JOINT VENTURE AGREEMENT

Exhibit 10.12

 

EXECUTION COPY

 

 

QubicaAMF Worldwide, S.à.r.l.

 

 

 

JOINT VENTURE AGREEMENT

 

Dated as of June 13, 2005

 

 

TABLE OF CONTENTS

 

 

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QubicaAMF Worldwide, S.à.r.l.

JOINT VENTURE AGREEMENT

 

THIS JOINT VENTURE AGREEMENT is made and entered into as of this 13th day of June, 2005, to be effective as of the closing of the transactions contemplated by Section 1B of the Contribution Agreement (as defined below) (the “ Effective Date ”), by and among QubicaAMF Worldwide, S.à.r.l., a société à responsabilité limitée organized under the laws of Luxembourg (the “ Company ”), AMF Holdings, Inc., a corporation organized under the laws of the State of Delaware, U.S.A. (“ AMF ”), Qubica Lux, S.à.r.l., a société à responsabilité limitée organized under the laws of Luxembourg (“ Qubica ”), AMF Bowling Products, LLC, a Virginia limited liability company (“ AMF Product s”), AMF Bowling Products International BV, a company organized under the laws of the Netherlands (“ AMF BV ”), Qubica, S.p.A., a Società per Azioni organized under the laws of Italy (“ Qubica Products ”), AMF Bowling India Private Limited, an India company (“ AMF India ”), AMF Bowling Products Mexico S. de R.L. de C.V., a Mexico company (“ AMF Mexico ”), AMF Bowling Poland Sp.zo.o, a Poland company (“ AMF Poland ”), AMF Bowling Products, LLC, a Russia company (“ AMF Russia ” and, together with AMF Products, AMF BV, AMF India, AMF Mexico and AMF Poland, the “ AMF Subs ”), Qubica Canada, Inc., a Canada corporation (“ Qubica Canada ”), Qubica USA, Inc., a Florida corporation (“ Qubica USA ”), and Aquta S.r.l., a limited liability company organized under the laws of Italy (“ Aquta ” and, together with Qubica Products, Qubica Canada, Qubica USA and Aquta, the “ Qubica Subs ”). AMF and Qubica and their respective successors and permitted assigns are collectively referred to herein as the “ Initial Shareholders ” and, individually, as an “ Initial Shareholder .” Each AMF Sub and Qubica Sub shall be parties to this Agreement solely for purposes of Sections 2.11 and 2.12 below. Capitalized terms used but not otherwise defined herein shall have the meanings given to such terms in ARTICLE I of this Agreement.

 

WHEREAS, Qubica is the current owner of Qubica Products (together with its Subsidiaries, the “ Qubica Products Business ”), and AMF is the current owner of AMF Products and AMF BV (collectively, and together with their respective Subsidiaries, the “ AMF Products Business ”);

 

WHEREAS, the business strengths of the Qubica Products Business include its distinctive entrepreneurial culture, its marketing oriented nature and its attention to customer needs through strategic initiatives, ongoing research and development and enterprise-wide innovation;

 

WHEREAS, the AMF Products Business has a long history in the market sector during which it has developed its production and managerial skills and continuously improved the quality of its products and its customer service, while making its production of products more cost-effective;

 

WHEREAS, the Initial Shareholders desire to combine the Qubica Products Business and the AMF Products Business to take advantage of both of their respective strengths in hopes of creating new value for the Initial Shareholders and achieving liquidity of such value for the Initial Shareholders through an initial Public Offering or a Sale of the Company, in any case in accordance with ARTICLE X of this Agreement;

 

WHEREAS, in order to effect the combination of the AMF Products Business and the Qubica Products Business, AMF and Qubica have agreed to contribute the AMF Products Business and the Qubica Products Business, respectively, to the Company in exchange for the Company’s issuance to each Initial Shareholder of Shares, PECS and CPECS representing initially 50% of the issued share capital of the Company, in each case on the terms and subject to the conditions set forth in the Contribution Agreement; and

 

WHEREAS, in connection with the foregoing, the Company and each of the Shareholders desire to enter into this Agreement for the purposes, among others, of setting forth the rights and obligations of

the Shareholders with respect to their ownership of the Company, providing for the election and treatment of the Company as a partnership for U.S. income tax purposes and the maintenance of all books and records in connection with such election, assuring continuity in the ownership and management of the Company and limiting the manner and terms by which the Shares, PECS and CPECS may be Transferred.

 

NOW, THEREFORE, in consideration of the mutual covenants set forth herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

 

ARTICLE I — CERTAIN DEFINITIONS

 

Capitalized terms used but not otherwise defined herein shall have the following meanings:

 

“ Adjusted Capital Account Deficit ” means with respect to any Capital Account as of the end of any Taxable Year, the amount by which the balance in such Capital Account is less than zero. For this purpose, such Person’s Capital Account balance shall be

 

(i) reduced for any items described in Treasury Regulation Section 1.704-1(b)(2)(ii)(d)(4), (5), and (6), and

 

(ii) increased for any amount such Person is obligated to contribute or is treated as being obligated to contribute to the Company pursuant to Treasury Regulation Section 1.704-1(b)(2)(ii)(c) (relating to partner liabilities to a partnership) or 1.704-2(g)(1) and 1.704-2(i) (relating to Minimum Gain).

 

“ Affiliate ” of any particular Person or entity means any other person or entity controlling, controlled by or under common control with such particular person or entity, where “control” means the possession, directly or indirectly, of the power to direct the management and policies of a Person whether through the ownership of voting securities, contract or otherwise.

 

“ Agreement ” means this Joint Venture Agreement, as amended or modified from time to time in accordance with the terms hereof.

 

“ AMF Managers ” means the three (3) representatives designated by AMF from time to time pursuant to the Articles, other than any individual whose employment with or service as a director or manager of the Company or any of its Subsidiaries is terminated for Just Cause, who shall initially be Thomas J. Formolo, Richard Lobo and Fred Hipp.

 

“ Articles ” means the articles of incorporation of the Company.

 

“ Board ” means the Company’s Board of Managers established pursuant to the Articles.

 

“ Book Value ” means, with respect to any Company property, the Company’s adjusted basis for federal income tax purposes, adjusted from time to time to reflect the adjustments required or permitted by Treasury Regulation Section 1.704-1(b)(2)(iv)(d)-(g).

 

“ Budget ” means the annual budget and operating plan of the Company and its Subsidiaries (including the Debt Amortization Schedule) as approved pursuant to the Articles.

 

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“ Capital Account ” means the capital account maintained for a Shareholder pursuant to Section 3.2 .

 

“ Capital Contributions ” means any cash, cash equivalents, promissory obligations, or the Fair Market Value of other property that a Person pays to the Company or is deemed to have paid to the Company in exchange for Shares, PECS and/or CPECS.

 

“ Code ” means the Luxembourg law of 10 August 1915 on commercial companies, as amended.

 

“ Company Interest ” means the interest of a Shareholder, CPEC Holder or PEC Holder in Profits, Losses, and Distributions of the Company.

 

“ Company Quarter ” means each quarter of the Company’s then current fiscal or calendar year.

 

“ Company Year ” means the Company’s fiscal year established pursuant to the Articles.

 

“ Contribution Agreement ” means the Contribution Agreement, dated as of June 13, 2005, by and among the Company, AMF and Qubica.

 

“ CPEC ” means a Convertible Preferred Equity Certificate in the registered form issued by the Company, each having a par value (and face amount) of twenty-five euro (EUR 25.00) and the rights and obligations specified with respect to the CPECS in this Agreement and in the terms and conditions of the CPECS.

 

“ CPEC Holder ” means any owner of one or more CPECS issued by the Company, as shown on the Company’s register of CPECS.

 

“ Deadlock Offer Price ” means the aggregate amount which the Selling Shareholder would receive in accordance with Section 4.1(e) of this Agreement in respect of its PECS, CPECS and Shares assuming all PECS, CPECS and Shares then outstanding (including all CPECS and Shares issuable upon the exercise of in-the-money options) were sold pursuant to a Sale of the Company on the date of delivery of the Deadlock Offer Notice for an aggregate purchase price equal to (x) (i) if the Deadlock Offer Notice is delivered on or prior to the 18-month anniversary of the Effective Date, 5.0 multiplied by the Company’s EBITDA for the twelve (12) full calendar months immediately preceding the date of delivery of the Deadlock Offer Notice or (ii) if the Deadlock Offer Notice is delivered after the 18-month anniversary of the Effective Date, 5.5 multiplied by the Company’s EBITDA for the twelve (12) full calendar months immediately preceding the date of delivery of the Deadlock Offer Notice, minus (y) the aggregate amount of all outstanding Indebtedness of the Company and its Subsidiaries as of such date, plus (z) the aggregate amount of all cash and cash equivalents held by or on behalf of the Company or its Subsidiaries as of such date.

 

“ Distribution ” means each payment made by the Company to any Person in respect of any Shares, CPECS or PECS held by such Person, whether in cash, property or securities of the Company and whether by dividend, redemption, repurchase, payment of yield, liquidating distribution or otherwise; provided that none of the following shall be deemed a “Distribution” for purposes of this Agreement: (i) any recapitalization, exchange or conversion of securities of the Company (including any exchange of PECS for CPECS or other PECS, any exchange of CPECS for PECS or other CPECS or any conversion of CPECS into Shares); (ii) any redemption or repurchase of Shares, CPECS or PECS from a former

 

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manager, officer, employee or consultant of the Company or any of its Subsidiaries pursuant to any written agreement between the Company and such manager, officer, employee or consultant as approved by the Board; and (iii) any subdivision or combination of any outstanding Shares, CPECS or PECS.

 

“ EBITDA ” means, for any period, the net income of the Company and its Subsidiaries for such period, prior to reduction or addition, as applicable, for (i) interest expense (including, without limitation, amortization of debt issuance costs) for such period, (ii) taxes (whether federal, state, local or foreign) based on income or profits for such period, (iii) depreciation, amortization (including amortization of goodwill and other intangibles) and other non-cash charges for such period, (iv) non-recurring expenses for such period associated with the creation of the joint venture and the combination of the AMF Products Business and the Qubica Products Business, (v) the aggregate amount of the Rebate (as defined in the Supply Agreement) for such period (i.e., the ten percent (10%) reduction in the amount owed by AMF Centers to AMF Products and Qubica Products for such period pursuant to the Supply Agreement) to the extent the parties to the Supply Agreement agree to terminate such Rebate as of the Put Closing or Deadlock Closing, as applicable, and (vi) unusual or other non-recurring charges or items of gain or loss, in each case determined on a consolidated basis in accordance with GAAP.

 

“ Excess Operating Cash Flow ” means, for any particular Company Quarter, an amount of cash equal to (i) the consolidated EBITDA of the Company and its Subsidiaries for such Company Quarter, minus (ii) all cash payments by the Company and its Subsidiaries during such Company Quarter in respect of capital expenditures, minus (iii) all cash payments by the Company and its Subsidiaries during such Company Quarter in respect of accrued interest on indebtedness for borrowed money, minus (iv) all cash payments by the Company and its Subsidiaries in respect of taxes based on income or profits for such Company Quarter, minus (v) the aggregate amount of all Tax Distributions made by the Company in respect of such Company Quarter, and minus (vi) for each of the first twelve (12) Company Quarters following the Effective Date, an amount equal to (a) the aggregate amount of all indebtedness for borrowed money of the Company and its Subsidiaries as of immediately following the Closing, divided by (b) twelve (12), and for each Company Quarter thereafter, zero.

 

“ Fair Market Value ” means, with respect to any asset or equity interest, its fair market value as determined in accordance with ARTICLE XI .

 

“ Fundamental Change ” means (a) a Fundamental Change (as defined in the Articles) and (b) any action proposed to be taken by a Subsidiary of the Company which, if taken by the Company, would constitute a Fundamental Change (as defined in the Articles).

 

“ GAAP ” means United States generally accepted accounting principles, consistently applied.

 

“ Global Coordinator ” means an investment banking firm of internationally recognized standing, who shall not have any material relationship with the Company, AMF or Qubica, and who shall be selected by the Board within thirty (30) days following the delivery of a Liquidity Request pursuant to Section 10.2(a) below; provided , however , if the Board is unable to agree on the selection of a Global Coordinator within such period, the AMF Managers and the Qubica Managers shall each select within ten (10) days after the expiration of such period one (1) such investment banking firm, and the two investment banking firms shall jointly select a third investment banking firm, which shall serve as the sole Global Coordinator for the purposes of this Agreement; provided , further , that if either the AMF Managers or the Qubica Managers fail to select one (1) such investment banking firm with such ten (10) day period, the investment banking firm selected by the other shall serve as the sole Global Coordinator for the purposes of this Agreement.

 

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“ Governmental Entity ” means any nation, province or state, or any political subdivision thereof, or any entity exercising executive, legislative, judicial, regulatory or administrative functions of government or any agency or department or subdivision of any governmental authority.

 

“ Headquarters ” has the meaning set forth in Section 2.6 .

 

“ Indebtedness ” means, as of any particular date, without duplication, (i) indebtedness of the Company or any of its Subsidiaries for borrowed money or issued in substitution or exchange for indebtedness for borrowed money, (ii) indebtedness evidenced by a note, bond, debenture or other debt security of the Company or any of its Subsidiaries (but excluding any PEC or CPEC), (iii) indebtedness for the deferred purchase price of property or services with respect to which the Company or any of its Subsidiaries is liable, contingently or otherwise (other than trade payables and other current liabilities incurred in the ordinary course of business which are not more than sixth months past due), (iv) any obligations under capitalized leases with respect to which the Company or any of its Subsidiaries is liable, contingently or otherwise, as obligor, guarantor or otherwise, or with respect to which obligations the Company or any of its Subsidiaries assures a creditor against loss, (v) indebtedness secured by a Lien on the assets of the Company or any of its Subsidiaries (excluding any letters of credit), (vi) accrued but unpaid Taxes of the Company or any of its Subsidiaries based on income or profits (net of all prepayments of such Taxes and net of any income Tax credits to the extent such credits will reduce, in the current Tax period, the amount of any such Taxes) and (vii) accrued interest to and including such date in respect of any of the obligations described in the foregoing clause (i) through (vi) of this definition and all premiums, penalties, charges, fees, expenses and other amounts which would be due if such obligations were paid or prepaid in full as of such date.

 

“ Just Cause ” means (i) a willful act which constitutes gross misconduct, fraud or embezzlement; (ii) the commission of, or the pleading of guilty or no contest to, any felony or crime which the Board reasonably determines would have an adverse effect on (A) the reputation of AMF, Qubica, the Company and/or any of its Subsidiaries or their respective relationships with suppliers, customers, employees or others, (B) the ability to effectively perform duties as an Officer, Manager or employee of the Company or any of its Subsidiaries, or (C) the business, operations or financial condition of the Company and/or its Subsidiaries, and/or (iii) willful action taken for the purpose of harming the Company and/or its Subsidiaries.

 

“ Key Executive ” means each of Emanuele Govoni, Luca Drusiani and Roberto Vaioli.

 

“ Liens ” means any mortgage, pledge, security interest, encumbrance, lien, or charge of any kind (including, without limitation, any conditional sale or other title retention agreement or lease in the nature thereof), any sale of receivables with recourse against the Company, any Subsidiary or any Affiliate thereof, any filing or agreement to file a financing statement as debtor under the Uniform Commercial Code or any similar statute other than to reflect ownership by a third party of property leased to the Company, any Subsidiary or any Affiliate under a lease which is not in the nature of a conditional sale or title retention agreement, or any subordination arrangement in favor of another Person (other than any subordination arising in the ordinary course of business).

 

“ Losses ” means items of Company loss and deduction determined according to Section 3.2 .

 

“ Manager ” means a current Manager on the Board, who, for purposes of the Articles, will be deemed a “Manager” (as defined in the Articles) but will be subject to the rights, obligations, limitations and duties set forth in this Agreement.

 

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“ Minimum Gain ” means the partnership minimum gain determined pursuant to Treasury Regulation Section 1.704-2(d).

 

“ Nextia ” means Nextia S.r.l., a limited liability company organized under the laws of Italy.

 

“ Officer ” means a person designated as an officer of the Company or any of its Subsidiaries to whom authority and duties have been delegated pursuant to the Articles (including, but not limited to, the chief executive officer and president, the chief financial officer, the vice president(s) and the secretary) or equivalent governing document of any Subsidiary, as the case may be, subject to any resolution of the Board appointing such person as an officer or relating to such appointment.

 

“ PEC ” means a Preferred Equity Certificate in registered form issued by the Company, each having a par value (and face amount) of one euro (EUR 1.00) and the rights and obligations specified with respect to the Preferred Equity Certificates in this Agreement and in the terms and conditions of the PECS.

 

“ PEC Holder ” means any owner of one or more PECS issued by the Company, as shown on the Company’s register of PECS.

 

“ Preferred Unpaid Yield ” of any PEC means, as of any date, an amount equal to the excess, if any, of (a) the aggregate Preferred Yield accrued on such PEC for all periods prior to such date (including partial periods), over (b) the aggregate amount of prior Distributions made by the Company that constituted payment of Preferred Yield on such PEC.

 

“ Preferred Yield ” means, with respect to each PEC, the amount accruing on such PEC on a daily basis, at the rate of 10% per annum, compounded on the last day of each calendar year, on (a) the Par Value of such PEC (as defined in the terms and conditions of such PEC) plus (b) the Preferred Unpaid Yield thereon, if any, for all prior years. In calculating the amount of any Distribution to be made during a period, the portion of the Preferred Yield with respect to such PEC for the portion of the quarterly period elapsing before such Distribution is made shall be taken into account in determining the amount of such Distribution.

 

“ Person ” means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization, any other business entity, or a Governmental Entity.

 

“ Profits ” means items of Company income and gain determined according to Section 3.2 .

 

“ Public Offering ” means any offering of the Shares of the Company (or a successor thereto) that are listed on a securities exchange or otherwise publicly offered (which shall include an offering pursuant to Rule 144A and/or Regulation S under the Securities Act, to professional market investors or similar persons); provided that the following shall not be considered a Public Offering: (i) any issuance of Shares as consideration for a merger or acquisition, and (ii) any issuance of Shares or rights to acquire Shares to employees of the Company or its Subsidiaries as part of an incentive or compensation plan.

 

“ Put Offer Price ” means the aggregate amount which the Selling Shareholder would receive in accordance with Section 4.1(e) of this Agreement in respect of its PECS, CPECS and Shares assuming all PECS, CPECS and Shares then outstanding (including all CPECS and Shares issuable upon

 

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the exercise of in-the-money options) were sold pursuant to a Sale of the Company on the date of delivery of the Put Offer Notice for an aggregate purchase price equal to (x) the product of (a) 6.5 multiplied by (b) the Company’s EBITDA for the twelve (12) full calendar months immediately preceding the date of delivery of the Put Notice, minus (y) the aggregate amount of all outstanding Indebtedness of the Company and its Subsidiaries as of such date, plus (z) the aggregate amount of all cash and cash equivalents held by or on behalf of the Company or its Subsidiaries as of such date.

 

“ Qubica Managers ” means the three (3) representatives designated by Qubica from time to time pursuant to the Articles, other than any individual whose employment with or service as a director or manager of the Company or any of its Subsidiaries is terminated for Just Cause, who shall initially be Marc Koeune, Emanuele Govoni and Paolo Baretta.

 

“ Regulatory Allocations ” has the meaning set forth in Section 4.3(e) .

 

“ Required Interest ” means 75% or more of the outstanding Shares of the Company.

 

“ Sale of the Company ” means any transaction or series of transactions pursuant to which any Person or group of related Persons (other than an Initial Shareholder) in the aggregate acquire(s) (i) all or substantially all of the Shares outstanding on a fully-diluted basis at the time of such transaction or series of transactions or (ii) all or substantially all of the Company’s and its Subsidiaries’ assets determined on a consolidated basis, in any case whether by merger, consolidation, joint venture, reorganization, liquidation or otherwise; provided that a Public Offering shall not constitute a Sale of the Company.

 

“ Securities Act ” means the Securities Act of 1933, as amended, and applicable rules and regulations thereunder, and any successor to such statute, rules, or regulations. Any reference herein to a specific section, rule, or regulation of the Securities Act shall be deemed to include any corresponding provisions of future law.

 

“ Share ” means a share representing a fractional part of the interest of a Shareholder in Profits, Losses and Distributions and having the rights and obligations specified in the Articles and this Agreement.

 

“ Shareholder ” means any owner of one or more Shares issued by the Company as reflected on the Company’s books and records.

 

“ Shareholder Group ” has the meaning set forth in Section 5.2 .

 

“ Strategic Plan ” has the meaning set forth in Section 2.10 .

 

“ Subsidiary ” means, with respect to any Person, any corporation, limited liability company, partnership, association, or business entity of which (i) if a corporation, a majority of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers, or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof, or (ii) if a limited liability company, partnership, association, or other business entity (other than a corporation), a majority of partnership or other similar ownership interest thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more Subsidiaries of that Person or a combination thereof. For purposes hereof, a Person or Persons shall be deemed to have a majority ownership interest in a limited liability company, partnership, association, or other business entity (other

 

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than a corporation) if such Person or Persons shall be allocated a majority of limited liability company, partnership, association, or other business entity gains or losses or shall be or control any managing director or general partner of such limited liability company, partnership, association, or other business entity. For purposes hereof, references to a “ Subsidiary ” of any Person shall be given effect only at such times that such Person has one or more Subsidiaries, and, unless otherwise indicated, the term “ Subsidiary ” refers to a Subsidiary of the Company. Notwithstanding the foregoing, for purposes of determining any amount hereunder with respect to any Subsidiary of the Company that is not then wholly-owned, directly or indirectly, by the Company, such determination shall include only a pro rata percentage of such amount based on the Company’s direct or indirect ownership percentage of such Subsidiary.

 

“ Supply Agreement ” means that certain Supply Agreement, dated as of the date hereof, to be effective as of the Effective Date, by and among AMF Products, AMF Mexico, the Company, Qubica Products and AMF Bowling Centers, Inc., a Delaware corporation (“ AMF Centers ”).

 

“ Tax ” or “ Taxes ” means any federal, state, county, local, foreign or other income, gross receipts, ad valorem, franchise, profits, sales or use, transfer, registration, excise, utility, environmental, communications, real or personal property, capital stock, license, payroll, wage or other withholding, employment, social security, severance, stamp, occupation, alternative or add-on minimum, estimated and other taxes of any kind whatsoever (including, without limitation, deficiencies, penalties, additions to tax, and interest attributable thereto) whether disputed or not.

 

“ Tax Code ” means the United States Internal Revenue Code of 1986, as amended. Such term shall be deemed to include any future amendments to the Tax Code and any corresponding provisions of succeeding Tax Code provisions (whether or not such amendments and corresponding provisions are mandatory or discretionary; provided , however , if they are discretionary, the term “Tax Code” shall not include them if including them would have a material adverse effect on either Initial Shareholder).

 

“ Tax Distribution ” has the meaning set forth in Section 4.1(b) .

 

“ Tax Matters Partner ” has the meaning set forth in Section 7.3 .

 

“ Taxable Year ” means the Company Year unless the Board determines otherwise in compliance with applicable laws.

 

“ Transaction Documents ” means this Agreement, the Contribution Agreement and all other agreements, instruments, certificates and other documents contemplated hereby or thereby.

 

“ Transfer ” means any sale, transfer, assignment, pledge, mortgage, exchange, hypothecation, grant of a security interest or other direct or indirect disposition or encumbrance of an interest (including, without limitation, by operation of law) or the acts thereof, but explicitly excluding conversions or exchanges of one class of Shares to or for another class of Shares. The terms “ Transferor ,” “ Transferee ,” “ Transferred ,” and other forms of the word “ Transfer ” shall have correlative meanings.

 

“ Treasury Regulations ” means the income tax regulations promulgated under the Tax Code and effective as of the date hereof. Such term shall, at the Board’s sole discretion, be deemed to include any future amendments to such regulations and any corresponding provisions of succeeding regulations (whether or not such amendments and corresponding provisions are mandatory or

 

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discretionary; provided , however, that if they are discretionary, the term “Treasury Regulations” shall not include them if including them would have a material adverse effect on either Initial Shareholder).

 

ARTICLE II — ORGANIZATIONAL MATTERS

 

2.1 Formation . The Company has been formed as a société à responsabilité limitée (“ SARL ”) under the laws of Luxembourg under and pursuant to the Articles and shall be continued in accordance with the Articles and this Agreement. The Shareholders hereby agree to execute, file and record all such other certificates and documents and to do such other acts as may be appropriate to comply with all requirements for the formation, continuation and operation of a SARL, the ownership of property, and the conduct of business under the laws of Luxembourg and any other jurisdiction in which the Company or any Subsidiary may own property or conduct business. Other than in connection with the execution and delivery of the Transaction Documents, the Company has no liabilities or other obligations and has conducted no business prior to the date hereof and shall not conduct any business prior to the Effective Date. Upon the closing of the transactions contemplated by Section 1B of the Contribution Agreement, the Company will issue to AMF and Qubica, respectively, the number of Shares, CPECS and PECS set forth opposite such Initial Shareholder’s name on Schedule A attached hereto such that initially each of AMF, on the one hand, and Qubica, on the other hand, shall hold and own 50% of the issued share capital of the Company.

 

2.2 Name . The name of the Company shall be QubicaAMF Worldwide, S.à.R.L. The Shareholders, with the quorum and majority requirements applicable to amendments of the Articles, may change the name of the Company at any time and from time to time. The Company’s business may be conducted under its name and/or any other name or names deemed advisable by the Board.

 

2.3 Purpose . The purpose of the Company is as set forth in article 2 of the Articles. Notwithstanding anything herein to the contrary, nothing set forth herein shall be construed as authorizing the Company to possess any purpose or power, or to do any act or thing, forbidden by law. Subject to the provisions of this Agreement and the other agreements contemplated hereby, (i) the Company may, with the approval of the Board, enter into and perform under any and all documents, agreements and instruments, all without any further act, vote or approval of any Shareholder, and (ii) the Board may authorize any Person (including any Shareholder, Manager or Officer) to enter into and perform under any document, agreement or instrument on behalf of the Company.

 

2.4 Powers of the Company . Subject to the provisions of the Articles, this Agreement and the agreements contemplated hereby, the Company shall have the power and authority to take any and all actions necessary, appropriate, proper, advisable, convenient or incidental to or for the furtherance of the purposes set forth in Section 2.3 , including the power:

 

(a) to conduct its business, carry on its operations and have and exercise the powers granted to a SARL by the Code and the Articles within Luxembourg and/or any other country that may be necessary, convenient or incidental to the accomplishment of the purpose of the Company;

 

(b) to acquire by purchase, lease, contribution of property or otherwise, own, hold, operate, maintain, finance, refinance, improve, lease, sell, convey, mortgage, transfer, demolish or dispose of any real or personal property that may be necessary, convenient or incidental to the accomplishment of the purpose of the Company;

 

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(c) to enter into, perform and carry out contracts of any kind, including contracts with any Shareholder or any Affiliate thereof, or any agent of the Company necessary to, in connection with, convenient to or incidental to the accomplishment of the purpose of the Company;

 

(d) to purchase, take, receive, subscribe for or otherwise acquire, own, hold, vote, use, employ, sell, mortgage, lend, pledge, or otherwise dispose of, and otherwise use and deal in and with, shares or other interests in or obligations of domestic or foreign corporations, associations, general or limited partnerships (including the power to be admitted as a partner thereof and to exercise the rights and perform the duties created thereby), trusts, limited liability companies (including the power to be admitted as a shareholder or appointed as a manager thereof and to exercise the rights and perform the duties created thereby) or individuals or direct or indirect obligations of any government, state, territory, governmental district or municipality or of any instrumentality of any of them;

 

(e) to lend money for any proper purpose, to invest and reinvest its funds and to take and hold real and personal property for the payment of funds so loaned or invested;

 

(f) to sue and be sued, complain and defend, and participate in administrative or other proceedings in its name;

 

(g) to appoint employees and agents of the Company and define their duties and fix their compensation;

 

(h) to indemnify any Person in accordance with the Articles and the Code and to obtain any and all types of insurance;

 

(i) to cease its activities;

 

(j) to negotiate, enter into, renegotiate, extend, renew, terminate, modify, amend, waive, execute, acknowledge or take any other action with respect to any lease, contract or security agreement in respect of any assets of the Company;

 

(k) to borrow money and issue evidences of indebtedness and guaranty indebtedness (whether of the Company or any of its Subsidiaries), and to secure the same by a mortgage, pledge or other Lien on the assets of the Company;

 

(l) to pay, collect, compromise, litigate, arbitrate or otherwise adjust or settle any and all other claims or demands of or against the Company or to hold such proceeds against the payment of contingent liabilities; and

 

(m) to make, execute, acknowledge and file any and all documents or instruments necessary, convenient or incidental to the accomplishment of the purpose of the Company.

 

2.5 Foreign Qualification . Prior to the Company’s conducting business in any jurisdiction other than Luxembourg, the Board shall cause the Company to comply, to the extent procedures are available and those matters are reasonably within the control of the Board, with all requirements necessary to qualify the Company as a foreign limited liability company in that jurisdiction. At the request of the Board or any Officer, each Shareholder shall execute, acknowledge, swear to and deliver all certificates and other instruments conforming with this Agreement that are necessary or appropriate to qualify, continue and terminate the Company as a foreign limited liability company in all such jurisdictions in which the Company may conduct business.

 

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2.6 Registered Office; Principal Office . The registered office of the Company shall be established in Luxembourg. The registered office may be transferred to any other place in the Grand Duchy of Luxembourg by means of a resolution of a general meeting of the Shareholders. The Company’s principal headquarters (“ Headquarters ”) will be in Richmond, Virginia, United States. The Company’s automatic scoring and strategic marketing divisions will be located in Bologna, Italy. Branches or other offices may be established either in Luxembourg or abroad as the Board deems advisable.

 

2.7 Term . The term of the Company commenced upon the date of incorporation before a notary and shall continue in existence until termination and dissolution thereof in accordance with the Articles.

 

2.8 Partnership Status for Tax Purposes . The Shareholders, PEC Holders and CPEC Holders intend that the Company shall be treated as a partnership for United States federal and, if applicable, state and local income tax purposes, and that the Company and each Shareholder, PEC Holder and CPEC Holder shall file all tax returns and shall otherwise take all tax and financial reporting positions in a manner consistent with such treatment, and, at the request of the Company, each Shareholder, PEC Holder and CPEC Holder shall execute IRS Form 8832 (and any corresponding form under state and local law) for such purpose. Without the consent of the holders of the Required Interest, the Company shall not make an election to be treated as a corporation for U.S. federal income tax purposes pursuant to Treasury Regulation 301.7701-3 (or any successor regulation or provision) and, if applicable, U.S. state or local income tax purposes. Except for tax purposes as otherwise set forth in this Section 2.8 , the Shareholders, PEC Holders and CPEC Holders intend that the Company not be a partnership (including, without limitation, a limited partnership), that no Shareholder, PEC Holder or CPEC Holder be a partner of any other Shareholder, PEC Holder or CPEC Holder by virtue of this Agreement and that neither this Agreement nor any other document entered into by the Company or any Shareholder, PEC Holder or CPEC Holder relating to the subject matter hereof shall be construed to suggest otherwise.

 

2.9 Related Party Transactions . Except as set forth on the attached Company Affiliated Transactions Schedule attached hereto as Schedule B and except as expressly contemplated by the Transaction Documents, the Company shall not, and shall cause each of its Subsidiaries to not, engage in any agreement, contract, commitment or transaction with any officer, director, manager, employee, shareholder or Affiliate (other than the Company and its Subsidiaries) of AMF or Qubica or with any individual related by blood, marriage or adoption to any such individual or any entity in which any such Person or individual owns any beneficial interest, without the prior approval of the Board.

 

2.10 Strategic Plan . Pursuant to the terms set forth in the Articles, the Board shall establish a strategic planning committee to review and evaluate the Company’s annual, five-year strategic business plan prepared by the Company’s senior management team at the direction of the Company’s chief executive officer (the “ CEO ”), which shall include without limitation the Budget and annual operating plan for the current fiscal year, which shall have been previously prepared by the Company’s senior management team at the direction of the CEO and approved by the Board (the “ Strategic Plan ”). The Company’s initial Strategic Plan is attached hereto as Schedule C .

 

2.11 Management of the Company and its Subsidiaries .

 

(a) Each of AMF, Qubica and the Company agrees to take all actions necessary or advisable to (i) cause each Subsidiary of the Company to execute and deliver this Agreement and each other Transaction Document to which such Subsidiary is named as a party thereto and (ii) cause each Subsidiary of the Company to perform all obligations of such Subsidiary under, and to carry out and

 

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consummate the transactions contemplated by, this Agreement and each other Transaction Document to which such Subsidiary is a party.

 

(b) Each of the Company, AMF and Qubica agrees to take all actions necessary or advisable to cause the Board to be comprised at all times of the AMF Managers and the Qubica Managers.

 

(c) Except as otherwise determined by the Board, the Company agrees to take all actions necessary or advisable to cause John Walker to be appointed at all times as the Company’s Chief Executive Officer.

 

(d) Except as otherwise determined by the Board, the Company agrees to take all actions necessary or advisable to cause the board of directors or managers (or equivalent governing body) of each of AMF BV, AMF Products and Qubica Products (and any other direct Subsidiary of the Company from time to time) to be comprised at all times from and after the Effective Date of (i) the chief executive of such entity from time to time, who shall initially be John Walker, and (ii) an equal number of representatives designated from time to time by each of AMF and Qubica.

 

(e) Except as otherwise determined by its board of directors or managers (or equivalent governing body), each of AMF BV, AMF Products and Qubica Products agrees to take all actions necessary or advisable to cause John Walker to be appointed at all times from and after the Effective Date as the chief executive of such entity.

 

(f) Except as otherwise determined by its board of directors or managers (or equivalent governing body), each of AMF BV, AMF Products and Qubica Products agrees to take all actions necessary or advisable to cause the board of directors or managers (or equivalent governing body) of each of their respective Subsidiaries (other than Nextia) to be comprised at all times from and after the Effective Date of (i) the chief executive of such entity from time to time, who shall initially be John Walker, and (ii) an equal number of representatives designated from time to time by each of AMF (with respect to each such Subsidiary, as well as AMF BV, AMF Products, Qubica Products and any other direct Subsidiary of the Company, the “ AMF Sub Directors ”) and designated by Qubica (with respect to each such Subsidiary, as well as AMF BV, AMF Products, Qubica Products and any other direct Subsidiary of the Company, the “ Qubica Sub Directors ”).

 

(g) Except as otherwise determined by its board of directors or managers (or equivalent governing body), each of AMF India, AMF Mexico, AMF Poland, AMF Russia, Qubica Canada, Qubica USA and Aquta agrees to take all actions necessary or advisable to cause John Walker to be appointed at all times from and after the Effective Date as the chief executive of such entity.

 

(h) Each of the Company, AMF BV, AMF Products, Qubica Products, AMF India, AMF Mexico, AMF Poland, AMF Russia, Qubica Canada, Qubica USA and Aquta agrees to take all actions necessary or advisable to cause the articles and bylaws (or equivalent governing documents) of such Person, other than the Company, to be amended as of the Effective Date such that: (i) all matters thereafter subject to the approval of the board of directors or managers (or equivalent governing body) of such Person (other than those matters specified in clause (ii) below) shall require the affirmative vote of a number of the directors or managers (or equivalent governing representatives) of such Person equal to (A) the total number of directors or managers (or equivalent governing representatives) of such Person, divided by (B) two (the result of which, if not a whole number, shall be rounded up to the nearest whole number), plus (C) one; and (ii) all matters thereafter subject to the approval of the board of directors or managers (or equivalent governing body) of such Person related to (x) the delegation, assignment,

 

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revocation or modification of the duties, responsibilities, functions and authority of any and all directors, managers and officers of such Person and/or (y) in the case of Qubica Products, the removal of the directors of Nextia and/or the delegation, assignment, revocation or modification of the duties, responsibilities, functions and authority of the directors of Nextia, shall require the affirmative vote of only a simple majority of the total number of directors or managers (or equivalent governing representatives of such Person (but including the affirmative vote of the chief executive of such Person, who shall initially be John Walker).

 

(i) Except as otherwise required hereunder, each of AMF BV, AMF Products, Qubica Products, AMF India, AMF Mexico, AMF Poland, AMF Russia, Qubica Canada, Qubica USA and Aquta agrees not to take any action described in clause (b) of the definition of Fundamental Change without the prior written approval of both a majority of the AMF Sub Directors then serving on the board of directors or managers (or equivalent governing body) of such entity and a majority of the Qubica Sub Directors then serving on the board of managers (or equivalent governing body) of such entity.

 

2.12 Certain Executives .

 

(a) The CEO (in his capacity as the CEO of the Company or as the chief executive of each of the Subsidiaries of the Company) may not, at any time on or prior to the second anniversary of the Effective Date, terminate any Key Executive’s employment or consulting arrangement with, or service as a manager or director (or equivalent governing representative) of, any of the Company’s Subsidiaries, unless the Board (or equivalent governing body of the applicable Subsidiary of the Company) makes a determination of Just Cause and approves such termination; it being agreed that, after the second anniversary of the Effective Date, the CEO (in his capacity as the CEO of the Company and the chief executive of each of its Subsidiaries) may, in his sole discretion and for any reason whatsoever, cause any such termination of a Key Executive. In the event any Key Executive’s employment or consulting arrangement with, or service as a manager or director (or equivalent governing representative) of, any of the Company’s Subsidiaries is terminated for any reason whatsoever, other than for Just Cause, the CEO (in his capacity as the CEO of the Company and/or as the chief executive of the applicable Subsidiaries of the Company) shall be responsible for the replacement of such Person and such replacement shall be subject to the approval of a majority of the Qubica Managers (in their capacity as members of the Board or members of the equivalent governing body of the applicable Subsidiaries of the Company); provided that if any such termination is for Just Cause, such replacement shall be subject only to the approval of the Board (or the equivalent governing body of the applicable Subsidiaries of the Company); provided , further , the foregoing shall not limit Qubica’s right to designate the Qubica Managers or the Qubica Sub Directors.

 

(b) If, at any time on or prior to the third anniversary of the Effective Date, any Key Executive voluntarily terminates his service as a manager or director (or equivalent governing representative) of the Company or any of its Subsidiaries, or his employment or consulting arrangement with any of the Company’s Subsidiaries, for any reason whatsoever, AMF shall immediately have the ability to exercise its rights pursuant to Section 10.1 and, if applicable, Section 10.2 below, unless such termination is (i) due to the death or disability of such Key Executive (as determined in good faith by the board of directors or managers (or equivalent governing body) of such Subsidiary) or (ii) due to the resignation of such Key Executive from his position as a manager or director (or equivalent governing representative) of such Subsidiary in connection with the approval of a transaction or other arrangement by the board of managers or directors (or equivalent governing body) of such Subsidiary for which such Key Executive withheld his approval after determining (based on a written opinion of independent legal counsel) that such transaction or arrangement would likely result in personal liability to such Key Executive, but, in the case of clause (ii), only if concurrently therewith such Key Executive is willing to

 

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enter into an alternative arrangement substantially identical in substance to his then current engagem