OPERATING AGREEMENT OF SU DISTRIBUTION LLC
This OPERATING AGREEMENT (the "Agreement"), is made and entered into as of
this 9th day of April, 2004, by and between SU Productions, LLC ("Member A") and
NT Media Corp. ("Member B"). Member A and Member B are sometimes referred to
herein as the "Members".
RECITALS
A. The Members propose to distribute a home video/DVD product tentatively
entitled "Strippers Untamed" (hereinafter referred to as Project "1") and any
other projects which the Members mutually agree to develop, produce and/or
distribute (collectively, the "Business").The Members further propose that their
organization take the form of a California Limited Liability Company. It is the
intention of the Members that this Limited Liability Company satisfies the
requirements to be classified as a partnership for federal tax purposes. This
Agreement shall not become effective unless and until Member B's audit firm has
approved the terms of same as it relates to matters pertaining to revenue
recognition.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the Members hereby covenant and agree as follows:
ARTICLE 1
DEFINITIONS
The following defined terms used in this Agreement shall have the
respective meanings specified below.
"Act" means the California Xxxxxxx-Xxxxxx Limited Liability Company Act,
as amended. To the extent that any provision of this Agreement is in conflict
with a provision of the Act and that provision may be waived pursuant to the
terms of the Act, then the provision shall be deemed to be waived by this
Agreement.
"Gross Revenue" shall be defined to mean all cash earned and received by
or on behalf of the Company (and not otherwise subject to defeasement in any
manner) in respect of the exploitation of the Video throughout the world,
including but not limited to any advances, minimum guarantees, royalties, and
license fees actually received by the Company from any sub-licensee or
sub-distributor in any market or Media.
"Direct Operational Costs" shall be defined as costs incurred directly or
indirectly on behalf of the Company, or for the benefit of the Company,
including but not limited to, all costs associated with the distribution,
advertising and exploitation of the Video, as well as general overhead costs of
the Company including the appropriate allocation of office rent, general office
material (but specifically excluding the general overhead costs of a Member),
production and printing of Company promotional and administrative materials,
office supplies, general Company accounting, legal and other professional fees
incurred both in connection with the formation of and subsequent to the
establishment of the Company.
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"Manager" shall be Xxxxxxx Xxxxxxxxx or any Person designated by mutual
approval of Member A and Member B.
"Media" shall mean all distribution rights in all media now known or
hereafter created or invented, including without limitation (i) the theatrical,
non-theatrical, or public (i.e. non-household viewing) video exhibition of the
Video, (ii) all television, including without limitation standard broadcast
television, pay cable, free cable, pay-per-view (including both residential and
non residential) and any other form of demand view, satellite free and pay, or
terrestrial free or pay, (iii) all computer and home video devices, including
without limitation, tape or laser disc based systems, inter-active video game
technology including without limitation, DVD, CD-I or CD-Rom or other home
computer based system, or any other system designed to permit the exhibition of
the Video in a residential or other non-theatrical setting, (iv) airlines and
ships; but excluding all ancillary and allied rights such as merchandising,
publishing and subsequent production rights.
"Net Cash from Operations" shall be defined as Gross Revenues from all
sources less Direct Operational Costs.
"Person" shall mean any individual, limited liability company,
partnership, association, governmental instrumentality, corporation, trust or
other legal person or entity.
"Tax Matters Member" shall mean the Member B for the purposes of Section
6231(a)(7) of the Internal Revenue Code (the "Code").
"Video" shall mean the video/DVD film owned and controlled by Member A,
the distribution rights of which are licensed hereunder, currently entitled
"Strippers Untamed".
ARTICLE 2
FORMATION OF COMPANY
2.1 Formation. The Members hereby organize a limited liability company, SU
Distribution LLC (the "Company"), pursuant to the Act and the terms of this
Agreement for the purposes hereinafter set forth. Each of Members A and B (and
their permitted successors in interest) are referred to herein individually as a
"Member," and collectively as the "Members." The Manager shall manage the
Company.
2.2 Name. The name of the Company shall be:
SU DISTRIBUTION LLC
The Company shall be a California Limited Liability Company. The Company shall
cause Articles of Organization to be prepared, executed and filed with the
Secretary of State.
2.3 Principal Office. The principal office and head-quarters of the
Company shall be at 00000 Xxxxxxx Xxxxxxxxx, #000, Xxxxxx, Xxxxxxxxxx 00000-0000
or at such other place as the Members may, from time to time, mutually approve
(the "Principal Office").
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2.4 Term. The Company shall commence as of the date of this Agreement and
shall continue until April 8, 2014 (the "Term") unless sooner terminated as
otherwise provided in this Agreement. Notwithstanding the foregoing sentence,
the Term of this Agreement shall not expire provided that Member B continues to
fund production of additional projects in accordance with Paragraph 10.2 below.
ARTICLE 3
PURPOSES AND POWERS
3.1 Purposes. The Company is formed for the purpose of engaging in the
Business and engaging in such other business that may be approved by all of the
Members.
3.2 Powers. The Company shall have such powers as are necessary or
appropriate to carry out the purposes of the Company and for the protection and
benefit of the Company. The Company may carry out its objectives and accomplish
its purposes as principal or agent, directly or indirectly through one or more
of its subsidiaries or affiliates, alone or with associates, or as a member or
as a participant in any firm, association, trust, limited liability company,
corporation, partnership or other entity. Although the Company may engage in any
or all of the above activities, the Company need not engage in any one or more
of them.
ARTICLE 4
INTERESTS OF MEMBERS
4.1 Interests. Except as otherwise expressly stipulated herein, the
interest of the respective Members in the assets, profits and losses of the
Company shall be owned forty-nine percent (49%) by Member A and fifty-one
percent (51%) by Member B. Notwithstanding the foregoing, Net Cash from
Operations shall be distributed, as determined by the parties, in such
proportions among the Members as follows:
(a) Notwithstanding the Term of this Agreement, five-sixths (5/6) of
the Net Cash from Operations shall be paid to Member B and one-sixth (1/6) of
the Net Cash from Operations shall be paid to Member A until such time, if ever,
as an aggregate of the initial Cash Contributions of the Members has been paid
pursuant to this subparagraph (a);
(b) Next, one hundred percent (100%) of Net Cash from Operations
shall be paid to End, Inc. (or the designee of Xxxxxx Xxxxxxx) solely for the
personal services of Xxxxxx Xxxxxxx ("End") for its promotional and sales
services related to Project 1, until such time, if ever, as End has received Ten
Thousand Dollars ($10,000) pursuant to this subparagraph (b), In the event that
End, Inc. does not render services on any projects subsequent to Project 1, the
parties hereto shall be free to negotiate with a third party for such services,
provided however, that unless agreed to in writing by the parties, neither party
shall be obligated to reduce its interest as a member pursuant to this
Paragraph;
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(c) Notwithstanding the Term of this Agreement Project 1), next,
five-sixths (5/6) of Net Cash from Operations shall be paid to Member B and
one-sixths (1/6) of Net Cash for Operations shall be paid to Member A until such
time, if ever, as the aggregate of the initial Cash Contributions of the Members
has been paid pursuant to this subparagraph (c);
(d) Notwithstanding the Term of this Agreement, next,
forty-seven-and-one-half percent (47-1/2%) of Net Cash from Operations shall be
paid to Member B, forty-seven-and-one-half percent (47-1/2%) of Net Cash from
Operations shall be paid to Member A and five percent (5%) of Net Cash from
Operations shall be paid to End (or the designee of Xxxxxx Xxxxxxx) solely for
the personal services of Xxxxxx Xxxxxxx, until such time, if ever, as Two
Million Four Hundred Thousand Dollars ($2,400,000) has been paid pursuant to
this subparagraph (d); and
(e) Then, all Net Cash from Operations remaining thereafter, if any,
shall be divided sixty-three-and-one-third percent (63-1/3%) to Member A,
thirty-three-and-two-thirds percent (33-2/3%) to Member B and five percent (5%)
to End on a continuing and ongoing basis in perpetuity notwithstanding the Term
of this Agreement.
With respect to any Projects subsequent to Project 1, Paragraphs 4.1(c) and
4.1(d) shall be deleted an the calculation of the interests payable to the
Members shall be paid pursuant to Paragraphs 4.1(a), (b), (d), and (e) in such
order.
4.2 Continuation of Interest. The interest of each Member in the Company
as provided in Section 4.1 shall continue unless and until some or all of such
interest is assigned pursuant to Article 9.
4.3 Limited Liability. No Member, including the Manager, shall be
personally liable for any debt, obligation, or liability of the Company, whether
that debt, obligation, or liability arises in contract, tort or otherwise.
ARTICLE 5
CAPITAL CONTRIBUTIONS AND OTHER
CONTRIBUTIONS OF THE MEMBERS
5.1 Cash Contribution of all Members. Each Member shall contribute to the
Company the initial cash contribution as set forth on Schedule "A" attached
hereto, as and when reasonably designated by the Members. Schedule "B" attached
hereto, shall be provided to the Members prior to completion of production of
Project 1, and shall be updated as required by the Members.
5.2 Additional Contribution of Member A. Member A shall license the
distribution rights to the Video to the Company, but no other rights such as
subsequent production rights, underlying copyrights or trademarks therein, all
of which are reserved to Member A.
5.3 Additional Cash Contributions. Upon the unanimous approval of all of
the Members, the Members may jointly call for additional cash contributions to
the Company; provided however that no Member shall be required to make cash
contributions pursuant to this Section 5.3 without such Member's specific
approval thereof.
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5.6 Loans by Members. With the approval of all of the Members, any Member
(including the Manager) may lend funds to the Company. Any loan made by a Member
to the Company shall be upon such terms and conditions (including interest) as
the Manager shall reasonably determine. In the event a Member makes a loan to
the Company, the principal amount of such loan and any interest accrued thereon
shall be repaid in its entirety prior to the making of any distribution to the
Members.
5.7 No Withdrawals. The capital of the Company shall not be withdrawn
except as hereinafter expressly stipulated.
ARTICLE 6
MANAGEMENT OF THE COMPANY
6.1 Management. The business and affairs of the Company shall be managed
under the direction of each Member, provided however, it is understood that the
Manager shall manage and direct the day to day the business and affairs of the
Company. The Manager shall have the authority to act for and on behalf of the
Company as determined by the Members, including the authority to enter into
agreements (including distribution agreements for the Video) on behalf of the
Company subject to good faith consultation and approval of Member B which shall
not be unreasonably withheld. Member A and Member B shall mutually agree on the
designation of the Manager. Xxxxxxx Xxxxxxxxx is hereby designated as the
Manager. Notwithstanding the foregoing, in the event of the death, disability,
or resignation of Xxxxxxx Xxxxxxxxx as Manager, Member B shall have the
automatic right to appoint a designee as the Manager. In the event of Xxxxxxx
Xxxxxxxxx'x resignation, such resignation shall be in writing. Xxxxxxxxx shall
not be removed as the Manager without the approval of all of the Members.
6.2 Meetings of Members. No annual or regular meetings of Members are
required. Meetings of Members may be held at such date, time and place, and in
such manner, as the Manager may determine.
ARTICLE 7
BOOKS AND RECORDS, AUDITS,
CAPITAL ACCOUNTS AND TAXES
7.1 Books; Statements. The Company shall keep accurate, full and complete
books and accounts showing its assets and liabilities, operations, transactions
and financial condition. All financial statements shall be accurate in all
material respects, shall present fairly the financial position and results of
the Company and shall be prepared in accordance with generally accepted
accounting principles consistently applied. The Members shall mutually determine
the methods to be used in the preparation of financial statements and federal,
state and municipal income and other tax or information returns for the Company,
in connection with all items of income and expense including, but not limited
to, valuation of assets, the method of depreciation, elections, credits and
accounting procedures. The parties hereby agree that Member B shall have the
final approval with respect to matters affecting accounting, finance and revenue
recognition matters in connection with the distribution of the Video.
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7.2 Where Maintained; Access. The books, accounts and records of the
Company shall be at all times maintained at the Principal Office. Each Member
shall have access to and may inspect and copy the books, accounts and records of
the Company, provided that any request for access to the books, accounts and
records of the Company must be reasonable.
7.3 Audits. In addition to the foregoing, any Member may, at its option
and at its own expense, conduct internal audits of the books, records and
accounts of the Company. Audits may be on either a continuous or a periodic
basis or both and may be conducted by employees of any Member, or of an
affiliate of any Member, or by independent auditors retained by the Company or
by any Member. Member B shall have the right to conduct any audits that may be
required arising out of Member B's status as a publicly traded company.
7.4 Capital Accounts. A separate capital account shall be maintained for
each Member in accordance with the Code.
ARTICLE 8
FISCAL YEAR
8.1 Fiscal Year. The fiscal year of the Company shall be January l,
through December 31, unless the Members shall approve any change thereto.
ARTICLE 9
ASSIGNMENT AND RIGHTS TO SALE OF INTEREST
9.1 Transfer of Interest. No Member may sell, assign, gift, transfer,
hypothecate or encumber all or any part of its membership interest without the
express written consent of all of the Members.
ARTICLE 10
COMPETITION / ADDITIONAL PROJECTS
10.1 No Restriction on Competition. Each Member and its affiliates are
expressly permitted, either directly or indirectly, to engage in or
possess an interest in an activity, the purpose or business of which
is either similar to, identical to, or competitive with the
development, production, and exploitation of video or other motion
pictures during the Term of the Company. No Member shall have any
obligation (but each Member shall have the right) to bring other
projects or opportunities to the Company.
10.2 Additional Projects: Notwithstanding that which is contained in
Paragraph 10.1 above, Member B hereby acknowledges that Member A has
the unfettered right to produce and otherwise exploit subsequent
productions derived or related to the Video; provided that if Member
B fully funds its initial Cash Contribution, then Company shall have
the right of first-negotiation to acquire distribution rights on the
next video/DVD produced by Member A (pursuant to the same terms and
conditions as that of Project 1) utilizing the trademark "Stripper
Untamed", which right shall roll for each successive video/DVD if
Company acquires distribution rights in the immediately prior
video/DVD. Nothing contained herein shall limit Member B's right to
assign this Agreement in whole or in part to any party acquiring all
or substantially all of Member B's assets, or for Member B to assign
its right to receive any amounts due to it pursuant to this
Agreement to any party. Without limiting the foregoing, neither
party shall assign this Agreement in whole or in part to any third
party without the written consent of all Members.
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In accordance with this Paragraph 10.2, in the event that Member B
elects not to proceed with any additional projects subsequent to
Project 1 (on a rolling basis as set forth in Paragraph 10.1 above),
and in the further event that Member A elects to produce additional
projects alone or with a third party, then Member B shall have the
perpetual interest set forth in Paragraph 4.1(e) above in all
subsequent productions derived in any way from Project 1 on a
pro-rata basis (based on the continuous number of projects produced)
to a hard floor of twelve percent (12%) of thirty-three and
two-thirds percent (33 2/3.5%) of one hundred percent (100%) of the
amounts received in connection with such subsequent productions
derived from Project 1 regarding of the parties involved of such
production. In calculating the amounts which shall be due to Member
B pursuant to this Paragraph, the Company shall only be permitted to
first deduct the actual out-of-pocket third party costs of
production, which shall specifically exclude any interest, overhead,
or producer fees payable to Member A or his designee.
For the purpose of determining the differentiation between each
Project, Member A shall present each future Project to Member B in
the group of episodes (or individual videos/DVD) that comprise such
Project. After such presentation of the future Projects, Member B
shall determine whether it shall participate in such Project in
accordance with the terms of this Agreement.
ARTICLE 11
DISSOLUTION IN GENERAL
11.1 Negation of Right to Dissolve by Will of Member.
(a) Provided that neither party is in breach of this Agreement, no
Member shall have the right to terminate this Agreement or dissolve the Company
by its express will or withdrawal without the express written consent of all of
the other Members.
(b) The Company shall continue until dissolved and terminated
pursuant to the terms of this Agreement or the Act. In the event of a
dissolution upon agreement of the Members, the parties shall designate the
"Liquidating Member" with full power and authority to liquidate all of the
assets of the Company.
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(c) The events of dissolution shall be: (i) agreement of the
Members, (ii) expiration of the Term or (iii) as otherwise provided in this
Agreement or the Act.
11.2 Winding Up of the Company. Upon dissolution of the Company, the
Company's business shall be wound up and all its assets distributed in
liquidation, provided, however, that the Members acknowledge and agree that, in
the event of a dissolution of the Company, the business of the Company shall be
operated in the normal course of events during the winding up period (except for
sales of assets or the business, or parts thereof, as approved by the
Liquidating Member). In the event that Company cannot sell all of its
distribution rights in the Video, then prior to dissolution of the Company, each
Member shall be assigned its pro rata share of the copyright in the Video;
provided that no Member may exploit its rights in the copyright without the
prior written approval of all other Members.
ARTICLE 12
NOTICES
12.1 Notices. No notice or other communication hereunder shall be
sufficient to affect any rights, remedies or obligations of any party hereto
unless such notice or communication is in writing and delivered to the person or
persons whose rights, remedies or obligations are affected, and is hand
delivered, sent via facsimile transmission, delivered by prepaid overnight
courier service or mailed by prepaid certified mail, return receipt requested,
addressed to the respective and appropriate party at the addresses indicated
herein. Notice shall be deemed sufficient upon hand delivery, facsimile
transmission, one day after deposit with such overnight courier service, or
three days after such mailing, as the case may be. The initial addresses for the
Members are as follows:
SU Productions LLC
00000 Xxxxxxx Xxxxxxxxx, #000
Xxxxxx, XX 00000-0000
NT Media Corp.
0000 Xxxxxxxx Xxxxxxxxx
Xxxxx 000
Xxxxxxx Xxxxx, XX 00000
12.2 Copies. A copy of any notice, service of process or other document in
the nature thereof relating to the Company, received by any Member from anyone
other than another Member shall be delivered by the receiving Member to the
other Members as soon as practicable.
ARTICLE 13
MISCELLANEOUS
13.1 Governing Law: Ownership . Except as is expressly herein stipulated
to the contrary, the rights and obligations of the Members and the
administration and termination of the Company shall be governed by the Act. The
validity, performance, and all matters relating to the interpretation and effect
of this Agreement shall be governed by the internal law in effect in the State
of California, without regard to principles of law (such as "conflicts of law")
that might make the law of some other jurisdiction applicable. The interest of
each Member in the Company shall be personal property for all purposes. All real
and other property (including without limitation the distribution rights in the
Video) owned by the Company shall be deemed owned by the Company, and no Member,
individually, shall have any individual ownership rights in and to such
property.
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13.2 Additional Documents and Acts. In connection with this Agreement, as
well as all transactions contemplated by this Agreement, each Member agrees to
execute and deliver such additional documents and instruments, and to perform
such additional acts, as may be necessary or appropriate to effectuate, carry
out and perform all of the terms, provisions and conditions of this Agreement,
and all such transactions. All approvals of any party hereunder shall be in
writing.
13.3 Arbitration: Jurisdiction. Any dispute arising out of or related to
the Company or a Member shall be submitted to binding arbitration in accordance
with the rules of the American Arbitration Association and a judgment on an
award may be enforced in any court of competent jurisdiction. Each of the
parties agrees to personal jurisdiction in any action brought in any arbitration
or court (whether federal or state), within the State of California having
subject matter jurisdiction arising under this Agreement.
13.4 Entire Agreement. This instrument contains all of the understandings
and agreements of whatsoever kind and nature existing among the parties hereto
with respect to this Agreement and the rights, interests, understandings,
agreements and obligations of the respective parties pertaining to the Company.
13.5 Binding Effect. Except as herein otherwise expressly stipulated to
the contrary, this Agreement shall be binding upon and inure to the benefit of
the parties signatory hereto, and their respective successors and permitted
assigns.
13.6 Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original and each of which shall constitute one and the
same Agreement.
13.7 Amendments. This Agreement may not be amended, altered or modified
except by a written instrument signed by each of the Members.
13.8 Severability. If any provision of this Agreement or the application
thereof to any person, entity, or circumstance shall be held to be invalid or
unenforceable to any extent, then the remainder of this Agreement and the
application of such provision to other persons, entities, or circumstances shall
not be affected thereby and shall be enforced to the greatest extent permitted
by law.
15.12 Conflict Waiver. The parties hereto acknowledge that the law firm of
Xxxxx & Xxxxxx LLP and Xxxxxx Xxxxx (collectively "W&I") have represented Member
A and Xxxxxxx Xxxxxxxxx in the past. The parties hereto waive any conflict or
any potential conflict which may exist as a result of W&I's prior representation
of Member A and with respect to the drafting of this Agreement on behalf of the
Company, or the future representation by W&I of the Company, including but not
limited to legal services related to the Video.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
SU Productions LLC
By:
------------------------------------
Xxxxxxx Xxxxxxxxx, Managing Member
NT Media Corp.
By:
------------------------------------
Its:
------------------------------------
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Schedule "A"
This is the Schedule of the initial "Cash Contributions" to the Company pursuant
to paragraph 5.1 of the Operating Agreement for SU Distribution LLC.
Member Cash Contribution
------ -----------------
SUProductions LLC An amount as mutually approved by the Members but in
("Member A") no event less than Twenty-Thousand Dollars ($20,000) or
more than Four Hundred Thousand Dollars ($40,000);
NT Media An amount as mutually approved by the Members but in
("Member B") no event less than One Hundred Thousand Dollars
($100,000) or more than Two Hundred Thousand Dollars
($200,000);
provided that at all times the ratio of the Cash Contributions between the
Members shall be one-sixth (1/6) by Member A and five-sixth (5/6) by Member B.
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Schedule "B"
As of October 8, 2004
Member A Cash Contribution Schedule
2/23/04 $8,000.00
3/8/04 $1,500.00
3/23/04 $5,000.00 plus $1,000.00 as salary advance not deposited
6/7/04 $8,000.00 plus $1,000.00 as salary advance not deposited
7/8/04 $6,000.00
10/7/04 $4,000.00
Total: $32,500.00 plus $2,000.00 as salary advance not
deposited = $34,500.00
Member B Cash Contribution Schedule
1/28/04 $5,000.00 Xxxxx & Xxxxxx
2/26/04 $30,000.00 SU Productions
3/22/04 $30,000.00 SU Productions
4/30/04 $7,500.00 SU Productions
6/18/04 $45,000.00 SU Productions - Cashiers Check
7/23/04 $30,000.00 SU Productions - Cashiers Check
Total: $147,500.00
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