the Lease Commencement Date, would have then required to be remedied pursuant to then - current governmental laws or regulations in their fo1rn existing as of the Lease Commencement Date and pursuant to the then - current interpretation of such governmental laws or regulations by the applicable governmental authority as of the Lease Commencement Date; provided, however, tl1at any capital expenditure shall be amortized (including interest on the amortized cost) over its useful life as Landlord shall reasonably deter1nine; (xiv) costs, fees, charges or assessments imposed by, or resulting from any mandate imposed on Landlord by, any federal, state or local government for fire and police protection, trash removal, community
- 11 - [JSG:se/102994_5.DOC/092404/4040.039] services, or other services which do not constitute ''Tax Expenses'' as that terrn is defined in Section 4.2(e)., below. Notwithstanding the foregoing, for purposes of this Lease, Operating Expenses shall not, however, include: (1) costs, including marketing costs, legal fees, space planners' fees, advertising and promotional expenses, and brokerage fees incurred in connection with the original construction or development, or original or future leasing of the Project, and costs, including per1nit, license and inspection costs, incurred with respect to the installation of tenant improvements made for new tenants in the Project or incurred in renovating or otherwise improving, decorating, painting or redecorating vacant space for tenants or other occupants of the Project (excluding, however, such costs relating to any common areas of the Project or parking facilities); (2) except as set forth in items (xii), (xiii), and (xiv) above, depreciation, interest and principal payments on mortgages and other debt costs, if any, penalties and interest, costs of capital repai1·s and alterations, and costs of capital improvements and equipment; (3) costs for which the Landlord is reimbursed by any tenant or occupant of the Project or by insurance by its carrier or any tenant's carrier or by anyone else, and electric power costs for which any tenant directly contracts with the local public service company; (4) any bad debt loss, rent loss, or reserves for bad debts or rent loss; (5) costs associated with the operation of the business of the partnersl1ip or entity which constitutes the Landlord, as the same are distinguished from the costs of operation of the Project (which shall specifically include, but not be limited to, accounting costs associated with the operation of the Project). Costs associated with the operation of the business of the partnership or entity which constitutes the Landlord include costs of partnership accounting and legal matters, costs of defending any lawsuits with any mortgagee (except as the · actions of the Tenant may be in issue), costs of selling, syndicating, financing, mortgaging or hypothecating any of the Landlord's interest in the Project, and costs incurred in connection with any disputes between Landlord and its employees, between Landlord and Project management, or between Landlord and other tenants or occupants, and Landlord's general corporate overhead and general and administrative expenses; (6) the wages and benefits of any employee who does not devote substantially all of his or her employed time to the Project unless such wages and benefits are prorated to reflect time spent on operating and managing the Project vis - a - vis time spent on matters umelated to operating and managing the Project; provided, that in no event shall Operating Expenses for purposes of this Lease include wages and/or benefits attributable to personnel above the level of Project manager or Project engineer; (7) amount paid as ground rental for the Project by the Landlord; (8) except for a Project management fee consistent with the management fee being charged in connection with the operation of Comparable Buildings (a fee not exceeding three percent (3%) of gross revenues of the Project shall be deemed acceptable), overhead and profit increment paid to the Landlord or to subsidiaries or affiliates of the Landlord for services in the Project to the extent the same exceeds the costs of such services rendered by qualified, frrst - class unaffiliated third parties on a competitive basis; (9) any compensation paid to clerks, attendants or other persons in commercial concessions operated by the Landlord, provided that any compensation paid to any concierge at the Project shall be includable as an Operating Expense; (10) the cost of payroll for clerks and attendants, garage keepers liability insurance, parking management fees, tickets and uniforms directly incurred in operating parking facilities; (11) rentals and other related expenses incurred in leasing air conditioning systems, elevators or other equipment which if purchased the cost of which would be excluded from Operating Expenses as a capital cost, except equipment not affixed to the Project which is used in providing janitorial or similar services and,
- 12 - [JSG:se/102994_5.DOC/092404/4040.039] further excepting from this exclusion such equipment rented or leased to remedy or ameliorate an emergency condition in the Project ; (12) all items and services for which Tenant or any other tenant in the Project reimburses Landlord or which Landlord provides selectively to one or more tenants (other than Tenant) without ' reimbursement; (13) costs, other than those incurred in ordinary maintenance and 1·epair, for sculpture, paintings, fountains or other objects of art; (14) any costs expressly excluded from Operating Expenses elsewhere in this Lease; (15) rent for any office space occupied by Project management personnel to the extent the size or rental rate of such office space exceeds the size or fair market rental value of office space occupied by management personnel of the Comparable Buildings in the vicinity of the Building, with adjustment where appropriate for the size of the applicable project; (16) costs arising from the gross negligence or willful misconduct of Landlord or its agents, employees, vendors, contractors, or providers of materials or services; (17) costs incurred to comply with laws relating to the removal of hazardous material (as defined under applicable law) which was in existence in the Building or on the Project prior to tl1e Lease Commencement Date, and was of such a nature that a federal, State or municipal governn1ental authority, if it had then had knowledge of the presence of such hazardous material, in the state, and under the conditions that it then existed in the Building or on the Project, would have then required the removal of such hazardous material or other remedial or containment action with respect thereto; and costs incurred to remove, remedy, contain, or treat hazardous material, which hazardous material is brought into the Building or onto the Project after the date l1ereof by Landlord or any other tenant of the Project and is of such a nature, at that time, that a federal, State or mu11icipal governn1ental authority, if it had then had knowledge of the presence of such hazardous material, in the state, a11d under the conditions, that it then exists in the Building or on the Project, would have then required the removal of such hazardous material or other remedial or containment action with respect thereto; and (18) costs arising from Landlord's charitable or political contributions. If Landlord is not furnishing any particular work or service (the cost of which, ifperfo1111ed by Landlord, would be included in Operating Expenses) to a tenant who has undertaken to perfor1n such work or service in lieu of the performance thereof by Landlord, Operating Expenses shall be deemed to be increased by an amount equal to the additional Operating Expenses which would reasonably have been incurred during such period by Landlord if it had at its own expense furnished such work or service to such tenant. If the Project is not at least ninety - five percent (95%) occupied during all or a portion of the Base Year or any Expense Year, Landlord may elect to make a11 appropriate adjustment to the components of Operating Expenses that vary based on the occupancy of the Project for such year to deter1nine the amount of Operating Expenses that would have been incurred had the Project been ninety - five percent (95%) occupied; and the amount so deter1nined shall be deemed to have been the amount of Operating Expenses for such year, provided that a comparable adjustment shall have been made, or if not made, shall also be made to the Base Year Operating Expenses. Operating Expenses for the Base Year shall not include (to the extent not continuing and applicable only to the Base Year) market - wide labor - rate increases due to extraordinary circumstances, including, but not limited to, boycotts and stril<es, and utility rate increases due to extraordinary circumstances including, but not limited to, conservation surcharges, boycotts, embargoes or other shortages, or amortized costs relating to capital improvements. (e) Taxes. (1) ''Tax Expenses'' shall mean all federal, state, county, or local governn1ental or municipal taxes, fees, charges or other impositions of every kind and nature, whether general, special, ordinary or extraordinary, (including, without limitation, real estate taxes, general and special assessments, transit taxes,
- 13 - [JSG:se/102994_5.DOC/092404/4040.039] leasehold taxes or taxes based upon the receipt of rent, including gross receipts or sales taxes applicable to the receipt of rent, unless required to be paid by Tenant, personal property taxes imposed upon the fixtures, machinery, equipment, apparatus, systems and equipment, appurtenances, furniture and other personal property used in connection with the Project, or any portion thereof), which shall be paid or accrued during any Expense Year (without regard to any different fiscal year used by such governmental or municipal authority) because of or in connection with the ownership, leasing and operation of the Project, or any portion thereof. (2) Tax Expenses shall include, without limitation: (i) Any tax on the rent, right to re11t or other income from the Project, or any portion thereof, or as against the business of leasing the Project, or any portion thereof; (ii) Any assessment, tax, fee, levy or charge in addition to, or in substitution, partially or totally, of any assessment, tax, fee, levy or charge previously included within the definition of real property tax, it being acknowledged by Tenant and Landlord that Proposition 13 was adopted by the voters of the State of California in the June 1978 election (''Proposition 13'') and that assessments, taxes, fees, levies and charges may be imposed by governmental agencies for such services as fire protection, street, sidewalk and road maintenance, 1·efuse removal and for other governmental services for1nerly provided without charge to property owners or occupants, and, in further recognition of the decrease in the level and quality of governmental services and amenities as a result of Proposition 13, Tax Expenses shall also include any governmental or private assessments or the Project's contribution towards a governmental or private cost - sharing agreement for the purpose of augmenting or improving the quality of services and amenities normally provided by governmental agencies; (iii) Any assessment, tax, fee, levy, or charge allocable to or measured by the area of the Premises or the Rent payable hereunder, including, without limitation, any business or gross income tax or excise tax with respect to the receipt of such rent, or upon or with respect to the possession, leasing, operating, management, maintenance, alteration, repair, use or occupancy by Tenant of the Premises, or any portion thereof; and (iv) Any assessment, tax, fee, levy or charge, upon this transaction or any document to which Tenant is a party, creating or transferring an interest or an estate in the Premises. (3) Notwithstanding the foregoing, the following shall be excluded from Tax Expenses: (i) net income, inheritance, estate, succession, transfer, gift, franchise, or capital stock tax, or any income taxes arising out of or related to ownership and operation of income - producing real estate (as opposed to rents, receipts or income attributable to operations at the Project, and except as expressly provided in Subparagraph 4.2(e)(l) above); (ii) any Tax Expenses attributable to any period prior to the Commencement Date hereof of after the expiration or earlier termination hereof; (iii) any assessments, charges, taxes, rents, fees, rates, levies, excises, license fees, per1nit fees, inspection fees, impact fees, concurrency fees, or other authorization fees or charges to the extent payable for the original development or installation of on - or off - site improvements or utilities (including without limitation street and intersection improvements, roads, rights of way, lighting, and signalization) necessary for the i11itial development or construction of the Project or any past, present or future phases thereof, or any past, present or future system development reimbursement schedule or sinking fund related to any of the foregoing, whether the improvements to which they may relate are installed prior to or after the Commencement Date of this Lease; and (iv) any items paid by Tenant under Section 4.5 of this Lease. All assessments which are not specifically charged to Tenant because of what Tenant has done, which can be paid by Landlord in installments, shall be paid by Landlord in the maximum number of installments permitted by law and not included as Tax Expenses except in the year in which the assessment installment is actually paid. (4) Any costs and expenses (including, without limitation, reasonable attorneys' fees) incurred in attempting to protest, reduce or minimize Tax Expenses shall be included in Tax Expenses in the Expense Year such expenses are paid. Tax refunds shall be credited against Tax Expenses and refunded to Tenant regardless of when received, based on the Expense Year to which the refund is applicable. If Tax Expenses for any Expense Year during the Lease Term or any extension thereof are increased after payment thereof, or if Tax Expenses for the Base Year are decreased after payment thereof, in either event for any reason, including, without limitation, error or reassessment by applicable governmental or municipal authorities, Tenant shall pay Landlord within thirty (30) days after demand any resulting increase in the amount of Tenant's Share of Direct Expenses for any Expense Year affected by such change. Any decrease in Tax Expenses, shall be paid by Landlord to Tenant within thirty (30) days after such determination or credited against Tax Expenses as set forth above. (5) The amount of Tax Expenses for the Base Year shall be known as ''Base Taxes''. If in any comparison year subsequent to the Base Year, the amount of Tax Expenses decreases below the amount of
- 14 - [JSG:se/102994_5.DOC/092404/4040.039] Base Taxes, then for purposes of all subsequent comparison years, including the comparison year in which such decrease in Tax Expenses occurred, the Base Taxes shall be decreased by an amount equal to the decrease in Tax Expenses. (f) ''Tenant's Share'' shall mean the percentage set forth in Section 6 of the Summary. 3. Allocation of Direct Expenses. (a) Method of Allocation. The parties acknowledge that the Building is a part of a multi - building project and that the costs and expenses incurred in connection with the Project (i.e. the Direct Expenses) should be shared between the tenants of the Building and the tenants of the other buildings in the Project. Accordingly, as set forth in Section 4.2 above, Direct Expenses (which consists of Operating Expenses and Tax Expenses) are determined annually for the Project as a whole, and a portion of the Direct Expenses, which portion shall be determined by Landlord on an equitable basis, shall be allocated to the tenants of the Building (as opposed to the tenants of any other buildings in the Project) and such portion shall be the Direct Expenses for· purposes of this Lease. Such portion of Direct Expenses allocated to the tenants of the Building shall include all Direct Expenses attributable solely to the Building and an equitable portion of the Direct Expenses attributable to the Project as a whole. (b) Cost Pools. Landlord shall have the right, from time to time, to equitably allocate some or all of the Direct Expenses for the Project among different portions or occupants of the Project (the ''Cost Pools''), in Landlord's reasonable discretion. Such Cost Pools may include, but shall not be limited to, the office space tenants of a building of the Project or of the Project, and the retail space tenants of a building of the Project or of the Project. The Direct Expenses within each such Cost Pool shall be allocated and charged to the tenants within such Cost Pool in an equitable manner. 4. Calculation and Payment of Additional Rent. If for any Expense Year ending or comme11cing within the Lease Term, Tenant's Share of Direct Expenses for such Expense Year exceeds Tenant's Shar·e of Direct Expenses applicable to the Base Year, then Tenant shall pay to Landlord, in the manner set forth in Section 4.4(a), below, and as Additional Rent, an amount equal to the excess (the ''Excess''). If in any Expense Year, the amo11nt of Tax Expenses is less than the amount of Base Taxes, the Excess shall be computed as if there were no Tax Expenses due for such year. (a) Statement of Actual Direct Expenses and Payment by Tenant. Landlord shall give to Tenant within one hundred twenty (120) days following the end of each Expense Year, a staten1ent (the ''Statement'') which shall state the Direct Expenses incurred or accrued for such preceding Expe11se Year, and which shall indicate the amount of the Excess. Within fifteen (15) business days after receipt of the Statement for each Expense Year commencing or ending during the Lease Te11n, if an Excess is present, Tenant shall pay, with its next installment of Base Rent due, the full amount of the Excess for such Expense Year, less the amounts, if any, paid during such Expense Year as ''Estimated Excess," as that term is defined in Section 4.4(b), below, and if Tenant paid more as Estimated Excess than the actual Excess, Tenant shall receive a credit in the amount of Tenant's overpayment against Rent next due under this Lease. Even though the Lease Terrn has expired and Tenant has vacated the Premises, when the final determination is made of Tenant's Share of Direct Expenses for the Expense Year in which this Lease terminates, if an Excess if present, Tenant shall pay to Landlord such amount within tl1irty (30) days after such determination, and if Tenant paid more as Estimated Excess than the actual Excess, Landlo1·d shall, within thirty (30) days, deliver a check payable to Tenant in the amount of the overpayment. The provisions of this Section 4.4(a) shall survive the expiration or earlier termination of the Lease Term. The failure of Landlord to timely furnish the Statement for any Expense Year shall not prejudice Landlord or Tenant from enfor·cing its rights under this Article 4, unless Landlord fails to provide a Statement within eighteen (18) n1onths after tl1e end of the applicable Expense Year, in which case Tenant's obligation to pay for the Excess relating to such Expense Year shall terminate. (b) Statement of Estimated Direct Expenses. In addition, Landlord shall endeavor to give Tenant a yearly expense estimate statement (the ''Estimate Statement'') which shall set forth Landlord's reasonable estimate (the ''Estimate'') of what the total amount of Direct Expenses for the then - current Expense Year shall be and the estimated excess (the ''Estimated Excess'') as calculated by comparing the Direct Expenses for such
- 15 - [JSG:se/102994_5.DOC/092404/4040.039] Expense Year, which shall be based upon the Estimate, to the amount of Direct Expenses for the Base Year. The failure of Landlord to timely furnish the Estimate Statement for any Expense Year shall not preclude Landlord from enforcing its rights to collect any Estimated Excess under this Article 4, nor shall Landlord be prol1ibited from revising any Estimate Statement or Estimated Excess theretofore delivered to the extent reasonably necessary. Thereafter, Tenant shall pay, with its next installment of Base Rent due, a fraction of the Estimated Excess for the then - current Expense Year (reduced by any amounts paid pursuant to the next to last sentence of this Section 4.4.(b)). Such fraction shall have as its numerator the number of months which have elapsed in such current Expense Year, including the month of such payment, and twelve (12) as its denominator. Until a new Estimate Statement is furnished (which Landlord shall have the right to deliver to Tenant at any time), Tenant shall pay monthly, with the monthly Base Rent installments, an amount equal to one - twelfth (1/12) of the total Estimated Excess set forth in the previous Estimate Statement delivered by Landlord to Tenant. 4.5 Taxes and Other Charges for Which Tenant Is Directly Responsible. (a) Tenant shall be liable for and shall pay ten (10) business days before delinquency, taxes levied against Tenant's equipment, furniture, fixtures and any other personal property located in or about the Premises. If any such taxes on Tenant's equipment, furniture, fixtures and any other personal property are levied against Landlord or Landlord's property or if the assessed value of Landlord's property is increased by the inclusion therein of a value placed upon such equipment, furniture, fixtures or any other personal property and if Landlord pays the taxes based upon such increased assessment, which Landlord shall have the right to do regardless of the validity thereof but only under proper protest if requested by Tenant, Tenant shall upon demand repay to Landlord the taxes so levied against Landlord or the proportion of such taxes resulting from such increase in the assessment, as the case may be. (b) If the tenant improvements in the Premises, whether installed and/or paid for by Landlord or Tenant and whether or not affixed to the real property so as to become a part thereof, are assessed for real property tax purposes at a valuation higher than the valuation at which tenant improvements confomung to Landlord's ''building standard'' (i.e., in excess of $40.50 per rentable square foot) in other space in the Building are assessed, then the Tax Expenses levied against Landlord or the property by reason of such excess assessed valuation shall be deemed to be taxes levied against personal property of Tenant and shall be governed by the provisions of Section 4.5(a), above. Improvements installed in the Premises for Tenant's initial occupancy thereof, the cost for which is not in excess of the sum of the Tenant Improvement Allowance and Supplemental Allowance set forth in Article 2 of Exhibit B hereto, are hereby stipulated to be ''building standard'' for purposes of this Section. (c) Notwithstanding any contrary provision herein, Tenant shall pay prior to delinquency any (i) rent tax or sales tax, service tax, transfer tax or value added tax, or any other applicable tax on the rent or services herein or otherwise respecting this Lease, (ii) taxes assessed upon or with respect to the possession, leasing, operation, management, maintenance, alteration, repair, use or occupancy by Tenant of the Premises or any portion of the Project, including the Project parking facility; or (iii) taxes assessed upon this transaction 01· any document to which Tenant is a party creating or transferring an interest or an estate in the Premises. 4.6 Records; Audit. Landlord shall maintain in a safe and orderly manner all of its records pertaining to the Direct Expenses payable pursuant to this Article 4 for a period of two (2) years after the completion of each calendar year. Landlord shall maintain such records on a current basis and in sufficient detail to perrnit adequate review thereof and, at all reasonable times, copies of such records shall be available to Tenant's accounting personnel (but not other representatives except as set forth in this Section 4.6) for such purposes at the management office of the Project. If Tenant disputes a Statement provided under Section 4.4 above, provided Tenant is not in default under this Lease after notice and expiration of any applicable cure period, Tenant may, by written notice to Landlord within two (2) years after receipt of a Statement for a particular Expense Year, cause an audit to be commenced of the Direct Expenses for such Expense Year by a nationally or regionally recognized firxn of certified public accountants or by Tenant's own internal certified public accountants on a non - contingency fee basis, at Tenant's sole expense, to verify if the Statement was accurate. Tenant shall give Landlord not less than ten (10) business days prior written notice of its intention to conduct any such audit. Landlord shall cooperate with Tenant during the course of such audit, which shall be conducted during normal business hours in Landlord's Building
- 16 - [JSG:se/102994_5.DOC/092404/4040.039] management office. Landlord agrees to make such personnel available to Tenant as is reasonably necessary to conduct such audit, but in no event shall such audit last more than five (5) business days in duration for each Lease Year audited. Tenant shall be entitled to make photostatic copies of the relevant accounting records at Tenant's sole expense, provided that Tenant keeps such copies confidential (subject to any legal disclosure required by law, judicial process, or regulation) and does not show or distribute such copies to any third party; provided that Tenant's accounting personnel, attorneys and any auditor engaged by Tenant may review such records and Tenant may share any audit results with its professional advisors. If such audit reveals an overpayment of Direct Expenses for the year covered by such Statement, then, provided Landlord does not reasonably dispute the result of such audit, Landlord shall credit the next monthly rent payment of Tenant, or if the Ter111 has expired, refund the overpayment. If such audit reveals an underpayment of Direct Expenses for the year covered by the Statement, then, p1·ovided Tenant does not reasonably dispute the result of such audit, Tenant shall pay the same with its next monthly rent payment, or if the Te11n has expired, within fifteen (15) days after receipt of the audit results. If Landlord disputes the results of an audit caused by Tenant, Landlord shall send Tenant a notice within thirty (30) days of receipt of the results of such audit and either party may submit the dispute to arbitration in accordance with Section 4.7 below provided that Tenant shall continue to pay to Landlord all rent, including any adjustments pursuant to this Article 4, until a final decision is rendered by such arbitration. Tenant's failure to dispute a year - end Statement and conduct an audit of Direct Expenses within two (2) years after receipt of the Statement for a particular Expense Year shall constitute Tenant's acknowledgement of the accuracy of such Statement. No audit hereunder shall be permitted after termination of the Lease due to default by Tenant, and Tenant agrees to keep the results of any audit hereunder confidential. Tenant agrees to pay the cost of any audit hereunder by Tenant; provided that if the audit reveals, with respect to any Expense Year, that Landlord has billed Tenant for Tenant's share of Direct Expenses more than five percent (5o/o) in excess of the Direct Expenses that Tenant should pay for such Expense Year pursuant to the terms of the Lease, then Landlord shall pay the reasonable cost of such audit, provided that the cost shall not exceed the reasonable customary cost of such audit on an hourly fee basis. 4.7 Arbitration of Audit Dispute. When invoked pursuant to Section 4.6 above, a dispute regarding an audit conducted pursuant to Section 4.6 shall be resolved by arbitration conducted in Los Angeles, California, as provided in this Section 4.7. The party desiring such arbitration shall give written notice thereof to the other specifying the dispute to be arbitrated. Within twenty (20) days after the date on which the arbitration procedure is invoked, each party shall appoint an experienced arbitrator and notify the other party of the arbitrator's name and address. The two arbitrators so appointed shall appoint a third experienced arbitrator. If the three arbitrators to be so appointed are not appointed within thirty (30) days after the date the arbitration procedure is invoked as provided in this Lease, then the arbitrator or arbitrators, if any, who have been selected shall proceed to carry out the arbitration. The arbitrator or arbitrators so selected shall furnish Landlord and Tenant with a written decision within thirty (30) days after the date of selection of the last of the arbitrators to be so selected. Any decision so submitted shall be signed by a majority of the arbitrators, if more than two have been selected. If only two arbitrators have been selected and they are unable to agree, then either Landlord or Tenant shall be entitled to apply to the presiding judge of the Superior Court of the County of Los Angeles, California for the selection of a third arbitrator who shall be selected from a list of names of experienced arbitrators submitted by Landlord or from a list of names submitted by Tenant, as the case may be, unless both Landlord and Tenant submit lists of names, in which case the Court, in its sole discretion, shall select the third arbitrator from the lists. In designating arbitrators and irI deciding the dispute, the arbitrators shall act in accordance with the Commercial Rules of Arbitration then in force of the American Arbitration Association, subject, however, to such limitations as may be placed upon them by the provisions of this Lease. The decision of the arbitrators shall be final and biriding upon the parties, and judgment on the award rendered by the arbitrators may be entered in any court having jurisdiction thereof. The obligation of Landlord and Tenant to submit a dispute to arbitration is limited to disputes arising under Section 4.6 above. • 5. Use Of Premises. 5.1 Permitted Use. Tenant shall use the Premises solely for the Permitted Use set forth in Section 7 of the Summary and Tenant shall not use or permit the Premises or the Project to be used for any other purpose or purposes whatsoever without the prior written consent of Landlord, which may be withheld in Landlord's sole discretion. 5.2 Prohibited Uses. The uses prohibited under this Lease shall iriclude, without limitation, use of the Premises or a portion thereof for (i) offices of any agency or bureau of the United States or any state or political
- 17 - [JSG:se/102994_5.DOC/092404/4040.039] subdivision thereof; (ii) offices or agencies of any foreign governmental or political subdivision thereof; (iii) offices of any health care professionals or service organization; (iv) schools or other training facilities which are not ancillary to corporate, executive or professional office use; (v) retail or restaurant uses; or (vi) live broadcasting activities such as radio and/or television stations. Tenant shall not allow occupancy density of the Premises greater than the highest density of any other office tenant of the Building. Tenant further covenants and agrees that Tenant shall not use, or suffer or permit any person or persons to use, the Premises or any part thereof for any use or purpose contrary to the provisions of the Rules and Regulations set forth in Exhibit D, attached hereto, or in violation of the laws of the United States of America, the State of California, or the ordinances, regulations or requirements of the local municipal or county governing body or other lawful authorities having jurisdiction over the Project) including, without limitation, any such laws, ordinances, regulations or requirements relating to haza1·dous materials or substances, as those terms are defined by applicable laws now or hereafter in effect. Tenant shall not do or pe1·nrit anything to be done in or about the Premises which will in any way damage the reputation of the Project or obstruct or interfere with the rights of other tenants or occupants of the Building, or injure or annoy them or use 01· allow the Premises to be used for any improper, unlawful or objectionable purpose, nor shall Tenant cause, maintain or permit any nuisance in, on or about the Premises. 6. Services and Utilities. 1. Standard Tenant Services. Landlord shall provide the following services on all days (unless otherwise stated below) during the Lease Terrn. (a) Subject to limitations imposed by all governmental rules, regulations and guidelines applicable thereto, Landlord shall provide heating and air conditioning (''HV AC'') when necessary for normal comfort for nor111al office use in the Prenrises during ''Building Hours," as that te1m is defined, below. For purposes of this Lease, ''Building Hours'' shall be from 8:00 A.M. to 6:00 P.M. Monday through Friday, and on Saturdays from 9:00 A.M. to 1:00 P.M., except for the date of observation of New Year's Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, Christmas Day and, at Landlord's discretion, other nationally recognized holidays which are observed by other Comparable Buildings (collectively, the ''Holidays''). Notwithstanding the foregoing, Building Hours shall be from 8:00 A.M. to 7:00 P.M. Monday through Friday, and on Saturdays from 9:00 A.M. to 1:00 P.M., except for the date of observation of the Holidays, for so long as Landlord remains obligated to provide such extended hour of operation under the now existing lease for a third party tenant in the Building, which obligation Landlord expects to continue through April 2006. (b) Landlord shall provide adequate electrical wiring and facilities (including use of Tenant's pro rata share of existing risers and conduit required for access to electricity and for data and communications wiring) for connection to Tenant's lighting fixtures and normal office use equipment, typical densities, including copy machines and microwaves. Landlord shall, as a standard service, furnish to the Prenrises during Building Hours, electric current of not less than five (5) watts per square foot on an annualized connected load basis, and otherwise subject to Title 24 regulations. Tenant will design Tenant's electrical system serving any equipment producing nonlinear electrical loads to accommodate such nonlinear electrical loads, including, but not limited to, oversizing neutral conductors, derating transformers and/or providing power - line filters. Engineering plans shall include a calculation of Tenant's fully connected electrical design load with and without demand factors and sl1all indicate the number of watts ofunmetered and submetered loads. Tenant shall bear the cost of replacement of lamps, starters and ballasts for non - Building standard lighting fixtures within the Premises. (c) Landlord shall provide city water from the regular Building outlets for drinking, lavatory and toilet purposes in the Building Common Areas. (d) Landlord shall provide janitorial services to the Premises five (5) days per week, except the date of observation of the Holidays, in and about the Prenrises and window washing services in a manner consistent with other comparable buildings in the vicinity of the Building. (e) Landlord shall provide nonexclusive, non - attended automatic passenger elevator service during the Building Hours, shall have one elevator available at all other times. Tenant shall have access to the Building, Premises and Project parking facility 24 hours a day, seven days a week, subject to reasonable rules and regulations and security procedures from time - to - time established by Landlord.
- 18 - [JSG:se/102994_5.DOC/092404/4040.039] ( f ) , Landlord shall provide nonexclusive freight elevator service subject to scheduling by Landlord. , (g) Landlord shall provide reasonable access control services for the Building seven (7) days per week, twenty - four (24) hours per day, in a manner consistent with other comparable first class office buildings in the vicinity of the Building. Notwithstanding the foregoing, Landlord shall in no case be liable for personal injury or property damage for any error with regard to the admission to or exclusion from the Building or Project of any person; subject to Landlord's indemnification obligations set forth in Article 10 below. (h) Landlord shall provide building security equipment, procedures and personnel for the Project which are consistent with those used in other comparable first class office buildings in the vicinity oftl1e Building. Landlord does not warrant the effectiveness of said security equipment, procedures and personnel and Tenant shall have the right, at Tenant's expense, to provide additional security equipn1ent or personnel in the Premises, provided that Landlord is given reasonable access to the Premises and that any such security system installed by Tenant complies with all applicable codes and shall not create any material security risk to the Building or materially adversely affect the rights of other tenants in the Project. (i) Tenant may install a supplemental or independent cooling system in the Premises (''Additional HVAC Equipment'') and may use, at Tenant's sole expense, the Building's chilled or condense1· water and electricity for the Additional HVAC Equipment. Tenant's use of such utilities shall be separately metered using meters installed at Tenant's sole expense. The Additional HVAC Equipment and the utilization of chilled or condenser water and electricity shall comply with applicable insurance regulations and applicable laws, shall not cause per·manent damage or injury to the Building, Building systems, Building structure or the Premises, shall not create a dangerous or hazardous condition nor interfere with or disturb other tenants in the Building, a11d shall be consistent with a first - class office building. The installation of Additional HVAC Equipment shall be subject to Landlord's prior approval pursuant to the terms of Exhibit B or Article 8 below, as applicable. Tenant sl1all be responsible for all costs related to the Additional HVAC Equipment and installation thereof, including without limitation, costs of any modification to the Base, Shell and Core, Building systems and Building structure and costs of subsequent maintenance in connection therewith. Tenant shall cooperate fully with Landlord at all times and abide by all regulations and requirements that Landlord may reasonably prescribe for the proper functioning and protection of the HVAC, electrical, mechanical and plumbing systems. Landlord agrees that it will cause the Project, Building and Common Areas to be maintained in a manner consistent with a first class office building in the vicinity of the Project. 6.2 Overstandard Tenant Use. Tenant shall not, without Landlord's prior written conse11t, use l1eat - generating machines, machines other than normal fractional horsepower office machines, or equipment or lighting other than Building standard lights in the Premises, which may affect the temperature otherwise maintained by the air conditioning system or increase the water nor111ally furnished for the Premises by Landlord pursuant to the terxns of Section 6.1 of this Lease. If such consent is given, Landlord shall have the right to install supplementary ail· conditioning units or other facilities in the Premises, including supplementary or additional metering devices, and the cost thereof, including the cost of installation, operation and maintenance, increased wear and tear on existing equipment and other similar charges, shall be paid by Tenant to Landlord upon billing by Landlord. If Tenant uses water, electricity, heat or air conditioning in excess of that supplied by Landlord pursuant to Section 6.1 of tl1is Lease, Tenant shall pay to Landlord, upon billing, the cost of such excess consumption, and, if such excess is used by Tenant on a regular basis, the cost of the installation, operation, and maintenance of equipment which is installed in order to supply such excess consumption, and the cost of the increased wear and tear on existing equipn1ent caused by such excess consumption. Landlord may install devices to separately meter any increased use and in such event Tenant shall pay the increased cost directly to Landlord, on demand, at the rates charged by the public utility company furnishing the same, including, if such excess is used bY. Tenant on a regular basis, the cost of such additional metering devices. Tenant's use of electricity shall never exceed the capacity of the feeders to the Project or the risers or wiring installation. If Tenant desires to use heat, ventilation or air conditioning during hours other than those for which Landlord is obligated to supply such utilities pursuant to the terms of Section 6.1 of tllis Lease, Tenant shall give Landlord such prior notice, if any, as Landlord shall from time to time establish as appropriate, of Tenant's desired use in order to supply such utilities, and Landlord shall supply such utilities to Tenant at such
- 19 - [JSG:se/102994_5.DOC/092404/4040.039] hourly cos t t o Tenan t ( whic h shal l be treate d a s Additiona l Rent ) a s Landlor d shal l from tim e t o tim e establish . The charge for after hours HVAC as of the date hereof is $65.00 per hour per zone on the floors of the Building. 3. Interruption of Use. Tenant agrees that, except as set forth in Section 6.4 below, Landlord shall not be liable for damages, by abatement of Rent or otherwise, for failure to furnish or delay in furnishing any service (including telephone and telecommunication services), or for any diminution in the quality or quantity thereof, when such failure or delay or diminution is occasioned, in whole or in part, by breakage, repairs, replacements, or improvements, by any strike, lockout or other labor trouble, by inability to secure electricity, gas, water, or other fuel at the Building or Project after reasonable effort to do so, by any riot or other dangerous condition, emergency, accident or casualty whatsoever, by act or default of Tenant or other parties, or by any other cause; and such failures or delays or diminution shall never be deemed to constitute an eviction or disturbance of Tenant's use and possession of the Premises or relieve Tenant from paying Rent or performing any of its obligations under this Lease. Furthermore, Landlord shall not be liable under any circumstances for a loss of, or injury to, property or for injury to, or interference with, Tenant's business, including, without limitation, loss of profits, however occurring, through or in connection with or incidental to a failure to furnish any of the services or utilities as set forth in this Article 6. Landlord may comply with voluntary controls or guidelines promulgated by any governmental entity relating to the use or conservation of energy, water, gas, light or electricity or the reduction of automobile or other emissions without creating any liability of Landlord to Tenant under this Lease, provided that Tenant's use oftl1e Premises is not materially adversely affected thereby. 4. Abatement for Untenantability. If the Premises or any portion thereof are rendered untenantable and are not used by Tenant for a period of three (3) consecutive business days or any ten (10) days in any twelve (12) month period (the ''Eligibility Period'') as a result of failure in the water, sewage, air conditioning, heating, ventilating, elevator or electrical systems of the Project, or as a result of any damage described in Article 11 , or as a result of any taking by eminent domain described in Article 13 , or because of the presence of Hazardous Materials (defined in Section 29.34 below) in, on or around the Building, the Premises or the Project, or as a result of any repair, maintenance or alteration performed by Landlord which interferes with Tenant's use of the Premises, Tenant's rent shall be reduced and abated after the expiration of the Eligibility Period for such time as the Premises or such portion thereof remain untenantable and are not used by Tenant, in the proportion that the rentable area of the portion of the Premises rendered untenantable and not used by Tenant bears to the total rentable area of the Premises. If the untenantability of the Premises described in this Section 6.4 is due to an event of damage described in Article 11 , after three (3) consecutive days of such untenantability Tenant's rights to rent abatement hereunder shall relate back to the first day of such untenantability. Notwithstanding the foregoing, during any rent abatement under this Lease, Tenant shall pay Landlord Additional Rent for all services and utilities provided to and used by Tenant during the period of the rent abatement. However, if due to the causes referred to in the first sentence of this Section 6.4, any portion of the Premises is rendered untenantable for a period of time in excess of the Eligibility Period, and the remaining portion of the Premises is not sufficient to allow Tenant to effectively conduct its business therein, and if Tenant does not conduct its business from such remaining portion, then for such time after expiration of the Eligibility Period during which Tenant is so prevented from effectively conducting its business therein, the rent for the entire Premises shall be abated; provided, however, if Tenant reoccupies and conducts its business from any portio11 of the Premises during such period, the rent allocable to such reoccupied portion, based on the proportion that the rentable area of such reoccupied portion of the Premises bears to the total rentable area of the Premises, shall be payable by Tenant from the date such business operations commence. If Tenant's right to abatement occurs during a free rent period which arises after the Lease Commencement Date, Tenant's free rent period shall be extended for the number of days that the abatement period overlapped the free rent period (''Overlap Period''). Landlord shall have the right to extend the expiration date for a period of time equal to the Overlap Period if Landlord sends a notice to Tenant of such election within thirty (30) days following the end of the extended free rent period. If Tenant's right to abatement occurs because of damage to the Premises described in Article 11 , Tenant's abatement period shall continue until Tenant has been given reasonably sufficient time, and reasonably sufficient access to the Premises, for the restoration of the Premises and installation of Tenant's property, furniture, fixtures and equipment and to move in. To the extent rental loss insurance carried by Landlord, the premiums for which are included in Direct Expenses, covers rent loss for any portion of the Eligibility Period, the Eligibility Period shall be reduced to the extent of such coverage. 7. epairs.
[JSG:se/102994_5.DOC/092404/4040.039] - 20 - Tenant shall, at Tenant's own expense, pursuant to the terms of this Lease, including without limitation Article 8 hereof, keep the Premises, including all improvements, fixtures and furnishings therein, in good order, repair and condition at all times during the Lease Te11n. In addition, Tenant shall, at Tenant's own expense, but under the supervision and subject to the prior approval of Landlord, and within any reasonable period of time specified by Landlord, pursuant to the terms of this Lease, including without limitation Article 8 hereof, but subject to the terms of Section 10.5 hereof, promptly and adequately repair all damage to the Premises and replace or repair all damaged, broken, or worn fixtures and appurtenances, except for damage caused by ordinary wear and tear 01· beyond the reasonable control of Tenant; provided however, that, at Landlord's option, or if Tenant fails to make such repairs, Landlord may, but need not, ten (10) days after delivery of written notice to Tenant, make such repairs and replacements, and Tenant shall pay Landlord the costs incurred therefore, thirty (30) days being billed for same. Notwithstanding the foregoing, Landlord shall be responsible for repairs to the Common Areas, exterior walls, foundation and roof of the Building, the structural portions of the floors of the Building, and the systems and equip1nent of the Building, except to the extent that such repairs are required due to the negligence or willful misconduct of Tenant; provided, however, that if such repairs are due to the negligence or willful misconduct of Tenant, Landlord shall nevertheless make such repairs at Tenant's expense, subject to the terms of Section 10.5 below. Landlord may, but shall not be required to, enter the Premises at all reasonable tin1es after reasonable prior notice to make such repairs, alterations, improvements or additions to the Premises or to the Project or to any equipment located in the Project as Landlord shall desire or deem necessary or as Landlord may be required to do by governmental or quasi - governmental authority or court order or decree. Tenant hereby :waives any and all rights under and benefits of subsection 1 of Section 1932 and Sections 1941 and 1942 of the California Civil Code or under any similar law, statute, or ordinance now or hereafter in effect. 8. Additions And Alterations. 1. Landlord's Consent to Alterations. Tenant may not make any improvements, alterations, additions or changes to the Premises or any mechanical, plumbing or HVAC facilities or systems pertaining to the Premises (collectively, the ''Alterations'') without frrst procuring the prior written consent of Landlord to such Alterations, which consent shall be requested by Tenant not less than thirty (30) days prior to the commencement thereof, and which consent shall not be unreasonably withheld by Landlord, provided it shall be deemed reasonable for Landlord to withhold its consent to any Alteration which affects the structural portions or the systems or equipment of the Building, which is visible from the exterior of the Building or which may give rise to a governmentally required change to the ''Base Building," as that term is defined in Section 8.2, below. Notwithstanding the foregoing, Tenant shall be permitted to make Alterations following ten (10) business days notice to La11dlord, but without Landlord's prior consent, to the extent that such Alterations are decorative only (i.e., installation of carpeting or painting of the Premises). The construction of the initial improvements to the Premises shall be governed by the terms of the Tenant Work Letter and not the terms of this Article 8. 2. Manner of Construction. Landlord may impose, as a condition of its consent to any and all Alterations or repairs of the Premises or about the Premises, such requirements as Landlord in its reasonable discretion may deem desirable, including, but not limited to, the requirement that Tenant utilize for such purposes only contractors, subcontractors, materials, mechanics and materialmen selected by Tenant and reasonably app1·oved by Landlord, the requirement that upon Landlord's request, Tenant shall, at Tenant's expense, remove such Alterations upon the expiration or any early ter1nination of the Lease Te1·1n, provided Landlord shall have notified Tenant at the time of Landlord's consent to the Alteration that such Alteration was subject to such removal requirement and that any Alterations designated for removal by Landlord shall be atypical for Comparable Buildings or generally unusable by typical office tenants. As long as the improvements installed in the Premises for Tenant's initial occupancy are typical for Comparable Buildings or generally usable by typical office tenants, no such improvements shall be required to be removed upon expiration or earlier ter111i11ation of the Lease. If Alte1·ations will involve the use of or disturb hazardous materials or substances existing in the Premises, Tenant shall comply with Landlord's rules and regulations concerning such hazardous materials or substances. Tenant shall construct all Alterations and perfor1n such repairs in a good and workmanlike manner, in confom1ance with any and all applicable federal, state, county or municipal laws, rules and regulations and pursuant to a valid building pennit, issued by the City of Los Angeles (if such per1nit is required), all in conformance with Landlord's construction rules and regulations. In the event Tenant performs any Alterations in the Premises after the Comme11cement Date which require or give rise to governmentally required changes to the ''Base Building," as that te1·m is defined below, then Landlord shall, at Tena11t's expense, make such changes to the Base Building. The ''Base Buildil[]lg'' shall include
the structural portions of the Building, and the public restrooms and the systems and equipment located in the internal core of the Building on the floor or floors on which the Premises are located. In performing the work of any such Alterations, Tenant shall have the work perforrned in such manner so as not to obstruct access to the Project or any portion thereof, by any other tenant of the Project, and so as not to obstruct the business of Landlord or other tenants in the Project. Tenant shall not use (and upon notice from Landlord shall cease using) contractors, services, workmen, labor, materials or equipment that, in Landlord's reasonable judgment, would disturb labor harmony with the workforce or trades engaged in performing other work, labor or services in or about the Building or the Common Areas. In addition to Tenant's obligations under Article 9 of this Lease, upon completion of any Alterations, Tenant agrees to cause a Notice of Completion to be recorded in the office of the Recorder of the County of Los Angeles in accordance with Section 3093 of the Civil Code of the State of California or any successor statute, and Tenant shall deliver to the Project management office a reproducible copy of the ''as built'' drawings (or a marked - up set of the final construction drawings) of the Alterations (to the extent plans or drawings are reasonably necessary in connection with the Alterations) as well as all permits, approvals and other documents, if any, issued by any governmental agency in connection with the Alterations. 3. Payment for Improvements. If payment is made directly to contractors, Tenant shall comply with Landlord's requirements for final lien releases and waivers in connection with Tenant's payment for work to contractors. If Tenant orders any work directly from Landlord, Tenant shall pay to Landlord a percentage of the cost of such work sufficient to compensate Landlord for all overhead, general conditions, fees and other costs and expenses arising from Landlord's involvement with such work. If Tenant does not order any work directly fi·om Landlord, Tenant shall reimburse Landlord for Landlord's reasonable, actual, out - of - pocket costs and expe11ses actually incurred in connection with Landlord's review of such work. 4. Construction Insurance. In addition to the requirements of Article 10 of this Lease, in the event that Tenant makes any Alterations, prior to the commencement of such Alterations, Tenant shall provide Landlord with evidence that Tenant carries ''Builder's All Risk'' insurance in an amount approved by Landlord covering the construction of such Alterations, and such other insurance as Landlord may require, it being understood and agreed that all of such Alterations shall be insured by Tenant pursuant to Article 10 of this Lease inunediately upon completion thereof. In addition, with respect to any Alterations that will cost in excess of $40,000, Landlord may, in its discretion, require Tenant to obtain a lien and completion bond or some alternate fo11n of security satisfactory to Landlord in an amount sufficient to ensure the lien - free completion of such Alterations and naming Landlord as a co - obligee. 5. Landlord's Property. All Alterations, improvements, fixtures, equipment and/or appurtenances which may be installed or placed in or about the Premises, from time to time, shall be at the sole cost of Tenant and shall be and become the property of Landlord, except that Tenant may remove any Alterations, improvements, fixtures and/or equipment which Tenant can substantiate to Landlord have not been paid for with any Tenant improvement allowance funds provided to Tenant by Landlord, provided Tenant repairs any damage to the Premises and Building caused by such removal and returns the affected portion of the Premises to a building standard tenant improved condition as determined by Landlord. Furthermore, Landlord may, by written notice to Tenant, require Tenant, at Tenant's expense, to remove any Alterations in the Premises, but only as set forth in Section 8.2 above, and to repair any damage to the Premises and Building caused by such removal and returns the affected po1·tion of the Premises to a building standard tenant improved condition as deterrnined by Landlord. If Tenant fails to complete such removal and/or to repair any damage caused by the removal of such Alterations in the Premises, and returns the affected portion of the Premises to a building standard tenant improved condition as determined by Landlord, Landlord may do so and may charge the cost thereof to Tenant. Tenant hereby protects, defends, indemnifies and holds Landlord harmless from any liability, cost, obligation, expense or claim of lien in any manner 1·elating to the installation, placement, removal or financing of any such Alterations, improvements, fixtures and/or equipment in, on or about the Premises, which obligations of Tenant shall survive the expiration or earlier termination of this Lease. 9. Covenant Against Liens. Tenant shall keep the Project and Premises free from any liens or encumbrances arising out of the work perfo 1·1 ned, materials furnished or obligations incurred by or on behalf of Tenant, and shall protect, defend, indemnify and hold Landlord harmless from and against any claims, liabilities, judgments or costs (including, [JSG:se/102994_5.DOC/092404/4040.039) - 21 -
- 22 - [JSG:se/102994_5.DOC/092404/4040.039] • without limitation, reasonable attorneys' fees and costs) arising out of same or in connection therewith. Tenant shall give Landlord notice at least twenty (20) days prior to the commencement of any such work on the Premises (or such additional time as may be necessary under applicable laws) to afford Landlord the opportunity of posting and recording appropriate notices of non - responsibility. Tenant shall remove any such lien or encumbrance by bond or otherwise within five (5) days after notice by Landlord, and if Tenant shall fail to do so, Landlord may pay the amount necessary to remove such lien or encumbrance, without being responsible for investigating the validity thereof. The amount so paid shall be deemed Additional Rent under this Lease payable upon demand, without limitation as to other remedies available to Landlord under this Lease. Nothing contained in this Lease shall authorize Tenant to do any act which shall subject Landlord's title to the Building or Premises to any liens or encumbrances whether claimed by operation of law or express or implied contract. Any claim to a lien or encumbrance upon the Building or Premises arising in connection with any such work or respecting the Premises not performed by or at the request of Landlord shall be null and void, or at Landlord's option shall attach only against Tenant's interest in the Premises and shall in all respects be subordinate to Landlord's title to the Project, Building and Premises. 10. Insurance. 1. Indemnification and Waiver. Tenant hereby assumes all risk of damage to property or injury to Tenant's property or injury to Tenant, its shareholders, partners, subpartners, members, and their respective officers, agents, servants, employees and independent contractors (collectively, ''Tenant Parties'') in, upon or about the Premises from any cause whatsoever and agrees that Landlord, its partners, subpartners and their respective officers, agents, servants, employees, and independent contractors (collectively, ''Landlord Parties'') shall not be liable for, and are hereby released from any responsibility for, any damage either to person or property or resulting from the loss of use thereof, which damage is sustained by Tenant or by other persons claiming through Tenant, subject to Landlord's indemnity obligations set forth in this Section 10.1 below. Tenant shall indemnify, defend, protect, and hold harmless the Landlord Parties from any and all loss, cost, damage, expense and liability (including without limitation court costs and reasonable attorneys' fees) incurred in connection with or arising fi·om any cause in, on or about the Premises, any negligence or willful misconduct of Tenant or of any person claiming by, through or under Tenant, or of the contractors, agents, servants, employees, invitees, guests or licensees of Tenant or any such person, in, on or about the Project or any breach of the terms of this Lease, either prior to, during, or after the expiration of the Lease Term, provided that the terms of the foregoing indemnity shall not apply to the extent of the negligence or willful misconduct of Landlord. Further, Tenant's agreement to indemnify Landlord pursuant to this Section 10.1 is not inte11ded and shall not relieve any insurance carrier of its obligations under policies required to be carried by Tenant pursuant to the provisions of this Lease, to the extent such policies cover the matters subject to Tenant's indemnification obligations; nor shall they supersede any inconsistent agreement of the parties set forth in any other provision of this Lease. Notwithstanding the provisions of this Section 10.1 to the contrary, but subject to the limitation on Landlord's liability set forth in Section 29.13, Landlord shall indemnify, protect, defend and hold harmless the Tenant Parties from and against any and all loss, cost, damage, expense and liability (including without limitation court costs and reasonable attorneys' fees) with respect to or arising out of any injury to persons or damage to property located on the Premises or within the Project (including, without limitation, the Premises, Tenant's property, any reasonable insurance deductible applicable thereto (subject to Section 10.5) and Tenant's personnel) (but not for injury to, or interference with, Tenant's or any Tenant Parties' business or for consequential damages), to the extent such damage or injury arises or results from (i) the negligence or willful misconduct of Landlord, its agents or employees (acting within the scope of their relationship with Landlord), and/or (ii) the default by Landlord of any obligations on Landlord's part to be perforrned under the terms of this Lease. Landlord's agreement to indemnify Tenant pursuant to this Section I 0.1 is not intended and shall not relieve any insurance carrier of its obligations under policies required to be carried by Landlord pursuant to the provisions of this Lease, to the extent such policies cover the matters subject to Landlord's indemnification obligations; nor shall they supersede any inconsistent agreement of the parties set forth in any other provision of this Lease. The provisions of this Section 10.1 shall survive the expiration or sooner termination of this Lease with respect to any claims or liability arising in connection with any event occurring prior to such expiration or terrrunation. 2. Tenant's Compliance With Landlord's Fire and Casualty Insurance. Tena11t shall, at Tenant's expense, comply with all reasonable insurance company requirements pertaini11g to the use of the Premises. If Tenant's conduct or use of the Premises causes any increase in the premium for such insurance policies then Tenant shall reimburse Landlord for any such increase. Tenant, at Tenant's expense, shall comply with all rules,
- 23 - [JSG:se/102994_5.DOC/092404/4040.039] orders, regulations or requirements of the American Insurance Association (fo1n1erly the National Board of Fire Underwriters) and with any similar body. 10.3 Tenant's Insurance. Tenant shall maintain the following coverages in the following amounts. (a) Commercial General Liability Insurance covering the insured against claims of bodily injury, personal injury and property damage (including loss of use thereof) arising out of Tenant's operations, and contractual liabilities (covering the performance by Tenant of its indemnity agreements) including a Broad Form endorsement covering the insuring provisions of this Lease and the performance by Tenant of the indemnity agreements set forth in Section 10 .1 of this Lease, for limits of liability not less than: Bodily Injury and Property Damage Liability Personal Injury Liability $3,000,000 each occurrence $3,000,000 annual aggregate $3,000,000 each occurrence $3,000,000 annual aggregate 0% Insured's participation (b) Physical Damage Insurance covering (i) all office furniture, business and trade fixtures, office equipment, free - standing cabinet work, movable partitions, merchandise and all other items of Tenant's property on the Premises installed by, for, or at the expense of Tenant, (ii) the ''Tenant Improvements," as that term is defined in Section 2 of Exhibit B, and any other improvements which exist in the Premises as of the Lease Commencement Date (excluding the Base Building) (the ''Original Improvements''), and (iii) all other improvements, alterations and additions to the Premises. Such insurance shall be written on an ''all risks'' of physical loss or damage basis, for the full replacement cost value (subject to reasonable deductible amounts) new without deduction for depreciation of the covered items and in amounts that meet any co - insm·ance clauses of the policies of insurance and shall include coverage for damage or other loss caused by fire or other peril including, but not limited to, vandalism and malicious mischief, theft, water damage of any type, including sprinkler leakage, bursting or stoppage of pipes, and explosion, and providing business interruption coverage for a period of one year. (c) Worker's Compensation and Employer's Liability or other similar insurance pursuant to all applicable state and local statutes and regulations. 10.4 Form of Policies. The minimum limits of policies of insurance required of Tenant under this Lease shall in no event limit the liability of Tenant under this Lease. Such insurance shall (i) name Landlo1·d, and any other party the Landlord so specifies, as an additional insured, including Landlord's managing agent, if any; (ii) specifically cover the liability assumed by Tenant under this Lease, including, but not limited to, Te11ant's obligations under Section 10.1 of this Lease; (iii) be issued by an insurance company having a rating of not less than A - X in Best's Insurance Guide or which is otherwise acceptable to Landlord and licensed to do business in the State of California; (iv) be primary insurance as to all claims thereunder and provide that any insurance carried by Landlord is excess and is non - contributing with any insurance requirement of Tenant; (v) be in form and content reasonably acceptable to Landlord; and (vi) provide that said insurance shall not be canceled or coverage changed unless thirty (30) days' prior written notice shall have been given to Landlord and any mortgagee of Landlord. Tenant shall deliver said policy or policies or certificates thereof to Landlord on or before the Lease Commenceme11t Date and prior to the expiration dates thereof. In the event Tenant shall fail to procure such insurance, or to deliver· such policies or certificate, Landlord may, at its option, upon at least ten (10) days prior notice to Tenant, procure such policies for the account of Tenant, and the cost thereof shall be paid to Landlord within five (5) days after delivery to Tenant of bills therefor. 10.5 Subrogatio . Landlord and Tenant intend that their respective property loss risks shall be borne by reasonable insurance carriers to the extent above provided, and Landlord and Tenant hereby agree to look solely to, and seek recovery only from, their respective insurance carriers in the event of a property loss to the extent that such coverage is agreed to be provided hereunder. Notwithstanding anything to the contrary in this Lease, the parties each hereby waive all rights and claims against each other for such losses, and waive all rights of subrogation of their respective insurers, provided such waiver of subrogation shall not affect the right to the insured to recover
- 24 - [JSG:se/102994_5.DOC/092404/4040.039] thereunder. The parties agree that their respective insurance policies are now, or shall be, endorsed such that the waiver of subrogation shall not affect the right of the insured to recover thereunder, so long as no material additional premium is charged therefor. 6. Additional Insurance Obligations. If commercially reasonable and available, Tenant shall carry and maintain during the entire Lease Term, at Tenant's sole cost and expense, increased amounts of the insurance required to be carried by Tenant pursuant to this Article IO and such other reasonable types of insurance coverage and in such reasonable amounts covering the Premises and Tenant's operations therein, as may be reasonably requested by Landlord and generally required by Landlord of the other tenants in the Project, but in no event in excess of the amounts and types of insurance then being required by landlords of other Comparable Buildings. 7. Landlord's Insurance. Landlord shall maintain during the Lease Term a policy or policies of insurance insuring the Building against loss or damage due to fire and other casualties covered within the classification of ''all risk'' or ''special forrn'' coverage, vandalism coverage and malicious mischief, sprinkler leakage, water damage and special extended coverage on building, as well as Commercial General Liability Insurance insuring against such risks as are customarily insured against by other landlords operating Comparable Buildings. Such coverage shall be in such amounts and with such deductibles or self - insured retention amounts as Landlord may from time to time reasonably dete11nine. Additionally, at the option of Landlord, such insurance coverage may include the risks of earthquakes and/or flood damage and additional hazards, a rental loss endorsement and one or more loss payee endorsements in favor of the holders of any mortgages or deeds of trust encumbering the interest of Landlord in the Project or any ground or underlying lessors of the Project, or any portion thereof. 11. Damage and Destruction. 11.1 Repair of Damage to Premises by Landlord. Tenant shall promptly notify Landlord of any damage to the Premises resulting from fire or any other casualty. If the Premises or any Common Areas serving or providing access to the Premises shall be damaged by fire or other casualty, Landlord shall pron1ptly and diligently, subject to reasonable delays for insurance adjustment or other matters beyond Landlord's reasonable control, and subject to all other terms of this Article 11 , restore the Base Building and such Common Areas. Such restoration shall be to substantially the same condition of the Base Building and the Common Areas prior to the casualty, except for modifications required by zoning and building codes and other laws or by the holder of a mortgage on the Building or Project or any other modifications to the Common Areas deemed desirable by Landlord, which are consistent with the character of the Project, provided that access to the Premises and any common restrooms serving the Premises shall not be materially impaired. Upon the occurrence of any damage to the Premises, upon notice (the ''Landlord Repair Notice'') to Tenant from Landlord, Tenant shall assign to Landlord (or to any party designated by Landlord) all insurance proceeds payable to Tenant under Tenant's insurance with respect improvements (but not personal property) in the Premises required under Section 10.3 of this Lease, and Landlord shall repair any injur·y 01· damage to the Tenant Improvements and the Original Improvements installed in the Premises and shall return such Tenant Improvements and Original Improvements to their original condition; provided that if the cost of such repair by Landlord exceeds the amount of insurance proceeds received by Landlord from Tenant's insurance carrier, as assigned by Tenant, the cost of such repairs shall be paid by Tenant to Landlord as and when required for the 1·epair of the damage; provided further that Tenant shall have the right to require that the improvements to the Preniises be reconstructed to a lesser standard condition (but not less than a Project standard condition). In tl1e event that Landlord does not deliver the Landlord Repair Notice within sixty (60) days following the date the casualty becomes known to Landlord, Tenant shall, at its sole cost and expense, repair any injury or damage to the Tenant Improvements and the Original Improvements installed in the Premises and shall return such Tenant Improven1ents and Original Improvements to their original condition (or, if Tenant's insurance proceeds are not sufficient to complete such restoration, to at least a Project standard condition). Whether or not Landlord delivers a Landlord Repair Notice, prior to the commencement of construction, Tenant shall submit to Landlord, for Landlord's review and approval, all plans, specifications and working drawings relating thereto, and the selection of the contractors to perform such improvement work shall be subject to Landlord's prior approval. Landlord shall not be liable for any inconvenience or annoyance to Tenant or its visitors, or injury to Tenant's business resulting in any way from such damage or the repair thereof; provided however, Tenant shall be entitled to abatement of rent in com1ection with damage to Premises, Building or Project in accordance with Section 6.4 above. In the event that Landlord shall not deliver the Landlord Repair Notice, Tenant's right to rent abatement pursuant to the preceding sentence shall
- 25 - [JSG:se/102994_5.DOC/092404/4040.039] terminate as of the date which is reasonably determined by Landlord to be the date Tenant should have completed - - repairs to the Premises assuming Tenant used reasonable due diligence in connection therewith. 11.2 Landlord's Option to Repair. Notwithstanding the terms of Section 11.1 of this Lease, in the event of any material damage to the Premises, Building or Project, Landlord may elect not to rebuild and/or restore the Premises, Building and/or Project, and instead terminate this Lease, by notifying Tenant in writing of such termination within sixty (60) days after the date of damage, such notice to include a termination date giving Te11ant sixty (60) days to vacate the Premises, but Landlord may so elect only if the Building or Project shall be damaged by fire or other casualty or cause, whether or not the Premises are affected, and one or more of the following conditions is present: (i) in Landlord's reasonable judgment, repairs cannot reasonably be completed within one hundred eighty (180) days after the date of discovery of the damage (when such repairs are made without the payment of overtime or other premiums); (ii) the holder of any mortgage on the Building or Project or ground lessor with respect to the Building or Project shall require that the insurance proceeds or any portion thereof be used to retire the mortgage debt, or shall terminate the ground lease, as the case may be; (iii) more than Five Million Dollars ($5,000,000) of the cost to repair the damage is not covered by Landlord's insurance policies for reasons other than Landlord's failure to insure as required under this Lease; or (iv) the damage occurs during the last twelve (12) months of the Lease Terrn; or (v) any owner of any other portion of the Project, other than Landlord, does not intend to repair the damage to such portion of the Project; provided, however, that if Landlord does not elect to te1111inate this Lease pursuant to Landlord's termination right as provided above, and the repairs cannot, in the reasonable opinion of Landlord, be completed within one hundred eighty (180) days after being commenced, Tenant may elect, no earlier than sixty (60) days after the date of the damage and not later than ninety (90) days after the date of such damage, to te1·1ninate this Lease by written notice to Landlord effective as of the date specified in the notice, which date shall not be less than thirty (30) days nor more than sixty (60) days after the date such notice is given by Tenant. In addition, if Landlord does not elect to terminate this Lease pursuant to Landlord's termination right as provided above, and the repairs cannot, in the reasonable opinion of Landlord, be completed within fifty percent (50%) of the remaini11g portion of the Term at the time of the damage, Tenant may elect, no earlier than thirty (30) days after the date of the damage and not later than sixty (60) days after the date of such damage, to ternlinate this Lease by writte11 notice to Landlord effective as of the date specified in the notice, which date shall not be less than thirty (30) days nor more than sixty (60) days after the date such notice is given by Tenant. 11.3 Waiver of Statutory Provisions. The provisions of this Lease, including this Article 11 , constitute an express agreement between Landlord and Tenant with respect to any and all damage to, or destruction of, all or any part of the Premises, the Building or the Project, and any statute or regulation of the State of Califon1ia, including, without limitation, Sections 1932(2) and 1933(4) of the California Civil Code, with respect to a11y rights or obligations concerning damage or destruction in the absence of an express agreement between the parties, and any other statute or regulation, now or hereafter in effect, shall have no application to this Lease or any da1nage or destruction to all or any part of the Premises, the Building or the Project. 12. Nonwaiver. No provision of this Lease shall be deemed waived by either party hereto unless expressly waived in a writing signed thereby. The waiver by either party hereto of any breach of any term, covenant or condition herein contained shall not be deemed to be a waiver of any subsequent breach of same or any other te1n1, covenant or condition herein contained. The subsequent acceptance of Rent hereunder by Landlord shall not be deemed to be a waiver of any preceding breach by Tenant of any terrn, covenant or condition of this Lease, other than tl1e failure of Tenant to pay the particular Rent so accepted, regardless of Landlord's knowledge of such preceding b1·each at the time of acceptance of such Rent. No acceptance of a lesser amount than the Rent herein stipulated shall be deemed a waiver of Landlord's right to receive the full amount due, nor shall any endorsement or statement on any check or payment or any letter accompanying such check or payment be deemed an accord and satisfaction, and Landlord may accept such check or payment without prejudice to Landlord's right to recover the full an1ount due. No receipt of monies by Landlord from Tenant after the termination of this Lease shall in any way alter the length of the Lease Term or of Tenant's right of possession hereunder, or after the giving of any notice shall reinstate, continue or extend the Lease Term or affect any notice given Tenant prior to the receipt of such monies, it being agreed that after the service of notice or the commencement of a suit, or after final judgment for possession of the Premises, · Landlord may receive and collect any Rent due, and the payment of said Rent shall not waive or affect said notice, suit or judgment.
- 26 - [JSG:se/102994_5.DOC/092404/4040.039] 13. Condemnation. If the whole or any part of the Premises, Building or Project shall be taken by power of eminent domain or condemned by any competent authority for any public or quasi - public use or purpose, or if any adjacent property or street shall be so taken or condemned, or reconfigured or vacated by such authority in such manner as to require tl1e use, reconstruction or remodeling of any part of the Premises, Building or Project, or if Landlord shall g1·ant a deed or other instrument in lieu of such taking by eminent domain or condemnation, Landlord shall have the option to te11ni11ate this Lease effective as of the date possession is required to be surrendered to the autl1ority. If more than twenty - five percent (25%) of the rentable square feet of the Premises is taken, or if access to the Prenlises is substantially impaired, in each case for a period in excess of one hundred eighty (180) days, Tenant shall have the option to terminate this Lease effective as of the date possession is required to be surrendered to the authority. Tenant shall not because of any taking assert any claim against Landlord or the authority for any compensation because of such taking and Landlord shall be entitled to the entire award or payment in connection therewith, except that Tenant shall have the right to file any separate claim available to Tenant for any taking of Tenant's personal property and fixtures belonging to Tenant and removable by Tenant upon expiration of the Lease Tern1 pursuant to the terms of this Lease, for moving expenses and for damages relating to business interruption and/or loss of goodwill, so long as such claims do not diminish the award available to Landlord, its ground lessor with respect to the Building or Project or its mortgagee, and such claim is payable separately to Tenant. All Rent shall be apportioned as of the date of such te1mi11ation. If any part of the Premises shall be taken, and this Lease shall not be so terminated, the Rent shall be proportionately abated. Tenant hereby waives any and all rights it might otherwise have pursuant to Section 1265.130 of The California Code of Civil Procedure. Notwithstanding anything to the contrary contained in this Article 13 , in the event of a temporary taking of all or any portion of the Premises for a period of one hundred and eighty (180) days or less, then this Lease shall not ternlinate but the Base Rent and the Additional Rent shall be abated for the period of such taking in proportion to the ratio that the amount of rentable square feet of the Premises taken bears to the total rentable square feet of the Prenlises. 14. Assignment And Subletting. 14.1 Transfers. Subject to the te1rns of Section 14.7 below, Tenant shall not, without the prior written consent of Landlord, which consent shall not be umeasonably withheld or delayed in accordance with tl1e terms hereof, assign, mortgage, pledge, hypothecate, encumber, or perrnit any lien to attach to, or otherwise transfer, this Lease or any interest hereunder, permit any assignment, or other transfer of this Lease or any interest hereunder by operation of law, sublet the Premises or any part thereof, or enter into any license or concession agreements or otherwise permit the occupancy or use of the Premises or any part thereof by any persons other than Tenant and its employees, guests, invitees and contractors (all of the foregoing are hereinafter sometimes referred to collectively as ''Transfers'' and any person to whom any Transfer is made or sought to be made is hereinafter sometimes referred to as a ''Transferee''). If Tenant desires Landlord's consent to any Transfer, Tenant shall notify Landlord in writing, which notice (the ''Transfer Notice'') shall include (i) the proposed effective date of the Transfe1·, which shall not be less than thirty (30) days nor more than one hundred eighty (180) days after the date of delivery of the Transfer Notice, (ii) a description of the portion of the Premises to be transferred (the ''Subject Space''), (iii) all of the terms of the proposed Transfer and the consideration therefor, including calculation of the ''Transfer Premium'', as that term is defined in Section 14.3 below, in connection with such Transfer, the name and address of the proposed Transferee, and a copy of all existing executed and/or proposed documentation pertaining to the proposed Transfer, including all existing operative documents to be executed to evidence such Transfer or tl1e ag1·een1ents incidental or related to such Transfer, provided that Landlord shall have the right to require Tenant to utilize Landlord's standard Transfer documents in connection with the documentation of such Transfer, (iv) current financial statements of the proposed Transferee and any other information reasonably required by Landlord necessary to enable Landlord to deter·111ine the financial responsibility, character, and reputation oftl1e proposed Transferee, the nature of such Transferee's business and proposed use of the Subject Space, and (v) an executed estoppel certificate from Tenant in the form attached hereto as Exhibit E. Any Transfer made without Landlord's prior written consent shall, at Landlord's option, be null, void and ofno effect, and shall, at Landlord's optio11, may be treated as a default by Tenant pursuant to the applicable provisions of Article 19 below. Whether or not Landlord consents to any proposed Transfer, Tenant shall pay Landlord's review and processing fees, as well as any reasonable professional fees (including, without limitation, attorneys', accountants', architects', engineers' and consultants' fees) incurred by Landlord, within thirty (30) days after written request by Landlord, in an amount not
to exceed $1,000 in the aggregate, for a Transfer in the ordinary course of business and for which Tenant and the Transferee execute and deliver Landlord's forrn of consent to transfer in the fo1·1n attached hereto as Exhibit G. 2. Landlord's Consent . Landlord shall not unreasonably withhold, condition or delay its conse 11 t to any proposed Transfer of the Subject Space to the Transferee on the terms specified in the Transfer Notice . Without limitation as to other reasonable grounds for withholding consent, the parties hereby agree that it shall be reasonable under this Lease and under any applicable law for Landlord to withhold consent to any proposed Transfer where one or more of the following apply : (a) The Transferee is of a character or reputation or engaged in a business which is not consistent with the quality of the Building or the Project; · (b) The Transferee intends to use the Subject Space for pu1 - poses which are not pennitted under this Lease; (c ) The Transferee is either a governmental agency or instrumentality thereof; (d) The Transferee is not a party of reasonable financial worth and/or financial stability in light of the responsibilities to be undertaken in connection with the Transfer on the date consent is requested; (e) The proposed Transfer would cause a violation of another lease for space in the Project, or would give an occupant of the Project a right to cancel its lease; (f) The tenns of the proposed Transfer will allow the Transferee to exercise a right of renewal, right of expansion, right of first offer, or other similar right held by Tenant that is specifically not pennitted to be transferred (Tenant may retain the right to exercise the same for the benefit of the Transferee); or (g) Either the proposed Transferee, or any person or entity which directly or indirectly, controls, is controlled by, or is under common control with, the proposed Transferee, (i) occupies space in the Project at the time of the request for consent and Landlord has space available for the proposed Transferee or such • proposed Transferee has an unexpired option to expand in the Project, or (ii) is negotiating with Landlord or has negotiated with Landlord (as evidenced by at least a written proposal and a written response tl1ereto) during the four (4) month period immediately preceding the date Landlord receives the Transfer Notice, to lease space in the Project and Landlord has space available for the proposed Transferee. If Landlord consents to any Transfer pursuant to the terms of this Section 14.2 (and does not exercise any recapture rights Landlord may have under Section 14.4 of this Lease), Tenant may within six (6) months after Landlord's consent, but not later than the expiration of said six - month period, enter into such Transfer of the Premises or portion thereof, upon substantially the same terms and conditions as are set forth in the Transfer Notice furnished by Tenant to Landlord pursuant to Section 14.1 of this Lease, provided that if there are any changes in the terms and conditions from those specified in the Transfer Notice (i) such that Landlord would initially have bee11 entitled to refuse its consent to such Transfer under this Section 14.2 , or (ii) which would cause the proposed Transfer to be materially more favorable to the Transferee than the terms set forth in Tenant's original Transfer Notice, Tenant shall again submit the Transfer to Landlord for its approval and other action under this Article 14 (including Landlord's right of recapture, if any, under Section 14.4 of this Lease). Notwithstanding anything to the contrary in this Lease, if Tenant or any proposed Transferee claims that Landlord has unreasonably withheld or delayed its consent under Section 14.2 or otherwise has breached or acted unreasonably under this Article 14 , their sole remedies shall be a suit for contract damages (other than damages for injury to, or interference witl1, Tenant's business including, without limitation, loss of profits, however occurring) or declaratory judgment and an injunction for the relief sought, and Tenant hereby waives any right at law or equity to ter111inate this Lease in connection therewith, on its own behalf and, to the extent pennitted under all applicable laws, on behalf of the proposed Transferee. Tenant shall indemnify, defend and hold harmless Landlord from any and all liability, losses, claims, damages, costs, expenses, causes of action and proceedings involving any third party or parties (including without limitation Tenant's proposed subtenant or assignee) who claim they were damaged by Landlord's wrongful withholding or conditioning of Landlord's consent. {JSG:se/102994_5.DOC/092404/4040.039] - 27 -
- 28 - [JSG:se/102994_5.DOC/092404/4040.039] 3. Transfer Premium. If Landlord consents to a Transfer, as a condition thereto which tl1e parties hereby agree is reasonable, Tenant shall pay to Landlord fifty percent (50%) of any ''Transfer Premium," as that term is defined in this Section 14.3 , received by Tenant from such Transferee. ''Transfer Premium'' shall mean all rent, additional rent or other consideration payable by such Transferee in connection with the Transfer in excess of the Rent and Additional Rent payable by Tenant under this Lease during the term of the Transfer on a per rentable , square foot basis if less than all of the Premises is transferred, after deducting the reasonable expenses incurred by Tenant for (i) any changes, alterations and improvements to the Premises in connection with the Transfer, (ii) any free base rent reasonably provided to the Transferee, (iii) the Base Rent and Additional Rent for Direct Expenses paid by Tenant with respect to the Subject Space during the period such space is vacant, not used for a11y purpose by Tenant and not subject to any Transfer, provided no such ''vacancy cost'' occurring prior to Tenant's notice to Landlord of Tenant's intent to Transfer such space shall be recognized, (iv) any brolcerage commissions in connection with the Transfer, (v) reasonable legal fees incurred in connection with the Transfer, and (vi) othe1· reasonable out - of - pocket costs incurred by Tenant in connection with the Transfer (collective_ly, the ''Transfer Costs''). ''Transfer Premium'' shall also include, but not be limited to, key money, bonus money or other cash consider·ation paid by Transferee to Tenant in connection with such Transfer, and any payment in excess of fair market value for services rendered by Tenant to Transferee or for assets, fixtures, inventory, equipment, or ft11niture transferred by Tenant to Transferee in connection with such Transfer. Tenant shall be required to pay Landlord its portion of any Transfer Premium on a monthly basis when received by Tenant, provided that Tenant shall be entitled to recover all of its Transfer Costs prior to owing to Landlord any Transfer Premium pursuant to the terr11s of this Section 14.3 . 4. Landlord's Option as to Subject Space. (a) Subject to Paragraph 14.4(b) below, notwithstanding anything to the contrary contai11ed in this Article 14, Landlord shall have the option (the ''Recapture Option''), by giving written notice to Tenant within twenty (20) days after receipt of any Transfer Notice in which Tenant proposes to sublease or assign at least 8,000 rentable square feet, to recapture the Subject Space for the te1·1n of the proposed Transfer set forth in the Transfer Notice. In the event of any such recapture of the Subject Space with respect to less than the entire Pren1ises, Landlord shall be responsible for any separate demising of the Subject Space from the remainder of the Prenlises, including any necessary balancing of the HVAC systems and separation of electrical circuits serving both the Subject Space and the remainder of the Premises. Such recapture notice shall cancel and te1minate this Lease with respect to the Subject Space for the term of the proposed Transfer set forth in the Transfer Notice as of the effective date of the proposed Transfer. (b) Tenant shall have the right to give Landlord a notice (the ''Early Transfer Notice'') including (i) the proposed effective date of the Transfer, which shall not be less than forty - five (45) days after the date of delivery of the Early Transfer Notice, (ii) a description of the portion of the Premises to be transferred (the ''Early Transfer Subject Space''), and (iii) and the ter1n for which Tenant proposes to Transfer such Early Transfer Subject Space. Landlord shall have the option (the ''Early Option''), if such Transfer relates to at least 8,000 rentable square feet, by giving written notice to Tenant within ten (10) days after receipt of any Early Transfe1· Notice, to recapture the Early Transfer Subject Space for the term of the proposed Transfer set forth in the Early Transfer Notice. Such recapture notice shall cancel and terminate this Lease with respect to the Early Transfer Subject Space for the term of the proposed Transfer set forth in the Early Transfer Notice as of the effective date of the proposed Transfer. If the Early Option is exercised with respect to less than the entire Premises, Landlord shall be responsible for any separate demising of the Subject Space from the remainder of the Premises, including any necessary balancing of the HVAC systems and separation of electrical circuits serving both the Early Transfer Subject Space and the remainder of the Premises. In the event the Subject Space has been identified as the Early Transfer Subject Space in an Early Transfer Notice, and Landlord does not exercise its Early Option with respect to such space as set forth in this Paragraph 14.4(b), then Landlord shall not have its Recapture Option set forth in Paragraph 14.4(a) above for a period of 180 days following Landlord's receipt of the applicable Early Transfe1· Notice with respect to any Transfer which is entered into for such Early Transfer Space during said 180 day period. Tena11t, nonetheless, still be obligated to give a Transfer Notice for its intended Transfer of such Subject Space, and Landlord retains all of its rights with respect to approval of any such Transfer and its other rights under this Article 14 (excluding the Recapture Option).
- 29 - [JSG:se/102994_5.DOC/092404/4040.039] (c) In the event of a recapture by Landlord pursuant to this Section 14.4 , if this Lease shall be canceled with respect to less than the entire Premises, the Rent and Security Deposit reserved herein shall be prorated on the basis of the number ofrentable square feet retained by Tenant in proportion to the number of rentable square feet contained in the Premises, and this Lease as so amended shall continue thereafter in full force and effect, and upon request of either party, the parties shall execute written confirmation of the same. 14.5 Effect of Transfer. If Landlord consents to a Transfer, (i) the terms and conditions of this Lease shall in no way be deemed to have been waived or modified, (ii) such consent shall not be deemed consent to any further Transfer by either Tenant or a Transferee, (iii) Tenant shall deliver to Landlord, promptly after execution, an original executed copy of all documentation pertaining to the Transfer in form reasonably acceptable to Landlord, (iv) Tenant shall furnish upon Landlord's request a complete statement, certified by an independent certified public accountant, or Tenant's chief financial officer, setting forth in detail the computation of any Transfer Premium Tenant has derived and shall derive from such Transfer, and (v) no Transfer relating to this Lease or agreement entered into with respect thereto, whether with or without Landlord's consent, shall relieve Tenant or any guaranto1· of the Lease from any liability under this Lease, including, without limitation, in connection with the Subject Space. Landlord or its authorized representatives shall have the right at all reasonable times to audit the books, records and papers of Tenant relating to any Transfer, and shall have the right to make copies thereof. If the Transfer Premium respecting any Transfer shall be found understated, Tenant shall, within thirty (30) days after demand, pay the deficiency, and if understated by more than two percent (2%), Tenant shall pay Landlord's costs of such audit. 14.6 Additional Transfers. Subject to the provisions of Section 14.7 below, for purposes of this Lease, the term ''Transfer'' shall also include (i) if Tenant is a partnership, the withdrawal or change, voluntary, involuntary or by operation of law, of fifty percent (50%) or more of the partners, or transfer of fifty percent (50%) or more of partnership interests, within a twelve (12) - month period, or the dissolution of the partnership without immediate reconstitution thereof, and (ii) if Tenant is a closely held corporation (i.e., whose stock is not publicly held and not traded through an exchange or over the counter), (A) the dissolution, merger, consolidation or other reorganization of Tenant or (B) the sale or other transfer of an aggregate of fifty percent (50%) or more of the voting shares of Tenant (other than to immediate family members by reason of gift or death), within a twelve (12) - month period, or (C) the sale, mortgage, hypothecation or pledge of an aggregate of fifty percent (50%) or more of the value of the unencumbered assets of Tenant within a twelve (12) - month period. 14.7 Non - Transfers. (a) Notwithstanding anything to the contrary contained in this Article 14 , none of the following shall be deemed a Transfer under this Article 14 and no Transfer Premium shall be payable in connection therewith: (i) an assignment or subletting of all or a portion of the Premises to a purchaser of all or substantially all of the assets of Tenant; (ii) a transfer to an entity, by operation of law or otherwise, in connection with the merger, consolidation or other reorganization of Tenant or an Affiliate (as hereinafter defined), provided such entity has assets and a net worth at least substantially the same value as the assets and net worth of Tenant immediately prior to such transfer; (iii) a transfer to an Affiliate (as hereinafter defined), or (iv) any change in ownership of Tenant described in Section 14.6 above if, after such change in ownership, the assets and net worth of Tenant are at least substantially the same value as the assets and net worth of Tenant immediately prior to such change in ownership. In addition, sale or transfer of stock of Tenant, Tenant's parent, or such parent's parent, through any public exchange shall not be deemed a Transfer, and redemption or issuance of additional stock of any class, unless used as a subterfuge to avoid the restrictions on Transfer set forth herein, shall not be deemed a Transfer. With reasonable promptness, and in any event within fifteen (15) days after request by Landlord, Tenant shall notify Landlord of any such assignment, sublease, action, or use which qualifies as such ''non - Transfer'' under this Section 14.7 and shall provide such information reasonably necessary to substantiate the same. ''Affiliate," as used in this Section 14.7 , shall mean an entity which is controlled by Tenant, or is under common control with Tenant ''Control," as used in this Section 14.7, shall mean the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person or entity, whether through the ownership of voting securities, by contract or otherwise. (b) Notwithstanding anything to the contrary contained in this Article 14 , Tenant shall have the right, after notice in accordance with Section 14.1, to permit other Persons (collectively, the ''Other
- 30 - [JSG:se/102994_5.DOC/092404/4040.039] Occupants'') to occupy up to one thousand five hundred (1,500) rentable square feet of the Premises during the Ter1n and any extensions thereof on the following conditions: (1) Such Other Occupant or the agreement per11litting such occupancy does not violate any of the enumerated conditions set forth in Paragraphs 14.2(a) through 14.2(g)_ above; (2) No demising wall shall separate the space occupied by Other Occupants from the space occupied by Tenant; and · (3) The aggregate number of Other Occupants occupying the space within the Premises shall never exceed three (3) at any given time. Landlord agrees that such occupancy of the Premises by Other Occupants shall not constitute a Transfer. Consequently, such occupancy by Other Occupants shall not require Landlord's consent nor entitle Landlord to any Transfer Premium. 14.8 Occurrence of Default. Any Transfer hereunder shall be subordinate and subject to the provisions of this Lease, and if this Lease shall be terminated during the te1·1n of any Transfer, Landlord shall have the right to: (i) treat such Transfer as cancelled and repossess the Subject Space by any lawful means, or (ii) requi1·e that such Transferee attorn to and recognize Landlord as its landlord under any such Transfer. If Tenant shall be in default under this Lease, Landlord is hereby irrevocably authorized, as Tenant's agent and attorney - in - fact, to direct any Transferee to make all payments under or in connection with the Transfer directly to Landlord (which Landlord shall apply towards Tenant's obligations under this Lease) until such default is cured. Such Transferee shall rely on any representation by Landlord that Tenant is in default hereunder, without any need for confi1·n1ation thereof by Tenant. Upon any assignment, the assignee shall assume in writing all obligations and covenants of Tenant thereafter to be performed or observed under this Lease. No collection or acceptance of rent by Landlord from any Transferee shall be deemed a waiver of any provision of this Article 14 or the approval of any Transferee or a release of Tenant from any obligation under this Lease, whether theretofore or thereafter accruing. In no event shall Landlord's enforcement of any provision of this Lease against any Transferee be deemed a waiver of Landlord's right to enforce any ter1n of this Lease against Tenant or any other person. If Tenant's obligations hereunder have been guaranteed, Landlord's consent to any Transfer shall not be effective unless the guarantor also consents to such Transfer. 15. Surrender Of Premises; Ownership And Removal Of Trade Fixtures. 1. Surrender of Premises. No act or thing done by Landlord or any agent or employee of Landlord during the Lease Term shall be deemed to constitute an acceptance by Landlord of a surrender of the Premises unless such intent is specifically acknowledged in writing by Landlord. The delivery of keys to the Pr·enlises to Landlord or any agent or employee of Landlord shall not constitute a surrender of the Premises or effect a ter1nination of this Lease, whether or not the keys are thereafter retained by Landlord, and notwithstanding such delivery Tenant shall be entitled to the return of such keys at any reasonable time upon request until tl1is Lease shall have been properly terminated. The voluntary or other surrender of this Lease by Tenant, whether accepted by Landlord or not, or a mutual termination hereof, shall not work a merger, and at the option of Landlord sl1all operate as an assignment to Landlord of all subleases or subtenancies affecting the Premises or ter1runate any or all such sublessees or subtenancies. 2. Removal of Tenant Property by Tenant. Upon the expiration of the Lease Term, or upon any earlier termination of this Lease, Tenant shall, subject to the provisions of this Article 15 , quit and smTender possession of the Premises to Landlord in as good order and condition as when Tenant took possession and as thereafter improved by Landlord and/or Tenant, reasonable wear and tear and repairs which are specifically made the responsibility of Landlord hereunder excepted. Upon such expiration or ter1ni11ation, Tenant shall, without expense to Landlord, remove or cause to be removed from the Premises all debris and rubbish, and such items of furniture, equipment, business and trade fixtures, free - standing cabinet work, movable partitions and other articles of personal property owned by Tenant or installed or placed by Tenant at its expense in the Premises, and such similar
- 31 - [JSG:se/102994_5.DOC/092404/4040.039] articles of any other persons claiming under Tenant, as Landlord may, in its sole discretion, require to be removed, and Tenant shall repair at its own expense all damage to the Premises and Building resulting from such removal. 16. Holding Over. If Tenant holds over after the expiration of the Lease Term or earlier termination thereof, with or without the express or implied consent of Landlord, such tenancy shall be from month - to - month only, and shall not constitute a renewal hereof or an extension for any further term, and in such case Rent shall be payable at a monthly rate equal to one hundred fifty percent (150%) (the ''Holdover Percentage'') of the Rent applicable during the last rental period of the Lease Te1·1n under this Lease. Such month - to - month tenancy shall be subject to every other applicable terrn, covenant and agreement contained herein. Nothing contained in this Article 16 shall be construed as consent by Landlord to any holding over by Tenant, and Landlord expressly reserves the right to require Tenant to surrender possession of the Premises to Landlord as provided in this Lease upon the expiration or other termination of this Lease. The provisions of this Article 16 shall not be deemed to limit or constitute a waiver of any other rights or remedies of Landlord provided herein or at law. If Tenant fails to surrender the Premises upon the termination or expiration of this Lease, in addition to any other liabilities to Landlord accruing therefi·om, Tenant shall protect, defend, indemnify and hold Landlord harmless from all loss, costs (including reasonable attorneys' fees) and liability resulting from such failure, including, without limiting the generality of the foregoing, any claims made by any succeeding tenant founded upon such failure to surrender and any lost profits to Landlord 1·esulting therefrom; provided, however, that Landlord shall not be entitled to any damages incurred by Landlord due to the loss of a prospective third - party tenant or delay in delivering the Premises or any portion tl1ereof to a prospective third - party tenant resulting from Tenant's holdover, unless (a) the lease to the prospective third - party tenant has been fully executed, and (b) Landlord has given notice to Tenant of the occurrence of such executed lease and the date Landlord, pursuant to such lease, intends to deliver the Premises or any portion thereof to the prospective third party tenant at least thirty (30) days prior to such date.. Notwithstanding anything to the contrary set forth hereinabove, the Holdover Percentage, with respect to the first ninety (90) days after the expiration of the Lease Term or earlier termination thereof, shall equal one hundred twenty - five percent (125%). 17. Estoppel Certificates. Within twenty (20) days following a request in writing by Landlord given to the notice addressees set forth in Section 10 of the Summary, Tenant shall execute, acknowledge and deliver to Landlord an estoppel certificate, which, as submitted by Landlord, shall be substantially in the form of Exhibit E, attached hereto (or such other form as may be required by any prospective mortgagee or purchaser of the Project, or any portion thereof), indicating therein any exceptions thereto that may exist at that time, and shall also contain any other infor1nation reasonably requested by Landlord 01· Landlord's mortgagee or prospective mortgagee. Any such certificate may be relied upon by any prospective mortgagee or purchaser of all or any portion of the Project. Tenant shall execute and deliver whatever other instruments may be reasonably required for such purposes. Within twenty (20) days following request by Tenant, Landlord shall execute, acknowledge and deliver to the Tenant a statement in writing, certifying (a) that this Lease is unmodified and in full force and effect (or if there have been modifications, that the same is in full force and effect as so modified and stating such modifications), (b) the dates to which the Base Rent, Additional Rent and other charges have been paid in advance, if any, and (c) whether or not to the knowledge of Landlord, Tenant is in default in the performance of any covenant, agreement or condition contained in this Lease and, if so, specifying each such default of which Landlord may have knowledge. 18. Subordination. This Lease shall be subject and subordinate to all present and future ground or underlying leases of the Building or Project and to the lien of any mortgage, trust deed or other encumbrances now or hereafter in force against the Building or Project or any part thereof, if any, and to all renewals, extensions, modificatio11s, consolidations and replacements thereof, and to all advances made or hereafter to be made upon the security of such mortgages or trust deeds, unless the holders of such mortgages, trust deeds or other encumbrances, or the lessors under such ground lease or underlying leases, require in writing that this Lease be superior thereto. Tenant covenants and agrees in the event any proceedings are brought for the foreclosure of any such mortgage or deed in lieu thereof (or if any ground lease is ter111inated), to attom, without any deductions or set - offs whatsoever, to the lienholder or purchaser or any successors thereto upon any such foreclosure sale or deed in lieu thereof (or to the
- 32 - [JSG:se/102994_5.DOC/092404/4040.039] ground lessor), if so requested to do so by such purchaser or lienholder or ground lessor, and to recognize such purchaser or lienholder or ground lessor as the lessor under this Lease, provided such lienholder or purchaser or ground lessor shall agree to accept this Lease and not disturb Tenant's occupancy, so long as Tenant timely pays the rent and observes and performs the terms, covenants and conditions of this Lease to be observed and performed by Tenant. Landlord's interest herein may be assigned as security at any time to any lienholde1·. Tenant shall, within five (5) business days of request by Landlord, execute such further instruments or assurances as Landlord may reasonably deem necessary to evidence or confrrm the subordination or superiority of this Lease to any such mortgages, trust deeds, ground leases or underlying leases. Tenant waives the provisions of any current or future statute, rule or law which may give or purport to give Tenant any right or election to terminate or otherwise adversely affect this Lease and the obligations of the Tenant hereunder in the event of any foreclosure proceeding or sale. Tenant shall, within ten (10) business days of request by Landlord from time to time, (i) execute a Nondisturbance and Attornment Agreement in the for1n of Exhibit F hereto in favor of any mortgagee of the Building or Project, and (ii) execute any other form ofnondisturbance and attornment agreement (or subordination, nondisturbance and attornment agreement, or subordination of the applicable mortgagee's lien) reasonably 1·equired by any mortgagee of the Building or Project (''Lender'') which provides comparable nondisturbance protection to Tenant in the event of a foreclosure. Notwithstanding anything to the contrary contained herein, Landlord agrees to expend commercially reasonable efforts to obtain for Tenant, as soon as reasonably possible and, in any case, within thirty (30) days of the execution and delivery of this Lease by Landlord and Tenant, a subordination, no11 - disturbance and attornment agreement from each Lender holding a deed of trust currently encumbering the Project in the form attached hereto as Exhibit F which may be recorded at Tenant's expense, and with respect to any mortgage, trust deed or ground lease hereafter executed affecting the Project and/or the Premises, this Lease shall be · subordinated thereto only if the holder thereof enters into a subordination, non - disturbance and attornment agreement substantially in the fo11n of Exhibit F hereto or any other .fo1·m of nondisturbance and attornment agreement (or subordination, nondisturbance and attornment agreement, or subordination of the applicable mortgagee's lien) reasonably required by any Lender which provides comparable nondisturbance protection to Tenant in the event of a foreclosure. 19. Defaults; Remedies. 1 9 .1 by Tenant: Events of Default. The occurrence of any of the following shall constitute a default of this Lease (a) Any failure by Tenant to pay any Rent or any other charge required to be paid under this Lease, or any part thereof, when due unless such failure is cured within five (5) days after Tenant's receipt of written notice thereof; provided, however, the such notice shall be in addition to and not in lieu of any notice required under Section 1161 of the California Code of Civil Procedure; or (b) Except where a specific time period is otherwise set forth for Tena11t's performance in this Lease, in which event the failure to perfor1n by Tenant within such time period shall be a default by Tenant under this Section 19 .1 (b ), any failure by Tenant to observe or perform any other provision, covenant or conditio11 of this Lease to be observed or perfor1ned by Tenant where such failure continues for thirty (30) days after written notice thereof from Landlord to Tenant (such notice shall be in addition to and not in lieu of any notice required under Section 1161 of the California Code of Civil Procedure); provided that if the nature of such default is such that the same cannot reasonably be cured within a thirty (30) day period, Tenant shall not be deemed to be in default if it diligently commences such cure within such period and thereafter diligently proceeds to rectify and cure such default; or (c) To the extent permitted by law, a general assignment by Tenant or any guarantor of the Lease for the benefit of creditors, or the taking of any corporate action in furtherance of bankruptcy or dissolution whether or not there exists any proceeding under an insolvency or bankruptcy law, or the filing by or against Tenant or any guarantor of any proceeding under an insolvency or bankruptcy law, unless in the case of a proceeding filed against Tenant or any guarantor the same is dismissed within sixty (60) days, or the appointment of a trustee or receiver to take possession of all or substantially all of the assets of Tenant or any guarantor, unless possession is restored to Tenant or such guarantor within thirty (30) days, or any execution or other judicially authorized seizm·e of all or substantially all of Tenant's assets located upon the Premises or of Tenant's interest in this Lease, unless such seizure is discharged within thirty (30) days; or
- 33 - [JSG:se/102994_5.DOC/092404/4040.039] (d) The failure by Tenant to observe or perfo1111 according to the provisio11s of Articles 5, 14 , 17 or 18 of this Lease where such failure continues for more than two (2) business days after notice from Landlord; provided, however, if the nature of the failure of performance under Article 5 does not (i) materially and adversely affect systems of the Building or the Building structure, (ii) materially and adversely affect access to or safety of any Premises in the Building, or (iii) materially and adversely affect the quiet enjoyment of any other tenant in the Project, then, if such default cannot reasonably be cured within such two (2) business day period, Landlord shall not be entitled to exercise its remedies under Section 19.2 if within such two (2) business day period Tenant shall commence such cure and thereafter diligently prosecute the same to completion within ten (10) days, provided that Tenant shall otherwise be liable to Landlord for such non - performance; or (e) Any failure by Tenant to provide Landlord with a renewed LC (defined in Article 22 below) or a substitute LC in for·m reasonably acceptable to Landlord at least thirty (30) days prior to the expi1·ation of the then existing LC. 2. Remedies Upon Default. Upon the occurrence of a default by Tenant, Landlord shall have, in addition to any other remedies available to Landlord at law or in equity (all of which remedies shall be distinct, separate and cumulative), the option to pursue any one or more of the following ren1edies, each and all of which shall be cumulative and nonexclusive, without any notice or demand whatsoever. (a) Te1·11rinate this Lease, in which event Tenant shall immediately surrender the Prenrises to Landlord, and if Tenant fails to do so, Landlord may, without prejudice to any other remedy which it may have for possession or arrearages in rent, enter upon and take possession of the Premises and expel or remove Tenant and any other person who may be occupying the Premises or any part thereof, without being liable for prosecution or any claim or damages therefor; and Landlord may recover from Tenant the following: (1) The worth at the time of any unpaid rent which has been earned at the time of such te11nination; plus (2) The worth at the time of award of the amount by which the unpaid rent which would have been earned after termination until the time of award exceeds the amount of such rental loss that Tenant proves could have been reasonably avoided; plus (3) The worth at the time of award of the amount by which the unpaid rent for the balance of the Lease Term after the time of award exceeds the amount of such rental loss that Tenant proves could have been reasonably avoided ; plus (4) Any other amount reasonably necessary to compensate Landlord for all the detriment proximately caused by Tenant's failure to perfor111 its obligations under this Lease or which in the ordinary course of things would be likely to result therefrom, specifically including but not limited to, brokerage commissions and advertising expenses incurred, expenses of remodeling the Premises or any portion thereof for a new tenant, whether for the same or a different use, and any special concessions made to obtain a new tenant; and (5) At Landlord's election, such other amounts in addition to or in lieu of the foregoing as may be permitted from time to time by applicable law. The te1·m ''rent'' as used in this Section 19.2 shall be deemed to be and to mean all sums of every nature required to be paid by Tenant pursuant to the terms of this Lease, whether to Landlord or to others. As used in Paragraphs 19.2(a)(l) and ill, above, the ''worth at the time of award'' shall be computed by allowing interest at the rate set forth in Article 25 of this Lease, but in no case greater than the maximum amount of such interest pe1mitted by law. As used in Paragraph l 9.2(a)(3) above, the ''worth at the time of award'' shall be computed by discounting such amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of award plus one percent (1%). (b) Landlord shall have the remedy described in California Civil Code Section 1951.4 (lessor may continue lease in effect after lessee's breach and abandonment and recover rent as it becomes due, if lessee has
- 34 - [JSG:se/102994_5.DOC/092404/4040.039] • the right to sublet or assign, subject only to reasonable limitations). Accordingly, if Landlord does not elect to terminate this Lease on account of any default by Tenant, Landlord may, from time to time, without terminating this Lease, enforce all of its rights and remedies under this Lease, including the right to recover all rent as it becomes due. (c) Landlord shall at all times have the rights and remedies (which shall be cumulative with each other and cumulative and in addition to those rights and remedies available under Sections 19.2(a) and 1.9.2(b), above, or any law or other provision of this Lease), without prior demand or notice except as required by applicable law, to seek any declaratory, injunctive or other equitable relief, and specifically enforce this Lease, or restrain or enjoin a violation or breach of any provision hereof. 3. Subleases of Tenant. If Landlord elects to terminate this Lease on account of any default by Tenant, as set forth in this Article 19, Landlord shall have the right to terminate any and all subleases, licenses, concessions or other consensual arrangements for possession entered into by Tenant and affecting the Premises or may, in Landlord's sole discretion, succeed to Tenant's interest in such subleases, licenses, concessions or arrangements. If Landlord elects to terminate this Lease on account of any default by Tenant and Landlord elects to ucceed to Tenant's interest in any such subleases, licenses, concessions or arrangements, Tenant shall have no further right to or interest in the rent or other consideration receivable thereunder. 4. Form of Payment After Default. Following the occurrence of a default by Tenant, Landlord shall have the right to require that any or all subsequent amounts paid by Tenant to Landlord hereunder, whether to cure the default in question or otherwise, be paid in the form of cash, money order, cashier's or certified check drawn on an institution acceptable to Landlord, or by other means approved by Landlord, notwithstanding any prior practice of accepting payments in any different form. 5. Efforts to Relet. No re - entry or repossession, repairs, maintenance, changes, alterations and additions, reletting, appointment of a receiver to protect Landlord's interests hereunder, or any otl1er action or omission by Landlord shall be construed as an election by Landlord to terminate this Lease or Tenant's right to possession, or to accept a surrender of the Premises, nor shall same operate to release Tenant in whole or in part from any of Tenant's obligations hereunder, unless express written notice of such intention is sent by Landlord to Tenant. Tenant hereby irrevocably waives any right otherwise available under any law to redeem or reinstate this Lease. 6. Waiver of Consequential Damages. Notwithstanding anything to the contrary contained in this Lease, neither Landlord nor Tenant shall be liable under any circumstances for, and each hereby releases the other from all liability for, consequential damages and injury or damage to, or interference with, the other party's business, including, but not limited to, loss of title to the Premises or any portion thereof, loss of profits, loss of business opportunity, loss of goodwill or loss of use, in each case however occurring, other than those consequential damages incurred by Landlord in connection with a holdover in the Premises by Tenant after the expiration or earlier te11nination of this Lease or incurred by Landlord in connection with failure by Tenant to provide an estoppel certificate as required under the provisions of this Lease. 20. Covenant Of Quiet Enjoyment. · Landlord covenants that Tenant, on paying the Rent, charges for services and other payments l1erein reserved and on keeping, observing and performing all the other terms, covenants, conditions, p1·ovisions and agreements herein contained on the part of Tenant to be kept, observed and perfor111ed, shall, during the Lease Term, peaceably and quietly have, hold and enjoy the Premises subject to the terms, covenants, conditions, provisions and agreements hereof without interference by any persons lawfully claiming by or through Landlord. The foregoing covenant is in lieu of any other covenant express or implied. 21. Security Deposit. Concurrent with Tenant's execution of this Lease, Tenant shall deposit with Landlord a security deposit (the ''Security Deposit'') in the amount set forth in Section 8 of the Summary, as security for the faithful
performance by Tenant of all of its obligations under this Lease. If Tenant defaults with respect to any provisions of this Lease, including, but not limited to, the provisions relating to the payment of Rent, the removal of property and the repair of resultant damage, Landlord may, without notice to Tenant, but shall not be required to apply all or any part of the Security Deposit for the payment of any Rent or any other sum in default and Tenant sl1all, upon demand therefor, restore the Security Deposit to its original amount. Any unapplied portion of the Security Deposit shall be returned to Tenant, or, at Landlord's option, to the last assignee of Tenant's interest hereunder, within thirty (30) days following the expiration of the Lease Term. Tenant shall not be entitled to any interest on the Security Deposit. Tenant hereby waives the provisions of Section 1950.7 of the California Civil Code, or any successor statute. 22. Credit. 22.1 Letter of Credit. Concurrent with Tenant's execution and delivery of this Lease, Tenant shall deliver to Landlord an unconditional, irrevocable letter of credit (''LC'') in the original amount of Two Hundred Forty - Three Thousand Eight Hundred Forty - Eight and 66/100 Dollars ($243,848.66) (the ''LC Stated Amo1.1nt''). The LC shall be issued by US Bank or a national money center bank reasonably acceptable to Landlord, and shall be in the fonn attached hereto as Exhibit H. Tenant shall pay all expenses, points and/or fees incurred in obtaining and renewing the LC. The LC shall be effective from the date of delivery thereof through the date which is one hundred (100) days after the expiration of the Lease Te11n (the ''LC Expiration Date''). The LC may be re - issued, renewed or replaced for annual periods, provided that the LC Stated Amount is not reduced except as expressly provided below. Each reissue, renewal or replacement LC shall be in the form attached hereto as Exhibit H and shall be subject to Landlord's prior written approval. The LC Stated Amount shall be reduced on each anniversary of the Rent Commencement Date (herein, each a ''Reduction Date''), subject to the provisions of Paragraphs (a) a11d (b) immediately below, in accordance with the following schedule (the ''Red1.1ction Sched1.1le''): Anniversary of the Rent Commencement Date LC Stated Amount First Second " Third Fourth Fifth $195,078.93 $146,309.20 $97,539.47 $48,769.74 $0.00 (a) No Reduction if Default. Notwithstanding any contrary provision hereof, if Tenant is in default under this Lease after notice and lapse of any applicable cure period (herein, an ''Event of Default'') on a Reduction Date, or if an Event of Default would exist and be continuing on a Reduction Date but Landlord is barred by applicable law from sending a notice of default to Tenant with respect thereto, or if Tenant is in default under this Lease and Tenant has received notice thereof as required by this Lease, but failed to cure such default within the time period per11iitted under this Lease or such lesser time as may remain before a Reduction Date, then the LC Stated Amount shall not be reduced on such Reduction Date (but shall be reduced upon the curing of such default, subject, however, to Landlord's draw on the LC as per1rutted hereunder in connection with an Event of Default). (b) Failure to Reissue, Renew or Replace. If the bank that issues the LC fails to extend the expiration date thereof through the LC Expiration Date, and/or if Landlord receives a notice of non - renewal fi·om such bank (as described in the LC), then Tenant shall provide Landlord with a substitute LC. If Tenant fails to provide Landlord with a substitute LC in a fo1111 reasonably acceptable to Landlord at least thirty (30) days prior to the expiration of the then existing LC, then (i) such failure shall be deemed an Event of Default hereunder, and (ii) Landlord shall be entitled to draw down the full amount of the LC then available and apply, use and retain the proceeds thereof in accordance with Section 22.3. [JSG:se/!02994_5.DOC/092404/4040.039] - 35 -
- 36 - [JSG:se/102994_5.DOC/092404/4040.039] 22.2 Application of LC and LC Account. Any amount of the LC which is drawn upon by Landlord, but not used or applied by Landlord shall be held by Landlord in an account (the ''LC Account'') as security for the full and faithful perfonnance of each of the terms hereof by Tenant, subject to use and application as set forth below. If an Event of Default shall occur and be continuing with respect to any provision of this Lease, including, but not limited to, the provisions relating to the payment of rent, or an Event of Default would exist under the Lease but Landlord is barred by applicable law from sending a notice of default to Tenant with respect thereto, 01· in the event the LC is not renewed or reissued at least thirty (30) days prior to the expiration of the then existing LC, Landlord may, but shall not be required to, draw upon all or any part of the LC and/or LC Account or use, retain or apply all or any part of the proceeds thereof for the payment of any rent or any other sum in default, to repair damages caused by Tenant, to clean the Premises, or for the payment of any other amount which Landlord may spend or become obligated to spend by reason of Tenant's default or to compensate Landlord for loss or damage which Landlord may suffer by reason of Tenant's default, including without limitation the amounts to which Landlord may become entitled pursuant to Section 19.2 above (whether or not such amounts have been awarded) and any other loss, liability, expense and damages that may accrue upon Tenant's default or the act or omissio11 of Tenant or any officer, employee, agent or invitee of Tenant, and costs and attorneys' fees incurred by Landlord to recover possession of the Premises upon a default by Tenant hereunder. The use, application, retention or draw of the LC and/or LC Account, or any portion thereof, by Landlord shall not (i) constitute the cure of any default by Tenant or the waiver of such default, (ii) prevent Landlord from exercising any other remedies provided for under this Lease or by law, it being intended that Landlord shall not first be required to proceed against the LC and/01· LC Account, or (iii) operate as a limitation on the amount of any recovery to which Landlord may otherwise be entitled. If any portion of the LC and/or LC Account is so drawn upon, or any part of the proceeds thereof is used or applied, Tenant shall, within five (5) days after written demand therefor, deposit cash with Landlord in an amount equal to the draw upon the LC and/or the amount of the LC Account that was used or applied (so that the combined amount of the remaining sums available to be drawn upon the LC and the LC Account balance equals the LC Stated Amount), and Tenant's failure to do so shall be an Event of Default under this Lease. The LC Account may be commingled with other funds of Landlord, shall be held in Landlord's name, and Tenant shall not be entitled to any interest or earnings thereon. Notwithstanding any contrary provision herein, in the event that the total amount of the LC outstanding plus any amount remaining in the LC Account exceeds the LC Stated Amount (''Excess Security''), then Landlord shall return the amount of the Excess Security to Tenant upon Tenant's request to the extent that such amount is available in the LC Account. 3. Waiver. Tenant hereby waives the provisions of Section 1950. 7 of the California Civil Code, and all similar or successor provisions of law, now or hereafter in force, and Landlord and Tenant hereby acknowledge that their entire agreement with respect to the LC and the LC Account is set forth herein. 4. Expiration of LC. Unless an Event of Default has occurred and is continuing under this Lease or • an Event of Default would exist under the Lease but Landlord is barred by applicable law from sending a notice of default to Tenant with respect thereto, within sixty (60) days following the LC Expiration Date, Landlord shall return any LC previously delivered by Tenant and any balance remaining in the LC Account after use and application in accordance with this Article 22, to Tenant (or, at Landlord's option, to the last assignee, if any, of Tenant's interest hereunder), and Tenant shall have no further obligation to provide the LC. • 5. Landlord's Transfer. Tenant acknowledges that Landlord has the right to transfer or n1ortgage its interest in the Building or Project and in this Lease, and Tenant agrees that in the event of any such transfer or mortgage, Landlord shall have the right to transfer or assign the LC and/or the LC Account to the transferee or mortgagee. Upon such transfer or assignment of the LC and/or LC Account, Landlord shall be deemed released by Tenant from all liability or obligation for the return of the LC and LC Account, as applicable, and Tenant shall look solely to such transferee or mortgagee for the return thereof. If Landlord transfers or assigns the LC and Tenant fails to cause the bank that issued the LC to accept such transfer or assignment, such failure shall be an Event of Default hereunder. 6. Bank Obligation. Tenant acknowledges and agrees that the LC is a separate and independent obligation of the issuing bank to Landlord and that Tenant is not a third party beneficiary of such obligation, and that Landlord's right to draw upon the LC for the full amount due and owing thereunder shall not be, in any way, restricted, impaired, altered or limited by virtue of any provision of the United States Bankruptcy Code, including without limitation, Section 502(b)(6) thereof.
[JSG:se/102994_5.DOC/092404/4040.039] - 37 - 23. Signs. 1. Full Floors. Subject to Landlord's prior written approval, in its discretion, and provided all signs are in keeping with the quality, design and style of the Building and Project, Tenant, if the Premises comprise an entire floor of the Building, at its sole cost and expense, may install identification signage anywhere in the Premises including in the elevator lobby of the Premises, provided that such signs must not be visible from the exterior of the Building. 2. Multi - Tenant Floors. If other tenants occupy space on the floor on which the P1·emises is located, Tenant's identifying signage shall be provided by Landlord, at Tenant's cost, and such signage shall be comparable to that used by Landlord for other similar floors in the Building and shall comply with Landlord's Building standard signage program. 3. Prohibited Signage and Other Items. Any signs, notices, logos, pictu1·es, names or advertisements which are installed and that have not been separately approved by Landlord may be removed without notice by Landlord at the sole expense of Tenant. Tenant may not install any signs on the exterior or roof of the Project or the Common Areas. Any signs, window coverings, or blinds (even if the same are located behind the Landlord - approved window coverings for the Building), or other items visible from the exterior of the Premises or Building, shall be subject to the prior approval of Landlord, in its sole discretion. 4. Building Directory. At Tenant's expense, Tenant shall be provided sixteen (16) lines to display Tenant's name and location in the Building and the names of Tenant's principal employees and subtenants. 24. Compliance With Law. Landlord represents to Tenant that Landlord has received a certificate of occupancy or equivalent approval for the Building, and that to the best knowledge of Landlord the Building is and as of the Lease Commencement Date will be in compliance with all Applicable Laws existing, effective and enforced with respect to the P1·oject as of the date hereof and as of the Lease Commencement Date. Tenant shall not in the conduct of its business or in its use of the Premises do anything or suffer anything to be done in or about the Premises which will in any way conflict with any law, statute, ordinance or other governmental rule, regulation or :requirement now or hereafter in effect, including, without limitation, the Americans with Disability Act of 1990 and local enactments thereof and promulgations thereunder (''Applicable Laws''). At its sole cost and expense, Tenant shall promptly comply with all requirements of Applicable Laws affecting the Premises, including, without limitation, making required changes to the Premises, the access thereto and common area restrooms therefor, systems serving the Premises, and other areas of the Project (other than making structural changes or changes to the Base Shell and Core, as defined in the Tenant Work Letter attached hereto as Exhibit B) (i) required due to the use and occupancy of the Premises for other than typical office uses, including those uses set forth in Article 5 above, or (ii) required due to repair, improvement or alteration of the Premises, including any Alterations described in Article 8, but excluding the construction and installation of the initial Tenant Improvements by or for Tenant pursuant to the Tenant Work Letter. Landlord shall deliver the Premises to Tenant in compliance with all Applicable Laws. Subject to Article 4, Landlord shall be responsible for compliance with Applicable Laws with respect to areas of the Project not within the Premises where such compliance measures are required due to another tenant's use, occupancy, repair, improvement or alteration of its premises, or where such compliance is not made the responsibility of Tenant as set forth above. 25. Late Charges. If any installment of Rent or any other sum due from Tenant shall not be received by Landlord or Landlord's designee within five (5) business days after Tenant's receipt of written notice from Landlord that said amount is due, then Tenant shall pay to Landlord a late charge equal to five percent (5%) of the overdue amount plus any reasonable attorneys' fees incurred by Landlord by reason of Tenant's failure to pay Rent and/or other charges when due hereunder. The late charge shall be deemed Additional Rent and the right to require it shall be in addition to all of Landlord's other rights and remedies hereunder or at law and shall not be construed as liquidated damages or as limiting Landlord's remedies in any manner. In addition to the late charge described above, any Rent or other amounts owing hereunder which are not paid within ten (I 0) days after the date they are due sl1all bear
[JSG:se/102994_5.DOC/092404/4040.039] - 38 - ' interest from the date when due until paid at a rate per aunum equal to the lesser of (i) the annual ''Bank Prime Loan'' rate cited in the Federal Reserve Statistical Release Publication G.13(415), published on the first Tuesday of each calendar month (or such other comparable index as Landlord and Tenant shall reasonably agree upon if such rate ceases to be published) plus three (3) percentage points, and (ii) the highest rate per11litted by applicable law. 26. Landlord's Right To Cure Default; Payments By Tenant. ' 1. Landlord's Cure. All covenants and agreements to be kept or performed by Tenant under this Lease shall be performed by Tenant at Tenant's sole cost and expense and without any reduction of Rent, except to the extent, if any, otherwise expressly provided herein. If Tenant shall fail to perfot'm any obligation under this Lease, and such failure shall continue in excess of the time allowed under Section 19.l(b), above, unless a specific time period is otherwise stated in this Lease, Landlord may, but shall not be obligated to, make any such payment or perfo1n1 any such act on Tenant's part without waiving its rights based upon any default of Tenant and witl1out releasing Tenant from any obligations hereunder. 2. Tenant's Reimbursement. Except as may be specifically provided to the contrary in this Lease, Tenant shall pay to Landlord, upon delivery by Landlord to Tenant of statements therefor: (i) sums equal to expenditures reasonably made and obligations incurred by Landlord in connection with the remedying by Landlord of Tenant's defaults pursuant to the provisions of Section 26.1; (ii) sums equal to all losses, costs, liabilities, damages and expenses referred to in Article 10 of this Lease; and (iii) sums equal to all expenditures made and obligations incurred by Landlord in collecting or attempting to collect the Rent or in enforcing or attempting to enforce any rights of Landlord under this Lease or pursuant to law, including, without limitation, all legal fees a11d other amounts so expended. Tenant's obligations under this Section 26.2 shall survive the expiration or sooner termination of the Lease Terrn. 27. Entry By Landlord. Landlord reserves the right at all reasonable times and upon reasonable notice to Tenant (except in the case of an emergency) to enter the Premises to (i) inspect them; (ii) show the Premises to prospective purchasers, mortgagees, or to current or prospective mortgagees, ground or underlying lessors or insurers, or during the last twelve (12) months of the Lease Term, to prospective tenants; (iii) post notices ofnonresponsibility; or (iv) alter, improve or repair the Premises or the Building, or for structural alterations, repairs or improvements to the Building or the Building's systems and equipment. Notwithstanding anything to the contrary contained in this Article 27, Landlord may enter the Premises at any time to (A) perforn1 services required of Landlord, including janitorial service; (B) take possession due to any breach of this Lease in the manner provided herein; and (C) perfor1n any covenants of Tenant which Tenant fails to perform. Subject to Section 6.4, Landlord may make any sucl1 entries without the abatement of Rent, except as otherwise provided in this Lease and may take such reasonable steps as required to accomplish the stated purposes. Tenant hereby waives any claims for damages or for any injuries or inconvenience to or interference with Tenant's business, lost profits, any loss of occupancy or quiet enjoyment of the Premises, and any other loss occasioned thereby; provided that the foregoing shall not modify Landlord's indemnity obligations set forth in Section I 0.1 above. For each of the above purposes, Landlord shall at all times have a key with which to unlock all the doors in the Premises, excluding Tenant's vaults, safes and special security areas designated in advance by Tenant. In an emergency, Landlord shall have the right to use any means tl1at Landlord may deem proper to open the doors in and to the Premises. Any entry into the Premises by Landlord in tl1e manner hereinbefore described shall not be deemed to be a forcible or unlawful entry into, or a detainer of, the Premises, or an actual or constructive eviction of Tenant from any portion of the Premises. No provision of this Lease shall be construed as obligating Landlord to perfor1n any repairs, alterations or decorations except as otherwise expressly agreed to be performed by Landlord herein. 28. Tenant Parking. 28.1 Tenant Parking. Tenant hereby agrees to license from Landlord, commencing on the Lease Commencement Date, the amount of parking passes set forth in Section 9 of the Summary, on a montl1ly basis throughout the Lease Te1n1, which parking passes shall pertain to the Project parking facility. Commencing on the earlier of the date on which Tenant first occupies the Premises for the conduct of business and the Lease Commencement Date, Tenant shall pay to Landlord for automobile parking passes on a monthly basis on tl1e first
[JSG:se/102994_5.DOC/092404/4040.039] - 39 - day of each month (after Base Rent commences, with Tenant's monthly payment of Base Rent) the prevailing rate charged from time to time at the location of such parking passes. (Rates per pass for parking as of the date hereof are $110.00 for unreserved parking and $175.00 for reserved parking.) In addition, Tenant shall be responsible for the full amount of any taxes imposed by any governmental authority in connection with the licensing of such parking passes to Tenant or the use of the parking facility by Tenant. Tenant's continued right to use the parking passes is conditioned upon Tenant abiding by all rules and regulations which are prescribed from time to time for the orderly operation and use of the parking facility where the parking passes are located, including any sticker or other identification system established by Landlord, Tenant's cooperation in seeing that Tenant's employees and visitors also comply with such rules and regulations and Tenant not being in default under this Lease. At its election, Tenant may convert up to two (2) of its parking passes into parking passes for reserved spaces upon at least ten (10) days prior notice to Landlord. Landlord reserves the right to convert any such reserved parking passes to valet assist parking passes at any time during the Tenn of this Lease, provided that the cost to Tenant for sucl1 passes shall not be increased on account of such conversion by Landlord. Landlord specifically reserves the right to change the size, configuration, design, layout and all other aspects of the Project parking facility at any time and Tenant acknowledges and agrees that Landlord may, without incurring any liability to Tenant and without any abatement of Rent under this Lease, from time to time, close - off or restrict access to the Project parking facility for purposes of pennitting or facilitating any such construction, alteration or improvements. Landlord may delegate its responsibilities hereunder to a parking operator in which case such parking operator shall have all the 1·ights of control attributed hereby to the Landlord. The parking passes licensed to Tenant pursuant to this Article 28 shall be provided to Tenant solely for use by Tenant's own personnel and such passes may not be transfen·ed, assigned, subleased or otherwise alienated by Tenant without Landlord's prior approval. Tenant may validate visitor pa1·king by such method or methods as the Landlord may establish, at the validation rate from time to time generally applicable to visitor parking. 2. Visitor P_arking; Validations. The Project parking facility shall be operated to provide parking for visitors to the Project at prevailing market rates, and the amount of such visitor parking shall not be less than that required by applicable codes, rules or regulations or governmental authorities having jurisdiction. Tenant shall have the right to validation parking in the Building Parking Area upon terms and conditions and subject to reasonable rules and regulations established from time to time by Landlord or Landlord's parking operator. If Tenant purchases in any particular month Six Hundred Dollars ($600) worth of parking validation stamps, Tenant shall be entitled to purchase additional validation stamps, which may be used only in such month, at seventy - five percent (75%) of the then prevailing rate for such validation stamps charged by Landlord. 3. After Hours Passes. In addition to the passes set forth in Section 28.1, Tenant is hereby granted the right to a license from Landlord without charge, commencing on the earlier of the date on which Tenant first occupies the Premises for the conduct of business and the Lease Commencement Date, for up to ten (10) parking passes on a monthly basis throughout the Lease Term, which parking passes shall be for parking in the Project parking facility only during the hours of 5:00 pm to 6:00 am Monday through Friday and At all hours on weekends (herein, the ''After Hours Passes''). Any such use of any After Hours Pass outside of said hours shall be subject to charge therefor at the Project's transient parking rates. For each of the After Hours Passes Tenant shall pay to Landlord $27.50 per month, at the same time and in the same manner Tenant is required to pay for its other parking passes hereunder. 29. Miscellaneous Provisions. 1. Terms; Captions. The words ''Landlord'' and ''Tenant'' as used herein shall include the plural as well as the singular. The necessary grammatical changes required to make the provisions hereof apply either to corporations or partnerships or individuals, men or women, as the case may require, shall in all cases be assumed as though in each case fully expressed. The captions of Articles and Sections are for convenience only and shall not be deemed to limit, construe, affect or alter the meaning of such Articles and Sections. 2. ;Binding Effect. Subject to all other provisions of this Lease, each of the covenants, conditions and provisions of this Lease shall extend to and shall, as the case may require, bind or inure to the benefit not only of Landlord and of Tenant, but also of their respective heirs, personal representatives, successors or assigns, provided this clause shall not pe1111it any assignment by Tenant contrary to the provisions of Article 14 of this Lea.se •
[JSG:se/102994_5.DOC/092404/4040.039] - 40 - 3. No Air Rights. No rights to any view or to light or air over any property, whether belonging to Landlord or any other person, are granted to Tenant by this Lease. If at any time any wi11dows of the Premises are temporarily darkened or the light or view therefrom is obstructed by reason of any repairs, improvements, maintenance or cleaning in or about the Project, the same shall be without liability to Landlord and without any reduction or diminution of Tenant's obligations under this Lease. 4. Antenna. Tenant shall be pernlitted to install on the roof of the Building a satellite dish or antennae and related equipment (the ''Antenna'') pursuant to the terms of a license agreement to be ente1·ed into between Landlord and Tenant. Tenant shall be responsible for all costs of installation, repair, maintenance and operation of the Antenna. 5. Transfer of Landlord's Interest. Tenant acknowledges that Landlord has the right to transfer all or any portion of its interest in the Project or Building and in this Lease, and Tenant agrees that in the eve11t of any such transfer, Landlord shall automatically be released from all liability under this Lease first accruing after the date of such transfer and Tenant agrees to look solely to such transferee for the performance of Landlord's obligations hereunder after the date of transfer and such transferee shall be deemed to have fully assumed and be liable for all obligations of this Lease to be performed by Landlord, including the return of any Security Deposit, and Tenant shall attom to such transferee. Tenant further acknowledges that Landlord may assign its interest in this Lease toa mortgage lender as additional security and agrees that such an assignment shall not release Landlord from its obligations hereunder and that Tenant shall continue to look to Landlord for the perfor111ance of its obligations hereunder. 6. Prohibition Against Recording. Except as provided in Section 29.4 of this Lease, neither this Lease, nor any memorandum, affidavit or other writing with respect thereto, shall be recorded by Tenant or by anyone acting through, under or on behalf of Tenant. 7. Landlord's Title. Landlord's title is and always shall be paramount to the title of Tenant. Nothing herein contained shall empower Tenant to do any act which can, shall or may encumber the title of Landlord. 8. Relationship of Parties. Nothing contained in this Lease shall be deemed or construed by the parties hereto or by any third party to create the relationship of principal and agent, partnership, joint venturer or any association between Landlord and Tenant. 9. Application of Payments. Landlord shall have the right to apply payments received from Tenant pursuant to this Lease, regardless of Tenant's designation of such payments, to satisfy any obligations of Tenant hereunder, in such order and amounts as Landlord, in its sole discretion, may elect. . 29.10 Time of Essence. Time is of the essence with respect to the perforn1ance of every provision of this Lease in which time of performance is a factor. 11. Partial Invalidity. If any ten11, provision or condition contained in this Lease shall, to any exte11t, be invalid or unenforceable, the remainder of this Lease, or the application of such terr11, provision or conditio11 to persons or circumstances other than those with respect to which it is invalid or unenforceable, shall not be affected thereby, and each and every other term, provision and condition of this Lease shall be valid and enforceable to the fullest extent possible per1nitted by law. 12. No Warranty. In executing and delivering this Lease, Tenant has not relied on any representations, including, but not linlited to, any representation as to the amount of any item comprising Additional Rent or the amount of the Additional Rent in the aggregate or that Landlord is furnishing the same services to other tenants, at all, on the same level or on the same basis, or any warranty or any statement of Landlord which is not set forth herein or in one or more of the exhibits attached hereto. 13. Landlord Exculpation. The liability of Landlord or the Landlord Parties to Tenant for any default by Landlord under this Lease or arising in connection herewith or with Landlord's operation, management,
leasing, repair, renovation, alteration or any other matter relating to the Project or the Premises shall be limited solely and exclusively to the interest of Landlord in the Building and other assets of Landlord relating directly to the Project (such as operating account, insurance and sales proceeds and condemnation awards). Neither La11dlord, nor any of the Landlord Parties shall have any personal liability therefor, and Tenant hereby expressly waives and releases such personal liability on behalf of itself and all persons claiming by, through or under Tenant. The limitations of liability contained in this Section 29.13 shall inure to the benefit of Landlord's and the Landlord Parties' present and future partners, beneficiaries, officers, directors, trustees, shareholders, agents and employees, and their respective partners, heirs, successors and assigns. Under no circumstances shall any present or future partner of Landlord (if Landlord is a partnership), or trustee or beneficiary (if Landlord or any partner of Landlord is a trust), have any liability for the performance of Landlord's obligations under this Lease. Notwithstanding any contrary provision herein, neither Landlord nor the Landlord Parties shall be liable under any circumstances for injury or damage to, or interference with, Tenant's business, including but not limited to, loss of profits, loss of rents or other revenues, loss of business opportunity, loss of goodwill or loss of use, in each case, however occurring. 14. Entire Agreement. It is understood and acknowledged that there are no oral agreements between the parties hereto affecting this Lease and this Lease constitutes the parties' entire agreement with respect to the leasing of the Premises and supersedes and cancels any and all previous negotiations, arrangements, brochures, agreements and understandings, if any, between the parties hereto or displayed by Landlord to Tenant with respect to the subject matter thereof, and none thereof shall be used to interpret or construe this Lease. None of the terms, covenants, conditions or provisions of this Lease can be modified, deleted or added to except in writing signed by the parties hereto. 15. Right to Lease. Landlord reserves the absolute right to effect such other tenancies in the Project as Landlord in the exercise of its sole business judgment shall determine to best promote the interests of the Building or Project. Tenant does not rely on the fact, nor does Landlord represent, that any specific tenant or type or number of tenants shall, during the Lease Te1·1n, occupy any space in the Building or Project. 16. Force Majeure. Any prevention, delay or stoppage due to strikes, lockouts, labor disputes, acts of God, inability to obtain services, labor, or materials or reasonable substitutes therefor, governmental actions, civil commotions, fire or other casualty, and other causes beyond the reasonable control of the party obligated to perform, except with respect to the obligations imposed with regard to Rent and other charges to be paid by Tenant pursuant to this Lease and except as to Tenant's obligations under Articles 5 and 24 of this Lease (collectively, a ''Force Majeure''), notwithstanding anything to the contrary contained i11 this Lease, shall excuse the performance of such party for a period equal to any such prevention, delay or stoppage and, therefore, if this Lease specifies a time period for performance of an obligation of either party, that time period shall be extended by the period of any delay in such party's perfo11nance caused by a Force Majeure. 17. Waiver of Redemption by Tenant. Tenant hereby waives, for Tenant and for all tl1ose claiming under Tenant, any and all rights now or hereafter existing to redeem by order or judgme11t of any court or by any legal process or writ, Tenant's right of occupancy of the Premises after any termination of this Lease. 18. Notices. All notices, demands, statements, designations, approvals or other communications (collectively, ''Notices'') given or required to be given by either party to the other hereunder or by law shall be in writing, shall be (A) sent by United States certified or registered mail, postage prepaid, return receipt requested (''Mail''), (B) transmitted by telecopy, if such telecopy is promptly followed by a Notice sent by Mail or a nationally recognized overnight courier, (C) delivered by a nationally recognized overnight courier, or (D) delivered personally. Any Notice shall be sent, transmitted, or delivered, as the case may be, to Tenant at the appropriate address as set forth in Section 10 of the Summary, or to such other place as Tenant may from time to time desig11ate in a Notice to Landlord, or to Landlord at the addresses set forth below, or to such other places as Landlord may from time to time designate in a Notice to Tenant. The effective date of any Notice shall be the date of delivery 01· tl1e date delivery is first refused, provided, however, that for delivery by telecopy, any delivery after 4:00 p.m. on a business day shall be the next business day. If Tenant is notified of the identity and address of Landlord's mortgagee or ground or underlying lessor, Tenant shall give to such mortgagee or ground or underlying lessor written notice of any default by Landlord under the terms of this Lease by registered or certified mail, and such mortgagee or ground or underlying lessor shall be given a reasonable opportunity to cure such default prior to (JSG:se/102994_5.DOC/092404/4040.039] - 41 -
[JSG:se/102994_5.DOC/092404/4040.039] - 42 - Tenant's exercising any remedy available to Tenant. As of the date of this Lease, any Notices to Landlord must be sent, transmitted, or delivered, as the case may be, to the following addresses: Wilshire Courtyard L.L.C. 5750 Wilshire Boulevard Lo s Angeles , Californi a 90036 Attention: Building Manager and Gilchrist & Rutter Professional Corporation 1299 Ocean Avenue, Suite 900 Santa Monica, California 9040 I Attention: Jonathan S. Gross, Esq. 19. Joint and Several. If there is more than one Tenant, the obligations imposed upon Tenant under this Lease shall be joint and several. 20. Authority. If Tenant is a corporation, trust or partnership, each individual executing this Lease on behalf of Tenant hereby represents and warrants that Tenant is a duly fo1·111ed and existing entity qualified to do business in California and that Tenant has full right and authority to execute and deliver this Lease and that eacl1 person signing on behalf of Tenant is authorized to do so. In such event, Tenant shall, within ten (10) days after execution of this Lease, deliver to Landlord satisfactory evidence of such authority and, if a corporation, upon demand by Landlord, also deliver to Landlord satisfactory evidence of (i) good standing in Tenant's state of incorporation and (ii) qualification to do business in California. 21. Attorneys' Fees. In the event that either Landlord or Tenant should bring suit for the possession of the Premises, for the recovery of any sum due under this Lease, or because of the breach of any provision of this Lease or for any other relief against the other, then all costs and expenses, including reasonable attorneys' fees, incurred by the prevailing party therein shall be paid by the other party, which obligation on the part of the other party shall be deemed to have accrued on the date of the commencement of such action and shall be enforceable whether or not the action is prosecuted to judgment. 22. Governing Law; WAIVER OF TRIAL BY JURY. This Lease shall be construed and enforced in accordance with the laws of the State of California. IN ANY ACTION OR PROCEEDING ARISING HEREFROM, LANDLORD AND TENANT HEREBY CONSENT TO (I) THE JURISDICTION OF ANY COMPETENT COURT WITHIN THE STATE OF CALIFORNIA, (II) SERVICE OF PROCESS BY ANY MEANS AUTHORIZED BY CALIFORNIA LAW, AND (III) IN THE INTEREST OF SAYING TIME AND EXPENSE, TRIAL WITHOUT A JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER OF THE PARTIES HERETO AGAINST THE OTHER OR THEIR SUCCESSORS IN RESPECT OF ANY MATTER ARISING OUT OF OR IN CONNECTION WITH THIS LEASE, THE RELATIONSHIP OF LANDLORD AND TENANT, TENANT'S USE OR OCCUPANCY OF THE PREMISES, AND/OR ANY CLAIM FOR INJURY OR DAMAGE, OR ANY EMERGENCY OR STATUTORY REMEDY. IN THE EVENT LANDLORD COMMENCES ANY SUMMARY PROCEEDINGS OR ACTION FOR NONPAYMENT OF BASE RENT OR ADDITIONAL RENT, TENANT SHALL NOT INTERPOSE ANY COUNTERCLAIM OF ANY NATURE OR DESCRIPTION (UNLESS SUCH COUNTERCLAIM SHALL BE MANDATORY) IN ANY SUCH PROCEEDING OR ACTION, BUT SHALL BE RELEGATED TO AN INDEPENDENT ACTION AT LAW. 23. Submission of Lease. Submission of this instrument for examination or signature by Tenant does not constitute a reservation of, option for or option to lease, and it is not effective as a lease or otherwise until execution and delivery by both Landlord and Tenant. 24. Brokers. Landlord and Tenant hereby warrant to each other that they have had no dealings with any real estate broker or agent in connection with the negotiation of this Lease, excepting only the real estate brokers or agents specified in Section 12 of the Summary (the ''Brokers''), and that they know ofno other real estate broker or agent who is entitled to a commission in connection with this Lease. Each party agrees to indemnify and defend
- 43 - [JSG:se/102994_5.DOC/092404/4040.039] • the other party against and hold the other party harmless from any and all claims, demands, losses, liabilities, lawsuits, judgments, costs and expenses (including without limitation reasonable attorneys' fees) with respect to any leasing commission or equivalent compensation alleged to be owing on account of any dealings with any real estate broker or agent, other than the Brokers, occurring by, through, or under the indemnifying party. Landlord covenants and agrees to pay all real estate commissions due in connection with this Lease to Brokers in accordance with the commission agreement executed by Landlord. 29.25 Independent Covenants. This Lease shall be construed as though the covenants herein between Landlord and Tenant are independent and not dependent and Tenant hereby expressly waives the benefit of any statute to the contrary and agrees that if Landlord fails to perform its obligations set forth herein, Tenant shall not be entitled to make any repairs or perform any acts hereunder at Landlord's expense or to any setoff oftl1e Rent or other amounts owing hereunder against Landlord. 26. Project or Building Name and Signage. Landlord shall have the right at any time to change the name of the Project or Building and to install, affix and maintain any and all signs on the exterior and on the interior of the Project or Building as Landlord may, in Landlord's sole discretion, desire. Tenant shall not use the name of the Project or Building or use pictures or illustrations of the Project or Building in advertising or other publicity or for any purpose other than as the address of the business to be conducted by Tenant in the Premises, without the prior written consent of Landlord. 27. Counterparts. This Lease may be executed in counterparts with the same effect as if both parties hereto had executed the same document. Both counterparts shall be construed together and shall constitute a single lease. 28. Confidentiality. Landlord and Tenant acknowledge that the content of this Lease and any related documents are confidential information. Landlord and Tenant shall keep such confidential information strictly confidential and shall not disclose such confidential information to any person or entity other than their respective financial, legal, and space planning consultants and their respective lenders, investors, partners, managers, brokers, members, officers and directors. 29. Transportation Management. Tenant shall fully comply with all present or future programs intended to manage parking, transportation or traffic in and around the Building, and in connection tl1erewith, Tenant shall take responsible action for the transportation planning and management of all employees located at the Premises by working directly with Landlord, any governmental transportation management organization or any other transportation - related committees or entities. 30. Building Renovations. It is specifically understood and agreed that Landlord has made no representation or warranty to Tenant and has no obligation and has made no promises to alter, remodel, improve, renovate, repair or decorate the Premises, Building, or any part thereof and that no representations respecting the condition of the Premises or the Building have been made by Landlord to Tenant except as specifically set forth herein or in the Tenant Work Letter. However, Tenant hereby acknowledges that Landlord is currently renovating or may during the Lease Ter1n renovate, improve, alter, or modify (collectively, the ''Renovations'') the Project, the Building and/or the Premises including without limitation the parking structure, common areas, systems and equipment, roof, and structural portions of the same, which Renovations may include, without limitation, (i) installing sprinklers in the Building common areas and tenant spaces, (ii) modifying the common areas and tenant spaces to comply with applicable laws and regulations, including regulations relating to the physically disabled, seismic conditions, and building safety and security, and (iii) installing new floor covering, lighting, and wall coverings in the Building common areas, and in connection with any Renovations, Landlord ma:y, among other things, erect scaffolding or other necessary structures in the Building, limit or eliminate access to portions of the . Project, including portions of the common areas, or perfo11n work in the Building, which work may create noise, dust or leave debris in the Building. Provided Tenant is afforded reasonable access to the Premises, Tenant hereby agrees that such Renovations and Landlord's actions in connection with such Renovations shall in no way constitute a constructive eviction of Tenant nor, except as otherwise provided herein, entitle Tenant to any abatement of Rent. Landlord shall have no responsibility or for any reason be liable to Tenant for any direct or indirect injury to or interference with Tenant's business arising from the Renovations, nor shall Tenant be entitled to any compensation or damages from Landlord for loss of the use of the whole or any part of the Premises or of Tenant's personal
- 44 - [JSG:se/102994_5.DOC/092404/4040.039] property or improvements resulting from the Renovations or Landlord's actions in connection with such Renovations, or for any inconvenience or annoyance occasioned by such Renovations or Landlord's actions; provided that the foregoing shall not modify Landlord's indemnity obligations set forth in Section 10.1 above. 31. No Violation. Tenant hereby warrants and represents that neither its execution of nor performance under this Lease shall cause Tenant to be in violation of any agreement, instrument, contract, law, rule or regulation by which Tenant is bound, and Tenant shall protect, defend, indemnify and hold Landlord harmless against any claims, demands, losses, damages, liabilities, costs and expenses, including, without limitation, reasonable attorneys' fees and costs, arising from Tenant's breach of this warranty and representation. 32. Communications and Computer Lines. Tenant may install, maintain, replace, remove or use any communications or computer wires and cables (collectively, the ''Lines'') at the Project in or serving the Premises, provided that (i) Tenant shall obtain Landlord's prior written consent (which shall not be unreasonably withheld), use an experienced and qualified contractor approved in writing by Landlord, and comply with all of the other provisions of Articles 7 and of this Lease, (ii) reasonable riser capacity shall be maintained for existing and future occupants of the Project, as determined in Landlord's reasonable opinion, (iii) the Lines therefor (including riser cables) shall be appropriately insulated to prevent excessive electromagnetic fields or radiation, and shall be surrounded by a protective conduit reasonably acceptable to Landlord, (iv) any new or existing Lines servicing the Premises shall comply with all applicable governmental laws and regulations, (v) as a condition to permitting the installation of new Lines, Landlord may require that Tenant remove existing Lines located in or serving the Premises and repair any damage in connection with such removal, and (vi) Tenant shall pay all costs in connection therewith. Landlord reserves the right to require that Tenant remove any Lines located in or serving the Premises which are installed in violation of these provisions, or which are at any time in violation of any laws or represent a dangerous or potentially dangerous condition. 33. Development of the Project. (a) Subdivision. Landlord reserves the right to further subdivide all or a portion of the Project. Tenant agrees to execute and deliver, upon demand by Landlord and in the form requested by Landlord, any additional documents needed to conform this Lease to the circumstances resulting from such subdivision. (b) The Other Improvements. If portions of the Project or property adjacent to the Project (collectively, the ''Other Improvements'') are owned by an entity other than Landlord, Landlord, at its option, may enter into an agreement with the owner or owners of any or all of the Other Improvements to provide (i) for reciprocal rights of access and/or use of the Project and the Other Improvements, (ii) for the common management, operation, maintenance, improvement and/or repair of all or any portion of the Project and the Other Improvements, (iii) for the allocation of a portion of the Direct Expenses to the Other Improvements and the operating expenses and taxes for the Other Improvements to the Project, and (iv) for the use or improvement of the Other In1provements and/or the Project in connection with the improvement, construction, and/or excavation of the Other Improvements and/or the Project. Nothing contained herein shall be deemed or construed to limit or otherwise affect Landlord's right to convey all or any portion of the Project or any other of Landlord's rights described in this Lease. (c) Construction of Project and Other Improvements. Te11ant acknowledges that portions of the Project and/or the Other Improvements may be under construction following Tenant's occupancy of the Premises, and that such construction may result in levels of noise, dust, obstruction of access, etc. wl1ich are in excess of that present in a fully constructed project. Tenant hereby waives any and all rent offsets or claims of constructive eviction which may arise in connection with such construction. 29.34 Hazardous Materials. Landlord represents and warrants to Tenant that to the best of Landlord's knowledge, the Project and all improvements therein have been and will be constructed without the use of asbestos or any other Hazardous Materials (as defined below) known to be hazardous at the time of its installation, and, to the best of Landlord's knowledge, no Hazardous Materials currently affect the Project in a materially adverse ma1mer. Landlord and Tenant will not, at any time, use or authorize the use of any portion of the Premises, tl1e Building, parking facilities, or the Project to be used in violation of any applicable laws relating to environmental conditions on, under or about the Project, including but not limited to asbestos, soil and ground water conditions and Hazardous Materials. Neither Landlord nor Tenant shall at any time use, generate, store or dispose of on, under or about the
- 45 - [JSG:se/102994_5.DOC/092404/4040.039] Building or transport to or from the same any Hazardous Materials or permit or allow any third party to do so, without compliance with all applicable laws. Landlord and Tenant shall defend, indemnify and hold the other harmless from and against any and all losses, damages, costs (including reasonable attorneys' fees), liabilities and claims arising from their respective failure to perfor1n in accordance with the foregoing. Any costs or expenses incurred with respect to Hazardous Materials at the Project in violation of Landlord's representation and warranty in this Section 29.34 shall not be included in Operating Expenses. For purposes of this Section 29.34, the ter111 ''to the best of Landlord's knowledge'' means the present, actual knowledge of persons directly employed by Landlord or any of its affiliates. As used herein, the term ''Hazardous Materials'' means any hazardous or toxic substance which is listed or defined as a ''hazardous waste," ''restricted hazardous waste," or ''hazardous substance'' under any municipal, state or federal law, code or other regulation, or which would require removal, treatment or remedial action pursuant to standards established by the California Depa1·t111ent of Health Services. This Section 29.34 shall not be construed to limit the provisions of Article 5 nor to permit use or storage of Hazardous Materials at the Project other than in immaterial quantities necessary to the uses permitted under Article 5 and which do not require any permit or variance from governmental authority having jurisdiction. [signatures appear on the following page]
IN WITNESS WHEREOF, Landlord and Tenant have caused this Lease to be executed the day a11d date first above written. ''Landlord'': WILSHIRE COURTYARD L.L.C., - 46 - [JSG:se/102994_5.DOC/092404/4040.039] a Delaware 1· ·ted liability comp By:_ Name : _. Title: ----- ' • ''Tenant'': WPT ENTERPRISES, INC., a Delaware co oration By: · -- = Name:" Title: - By: Name:_ Title: 'A: N , -- ' --- =
)]8URRT[XQ^$$_P"$H\.>,M!TF]L?#EOX%NO'/Q'U#Q=\
M??#3]I/XMZ)HWP8^).F>+/'_ .TAKMG\\ @MUXCTKX=_#[Q]XMGMOVA=#^
M&/Q7^./BOX%_#[PCHVK^*_%UAJVC77A73/ ^C? FRO[KQ1H/@WPYJOAI/A_+
M;^$[C3XY_H[2/VZ_COXM\4?!?P9X/M_@EJ^D?&C]J_1/@AX/^/MGX8\ #O 7Q,T/X5P
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M:M'8P7%Q#9IJ,]RMM%//'"$2:16 /E__ ()->)?BI\5?V3O@)\ -:^%G[0/@K1OAM##Q);^,/%7V;5=0\(^-+&76_&W@7QWX2 /U#^"?P
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M.GC7P/HFG?LXMX YU"SM+ZXTQ;@64UY:VUU) T
M\$3KF:1X%\$^'[G1[S0?!WA71+OP[X5M_ OA^ZTCP]I&FW.A>";22SEM/!VC
MSV=G#+IGA6UET^PDM_#UDT&D0R6-F\=FK6T)0 ^(/V!_CG\2/C#9?%?2_'/C
MBV^+FF>"H?V==2\.?%K3]'\,:'8:Y=?%S]EGX/?Q/X9CL_"&G:=HDPTK4_
M&47CG2;N*$W*>#?B?X1TFYDOCI*:UJWZ$UDZ)H&A>&K'^R_#FB:1X?TS[7?W
M_P#9VB:;9Z58_;M5O9]2U2]^R6$,%O\ :]2U&ZNM0O[GR_.O+VYGNKAY)YI)
M&UJ "BBB@ HHHH **** "BBB@ HHHH **** "OP__P"",=;_:-^*/A>P^,_Q#U"'XA_$V?X_>%_ _PUEMM0\ :]X'^ /_ IOXSZ9
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MMO%"?%Z7X7^%I/B0OB:VLXXK.W\1+XQ;61KEO9QQVD.J"ZCMD6!8P/IJBB@
MHHHH **** "BBB@ HHHH **** "BBB@ HHHH **** "BBB@ HHHH **** "B
MBB@ HHHH **** "BBB@ HHHH **** "BBB@ HHK\H/B-^WO\3/AC\9/VT_@+
MK?ACX=3^.O"/@J'QS^PE=@^((+/XQ'3?A5\,-0^+WA+XFZ+'J]UJLLW[-7CW
MXI?#OXC?%WQ/X-ETH7?[.?Q<\/ZIX4\*:CXD^&'Q(U"4 _5^BOS&^%/_ 4I
M\#:]X ^$%SXR\,>,/$'C;Q-I_P -_ OQ(\1?#OPOHND_#?0?VC_%_P"Q%IG[
M==U\+K#3_&'Q(D\7Z5%J_P '-4T;5_"^L7)\2>!K34_&7A+P-K/Q/G\5IXA&
MET_"O_!330/BM;_#2#X:_!+XIZ'=?$OXPWGP6DU'XG/\,+2#P+J6H?\ !/JV
M_P""@W@WQQJ&B>"OBKXJF\6^&]9^'?B3P;H=SHNDZYI&NVFKMXO@O7TZ71=
M3Q: ?J+17Y+?L_?\%2O!_BO]G#X3?$?XQ^!/'WA?QWJ^I_L\_"SX@W36?PQ\
M,_#P_%?XW_LL_"7]H_P]XDLO&>L?%Z;P'X#^&WC]OBMH?P_^&\?Q.\<^%O&/
MB'XKZEHOPITSPYJ7BOQ'X0A\3?HY\9/B[X&^!'PU\4?%;XD>(-$\,>$/"L%A
M]NUCQ'KNB^%]$34-J:;I<%W?0 'IM%?GS^Q1^W9\//VCOA)\!=0\6?%3X)ZK\:/C78_%
M"\T;P_\ !_7)=8\(>)D^&'CCQIX:\0W/@BZ?6/$LEU8:19>%)9=0:_UMKU9X
M;J2>UL'8:?;_ '_)_"UAI=MX3^'FDI:?+W[#'CC]H[]L/
MX$?&SX6W?[4WQ1^#GQMO_P!E3]A'XL_ Z+Q3J]GXI\6P>)O&GP-L?B)K?[7>
MB^*[."RU/XD?LI_M+_%*\E^%/BCX66FMW4O@S4O@W\:-&\*^*/A1XH\::#I7
MPY_8$_L=?!MD2-M9_:(=(HEMXD?]L7]KUTBMUAGMEMXE;XY$1VXMKFYMQ @6
M$07$\.SRYI%9_P#PQ_\ "#"K_;O[1@5(IX$4?MD_M?A4@NF1[JW11\
$-GA[QGHDKVYNM(UZRMM.EO=/GMWU'1]%U,
M7FDV7K%5[2TM;"UMK&QMK>RLK*WAM+.SM(8[:UM+6VC6&WMK:WA5(8+>"%$B
MAAB1(XHT5$554 6* "BBB@ HHHH **** "BBB@ HHHH **** "BBB@ HHHH
M**** "BBB@ HHHH **** "BBB@ HHHH **** "BBB@ HHHH **** "BBB@ H
MHHH **** "BBB@ HHHH **** "BBB@ HHHH ^6_VN?@!K/[0WPW\):-X3\2:
M=X7\=_"[XX_ O]H3P#>Z]9WFH>%=5\5? KXH>&_B+!X/\76EA/#>1^'/'FF:
M+JG@F]UZSBU+4/!,VOVWCS2=#\0:OX7L-$U#P_\ :F_98^,?[5/AOPK;^)M4
M^%FB1CP5\>?AWXK^$^I7OBWQO\-;"/XS_#_2_"?AOXOZ'XC&A>#-=UGXS?!7
M6]'OM1\":PGA;P,C^#/B1\2? ]GJ?AG6[_3OB-#^BE% 'X2_$?\ X)*>,_%W
MB/X\>*[+Q#\)M3\4?$OX9_M9>!_!_CCQE87M[X\T+QE\7=,_8=G^!7QGUOQ#
MI_@R)F^(?P@^(7[*OC+XJ0WWAZWTJ]\/^/OB)!XF\!:UH^M0ZG?SW/B/_P $
MHO&OB_XA^+_B3I.J?!6Q\2:MK/[6/B31]6NM,U>/7/\ A+?B[^U_^RK^TS^S
M]XWOM;MO"TM_8^+?V?++X,_%S3_"NL6
#/VA?#,NM_&:TU;P)J/[<'_ 4[^$?CG2+WXJ6GCQW\!_LY
M^ ?V@/B#\.O#/CKX5-X(OO$WP+\"?#0_#&!+GX^?"_6?&6KV<]IX6^'GQ,^%
M7CJ[^-VA>,/@_P#0WPU_X*KW7CW5/A]IJ^$_A?=:3KG[1>C_ .\4^/_ 9\
M4-(\<:'%!XRT[]C+4OAYKNB>!_#EW?\ Q2D\/>,)_P!M?P'X47QUI7A7QEHO
MP_\ &-O\.8OC]H_P-\'_ !MU/QI\#P#R?PO_ ,$6M1\-?#S0/ F@_%;P3\-]
M>L%BLKWXQ?"CX>CPI\3++2]2_P""2^H?\$V?%">&;V&Z66RO[_XAKX0_:?M9
MM0U:_P!/?6O /A3PQJFEWNL:3IGCW3^U\4_\$GO%'C"'X7>(-3\1? #1OB)X
M$\(?&&75+[P5\._B;8^$+KXT?%7]I?\ 8<_:!A^+?@O3?B5\5_C!XO\ .K^
M&[C]C6<6+V'C:_OD\5?$Z;Q-I]YIFI>&]2O?&WO?P _;BO/VM_V3_CW\;M(L
M_"WP^T;P_P#"2X\0:1<:#\4?"NN?$+X7^+K_ .$ESXL\:_"_XS^'/#>L:Q/\
M(/C!\!_%!?PSXLT/Q7J6C>*/MUI]M\0>!?A]J%O=^'8/A3]FG_@HUXS^$?P
M^(WQ1_:(^)MQ,M9\1> O&'PD\>_#_ $^T\0)X>T;P;XI^
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M+IBS6_QY\YS;+]E[]F?3;>QM-._9V^!=A::9KGA_Q
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M_P //$O_ F6C_%7P3XD^&