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 Beverly-Killea 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 Michael Swerdlick 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 18034
Ventura Boulevard, #236, Encino, California 91316-3516
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 Robert Blagman) solely for the
personal services of Robert
Blagman ("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 Robert Blagman) solely for
the personal services of
Robert Blagman, 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
