SECURITIES AND EXCHANGE COMMISSION
Washington, D.C 20549
Schedule 13D
Under the Securities Exchange Act of 1934
(Amendment No. )
PARADISE MUSIC & ENTERTAINMENT, INC
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(Name of Issuer)
COMMON STOCK
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(Title of Class of Securities)
699071-10-6
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(CUSIP Number)
Helen W. Melman, Esq.
815 Moraga Drive
Los Angeles, California 90049
(310) 472-4191
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(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
December 16, 1999
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(Date of Event which Requires Filing
of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(e), 13d-1(f) or 13d-l(g), check the following box
|_|.
(Continued on following pages)
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CUSIP No. 699071-10-6 SCHEDULE 13D
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1 NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Consolidated Entertainment, LLC
95-467-3005
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) |X|
(b) |_|
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
00
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEM 2(d) or 2(e) |_|
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
California
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7 SOLE VOTING POWER
0
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NUMBER OF 8 SHARED VOTING POWER
SHARES
BENEFICIALLY 925,000
OWNED BY --------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING
PERSON 0
WITH --------------------------------------------------------
10 SHARED DISPOSITIVE POWER
925,000
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
925,000 shares of Common Stock
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* |_|
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
11.9%
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14 TYPE OF REPORTING PERSON*
OO
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
CUSIP No. 699071-10-6 SCHEDULE 13D
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1 NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Jesse Dylan
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) |X|
(b) |_|
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
00
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEM 2(d) or 2(e) |_|
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
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7 SOLE VOTING POWER
641,000
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NUMBER OF 8 SHARED VOTING POWER
SHARES
BENEFICIALLY 925,000
OWNED BY --------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING
PERSON 641,000
WITH --------------------------------------------------------
10 SHARED DISPOSITIVE POWER
925,000
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,566,000 shares of Common Stock
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* |_|
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
20.1%
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14 TYPE OF REPORTING PERSON*
IN
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
CUSIP No. 699071-10-6 SCHEDULE 13D
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1 NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Craig Rodgers
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) |X|
(b) |_|
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
00
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEM 2(d) or 2(e) |_|
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
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7 SOLE VOTING POWER
0
--------------------------------------------------------
NUMBER OF 8 SHARED VOTING POWER
SHARES
BENEFICIALLY 925,000
OWNED BY --------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING
PERSON 0
WITH --------------------------------------------------------
10 SHARED DISPOSITIVE POWER
925,000
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
925,000 shares of Common Stock
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* |_|
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
11.9%
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14 TYPE OF REPORTING PERSON*
IN
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
Item 1. Security and Issuer.
This Statement on Schedule 13D is filed by Consolidated Entertainment LLC,
a California limited liability company ("LLC"), Jesse Dylan and Craig Rodgers
(individually or collectively, the "Reporting Persons") to report the beneficial
ownership of shares of common stock, par value $.01 per share, of Paradise Music
& Entertainment, Inc., a Delaware corporation (the "Company"). The Company's
principal business address is 53 West 23rd Street, 11th Floor, New York, New
York 10010.
Item 2. Identity and Background.
The LLC is a limited liability company organized in the state of
California. Its principal business is television, commercial and music video
production and related activities. The address of its principal business and
office is 8330 West Third Street, Los Angeles, California 90048.
The members of the LLC are Jesse Dylan, who has a 51% interest, and Craig
Rodgers, who has a 49% interest. Craig Rodgers serves as manager and president
of the LLC, and is responsible for its day-to-day operations. His business
address is 8330 West Third Street, Los Angeles, California 90048.
Jesse Dylan's principal occupation is chairman and chief executive officer
of the Company. His principal business address is 8330 West Third Street, Los
Angeles, California 90048.
Jesse Dylan and Craig Rodgers are citizens of the United States.
During the last five years, no Reporting Person has been convicted in a
criminal proceeding (excluding traffic violations or similar misdemeanors) or
been a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction resulting in a judgment, decree or final order enjoining
future violations of, or prohibiting or mandating activities subject to, federal
or state securities laws, or the finding of any violation with respect to such
laws.
Item 3. Source and Amount of Funds or Other Consideration.
Pursuant to an Asset Purchase Agreement by and among the Company, Straw
Dogs Acquisition Corp., a wholly owned subsidiary of the Company ("Straw Dogs"),
the LLC, Jesse Dylan and Craig Rodgers, dated September 23, 1999, on December
16, 1999, Straw Dogs acquired substantially all of the assets and assumed
substantially all of the liabilities of the LLC in consideration for 900,000
shares of the Company's common stock. In addition, Straw Dogs acquired all of
the stock of Spur & Buckle, Inc., a company which is wholly owned by Jesse
Dylan, in consideration for 541,000 shares of the Company's common stock,
pursuant to a Stock Purchase Agreement dated September 24, 1999, among the
Company, Straw Dogs and Jesse Dylan. The shares were valued at $5.75 per share.
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Item 4. Purpose of Transaction.
The Reporting Persons acquired the Company's common stock for investment
purposes in connection with the sale of the businesses of the LLC and Spur &
Buckle to Straw Dogs. The assets of the LLC were transferred to Straw Dogs in a
tax-free reorganization as described in Section 368(a)(1)(C) of the Internal
Revenue Code. As a result, the LLC will, as soon as reasonably practicable,
liquidate and distribute its remaining assets, including the 925,000 shares of
the Company's common stock it owns, to its two members, 51% to Dylan and 49% to
Rodgers.
Jesse Dylan is employed as the chairman, chief executive officer and a
director of the Company pursuant to an Employment Agreement dated as of July 1,
1999 for a term expiring on June 30, 2004. The Company has agreed to nominate
Jesse Dylan as a member of the management slate of directors at each annual
meeting of stockholders during his employment under the agreement.
Jesse Dylan holds ten-year options to purchase 750,000 shares of the
Company's common stock at $5.00 per share which vest as to 250,000 shares on
each of July 1, 2000, 2001 and 2002.
Craig Rodgers holds ten-year options to purchase 100,000 shares of the
Company's common stock at $5.00 per share which vest as to one-third of the
shares on each of July 1, 2000, 2001 and 2002.
Except as described herein, none of the Reporting Persons has any plans or
proposals which relate to or would result in:
(a) The acquisition by any person of additional securities of the
Company, or the disposition of securities of the Company;
(b) An extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving the Company or any of its subsidiaries;
(c) A sale or transfer of a material amount of assets of the Company
or any of its subsidiaries;
(d) Any change in the present board of directors or management of
the Company, including any plans or proposals to change the number or term of
directors or to fill any existing vacancies on the board;
(e) Any material change in the present capitalization or dividend
policy of the Company;
(f) Any other material change in the Company's business or corporate
structure;
(g) Changes in the Company's charter, bylaws or instruments
corresponding thereto or other actions which may impede the acquisition of
control of the Company by any person;
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(h) Causing a class of securities of the Company to be delisted from
a national securities exchange or to cease to be authorized or to be quoted in
an inter-dealer quotation system of a registered national securities
association;
(i) A class of equity securities of the Company becoming eligible
for termination of registration pursuant to Section 12(g)(4) of the Act; or
(j) Any action similar to any of those enumerated above.
Item 5. Interest in Securities of the Issuer.
(a) - (b) The beneficial ownership of the Company's common stock by each
Reporting Person is as follows:
LLC DYLAN RODGERS
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Sole Power to Vote 0 641,000 0
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Shared Power to Vote 925,000 925,000 (1) 925,000 (1)
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Sole Power to Dispose 0 641,000 0
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Shared Power to Dispose 925,000 925,000 (1) 925,000 (1)
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% Ownership (2) 11.9% 20.1% 11.9%
- ----------
(1) Represents the shares directly owned by the LLC. Each of Dylan and Rodgers
disclaims beneficial ownership of any such shares which exceed his
proportionate interest in the LLC.
(2) Based on 6,355,331 shares outstanding on October 18, 1999 as stated in the
Company's Proxy Statement for the Special Meeting of Stockholders held on
December 16, 1999, filed with the Securities and Exchange Commission on
November 10, 1999, plus the 1,441,000 shares issued to the LLC and Dylan
as described in Item 3 above.
(c) The Reporting Persons engaged in the following transactions in the
past 60 days: See Item 3 above.
(d) Not applicable.
(e) Not applicable.
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Item 6. Contracts, Arrangements, Understandings or Relationships With Respect to
Securities of the Issuer.
The voting and disposition of the Company's common stock owned by the LLC
is determined in accordance with the terms of the LLC's Operating Agreement
dated as of February 19, 1998. Pursuant to such Operating Agreement, subject to
Jesse Dylan's right to sell substantially all of the assets of the LLC in
connection with certain business transactions, any merger, liquidation,
reorganization, transfer of assets or acquisition requires the unanimous consent
of the members. All other decisions pertaining to the LLC are decided by a
majority of the membership interests.
Item 7. Material to be Filed as Exhibits.
The following exhibits are filed herewith:
1. Operating Agreement for Consolidated Entertainment, LLC.
SIGNATURES
After reasonable inquiry and to the best of our knowledge and belief, we
certify that the information set forth in this Statement is true, complete and
correct. Pursuant to Rule 13d-1(k)(1), we agree that this statement is filed on
behalf of each of us.
CONSOLIDATED ENTERTAINMENT, LLC.
Date: December 27, 1999 By /S/ Craig Rodgers
--------------------------------------------
Craig Rodgers, President
Date: December 27, 1999 /S/ Jesse Dylan
--------------------------------------------
JESSE DYLAN
Date: December 27, 1999 /S/ Craig Rodgers
--------------------------------------------
CRAIG RODGERS
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EXHIBIT 1
OPERATING AGREEMENT
FOR
CONSOLIDATED ENTERTAINMENT, LLC
A CALIFORNIA LIMITED LIABILITY COMPANY
This Operating Agreement (this "Agreement"), is made as of the 19th
day of February, 1998, by and among CRAIG RODGERS ("Craig") and TODD GELFAND,
TRUSTEE OF THE ASIA PACIFIC CAPITAL TRUST (the "Trust") (collectively referred
to as the "Members" or individually as a "Member"), with reference to the
following facts:
A. On February 19, 1998, Articles of Organization (the "Articles")
for Consolidated Entertainment, LLC (the "Company"), a limited liability company
under the laws of the State of California, were filed with the California
Secretary of State.
B. The Members desire to adopt and approve an operating agreement
for the Company under the Beverly-Killea Limited Liability Company Act (the
"Act").
NOW, THEREFORE, the Members by this Agreement set forth the
operating agreement for the Company upon the terms and subject to the conditions
of this Agreement.
ARTICLE I
ORGANIZATIONAL MATTERS
1.1 Name. The name of the Company shall be "Consolidated
Entertainment, LLC." The Company may conduct business under that name, the name
"Straw Dogs" or any other name approved by the Members. The Company shall file a
fictitious business name statement for the name "Straw Dogs" in accordance with
the California Business and Professions Code.
1.2 Term. The term of the Company commenced as of the date of the
filing of the Articles and shall continue in existence until dissolved as
provided by this Agreement or the Act.
1.3 Office and Agent. The Company shall continuously maintain an
office and registered agent in the State of California as required by the Act.
The principal office of the Company shall be at 1520 Second Street, 2nd Floor,
Santa Monica, California 90401 or such location as the Members may determine.
The registered agent shall be as stated in the Articles or as otherwise
determined by the Members. The Company shall take all appropriate action to
qualify to do business in any other state where it conducts regular business
activities.
1.4 Business of the Company. The Company shall engage in the
business of television commercial and music video production, and such other
activities directly related to the foregoing business as may be necessary or
advisable in the reasonable opinion of the Members to further such business. The
Company shall not engage in any businesses other than as described in the
preceding sentence.
<PAGE>
ARTICLE II
CAPITAL CONTRIBUTIONS
2.1 Capital Contributions. Each Member shall make a contribution to
the capital of the Company in the amount shown opposite the Member's name on
Exhibit A attached hereto. No Member shall be required to make any additional
contributions to the capital of the Company. Additional contributions to the
capital of the Company shall be made only with the unanimous consent of the
Members. Except as provided in this Agreement, no Member may withdraw his
capital contribution. All of the Members shall be required to personally
guarantee any debt, lease, loan or other obligation of the Company if any one
Member (or the beneficial owner of a Member) is required to provide such a
personal guarantee. In the event a Member, or the beneficial owner of a Member,
is required to make a payment pursuant to any such personal guarantee
disproportionate to such Member's Membership Interest, the other Member shall
reimburse the first Member in such amount that results in both Members
contributing to such guarantee in proportion to their Membership Interests.
2.2 Capital Accounts. The Company shall establish an individual
capital account ("Capital Account") for each Member. The Company shall determine
and maintain each Capital Account in accordance with Treasury Regulations
Section 1.704-1(b)(2)(iv). Upon a valid transfer of a Member's interest in the
Company ("Membership Interest") in accordance with Article VI, such Member's
Capital Account shall carry over to the new owner.
2.3 No Interest. The Company shall not pay any interest on capital
contributions.
ARTICLE III
NEW MEMBERS
3.1 Admission of Additional Members. Additional Members may be
admitted with the unanimous approval of all of the Members. Additional Members
will participate in the management, "Net Profits", "Net Losses" (as such terms
are defined in Paragraph 5.1), and distributions of the Company on such terms as
are determined by the unanimous approval of all of the Members. Exhibit A shall
be amended upon the admission of an additional Member to set forth such Member's
name and capital contribution.
ARTICLE IV
MANAGEMENT AND CONTROL OF THE COMPANY
4.1 Management and Powers. Craig shall have the title of Manager, as
defined in the Act. Notwithstanding that Craig is named as Manager, the Company
shall be managed by the Members. Craig shall also be named President of the
Company. The Members acknowledge that Craig's compensation shall be based upon a
reasonable allocation of duties between Craig and Jesse Dylan ("Jesse"), and
that if Jesse is unavailable and unable to perform such duties due to long-term
commitments outside of this Company, such as directing a motion picture, the
Members should hold good faith discussions regarding whether an adjustment to
Craig's compensation is warranted.
4.2 Decision Making. Except as specifically provided in this
Agreement, it is the intention of the Members that all material business
decisions regarding the regular and ordinary business of the Company be made
jointly by Craig and by Jesse on behalf of the Trust, but in the event they do
not agree on an issue, then such decision shall be decided by a majority of
Membership Interests then outstanding. Notwithstanding the preceding sentence,
Craig and Jesse may at any time delegate decision-making authority over one or
more of such issues to the other, or revoke such delegation.
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4.2.1 The Trust shall have the authority to sell substantially
all of the assets of the Company in connection with an "overall deal" pursuant
to which the purchaser acquires the rights to Jesse's services as a producer or
director in the filmed entertainment industry and finances all or part of
Jesse's activities in the filmed entertainment industry. Any other merger,
liquidation, reorganization, transfer of assets or acquisition shall require the
unanimous consent of the Members.
4.2.2 All other decisions pertaining to the Company not
described in Paragraph 4.2, or in subparagraph 4.2.1, or addressed elsewhere in
this Agreement, shall be decided by a majority of the Membership Interests then
outstanding.
4.3 Member Approval. No annual or regular meetings of the Members
are required to be held. However, if such meetings are held, such meetings shall
be noticed, held and conducted pursuant to the Act. In any instance in which the
approval of the Members is required under this Agreement, such approval may be
obtained in any manner permitted by the Act. Unless otherwise provided in this
Agreement, approval of the Members shall mean the approval of Members who hold a
majority of the Membership Interests.
4.4 Devotion of Time. Craig shall devote his full-time exclusive
services to the business of the Company. The Trust shall not be required to
provide any services to the Company. Jesse shall provide his exclusive services
as a producer and director of television commercials and music videos and as an
executive in the television commercial and music video production industries to
the Company, although the Members acknowledge that Jesse shall not be required
or available to perform those services on a full-time basis.
4.5 Compensation. No Member shall be entitled to compensation as a
Member of the Company. Craig shall be entitled to reasonable compensation as
President of the Company. Jesse shall be entitled to compensation, including
applicable profit percentages, on any commercials and music videos he directs
and/or produces on behalf of the Company as may be determined on a
project-by-project basis.
ARTICLE V
ALLOCATIONS OF NET PROFITS AND NET LOSSES AND DISTRIBUTIONS
5.1 Definitions. When used in this Agreement, the following terms
shall have the meanings set forth below:
"Adjusted Capital Account Deficit" means, with respect to any
Member, the deficit balance, if any, in such Member's Capital Account as of the
end of the relevant fiscal year, after giving effect to the following
adjustments:
(i) Credit to such Capital Account any amounts which
such Member is obligated to restore or is deemed to be obligated to restore
pursuant to the penultimate sentences of Regulations Sections 1.704-2(g)(1) and
1.704-2(i)(5); and
(ii) Debit to such Capital Account the items described
in Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) and
1.704-1(b)(2)(ii)(d)(6) of the Regulations.
The foregoing definition of Adjusted Capital Account Deficit is intended to
comply with the provisions of Section 1.704-1(b)(2)(ii)(d) of the Regulations
and shall be interpreted consistently therewith.
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time, the provisions of succeeding law, and to the extent
applicable, the Treasury Regulations.
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"Net Profits" and "Net Losses" shall mean the income, gain,
loss, deductions, and credits of the Company in the aggregate or separately
stated, as appropriate, determined in accordance with the method of accounting
at the close of each fiscal year employed on the Company's information tax
return filed for federal income tax purposes.
"Percentage Interest" shall mean the percentage of a Member
set forth opposite the name of such Member under the column "Member's Percentage
Interest" in Exhibit "A" attached hereto, as such percentage may be adjusted
from time to time pursuant to the terms of this Agreement.
"Treasury Regulations" shall mean the final or temporary
regulations that have been issued by the U.S. Department of Treasury pursuant to
its authority under the Code, and any successor regulations.
5.2 Allocations of Net Profit and Net Loss.
A. Net Loss. Net Loss shall be allocated to the Members in
proportion to their Percentage Interests.
Notwithstanding any other provision of this Article, no Member
shall receive an allocation of Net Losses or any other item of loss or deduction
that would create or increase an Adjusted Capital Account Deficit of the Member.
Any loss not allocated to a Member because of the foregoing provision shall be
allocated to the other Members (to the extent the other Members are not limited
in respect of the allocation of losses under this Paragraph 5.2A). In the event
that any loss cannot be allocated by reason of the limitations set forth in the
preceding two sentences, such loss shall be allocated to all of the Members in
accordance with their respective Percentage Interests. Any loss reallocated
under this Paragraph 5.2A shall be taken into account in computing subsequent
allocations of income and losses pursuant to this Article V, so that the net
amount of any item so allocated and the income and losses allocated to each
Member pursuant to this Article V, to the extent possible, shall be equal to the
net amount that would have been allocated to each such Member pursuant to this
Article V if no reallocation of losses had occurred under this Paragraph 5.2A.
B. Net Profit. After giving effect to any adjustment required
by reason of the last sentence of Paragraph 5.2A, Net Profit shall be allocated
to the Members in proportion to their Percentage Interests.
5.3 Code Section 704(c) Allocations. Notwithstanding any other
provision in this Article V, in accordance with Code Section 704(c) and the
Treasury Regulations promulgated thereunder, income, gain, loss, and deduction
with respect to any property contributed to the capital of the Company shall,
solely for tax purposes, be allocated among the Members so as to take account of
any variation between the adjusted basis of such property to the Company for
federal income tax purposes and its fair market value on the date of
contribution. Allocations pursuant to this Paragraph 5.3 are solely for purposes
of federal, state and local taxes. As such, they shall not affect or in any way
be taken into account in computing a Member's Capital Account or share of
profits, losses, or other items of distributions pursuant to any provision of
this Agreement.
5.4 Distribution of Assets by the Company. Subject to applicable law
and any limitations contained elsewhere in this Agreement, the Members may
unanimously elect from time to time to cause the Company to make cash or other
distributions. Distributions shall be first to the Members in proportion to
their unreturned capital contributions until each Member has recovered its
capital contributions, and then to the Members in proportion to their Percentage
Interests. A Member's capital contribution shall, for purposes of this Paragraph
5.4, be deemed to include any payments by a Member of an affiliate of a Member
pursuant to a personal guarantee on any obligations of the Company.
Notwithstanding the preceding terms of this
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Paragraph 5.4, except to the extent such distribution may be in violation of the
Act, the Company shall distribute annually to the Members an amount equal to the
State and Federal income tax liability of a Member at the appropriate combined
State and Federal marginal tax brackets which such Member would incur on account
of the Member being required to report on his State or Federal income tax return
such Member's pro rata share of the Net Profits of the Company allocated to such
Member pursuant to Paragraph 5.2 (as applicable to an individual residing solely
in California and determined after giving effect to any deduction of State taxes
for Federal income tax purposes), prior to the due date for such payment to the
appropriate tax authority.
ARTICLE VI
TRANSFER AND ASSIGNMENT OF INTERESTS
6.1 Transfer and Assignment of Interests. No Member shall be
entitled to transfer, assign, convey, sell, encumber or in any way alienate all
or any part of his or her Membership Interest (collectively, "Transfer") except
with the prior written approval of all Members, which approval may be given or
withheld, conditioned or delayed, as each of the other Members may determine in
their sole and absolute discretion.
6.2 Substitution of Members. A transferee of a Membership Interest
shall have the right to become a substitute Member only if (i) consent of the
Members is given in accordance with Section 6.1, (ii) such person executes an
instrument satisfactory to the Members accepting and adopting the terms and
provisions of this Agreement, and (iii) such person pays any reasonable expenses
in connection with his or her admission as a new Member. The admission of a
substitute Member shall not release the Member who assigned the Membership
Interest from any liability that such Member may have to the Company.
6.3 Transfers in Violation of this Agreement. Upon a Transfer in
violation of this Article VI, the transferee shall have no right to vote or
participate in the management of the Company, its property, or its affairs, or
to exercise any rights of a Member. Such transferee shall not be entitled to
receive the share of the Company's Net Profits, Net Losses and distributions of
the Company's assets proportionate to such Membership Interest.
6.4 Permitted Transfers. Notwithstanding anything to the contrary
set forth in Section 6.1, a Member who is a natural person shall be permitted
without the approval of any other Member to transfer such Member's interest to a
revocable living trust established for the benefit of such Member, such Member's
spouse, and such Member's lineal descendants, or any of them.
ARTICLE VII
CONSEQUENCES OF TRIGGERING EVENTS AND
BUYOUT OF MEMBERSHIP INTEREST
7.1 Triggering Event. Except as otherwise provided in Article IX
hereof, upon the occurrence of the death of Craig or Jesse, the permanent
disability of Craig or Jesse that prevents that person from performing the
services described in Paragraph 4.4, the resignation of a Member from the
Company, or the failure of either Craig or Jesse to perform the services
described in Paragraph 4.4 ("Triggering Event"), the Membership Interest of the
Member who is the subject of the Triggering Event (the Trust in the case of
Jesse's death, permanent disability, or failure to perform services) shall be
purchased by the other Member or the other Member's designee for the price and
according to the terms set forth in Paragraphs 7.2 and 7.4. A Member with
respect to which a Triggering Event has occurred (or the legal representative of
that Member) shall be referred to as a "Former Member" and the other Member
shall be referred to as the "Remaining Member."
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7.2 Purchase Price. Except as otherwise provided in Paragraph 7.6,
below, the purchase price for the Former Member's Interest shall be the fair
market value of the Former Member's Interest as determined by an independent
appraisal in accordance with this Paragraph 7.2. The Former Member and the
Remaining Member shall each select one (1) independent appraiser, and the two
appraisers so selected shall complete their appraisals of the Company within
ninety (90) days after the Triggering Event. If the higher of the two appraisals
is no more than ten percent (10%) above the lower appraisal then the average of
the two appraisals shall equal the fair market value of the Company. If the
higher of the two appraisals is more than ten percent (10%) above the lower
appraisal, then the two appraisers shall jointly select a third appraiser who
shall complete the appraisal of the Company within one hundred eighty (180) days
following the Triggering Event. If the third appraisal is no more than ten
percent (10%) above or below one of the first two appraisals, then the value of
the Company shall be equal to the average of those two appraisals. If the third
appraisal is more than ten percent (10%) above or below the other two
appraisals, then the fair market value of the Company shall be equal to the
average of all three appraisals. The purchase price of the Former Member's
Interest shall be equal to the value of the Company as determined hereinabove,
multiplied by the Percentage Interest of the Former Member, i.e. there shall be
no premium or discount attributable to a majority or minority Interest. The
Company and the Former Member shall each pay one-half of the cost of all of the
appraisals required herein.
7.3 Effect of Triggering Event. From and after the date (the
"Triggering Event Date") on which a Triggering Event occurs with respect to a
Former Member, such Former Member shall have no right to participate in the
management, property, and affairs of the Company. Such Former Member shall be
entitled to an allocation of Net Profits and Net Losses and receive
distributions with respect to the operation of the Company through and including
the Triggering Event Date. A Former Member shall not be entitled to receive an
allocation of Net Profits, Net Losses, or distributions with respect to any
business or operations following the Triggering Event Date.
7.4 Payment of Purchase Price. The purchase price for the Former
Member's Interest shall be paid within sixty (60) days after the determination
of the fair market value of the Former Member's Interest, except that if the
purchase price is greater than Fifty Thousand Dollars ($50,000.00), the purchase
price shall be paid in sixty (60) equal monthly installments on the first day of
each calendar month beginning on the first day of the second calendar month
following the determination of the fair market value of the Former Member's
Interest. All payments described in this Paragraph 7.4 shall include interest
from the Triggering Event Date at the prime rate of interest charged by Bank of
America NT & SA on the Triggering Event Date.
7.5 Application of Article VII. The terms of this Article VII shall
apply notwithstanding that the death of a Member or the purchase of a Former
Member's Interest by the Remaining Member may cause the technical termination
and dissolution of the Company under the Code or the Act. No Former Member or
Remaining Member shall be entitled to a distribution on account of a technical
termination of the Company as the result of a Triggering Event.
7.6 Adjustment to Buy-Out Price. In the event of either (i) a
Member's notice of resignation or failure by either Craig or Jesse to perform
services described in Paragraph 4.4 prior to July 1, 1999; or (ii) the notice of
resignation of a Member or failure by either Craig or Jesse to perform the
services described in Paragraph 4.4 upon less than six (6) months advance notice
of same to the Company, the purchase price for the Former Member's Membership
Interest shall be the lesser of one-half of the fair market value of the Former
Member's Membership Interest, or the payment otherwise due to the Former Member
if the Company were then liquidated in accordance with Article IX.
7.7 Non-Solicitation. For a period of one (1) year after a
Triggering Event Date, the Former Member (or Jesse if the Trust is the Former
Member) shall not directly or indirectly, as principal, agent,
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employer, employee, director, officer, stockholder or in any other individual or
representative capacity, solicit any employees of the Company or any of its
affiliates who were employed or otherwise under contract to the Company as of
the Triggering Event Date. For purposes of the preceding sentence, the term
"employees" shall include all music video and television commercial directors
under contract to the Company or any affiliates, whether employed directly,
through a loan-out corporation or through any other form of entity.
ARTICLE VIII
ACCOUNTING, RECORDS, REPORTING BY MEMBERS
8.1 Books and Records. The books and records of the Company shall be
kept in accordance with the accounting methods followed for federal income tax
purposes. The Company shall maintain at its principal office in California all
of the following:
A. A current list of the full name and last known business or
residence address of each Member set forth in alphabetical order, together with
the capital contributions, capital account and Membership Interest of each
Member;
B. A copy of the Articles and any and all amendments thereto
together with executed copies of any powers of attorney pursuant to which the
Articles or any amendments thereto have been executed;
C. Copies of the Company's federal, state, and local income
tax or information returns and reports, if any, for the six (6) most recent
taxable years;
D. A copy of this Agreement and any and all amendments thereto
together with executed copies of any powers of attorney pursuant to which this
Agreement or any amendments thereto have been executed;
E. Copies of the financial statements of the Company, if any,
for the six (6) most recent fiscal years; and
F. The Company's books and records as they relate to the
internal affairs of the Company for at least the current and past four (4)
fiscal years.
8.2 Reports. The Company shall cause to be filed, in accordance with
the Act, all reports and documents required to be filed with any governmental
agency. The Company shall cause to be prepared at least annually information
concerning the Company's operations necessary for the completion of the Members'
federal and state income tax returns. The Company shall send or cause to be sent
to each Member within ninety (90) days after the end of each taxable year (i)
such information as is necessary to complete the Members' federal and state
income tax or information returns and (ii) a copy of the Company's federal,
state, and local income tax or information returns for the year.
8.3 Bank Accounts. The Members shall maintain the funds of the
Company in one or more separate bank accounts in the name of the Company, and
shall not permit the funds of the Company to be commingled in any fashion with
the funds of any other person.
8.4 Tax Matters for the Company. Craig is designated as "Tax Matters
Partner" (as defined in Code Section 6231), to represent the Company (at the
Company's expense) in connection with all examination of the Company's affairs
by tax authorities and to expend Company funds for professional services and
costs associated therewith.
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ARTICLE IX
DISSOLUTION AND WINDING UP
9.1 Conditions of Dissolution. The Company shall dissolve upon the
occurrence of any of the following events:
A. Upon the entry of a decree of judicial dissolution pursuant
to Section 17351 of the Corporations Code;
B. Upon the unanimous vote of Members;
C. The sale of all or substantially all of the assets of
Company;
D. In the case of a Triggering Event caused by the resignation
of a Member or the failure of Craig or Jesse to provide the services described
in Paragraph 4.4, upon the vote of the Remaining Member; or
E. As may otherwise be required by law, except as provided in
Paragraph 7.5.
9.2 Winding Up. Upon the dissolution of the Company, the Company's
assets shall be disposed of and its affairs wound up. The Company shall give
written notice of the commencement of the dissolution to all of its known
creditors.
9.3 Order of Payment of Liabilities Upon Dissolution. After
determining that all the known debts and liabilities of the Company have been
paid or adequately provided for, the remaining assets shall be distributed to
the Members in accordance with their positive capital account balances, after
taking into account the allocation of Net Profits and Net Losses for the
Company's taxable year during which liquidation occurs.
9.4 Limitations on Payments Made in Dissolution. Except as otherwise
specifically provided in this Agreement, each Member shall be entitled to look
only to the assets of the Company for the return of its positive Capital Account
balance and shall have no recourse for its Capital Contribution and/or share of
Net Profits against any other Member.
9.5 Certificates. The Company shall file with the California
Secretary of State a Certificate of Dissolution upon the dissolution of the
Company and a Certificate of Cancellation upon the completion of the winding up
of the Company's affairs.
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ARTICLE X
INDEMNIFICATION AND INSURANCE
10.1 Indemnification of Agents. The Company shall indemnify any
Member and may indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or proceeding
by reason of the fact that he or she is or was a Member, officer, employee or
other agent of the Company or that, being or having been such a Member, officer,
employee or agent, he or she is or was serving at the request of the Company as
a manager, director, officer, employee or other agent of another limited
liability company, corporation, partnership, joint venture, trust or other
enterprise (all such persons being referred to hereinafter as an "agent"), to
the fullest extent permitted by applicable law in effect on the date hereof and
to such greater extent as applicable law may hereafter from time to time permit.
10.2 Insurance. The Company shall have the power to purchase and
maintain insurance on behalf of any person (including without limitation any
Member) who is or was an agent of the Company against any liability asserted
against such Person and incurred by such person in any such capacity, or arising
out of such person's status as an agent, whether or not the Company would have
the power to indemnify such person against such liability under the provisions
of Paragraph 10.1 or under applicable law.
ARTICLE XI
MISCELLANEOUS
11.1 Complete Agreement. This Agreement and the Articles constitute
the complete and exclusive statement of agreement among the Members with respect
to the subject matter herein and therein and replace and supersede all prior
written and oral agreements among the Members. No representation, statement,
condition, or warranty not contained in this Agreement or the Articles shall be
binding on the Members or have any force or effect whatsoever. To the extent
that any provision of the Articles conflict with any provision of this
Agreement, the Articles shall control.
11.2 Binding Effect. Subject to the provisions of this Agreement
relating to transferability, this Agreement will be binding upon and inure to
the benefit of the Members, and their respective successors and assigns.
11.3 Parties in Interest. Except as expressly provided in the Act,
nothing in this Agreement shall confer any rights or remedies under or by reason
of this Agreement on any Persons other than the Members and their respective
successors and assigns nor shall anything in this Agreement relieve or discharge
the obligation or liability of any third person to any party to this Agreement,
nor shall any provision give any third person any right of subrogation or action
over or against any party to this Agreement.
11.4 Pronouns; Statutory References. All pronouns and all variations
thereof shall be deemed to refer to the masculine, feminine, or neuter, singular
or plural, as the context in which they are used may require. Any reference to
the Code, the Regulations, the Act, Corporations Code or other statutes or laws
will include all amendments, modifications, or replacements of the specific
sections and provisions concerned.
11.5 Headings. All headings herein are inserted only for convenience
and ease of reference and are not to be considered in the construction or
interpretation of any provision of this Agreement.
11.6 Interpretation. In the event any claim is made by any Member
relating to any conflict, omission or ambiguity in this Agreement, no
presumption or burden of proof or persuasion shall be implied by virtue of the
fact that this Agreement was prepared by or at the request of a particular
Member or his or her counsel.
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11.7 References to this Agreement. Numbered or lettered articles,
sections and subsections herein contained refer to articles, sections and
subsections of this Agreement unless otherwise expressly stated.
11.8 Jurisdiction. Each Member hereby consents to the exclusive
jurisdiction of the courts sitting in Los Angeles County, California in any
action on a claim arising out of, under or in connection with this Agreement or
the transactions contemplated by this Agreement.
11.9 Exhibits. All Exhibits attached to this Agreement are
incorporated and shall be treated as if set forth herein.
11.10 Severability. If any provision of this Agreement or the
application of such provision to any person or circumstance shall be held
invalid, the remainder of this Agreement or the application of such provision to
persons or circumstances other than those to which it is held invalid shall not
be affected thereby.
11.11 Additional Documents and Acts. 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 the
transactions contemplated hereby.
11.12 Notices. Any notice to be given or to be served upon the
Company or any party hereto in connection with this Agreement must be in writing
(which may include facsimile) and will be deemed to have been given and received
when delivered to the address specified by the party to receive the notice. Such
notices will be given to a Member at the address specified in Exhibit A hereto.
Any party may, at any time by giving five (5) days' prior written notice to the
other parties, designate any other address in substitution of the foregoing
address to which such notice will be given.
11.13 Amendments. All amendments to this Agreement will be in
writing and signed by all of the Members.
11.14 No Interest in Company Property; Waiver of Action for
Partition. No Member has any interest in specific property of the Company.
Without limiting the foregoing, each Member irrevocably waives during the term
of the Company any right that he may have to maintain any action for partition
with respect to the property of the Company.
11.15 Multiple Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, but all of
which shall constitute one and the same instrument.
11.16 Attorney Fees. In the event that any dispute between the
Company and the Members or among the Members should result in litigation or
arbitration, the prevailing party in such dispute shall be entitled to recover
from the other party all reasonable fees, costs and expenses of enforcing any
right of the prevailing party, including without limitation, reasonable
attorneys' fees and expenses, all of which shall be deemed to have accrued upon
the commencement of such action and shall be paid whether or not such action is
prosecuted to judgment. Any judgment or order entered in such action shall
contain a specific provision providing for the recovery of attorney fees and
costs incurred in enforcing such judgment and an award of prejudgment interest
from the date of the breach at the maximum rate of interest allowed by law. For
the purposes of this Section: (a) attorney fees shall include, without
limitation, fees incurred in the following: (1) postjudgment motions; (2)
contempt proceedings; (3) garnishment, levy, and debtor and third party
examinations; (4) discovery; and (5) bankruptcy litigation and (b) prevailing
party shall mean the party who is determined in the proceeding to have prevailed
or who prevails by dismissal, default or otherwise.
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11.17 Remedies Cumulative. The remedies under this Agreement are
cumulative and shall not exclude any other remedies to which any person may be
lawfully entitled.
11.18 Time is of the Essence. All dates and times in this Agreement
are of the essence.
IN WITNESS WHEREOF, all of the Members of CONSOLIDATED
ENTERTAINMENT, LLC, a California Limited Liability Company, have executed this
Agreement, effective as of the date written above.
MEMBER:
/S/ Craig Rodgers
-------------------------------------------
CRAIG RODGERS
/S/ Todd Gelfand
-------------------------------------------
TODD GELFAND, TRUSTEE OF THE ASIA PACIFIC
CAPITAL TRUST
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ACKNOWLEDGMENT
The undersigned acknowledges that he has read and that he
understands the terms and conditions of this Operating Agreement of CONSOLIDATED
ENTERTAINMENT, LLC, and that he agrees on behalf of himself, his successors and
assigns to be bound by all of the terms and conditions thereof as they pertain
to the undersigned and to the Trust.
/S/ Jesse Dylan
----------------------------------
JESSE DYLAN
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EXHIBIT A
CAPITAL CONTRIBUTION AND ADDRESSES OF MEMBERS
OF
CONSOLIDATED ENTERTAINMENT, LLC
AS OF
FEBRUARY 19, 1998
<TABLE>
<CAPTION>
Member's Capital Member's
Member's Name Member's Address Contribution Percentage Interest
- ---------------------- ------------------------ ---------------- -------------------
<S> <C> <C>
Todd Gelfand, $51.00 Fifty-one Percent
Trustee of the Asia (51%)
Pacific Capital Trust
Craig Rodgers $49.00 Forty-nine Percent
(49%)
</TABLE>
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ASSIGNMENT AND ASSUMPTION AGREEMENT
THIS ASSIGNMENT AND ASSUMPTION AGREEMENT ("Agreement") is entered into
this 15th day of August, 1999, by and between Todd Gelfand, Trustee of the Asia
Pacific Capital Trust ("Assignor") and Jesse Dylan ("Assignee").
Assignor, for good and valuable consideration, hereby sells, assigns,
transfers, conveys and delivers to Assignee all right, title and interest of
Assignor as a member in Consolidated Entertainment, LLC ("LLC Interest").
Assignee hereby agrees to assume and discharge all debts, liabilities and
other obligations of Assignor in connection with the ownership of the LLC
Interest from and after the date hereof.
IN WITNESS WHEREOF, Assignor and Assignee have executed this Agreement to
be effective the date first set forth above.
"ASSIGNOR" "ASSIGNEE"
/S/ Todd Gelfand By: /S/ Jesse Dylan
- --------------------------------- ----------------------------------
TODD GELFAND, TRUSTEE OF THE JESSE DYLAN
ASIA PACIFIC CAPITAL TRUST
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