MEMORANDUM OF UNDERSTANDING FOR FORMATION OF

SPV

THIS MEMORANDUM OF UNDERSTANDING made at __________ this ______

day of ___________, 20_ _

BETWEEN

XYZ ENTERTAINMENT PVT. LTD., a company incorporated under the

provisions of the Companies Act, 1956 having its registered office at

_________________________________________________________, hereinafter referred

to as “XYZ” (which expression shall unless repugnant to the context or

meaning thereof be deemed to mean and include its successors and assigns) of

the One Part;

AND

PQR ENTERPRISES, a partnership firm duly registered under the provisions of

the Indian Partnership Act, 1932 and carrying on business at

_________________________________________________________________, represented

by its partners (1) _________________________________ and (2)

__________________________________________, both of ____________, Indian

Inhabitants, being the partners of the said firm, hereinafter referred to as

“PQR” (which expression shall unless it be repugnant to the context or the

meaning thereof be deemed to mean and include the partners or partner for the

time being of the said firm and the survivors or survivor of them and the heirs,

executors, administrators of the last surviving partner) of the Other Part;

IT IS AGREED, UNDERSTOOD AND RECORDED BY AND BETWEEN THE

PARTIES AS UNDER:

1. RECITALS AND OBJECTIVES:

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 (a) XYZ are in the field of entertainment and have knowledge

experience and expertise in running and setting up of

Entertainment Centre (hereinafter referred to as “EC”) consisting

of ________________________________________________________.

(b) PQR are the owners and otherwise are also entitled to an exclusive

space and area of ______________ sq.ft. of carpet area on the

____________ floor of the SUPER MALL situated at

__________________________________________________________________

(hereinafter referred to as “the said property”).

(c) XYZ and PQR have agreed to jointly plan, set up, establish, run

and manage the said EC in and from the said property on the

terms and conditions recorded herein and by forming SPECIAL

PURPOSE VEHICLE (hereinafter called “SPV”) between them. The

estimated project cost of the said EC is Rs. ___________________/-

(Rupees ___________________________ only).

2. SPV:

(a) XYZ and PQR shall form the said SPV in the form of a Private

Limited Company (hereinafter referred to as “the Company”)

(b) The shareholding and contribution of XYZ and PQR in the

Company shall be as under:-

(i) XYZ 50%

(ii) PQR 50%

---------
Total 100%
======

The intention of the Parties is to share the Profit and Loss in the

above ratio.

(c) The Share Capital Contribution shall be brought by XYZ and PQR

in the proportion of 50:50 respectively. The further amounts

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 required for the project shall be arranged by way of loans/finances

from the private parties or Banks/financial institutions.

(d) XYZ and PQR shall incorporate and register the Company within a

period of __________ weeks from the date hereof with the main

object of setting, managing, establishing and running the said EC

in and from the property. The issued, subscribed and paid up

Capital of the Company shall be Rs. ___________/- (Rupees

_______________ __________ only) divided into _________ equity

shares of Rs. 100/- each.

(e) XYZ and PQR and/or their Directors/Shareholders/Partners shall

be the only subscribers to the Memorandum and Articles of

Association of the Company. The name of the proposed Company

will be “________________________” or “__________________________”.

In case the said names are not approved by the Registrar of

Companies or not available for registration, the XYZ and PQR with

mutual consent of each other would select another name of the

said Company.

(f) The Memorandum and Articles of Association of the Company shall

be approved by both the parties hereto and the same shall be

subscribed by both the parties hereto. All expenses pertaining to

the formation and incorporation of the Company shall be

ultimately borne by the Company.

(g) The Company shall be managed by Four Directors who shall be

permanent Directors of the Company. The maximum number of

Directors of the Company shall not exceed Four. Two Directors

shall be nominated by XYZ and two by PQR. The appointment of

Directors shall be done simultaneously. One Director from XYZ

shall be the Chairman and One Director from PQR shall be the

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 Vice-Chairman. In the event of tie in any meetings, the Chairman

shall not have casting vote. The differences/ the disputes shall be

referred to the arbitration as set out in clauses 13 hereinbelow.

(h) The parties shall exercise their voting rights at Board Meetings and

General Body Meetings and to uphold and effectuate the provisions

of this Memorandum of Understanding.

(i) The Bank Account of the Company shall be operated under joint

signatures of any two Directors one from “XYZ” and one from

“PQR”; and

(j) The Articles of Association of the said Company shall be consistent

with the provisions of the Companies Act, 1956 and incorporate all

the terms of this Memorandum of Understanding so as to govern

the rights of the shareholding and Directorship with equal

representation to both the Groups. However, in the event of any

conflict between the terms of this Memorandum of Understanding

and the Articles of Association of the proposed Company, the

provisions of this Memorandum of Understanding shall prevail. It

is agreed that this Memorandum of Understanding between the

parties shall always remain in full force and binding between the

parties so as to govern their respective rights and obligations in the

development of the said property notwithstanding the formation of

the said Company.

3. OBLIGATIONS OF THE COMPANY (SPV of XYZ and PQR):

(i) To plan, set up and establish the said EC in the said property and

to invest all the necessary amounts for the same including for

acquisition of equipment, installation, consultancy and pre-

operative expenses.

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(ii) To carry on business activities of the said EC.

(iii) To recruit persons for carrying on the activities for Technical

Services, Supervision, Marketing, Finance, Support Staff etc. and

as may be required for operation of EC.

(iv) To apply and obtain for various permissions required for

commencing and running of EC.

(v) To defray all the operating expenses, such as salary, wages,

electricity charges, repairs, maintenance etc., and all other general

expenses which are necessary for the purpose of conducting

business, including Cam Charges, Service Tax and other

Mandatory Charges, Property Tax etc.

(vi) To pay one time Project Consultancy fees to XYZ @ ____% of the

total project cost and which shall be paid on or before opening the

said EC to the public at large.

(vii) In addition to payment referred in sub clause (VI) above, to further

pay to XYZ royalty as under:-

(a) @ _____% of Gross Collection/revenue for first six months;

and

(b) After expiry of six months the percentage of royalty of gross

collection/revenue to be reviewed and to be decided

mutually. If it is not decided mutually, in that event, it shall

be @ __% of Gross Collection/revenue for the remaining term

thereafter.

(viii) To pay to the PQR, being the Owners of the said property

compensation for use of the said property as under:-

(a) ___% of the total gross revenue generated each month; or @

of Rs. ____/- per sq.ft. per month of the total Carpet Area

occupied by Entertainment Centre, whichever is higher.

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4. OBLIGATIONS TO BE COMPLIED WITH BY XYZ:

(i) To grant its consent to the Company to use it’s brand name

“SMARTY” for the said EC subject to the terms and conditions of

this Memorandum of Understanding. All the rights and authorities

in respect of the said brand name “SMARTY” are the ownership of

XYZ and shall continue to be of XYZ. The Company shall be

granted limited license to use the said brand name “SMARTY” for

the said EC only as long as the Company and PQR fulfils all their

obligations as recorded in the present Memorandum of

Understanding and till such time the present Memorandum of

Understanding is in force. A separate agreement shall be entered

between the Company and XYZ in that regard.

(ii) To provide project consultancy services in terms of setting up of

the project by identifying equipments/games/instalments and

successful trial run.

(iii) To co-ordinate with various agencies, such as equipment

suppliers/Architect/Government Agencies etc.

(iv) To provide training to the staff of Entertainment Centre for first 6

months only.

(v) To provide marketing support in respect of setting up/establishing

loyalty programmes etc. but shall not include advertising support

in any manner whatsoever.

(vi) To provide assistance in general operations and administration of

the activities of the Entertainment Centre.

(vii) To bring in their share of contribution to the SPV in instalments in

the form of equipments or cash as may be feasible and convenient.

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 (viii) To act in the interest of the company and to assist the Company in

achieving its targets.

5. OBLIGATIONS TO BE COMPLIED WITH BY PQR:

(i) To provide space in the Mall equivalent to ________ sq.ft. of carpet

area on _____ Floor of the Super Mall situated at

____________________________________________________________ for

the said EC. PQR shall provide the aforesaid space as long as this

Memorandum of Understanding is valid.

(ii) To provide all infrastructures and all infrastructural support as

may be required for the setting up and operating of the

Entertainment Centre inclusive of but not limited to flooring, air

heating/conditioning, electrical, power backup water, drainage,

communication facilities etc.

(iii) To bring in their share of contribution to the SPV in agreed

instalments as may be required.

(iv) To ensure safety and security measures for the visitors etc.

(v) To provide liaison and sign papers, documents for applications and

permissions from Various Authorities as may be necessary for

conducting activities.

(vi) To provide No Objection Certificate or such other required

document to XYZ for obtaining mortgage or loan for their share of

contribution.

(vii) A separate Agreement to be entered into by the Company with PQR

regarding the use of the said property.

6. PERIOD AND TERMINATION:

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(i) The arrangement recorded herein shall be valid for a minimum

period of three years from the date of commercial opening of the

said EC to the public.

(ii) The renewal of the period for a further term is to be decided

mutually on the terms and conditions as may be agreed upon. The

decision regarding the renewal of the term shall be taken at least

three months prior to the expiry of the said period of three years.

(iii) In the event of any breach by any party, the other party after giving

the defaulted party a notice of 60 days to rectify the breach, shall

be entitled to terminate this Memorandum of Understanding.

(iv) Upon termination of this Memorandum of Understanding by efflux

of time or otherwise, the said business of EC shall be closed down

and the license granted to the Company to use XYZ’s brand name

“SMARTY” shall also come to an end.

(v) In the above circumstances, the shares of the parties and assets of

the Company shall be valued by any reputed firm of Chartered

Accountants to ascertain the fair market value of the said shares

and assets.

(vi) Both the Parties shall have first right of refusal for purchasing the

shares of each other at the valued price arrived by the said

Valuers/Chartered Accountants.

(vii) If XYZ refuses to Purchase the said shares of PQR within 60 days

of the notice sent by PQR and XYZ offering the said shares at the

valued price in that event PQR shall be entitled to sell the said

shared to any third party/outside person at the price as may be

deem fit and proper by PQR.

(viii) If PQR refuses to Purchase the said shares of XYZ within 60 days

of the notice sent by XYZ and PQR offering the said shares at the

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 valued price in that event XYZ shall be entitled to sell the said

shared to any third party/outside person at the price as may be

deem fit and proper by XYZ.

7. RELATIONSHIP

This Understanding between the parties is on a principal-to-

principal basis and this Memorandum of Understanding shall

not create a partnership or agency or employer-employee

relationship between them.

8. NO ASSIGNMENT:

The parties shall not be directly and/or indirectly entitled to assign

their interest under this Memorandum of Understanding to any

third party without the written consent of the other party and any

attempt to do will be void.

9. ENTIRE AGREEMENT

This Memorandum of Understanding shall constitute the entire

agreement between the parties hereto in relation to the

subject matter hereof and supercedes all prior

understandings, letters of intent, agreements, contracts etc.,

whether oral or written, between the parties hereto.

10. WAIVER

Any term or condition of this Memorandum of Understanding

may be waived at any time by the party that is entitled to the

benefit thereof, but no such waiver shall be effective unless

set forth in a written instrument duly executed by or on

behalf of the party waiving such term or condition. No waiver

by any party of any term or condition of this Memorandum of

Understanding, in any one or more instances, shall be deemed

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 to be or construed as a waiver of the same or any other term

or condition of this Memorandum of Understanding on any

future occasion. All remedies either under this Memorandum

of Understanding or by law or otherwise afforded, will be

cumulative and not alternative.

11. MODIFICATIONS

This Memorandum of Understanding may be modified, varied or

amended only by a written instrument duly executed by each

of the parties hereto.

12. CONFIDENTIALITY:

The parties shall maintain total confidentiality about this

Memorandum of Understanding till such time the said EC is

opened for the public at large.

13. ARBITRATION:

In the event of any dispute, differences, non-compliance or non-

payment arising between the parties hereto with regard to these

presents or interpretation thereof or in respect of affairs of the

Company and which cannot be mutually resolved within a

reasonable time; the same shall be referred to the Arbitration

under the provisions of The Arbitration and Conciliation Act, 1996

or any other prevailing Arbitration law. The Arbitration shall be

held in the city of ____________ and it shall be conducted in English

Language.

14. JURISDICTION AND GOVERNING LAWS

This Agreement shall be governed and construed in

accordance with the laws of India and shall be subject to all

applicable rules, laws, regulations as may be in force from

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 time to time. Subject to the Arbitration clause, the parties

agree to submit to the exclusive jurisdiction of courts at

_____________.

SIGNED SEALED AND DELIVERED )

by the withinnamed XYZ ENTERTAINMENT)

PVT. LTD., through it’s duly )

Authorized Signatory in the presence of… )

SIGNED AND DELIVERED )

by the withinnamed PQR )

ENTERPRISES through its Partners )

in the presence of… …. …. )

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