Santa Monica Pictures, LLC, Perry Lerner, Tax Matters Partner - Page 287

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          or after December 10, 2001.30  Members holding Common II                    
          interests also had no voting rights in SMP.                                 
               Under the SMP LLC agreement, if the members holding                    
          preferred interests exercised their conversion rights, SMP had              
          the right to redeem all the preferred interests at a price equal            
          to the sum of the preferred capital accounts for all holders of             
          preferred interests.  SMP also had the option to convert the                
          preferred interests into debt of SMP beginning on December 31,              
          1997, and on conversion, the debt would have a principal amount             
          equal to $5 million for a term of 5 years at an interest rate of            
          8 percent per annum.                                                        
               Mr. Lerner was appointed SMP’s manager.  The SMP LLC                   
          agreement provided that no member could sell, assign, transfer or           
          dispose of, directly or indirectly, by operation of law or                  
          otherwise (including by merger, consolidation, dividend, or                 
          distribution) any membership interest, without the prior written            
          consent of SMP’s manager.  It also provided that no member could            
          retire or withdraw from SMP without SMP’s manager’s written                 
          consent except in certain defined circumstances.                            
               Pursuant to the SMP LLC agreement, with certain exceptions,            
          each SMP member (including any additional members) agreed that it           


               30 Members holding preferred interests could immediately               
          convert their preferred interests to Common II interests if                 
          certain required annual distributions of excess cashflow were not           
          made.                                                                       





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