Nutech Digital,
Inc.
3841 Hayvenhurst
Drive
Encino, CA
91436
As of January 15, 2007
Mr. Troy
Carter
9100 Wilshire
Blvd.
Suite
520E
Beverly Hills,
CA 90212
Re: Nu-Tech Digital, Inc.
- Joint Venture with
The Co-Op,
LLC
Dear Mr.
Carter:
This letter expresses our understanding with
respect to your entering into a joint venture with NuTech Digital,
Inc., a California corporation (the “Company”) and the
Company’s Agreement to create a new division to be run by you
and/or your corporate designee (currently to be known as the
“The Co-Op, LLC division”, “CMG” and/or the
“CMG Division”) which will operate as a separate
division of the Company.
1. You, Troy Carter and/or your corporate
designee (“Carter”), will become a director of the
Company, with the title of Chairman/CEO of the CMG Division and
will operate the CMG Division as a separate division of the Company
(i.e. CMG shall not be operated as a separate legal entity). CMG
will be responsible for operating its business consistent with
applicable legal requirements, sound business practices and the
overall policies of the Company. Although CMG will be operated as a
separate division for which separate financials will be maintained,
the revenues and earnings of the CMG Division shall be reported as
part of the revenues and earnings of the Company.
2. In order to
enable the Company to successfully go forward with the CMG
Division, Carter will provide content to the CMG Division which is
owned by, licensed to or otherwise controlled by Carter, to be used
or developed for use in business to be conducted by the CMG
Division.
3. Carter will
enter into a non-exclusive consulting agreement with the Company
(the “Consultant Agreement”) on commercially reasonable
terms to be determined by the parties, wherein Carter shall (i) be
the Chief Executive Officer of the CMG Division and (ii) agree to
devote time and attention to the Company and the CMG Division
thereby utilizing his skill, labor and attention to advance the
general best interests of the Company and the CMG Division. Carter
shall dedicate that amount of time necessary to maximize Company's
business within the CMG Division, commensurate with similar
executives involved in similar situations. Carter has all requisite
power and authority to execute this agreement, to consummate this
transaction and to carry out and perform Carter’s obligations
under this agreement.
4. The Company
will issue to Carter, upon the execution of the Consultant
Agreement, fifteen million (15,000,000) shares of the
Company’s common stock (the “Carter Shares”)
which shall constitute approximately 30 percent of the issued and
outstanding shares of the Company’s common stock. Such shares
shall be, to the greatest extent possible, unrestricted and
unlegended; and those restricted shares shall be with the shortest
possible time period prior to removal of the any restriction on
sale (not to exceed one (1) year from date of signature herein).
Carter shall have all customary anti-dilution rights with respect
to maintaining his proportionate share of ownership of outstanding
shares of the Company. Company shall grant Carter so-called
“piggy-back registration rights”, to be include on
Company’s future Registration Statement.
5. Compensation
to Carter and other employees of the Company who provide services
to the CMG Division shall be approved by the Company’s Board
of Directors. Company shall continue to operate its business in
normal fashion, as an active business and a “going
concern” (i.e. not in name only and without inactive
operations) and shall use its best efforts to reduce its existing
debt from revenues generated by Company outside of the CMG
division. Ten (10%) percent of the CMG Division’s gross
revenues shall be paid to Company, however such payment shall be
utilized exclusively by Company for costs associated with its
Public Filings, press releases and/or annual meetings. This ten
(10%) percent payment shall be capped at one third (33.33%) of the
actual expenses associated with filings, press releases, and annual
meetings.
6. The Board of Directors, after Carter joins
the Company, will consist of four members, three of whom shall be
chosen by Carter and one of whom shall be or be chosen by Lee
Kasper (“Kasper”). Three members of the Board of
Directors will resign subsequent to closing of this transaction,
and at such time, the Company will appoint Carter and such two
other individuals designated by Carter to become Board Members. All
costs related to the addition of the Carter designees to the
Company’s Board of Directors shall be divided between Carter
and Company upon mutual agreement, including the cost of
Directors’ and Officers’ Liability
Insurance.
7. The Board
shall have agreed to appoint Kapser as the Company’s Chief
Executive Officer with Carter being appointed as head of the CMG
Division. Kasper will also enter into an employment agreement with
the Company on commercially reasonable terms to be determined by
the Board of Directors in place immediately following closing of
this transaction.
8. The CMG Division will be responsible solely
for any obligations assumed by the CMG Division and will indemnify
Company from any claims or actions arising out of or in connection
with any assumed obligations, other than those which were
materially misrepresented by the Company. Company shall be fully
responsible for, and shall pay any audit or other claims by, any
licensor, other company or person,
and
otherwise fulfill any other obligations not expressly comprising
the assumed obligations, including without limitation, monies owed
in respect of accounting statements for and/or royalties payable
for periods up to the closing date. Carter and Carter’s
designees is/are not assuming, and shall not be responsible for,
any indebtedness, liabilities or obligations of Company, whether
fixed, contingent, or otherwise, except for the assumed
obligations.
9. Retained
Assets: For the avoidance of doubt, Carter shall retain any cash
that Carter had on hand on the closing date, and shall retain any
business interest not specifically delivered to Company at
closing.
10. Carter and the Company will enter into an
indemnification agreement whereby Carter and the other Board
members designated by Carter will be personally indemnified by the
Company from any claims, suits, controversies or litigation
commenced against the Company and/or its Board of Directors arising
out of the Company’s actions, unrelated to the CMG Division,
including but not limited to any and all claims, suits,
controversies and/or debts which were incurred or were in existence
prior to this transaction. Response, negotiation, payment and/or
settlement of such claims, suits, controversies or litigation,
together with payment for same, as well as attorney’s fees
and court costs in connection therewith, shall be the sole
responsibility of Company, outside of the CMG Division.
11. The Company shall purchase and maintain
Errors and Omissions (“E&O”) insurance coverage in
an amount suitable to sufficiently cover all pre-existing and
future claims, suits, controversies and/or debts incurred by the
Company prior to this transaction, and shall maintain such E&O
coverage for the duration of Carter’s (and Carter’s
designees’) involvement with Company. Company warrants and
certifies that its By-Laws empower Company to purchase and maintain
such E&O coverage, and that Company has the financial
wherewithal to purchase and to maintain such E&O coverage.
Carter and the Carter designees shall have the unfettered right to
tender immediate resignation with no further responsibility for or
to the Company should such E&O coverage lapse, or should such
E&O coverage be denied by a reputable insurer, at any point in
the future. All costs related to the premiums payable to bind such
E&O coverage shall be divided between Carter and Company upon
mutual agreement.
12. Representations, warranties, covenants of
Company. Company represents and warrants to Carter as
follows:
a) Organization
and Qualification: Company (a) is duly organized, validly existing
and in good standing under the laws of the jurisdiction of its
formation; (b) has all requisite power and authority, to own, lease
and operate its properties and to carry on its business as it has
been and is now being conducted, (c) is duly qualified or licensed
to do business and in good standing in each jurisdiction in which
the ownership or lease of its properties or the conduct of its
business makes such qualification necessary other than in such
jurisdictions where the failure to be so qualified (individually or
in the aggregate) would not have a material adverse
effect.
b)
Authorization and Validity of Agreement: Company (a) has all
requisite power and the full right and authority to execute this
agreement, to carry out and perform its obligations under this
agreement, and to consummate the transaction; (b) the execution,
delivery and performance by Company of this agreement and the
consummation of the transactions contemplated herein, have been or
shall be duly and validly authorized by all necessary action on the
part of Company and no other action on the part of Company or any
other Person is necessary for the authorization, execution,
delivery or performance by Company of this agreement and the
consummation of the transactions hereunder; (c) this Agreement has
been duly executed and delivered by Company and, assuming that this
agreement is duly executed and delivered by Carter, this agreement
constitutes the valid and binding obligation of Company enforceable
in accordance with its terms except as limited by any future
bankruptcy, receivership or similar proceeding; and (d) the parties
executing this document on behalf of Company constitute all parties
necessary to make the grants and perform all the obligations of
Company hereunder.
c)
Financial Statements: Company shall provide Carter with all
financial statements relating to the Company’s business and
assets, including balance sheets, income and royalty statements and
cash flow statements, as of September 30, 2006 (collectively, the
“Financial Statements”). Company represents that the
Financial Statements (a) have been prepared in conformity with
GAAP, (b) conform to the books and records of Company in all
material respects, and (c) fairly present the financial position of
Company as of the
