<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED APRIL 30, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________________ to __________________
Commission File Number: 0-23491
GLOBAL MEDIA CORP.
(Exact name of registrant as specified in its charter)
NEVADA 91-1842480
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
83 VICTORIA CRESCENT, NANAIMO, BC, CANADA V9R 5B9
(Address of Principal Executive Offices; Zip Code)
Registrant's telephone number, including area code: (250) 716-9949
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes X No
----- -----
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS:
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by court. Yes No
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS:
State the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date: AS OF JUNE 11, 1999,
THERE WERE 20,545,431 SHARES OUTSTANDING OF THE COMPANY'S COMMON STOCK.
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
GLOBAL MEDIA CORP.
CONSOLIDATED BALANCE SHEETS
Unaudited
(in US dollars)
<TABLE>
<CAPTION>
April 30 July 31
1999 1998
$ $
- -------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT
Cash 85,299 14,996
Accounts receivable 28,993 206
Inventory -- 1,992
Prepaid expenses 3,891 8,229
Due from affiliated companies [NOTE 4] -- 71,065
Income tax recoverable 2,531 2,439
- -------------------------------------------------------------------------------------------
120,714 98,927
Capital assets [NOTE 6] 526,942 172,635
- -------------------------------------------------------------------------------------------
647,656 271,562
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
LIABILITIES
CURRENT
Accounts payable and accrued liabilities 158,704 201,234
Employee withholdings 24,747 51,354
Due to affiliated company [NOTE 4] 137,703 46,284
Note Payable [NOTE 9] 548,200 --
Due to shareholders [NOTE 4] 242,536 79,269
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1,111,890 378,141
SHAREHOLDERS' EQUITY (DEFICIENCY)
Share capital [NOTE 7] 12,546 11,892
Additional paid in capital [NOTE 7] 869,671 543,525
Deficit (1,355,121) (681,819)
Cumulative translation adjustment 8,670 19,823
- -------------------------------------------------------------------------------------------
(464,234) (106,579)
- -------------------------------------------------------------------------------------------
647,656 271,562
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</TABLE>
SEE ACCOMPANYING NOTES
<PAGE>
GLOBAL MEDIA CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME
(LOSS)
Unaudited
(in US dollars)
<TABLE>
<CAPTION>
For the 3 Months Ended For the 9 Months Ended
---------------------- ----------------------
April 30 April 30 April 30 April 30
1999 1998 1999 1998
$ $ $ $
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUE -- -- -- --
- ----------------------------------------------------------------------------------------------------------------
GENERAL AND ADMINISTRATIVE EXPENSES
Advertising, marketing and investor relations 51,361 505 144,648 3,529
Amortization 54,783 5,645 90,060 16,678
Foreign exchange 2,921 (3,923) 7,280 7,403
Professional fees 36,897 19,112 121,814 86,586
Office and miscellaneous 51,831 17,703 114,740 41,708
Travel 41,583 6,655 75,549 15,590
Wages and benefits 26,604 -- 69,848 --
- ----------------------------------------------------------------------------------------------------------------
265,980 45,697 623,939 171,494
Net interest expense and financing fees 36,814 209 47,283 346
- ----------------------------------------------------------------------------------------------------------------
LOSS FROM CONTINUING OPERATIONS (302,794) (45,906) (671,222) (171,840)
- ----------------------------------------------------------------------------------------------------------------
(Loss) recovery from operations of discontinued call
center and satellite businesses [NOTE 3]
Call center -- 82,631 -- 146,497
Satellite -- (27,401) (2,080) (204,458)
- ----------------------------------------------------------------------------------------------------------------
(LOSS) RECOVERY FROM DISCONTINUED OPERATIONS -- 55,230 (2,080) (57,961)
- ----------------------------------------------------------------------------------------------------------------
NET AND COMPREHENSIVE INCOME (LOSS) FOR PERIOD (302,779) 9,324 (673,302) (229,801)
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
Loss per common share from continuing operations (0.01) (0.00) (0.03) (0.01)
Loss per common share from discontinued operations (0.00) (0.00) (0.00) (0.00)
- ----------------------------------------------------------------------------------------------------------------
LOSS PER COMMON SHARE (0.01) (0.00) (0.03) (0.01)
Shares used in the computation of loss per share 20,544,431 19,890,831 20,253,942 19,619,116
</TABLE>
SEE ACCOMPANYING NOTES
<PAGE>
GLOBAL MEDIA CORP.
CONSOLIDATED STATEMENTS OF
SHAREHOLDERS' EQUITY (DEFICIENCY)
Unaudited
(in US dollars)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL UNISSUED RETAINED CUMULATIVE
------------------ PAID-IN SHARE EARNINGS TRANSLATION
SHARES AMOUNT CAPITAL CAPITAL (DEFICIT) ADJUSTMENT
# $ $ $ $ $
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, JULY 31, 1996 [NOTE 7] -- -- -- 1 14,486 (408)
Common shares issued for cash 11,059,400 11,059 128,641 -- -- --
Unissued common shares [NOTE 7] -- -- -- 144,000 -- --
Movement on cumulative translation -- -- -- -- -- 385
Loss for the year -- -- -- -- (108,999) --
Dividends declared and paid -- -- -- -- (114,632) --
- ----------------------------------------------------------------------------------------------------------------------------
BALANCE, JULY 31, 1997 11,059,400 11,059 128,641 144,001 (209,145) (23)
Common shares issued for cash [NOTE 7] 730,533 731 364,536 (144,000) -- --
Common shares issued for other than
cash consideration:
Consideration for shares in
Westcoast Wireless [NOTES 1 AND 7] 8,000,000 1 -- (1) -- --
In kind services 100,898 101 50,348 -- -- --
Movement on cumulative translation -- -- -- -- -- 19,846
Loss for the year -- -- -- -- (472,674) --
- ----------------------------------------------------------------------------------------------------------------------------
BALANCE, JULY 31, 1998 19,890,831 11,892 543,525 -- (681,819) 19,823
Stock options exercised 653,600 654 326,146
Movement on cumulative translation (11,153)
Loss for the Period (673,302)
- ----------------------------------------------------------------------------------------------------------------------------
BALANCE, APRIL 30, 1999 20,544,431 12,546 869,671 -- (1,355,121) 8,670
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES
<PAGE>
GLOBAL MEDIA CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited
(in US dollars)
<TABLE>
<CAPTION>
For the 9 Months Ended
----------------------
April 30 April 30
1999 1998
$ $
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Loss for the period (673,302) (229,801)
Items not requiring an outlay of funds
Amortization 90,060 16,678
Services settled through share issuance -- 50,449
Deferred revenue -- (12,062)
- ----------------------------------------------------------------------------------------------------------------------------
(583,242) (174,736)
Changes in non-cash operating working capital
Accounts receivable (28,787) (2,124)
Inventory 1,992 9,275
Prepaid expenses 4,338 (11,000)
Income tax recoverable (92) --
Accounts payable and accrued liabilities (42,530) 34,387
Employee withholdings (26,607) 11,576
Advances from (to) shareholder 163,267 (39,026)
Advances from affiliated companies 162,484 2,329
- ----------------------------------------------------------------------------------------------------------------------------
CASH USED IN OPERATING ACTIVITIES (349,177) (169,319)
- ----------------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Purchase of capital assets (462,463) (165,414)
- ----------------------------------------------------------------------------------------------------------------------------
CASH USED IN INVESTING ACTIVITIES (462,463) (165,414)
- ----------------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Note payable 548,200 --
Share subscriptions 326,800 221,267
- ----------------------------------------------------------------------------------------------------------------------------
CASH PROVIDED BY FINANCING ACTIVITIES 875,000 221,267
- ----------------------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash 6,973 4,422
INCREASE (DECREASE) IN CASH DURING THE PERIOD 70,303 (109,044)
Cash, beginning of period 14,996 121,890
- ----------------------------------------------------------------------------------------------------------------------------
CASH, END OF PERIOD 85,299 12,846
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Interest - paid 4,190 4,470
- ----------------------------------------------------------------------------------------------------------------------------
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</TABLE>
SEE ACCOMPANYING NOTES
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. NATURE OF BUSINESS AND BASIS OF PRESENTATION
Global Media Corp. (the "Company") was incorporated on April 8, 1997 in the
State of Nevada and is headquartered in Nanaimo, B.C., Canada. The Company
(through its now-subsidiary Westcoast Wireless Cable Ltd. ("Westcoast
Wireless")) was originally engaged in the marketing of satellite programming
and hardware and later was engaged in the business of providing call center
services (see note 3). The Company discontinued its existing lines of
business by the end of fiscal 1998, and, in the first quarter of fiscal 1999,
adopted an internet-focused business plan. As of April 30, 1999 the Company
had not yet commenced revenue generating activities and was engaged primarily
in the development of an electronic commerce web-site, the development of a
broadcast network over the internet, and the development of templates for the
application of the e-commerce back-end system to multiple sites on the
internet. Subsequent to quarter-end, the e-commerce web-site,
globalmedia.com, was launched on May 18, 1999.
The accompanying unaudited interim consolidated financial statements have been
prepared in conformity with generally accepted accounting principles in the
United States of America ("GAAP"). All significant intercompany amounts have
been eliminated in the consolidation process. The preparation of financial
statements in conformity with GAAP requires the Company's management to make
estimates and assumptions that affect the amounts reported in the financial
statements and related notes. Actual results may differ from these estimates. In
the opinion of management, all adjustments necessary to fairly state the results
for the quarters and nine months ended April 30, 1999 and April 30, 1998 have
been made. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with GAAP have been condensed or
omitted pursuant to the rules and regulations of the Securities and Exchange
Commission. These unaudited interim consolidated financial statements should
therefore be read in conjunction with the audited consolidated financial
statements and the notes thereto included in the Company's Annual Report on Form
10-KSB for the year ended July 31, 1998.
The results of operations for the quarters and nine months ended April 30, 1999
and 1998 are not necessarily indicative of the results to be expected or
anticipated for the full fiscal year.
2. SIGNIFICANT ACCOUNTING POLICIES
CAPITAL ASSETS AND AMORTIZATION
Capital assets are recorded at cost. Amortization has been calculated using the
following methods and rates, except in the year of acquisition when one half of
the rate is used.
<TABLE>
<S> <C>
Communications infrastructure 3 year straight line
Office furniture and equipment 20% declining balance
Purchased software, other than for web site development 20% declining balance
Capitalized development costs and purchased software for web site development 3 year straight line
Computer equipment 30% declining balance
Leasehold improvements 5 year straight line
</TABLE>
<PAGE>
FOREIGN CURRENCY TRANSLATION
Assets and liabilities of the Company's wholly-owned Canadian subsidiaries
Westcoast Wireless and Global Media Entertainment Corp. are translated into US
dollars at the period-end exchange rate. Income and expense items are translated
at average exchange rates prevailing during the fiscal period. The resulting
translation adjustments are recorded as a separate component of shareholders'
equity.
Monetary assets and liabilities of the Company denominated in a foreign currency
are translated into US dollars at period end exchange rates. Other balances are
recorded at rates in effect on the dates of the transaction. Exchange gains and
losses arising on translation are reflected in net income for the period.
LOSS PER SHARE
The Company has adopted SFAS128, "Earnings per share", in the current year on a
retroactive basis. In accordance with Statement 128, basic earnings per share is
computed using the weighted average number of common shares outstanding. Diluted
earnings per share is computed using the weighted average number of common
shares per dilutive common share equivalents outstanding during the period using
the treasury stock method. Due to the net loss during the quarter and nine
months ended April 30, 1999, the same number of shares were used to compute both
basic and fully diluted earnings per share.
3. DISCONTINUED OPERATIONS
The Company was engaged in providing call center services until the first
quarter of fiscal 1999, and Westcoast Wireless was engaged in the marketing of
direct-to-home satellite hardware and programming services until the fourth
quarter of 1998.
4. RELATED PARTY TRANSACTIONS
The affiliated companies are related to the Company by virtue of control by an
officer of the Company. No related party transactions occurred during the nine
months ending April 30, 1999 with the exception of:
(i) A partial repayment of a shareholder loan, $ 71,065, which was used
to repay a receivable owed to the Company by an affiliate owned by
the same shareholder;
(ii) Advances from an affiliated company in the amount of $ 162,484; and,
(iii) Shareholder loans of $ 234,332.
5. INCOME TAXES
For financial reporting purposes, a valuation allowance has been established for
all deferred tax assets due to the uncertainty of realization. As a result of
certain stock transactions, utilization of the Company's net operating loss
carryforwards may be subject to limitations in the event that a change in
ownership has occurred, as defined in Section 382 of the Internal Revenue Code
of 1986, as amended.
6. CAPITAL ASSETS
<TABLE>
<CAPTION>
ACCUMULATED NET BOOK
COST AMORTIZATION VALUE
$ $ $
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
APRIL 30, 1999
Office furniture and equipment 22,431 2,696 19,735
<PAGE>
Computer equipment 134,028 30,728 103,300
Leasehold improvements 3,832 762 3,070
Communications center infrastructure 91,146 33,887 57,259
Web site development costs 307,393 38,420 268,973
Web site purchased software 24,550 3,068 21,482
Other purchased software 65,250 12,127 53,123
- -----------------------------------------------------------------------------------------------------------------
648,630 121,688 526,942
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
JULY 31, 1998
Office furniture and equipment 18,859 4,842 14,018
Computer equipment 70,107 13,117 56,990
Leasehold improvements 8,594 4,905 3,689
Communications center infrastructure 91,575 17,325 74,250
Web site development costs -- -- --
Web site purchased software -- -- --
Other purchased software 27,209 3,520 23,689
- -----------------------------------------------------------------------------------------------------------------
216,344 43,709 172,635
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
7. SHARE CAPITAL
<TABLE>
<CAPTION>
QUARTER ENDED APRIL 30 YEAR ENDED JULY 31
---------------------- ------------------
1999 1998
# #
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
AUTHORIZED
Common shares, par value $0.001 each 200,000,000 200,000,000
ISSUED
Common shares 20,544,431 19,890,831
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
STOCK OPTION PLANS
Effective April 8, 1997 the Company adopted the 1997 Directors and Officers
Stock Option Plan (the "1997 Plan"). The 1997 Plan is administered by the Board
of Directors who have sole discretion and authority to determine individuals
eligible for awards under the 1997 Plan. The 1997 Plan provides for issuance of
a total of 500,000 options, within a period of 10 years from the effective date.
The conditions of exercise of each grant are determined individually by the
Board at the time of the grant. No options have been granted under this plan.
Effective August 21, 1998 the Company adopted the 1998 Directors and Officers
Stock Option Plan (the "1998 Plan"). The Plan is administered by the Board of
Directors who have sole discretion and authority to determine individuals
eligible for awards under the 1998 Plan. The 1998 Plan provides for issuance of
a total of 1,000,000 options, within a period of 10 years from the effective
date. The conditions of exercise of each grant are determined individually by
the Board at the time of the grant. 1,000,000 options at an exercise price of
$0.50 per share have been granted under this plan. No grants occurred in the
quarter ended April 30, 1999.
Effective March 24, 1999 the Company adopted the 1999 Directors and Officers
Stock Option Plan (the "1999 Plan"). The 1999 Plan is administered by the Board
of Directors who have sole discretion and authority to determine individuals
eligible for awards under the 1999 Plan. The 1999 Plan provides for issuance of
a total of 4,000,000 options, within a period of 10 years from the effective
date. The conditions of exercise of each grant are determined individually by
the Board at the time of the grant.
<PAGE>
2,933,000 options at exercise prices of $4.00 have been granted under this plan
and all of these grants occurred in the quarter ended April 30, 1999.
As of April 30, 1999 653,600 options had been exercised under the 1998 Plan and
no options had been exercised under the 1999 Plan.
8. COMMITMENTS AND CONTINGENCIES
The Company entered into a commercial lease for office space effective
October 1, 1997 and will pay a total of $52,939 per year until July 31, 2002.
By agreement dated April 20, 1999, as amended on June 4, 1999, the Company
entered into an arrangement to engage RealNetworks, Inc. to perform consulting
services in connection with the Global Media Broadcast Network project. Under
the terms of the agreement, the Company is required to make payments totaling
$3,655,000 over the duration of the project with the final payment date
projected to be December 21, 1999.
9. NOTE PAYABLE AND DUE TO SHAREHOLDERS
On November 5, 1998, the Company entered into a bridge loan agreement with
Rolling Oaks Enterprises, LLC allowing the Company to draw on a line of credit
of up to $500,000, repayable within one year. The interest rate on the credit
facility was 24% per annum, with an origination fee of 1% payable on receipt of
the funds.
The shareholder loans as of April 30, 1999 had no fixed terms of repayment and
therefore are classified as current liabilities on the balance sheet. Subsequent
to quarter-end, the Company and the shareholders agreed to settle the loans by
way of the issuance of shares, partial repayment and partial conversion to new
promissory notes.
10. SUBSEQUENT EVENTS
Effective May 6, 1999 the Company entered into a Securities Purchase Agreement
and ancillary agreements with Rose Glen Capital Group, Inc. ("Rose Glen")
pursuant to which the Company issued, for cash, a convertible debenture to Rose
Glen in the aggregate principal amount of $8,500,000 and warrants to purchase
680,000 shares of the Company's common stock at an exercise price of $8.4375 per
share. The convertible debenture has a three year term during which the
debenture may be convertible into convertible preferred shares of the Company on
the Company's articles of incorporation being amended to allow for the issuance
of the preferred shares. On June 8, 1999 the Company mailed to its shareholders
an Information Statement concerning this matter and as majority shareholder
approval has already been obtained for the amendment of the Company's articles
of incorporation to allow for the issuance of the preferred shares, the Company
expects that the convertible debentures will have been converted into
convertible preferred shares of the Company by July 31, 1999, the Company's
fiscal year-end. Further details on this matter are also available by referring
to the Company's Form 8-K filing made May 20, 1999.
On May 18, 1999 the Company fully repaid its $500,000 line of credit, and
$48,200 of accrued interest to Rolling Oaks Enterprises, LLC.
<PAGE>
The Company launched its main e-commerce internet site, globalmedia.com, on May
18, 1999.
11. RISKS ASSOCIATED WITH THE YEAR 2000
The Year 2000 issue is the result of computer programs being written using two
digits rather than four to define the applicable year. In other words,
date-sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000. This could result in system failures or miscalculations
causing disruptions of operations, including, among other things, a temporary
inability to process transactions, send invoices or engage in similar normal
business activities.
The Company does not believe that it has material exposure to the Year 2000
issue with respect to its own information systems since its existing systems
correctly define the Year 2000. The Company is in the process of inquiring as to
the extent to which its major suppliers' systems (insofar as they relate to the
Company's business) are subject to the Year 2000 issue. The Company is currently
unable to predict the extent to which the Year 2000 issue will affect its
suppliers, or the extent to which it would be vulnerable to its suppliers'
failure to remediate any Year 2000 issues on a timely basis. The failure of a
major supplier subject to the Year 2000 issue to convert its systems on a timely
basis or a conversion that is incompatible with the Company's systems could have
a material adverse effect on the Company. In addition, historically most of the
purchases from the Company will be made with credit cards and the Company's
operations may be materially adversely affected to the extent its customers are
unable to use their credit cards due to Year 2000 issues that are not rectified
by their credit card providers. One further, and more extreme, case may be the
failure of the communication mode (telephone, cable or satellite), over the
internet, which could significantly impact the Company's ability to generate
sales.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion contains or may contain forward-looking statements
based on current expectations, estimates and projections about the Company's
industry, management's beliefs and certain assumptions made by management. All
statements, trends, analyses and other information contained herein relative to
trends in net sales, gross margin, anticipated expense levels, liquidity and
capital resources, as well as other statements, including, but not limited to,
words such as "anticipate," "believe," "plan," "estimate," "expect," "seek" and
"intend," and other similar expressions, constitute forward-looking statements.
These forward-looking statements involve risks and uncertainties, and actual
results may differ materially from those anticipated or expressed in such
statements. Except as required by law, the Company undertakes no obligation to
update any forward-looking statement, whether as a result of new information,
future events or otherwise. Readers, however, should carefully review the
factors set forth in other reports or documents that the Company files from time
to time with the Securities and Exchange Commission (the "SEC").
OVERVIEW
As of April 30, 1999, the Company was engaged primarily in the development of an
electronic commerce web-site, the development of a broadcast network over the
internet, and the development of templates for the application of the e-commerce
back-end system to multiple sites on the internet. During the third quarter of
fiscal 1999, the Company made significant progress towards execution of its
business plan.
E-COMMERCE WEB SITE AND LICENSING MARKETING PROGRAM
During the quarter ended April 30, 1999, the Company continued development of
its main e-commerce web site, "globalmedia.com", and therefore did not generate
revenues. The Company launched the site subsequent to quarter-end on May 18,
1999 and began generating revenues. The Company adopted an initial pricing
policy intended to result in a small initial volume of transactions on the
globalmedia.com web site while the site development is fully completed. The
Company intends to generally lower prices during the latter part of the
Company's fourth quarter of fiscal 1999 and/or the first quarter of fiscal 2000,
which is anticipated to have the effect of increasing sales.
The Company's licensing marketing program continued to receive a positive
interest from the radio community and other target markets. The Company
intends to begin adding the e-commerce model to select licensees in the
latter part of fourth quarter fiscal 1999, which is also expected to increase
the Company's sales.
Until the pricing changes are implemented and the e-commerce model is
launched for licensees, the Company does not anticipate earning significant
revenues. Management expects that at that time the Company will be well
positioned to take a leading position in providing complete turnkey solutions
for the retailing of entertainment product online.
MUSIC WEB SITES
The Company also launched its "indieaudio.com" and "indielife.com" web sites
during the quarter. These sites are positioned to be an online center for the
independent music community. The interactive editorial and audio content has
been designed to attract a wide cross-section of
<PAGE>
musicians and music fans. Management anticipates that the primary value of the
sites will be in driving traffic to the globalmedia.com web site. The sites will
also generate direct revenue through the sale of digital audio files as well as
through advertising revenue.
CORPORATE WEB SITE
During the quarter the Company continued to update its corporate web site,
"gmcorp.net", in order to showcase its business plan, management team and
provide information about its licensing and affiliate programs.
STRATEGIC ALLIANCES
During the quarter, the Company continued to improve its key strategic alliances
by entering into several agreements with RealNetworks, Inc. for the purpose of
providing audio and video broadcast capability to licensees. These agreements
encompass the building of the Global Media Broadcast Network and the development
of a highly customized RealPlayer. In the opinion of the Company's management,
the relationship with RealNetworks that the Company established during the
quarter represents a significant milestone reached towards successful
implementation of the Company's business plan.
As reported previously, other strategic partners that the Company has developed
relationships with include Muze, Baker and Taylor and Liquid Audio. Muze is the
leading independent source of digital information about music, books and movies
and is the database source for the globalmedia.com web site. Baker & Taylor
manages all packaging, shipping and returns of CDs, videos, DVDs and books sold
through the globalmedia.com web site. Operating worldwide, Baker & Taylor
distributes a wide range of products, including books, video, audio, software,
and related services to retail stores and libraries. Baker & Taylor has 11
inventory distribution centers across the United Sates. Liquid Audio's
technology allows consumers to preview and purchase CD-quality music over the
internet, while ensuring copyright protection and tracking royalties.
As part of its growth strategy, the Company seeks to establish strategic
alliances with global on-line, music and media companies to attract additional
users to, and increase brand awareness of, the Company's web sites. These
include network television operators, cable and satellite operators as well as
radio networks. The Company is also seeking partnerships with large internet
portals, search engines and chat sites. The Company views entertainment
development and distribution as an essential element to draw visitors to its
globalmedia.com web site and worked during the quarter to develop relationships
with content developers and distribution technology partners.
RESULTS OF CONTINUING OPERATIONS
During the quarter and nine months ended April 30, 1998, the Company operated
a call center and a satellite marketing business. The Company had
discontinued both of those businesses by the first quarter of fiscal 1999.
The financial results from those periods contained in the following
discussion include only revenues and expenses related to the Company's
corporate activities and exclude any revenues or expenses from those
discontinued lines of business. SEE " --Discontinued Operations."
The results of operations for the quarters and nine months ended April 30, 1999
and 1998 are not necessarily indicative of the results to be expected or
anticipated for any future comparable period or full fiscal year.
<PAGE>
NINE MONTHS ENDED APRIL 30, 1999 COMPARED TO NINE MONTHS ENDED APRIL 30, 1998
NET REVENUES. During the nine months ended April 30, 1999 the Company had
not yet commenced earning revenues from its internet business (comparable period
fiscal 1998: Nil).
OPERATING EXPENSES. General and Administrative expenses for the nine
months ended April 30, 1999 were $623,939, as compared to $171,494 for the nine
months ended April 30, 1998. The increase reflects costs associated with ongoing
development of the Company's web sites, more advertising for the preparation of
the launch of the sites, greater amortization due to more capital assets,
increased office expenses, increased corporate travel and the hiring of
additional staff. Wages and benefits of $69,848 (comparable period fiscal 1998:
Nil) reflect the hiring of staff for the Company's licensing and affiliate
programs, corporate web site development and e-commerce web site development.
Advertising, marketing and investor relation expenses increased to $144,648
(comparable period fiscal 1998: $3,529) due to the news releases, internet and
other promotions used to inform shareholders and the general public, and
expenses related to promotion of the web site licensing programs. Amortization
increased to $90,060 (comparable period fiscal 1998: $16,678), due to the
increase in capital assets over the last year. Professional fees increased to
$121,814 (comparable period fiscal 1998: $86,586) in concert with the Company's
general increase in business activities. Office and miscellaneous expenses of
$114,740 (comparable period fiscal 1998: $41,708) increased primarily due to:
rent expense at the larger Nanaimo offices $48,993 (comparable period fiscal
1998: $33,507), telephone $23,955 (comparable period fiscal 1998: $3,690), and
general office expense $18,124 (comparable period fiscal 1998: $3,532). Travel
expense of $75,549 (comparable period fiscal 1998: $15,590) consisted primarily
of travel relating to development of strategic alliances, working with web site
designers and developers and attending industry related conferences.
INTEREST EXPENSE. Net interest expense and financing fees increased to
$47,283 (comparable period fiscal 1998: $346), due primarily to interest
payments on the Rolling Oaks Enterprises, LLC bridge financing which was repaid
subsequent to quarter end.
NET LOSS. The Company experienced a $671,222 loss from continuing
operations for the nine months ended April 30, 1999, as compared to a $171,840
loss from continuing operations for the nine months ended April 30, 1998. This
increase in loss from continuing operations reflects increases in the Company's
development activities including increases in the number of employees, an
increase in amortization as the result of additional computer equipment
purchases, and an increase in office, travel and other costs.
QUARTER ENDED APRIL 30, 1999 COMPARED TO QUARTER ENDED APRIL 30, 1998
NET REVENUES. During the quarter ended April 30, 1999 the Company had
not yet commenced earning revenues from its internet business (third quarter
fiscal 1998: Nil).
OPERATING EXPENSES. General and administrative expenses increased in the
third quarter to $265,980 as compared to $45,697 in third quarter fiscal 1998.
The low comparative prior year figure reflects the fact that development of the
Company's web sites had not yet commenced. The following factors contributed to
larger expenses in the current quarter: greater emphasis on promotion of the
Company to attract quality licensee leads for the e-commerce site increased
advertising to $51,361 (third quarter fiscal 1998: $505); depreciation of a
larger capital base increased amortization costs to $54,783 (third quarter
fiscal 1998: $5,645); increases in corporate travel increased travel costs to
$41,583 (third quarter fiscal 1998: $6,655); increased use of consultants and
legal counsel increased professional fees to $36,897 (third quarter fiscal 1998:
$19,112), and hiring staff increased wages to $26,604 (third
<PAGE>
quarter fiscal 1998: Nil).
INTEREST EXPENSE. Net interest expense and financing fees increased to
$36,814 (comparable period fiscal 1998: $209), due primarily to interest
payments on the Rolling Oaks Enterprises, LLC bridge financing which was repaid
subsequent to quarter-end.
NET LOSS. The Company experienced a $302,794 loss from continuing
operations for the quarter ended April 30, 1999, as compared to a $45,906 loss
from continuing operations for the quarter ended April 30, 1998. This increase
in loss reflects the increased development activity of the Company, including
increased number of personnel, increased amortization from increased computer
equipment purchases, and an increase in office, travel and other costs.
LIQUIDITY AND CAPITAL RESOURCES
In the nine months ended April 30, 1999 the Company financed its operations
and capital expenditures primarily from equity financing and loans from
shareholders and affiliates. As of April 30, 1999 the Company had cash of
$85,229, a working capital ratio of 0.11 and negative shareholders' equity of
$464,234. Subsequent to quarter-end, the Company considerably strengthened
its financial position by entering into a $8.5 million financing arrangement
with an unrelated institutional investor. Under this arrangement, the Company
issued, for cash, $8.5 million of convertible debentures which would be
convertible in certain circumstances into convertible preferred shares. In
such case, the convertible preferred shares would be convertible into common
shares of the Company. Management of the Company currently anticipates that
the debentures will be converted into convertible preferred shares of the
Company prior to the Company's July 31, 1999 year-end.
In the nine months ended April 30, 1999 the Company's cash position increased by
$70,303, from $14,996 to $85,299 (comparable period fiscal 1998: decreased
$109,044). This improvement resulted primarily from the Company obtaining a
bridge loan of $500,000, (comparable period fiscal 1998: Nil) and sales
of common shares pursuant to stock option exercises totaling $326,800,
(comparable period fiscal 1998: $221,267 from the sale of common shares). The
increase in cash was offset by cash used in operating activities of $349,177
(comparable period fiscal 1998: $169,319), and investment in capital assets of
$462,463 (comparable period fiscal 1998: $165,414).
CASH USED BY OPERATIONS
Over the nine months ended April 30, 1999 as compared to the prior year period,
cash used by operating activities increased by $179,858, reflecting the
increased level of activity in the Company. The Company experienced an operating
loss of $673,302 (comparable period fiscal 1998: $229,801) offset by
amortization of $90,060 (comparable period fiscal 1998: $16,678), leaving cash
used by operations, before consideration of changes in non-cash working capital
items, of $583,242 (comparable period fiscal 1998: $174,736).
CHANGES IN NON-CASH OPERATING WORKING CAPITAL ITEMS
In the nine months ended April 30, 1999 cash provided by changes in working
capital resulted from a sale of inventory for $1,992 (comparable period fiscal
1998: $9,275), a decrease in prepaid expenses of $4,338 (comparable period
fiscal 1998: increase of $11,000), an increase in advances from shareholder of
$163,267 (comparable period fiscal 1998: decrease of $39,026) and an increase in
advances from affiliated companies of $162,484 (comparable period fiscal 1998:
$2,329). Cash used by changes in
<PAGE>
working capital resulted from an increase in accounts receivable of $28,787, a
decrease in accounts payable and accrued liabilities of $42,530 and a decrease
in employee withholdings payable of $26,607.
INVESTING ACTIVITIES
In the nine months ended April 30, 1999 there was a decrease in cash of $462,463
(comparable period fiscal 1998: $165,414) caused by fixed asset purchases of
computer equipment and software to be used in the e-commerce web sites, and the
expenditure of development costs on these sites.
FINANCING ACTIVITIES
Financing activities provided $875,000 of cash during the nine months ended
April 30, 1999. The Company secured bridge financing in the amount of $500,000
which accrued $48,200 of interest during the period, (comparable period fiscal
1998: Nil), and realized $326,800 from the sale of shares through the exercise
of stock options (comparable period fiscal 1998: $221,267 through the sale of
common shares) under the Company's 1998 Directors and Officers Stock Option Plan
(the "1998 Plan").
Effective March 24, 1999 the Company adopted the 1999 Directors and Officers
Stock Option Plan (the "1999 Plan"). The 1999 Plan (a) is administered by the
Board of Directors who have sole discretion and authority to determine the
individuals eligible for awards under the 1999 Plan and the conditions of
exercise of each grant, and (b) provides for issuance of options to purchase
a total of 4,000,000 shares of the Company's common stock within a period of
ten years from the effective date of the option. The Company has granted
2,933,000 options at exercise prices of $4.00 per share under the 1999 Plan,
all of which occurred in the quarter ended April 30, 1999. As of April 30,
1999, 653,600 options had been exercised under the Company's 1998 Stock
Option Plan and no options had been exercised under the 1999 Plan. No options
have been issued or exercised under the Company's 1997 Directors and Officers
Stock Option Plan.
CAPITAL EXPENDITURES AND COMMITMENTS
The Company made capital expenditures of $314,368 during the third quarter of
fiscal 1999, principally consisting of $201,620 of capitalized development costs
for the globalmedia.com web site and the Company's other initiatives, $59,633 of
computer hardware purchases and $44,328 of software purchases. As of April 30,
1999 the Company had no material commitments outstanding for purchases of
additional capital assets, except for the Company's April 20, 1999 engagement
of RealNetworks Inc. to perform consulting services in connection with the
design and development of the Global Media Broadcast Network. Under the terms of
the agreement, as amended on June 4, 1999, the Company is required to make
payments totaling $3,655,000 over the duration of the project with the final
payment date projected to be December 21, 1999.
FUTURE CAPITAL REQUIREMENTS
The Company believes that the net proceeds from its convertible debenture
offering and revenue from its newly opened web site (SEE "Subsequent Events",
below), plus the availability of additional shareholder and other secured loans,
will be sufficient to meet its operating cash requirements and budgeting capital
expenditures for the remainder of fiscal 1999. The Company expects to meet its
long-term cash and operational requirements through equity financings and
revenues from its web site and its licensees' web sites.
<PAGE>
FOREIGN CURRENCY TRANSLATION
Assets and liabilities of the Company's wholly-owned Canadian subsidiary,
Westcoast Wireless Cable Ltd. are translated into US dollars at the
period-end exchange rate. Income and expense items are translated at average
exchange rates prevailing during the fiscal period. The resulting translation
adjustments are recorded as a separate component of shareholders' equity.
Monetary assets and liabilities of the Company denominated in a foreign
currency are translated into US dollars at period-end exchange rates. Other
balances are recorded at rates in effect on the dates of the transaction.
Exchange gains and losses arising on translation are reflected in net income
for the period.
DISCONTINUED OPERATIONS
The Company was engaged in the business of providing call center services until
the first quarter of fiscal 1999, at which time it discontinued those
operations. In addition, the Company's wholly-owned subsidiary Westcoast
Wireless Cable Ltd., a Canadian limited company, was engaged in the home
satellite business until the fourth quarter of fiscal 1998 at which time it
discontinued its operations following a decision by the Canadian Federal Court
of Appeal in November, 1997 prohibiting the sale of US based satellite and
programming services in Canada.
RISKS ASSOCIATED WITH THE YEAR 2000
The Year 2000 issue is the result of computer programs being written using two
digits rather than four to define the applicable year. In other words,
date-sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000. This could result in system failures or miscalculations
causing disruptions of operations, including, among other things, a temporary
inability to process transactions, send invoices or engage in similar normal
business activities.
The Company does not believe that it has material exposure to the Year 2000
issue with respect to its own information systems since its existing systems
correctly define the Year 2000. The Company is in the process of inquiring as to
the extent to which its major suppliers' systems (insofar as they relate to the
Company's business) are subject to the Year 2000 issue. The Company is currently
unable to predict the extent to which the Year 2000 issue will affect its
suppliers, or the extent to which it would be vulnerable to its suppliers'
failure to remediate any Year 2000 issues on a timely basis. The failure of a
major supplier subject to the Year 2000 issue to convert its systems on a timely
basis or a conversion that is incompatible with the Company's systems could have
a material adverse effect on the Company. In addition, historically most of the
purchases from the Company will be made with credit cards and the Company's
operations may be materially adversely affected to the extent its customers are
unable to use their credit cards due to Year 2000 issues that are not rectified
by their credit card providers. One further, and more extreme, case may be the
failure of the communication mode (telephone, cable or satellite), over the
internet, which could significantly impact the Company's ability to generate
sales.
RECENT ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board has issued SFAS130, "Reporting
comprehensive income", SFAS131, "Disclosures about segments of an enterprise
and related information", SFAS132, "Employers' Disclosures about pensions and
other post-retirement benefits" and SFAS133, "Accounting for derivative
instruments and hedging activities". SFAS130, SFAS131 and SFAS132 are
effective for financial statements for fiscal years beginning after December
15, 1997. SFAS 133 was initially to be effective for financial statement for
fiscal years beginning after June 15, 1999. On May 19, 1999, FASB voted to
delay the effective date of SFAS 133 by one year. The consequences of that
vote are not yet known.
<PAGE>
SFAS130 establishes standards for reporting and display of comprehensive income,
its components and accumulated balances. Comprehensive income is defined to
include all changes in equity except those resulting from investments by owners
and distributions to owners. Among other disclosures, SFAS130 requires that all
items that are required to be recognized under current accounting standards as
components of comprehensive income be reported in a financial statement that is
displayed with the same prominence as other financial statements. The Company
anticipates that implementing the provisions of SFAS130 will not have a
significant impact on the Company's existing disclosures. The Company has not
determined the manner in which it will present the information required by
SFAS130 in its fiscal 1999 annual financial statements.
SFAS 131, 132 and 133 currently have no effect on the Company.
<PAGE>
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. EXHIBITS.
The following documents are filed as exhibits to this Quarterly Report:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DOCUMENT
- -------- --------
<S> <C>
4.1 1999 Directors and Officers Stock Option Plan (1)
10.1 Secured Promissory Note, dated November, 1998, from the Company to
Rolling Oaks Enterprises, LLC. (2)
10.2 Security Agreement, dated November 30, 1998, from the Company to
Rolling Oaks Enterprises, LLC. (2)
10.3 Streaming Media Services Agreement, dated April 19, 1999, between
the Company and RealNetworks, Inc. (2) (3)
10.4 Letter agreement for consulting services from RealNetworks, Inc. to
the Company, dated and accepted on April 20, 1999. (2) (3)
10.5 Letter from RealNetworks, Inc. to the Company, dated and accepted on
June 4, 1999, amending the April 20, 1999 letter agreement. (2) (3)
27 Financial Data Schedule. (2)
</TABLE>
------------------------------------------
(1) Incorporated by reference to the Company's Form S-8 Registration Statement
filed with the SEC via Edgar on March 24, 1999.
(2) Filed with this quarterly report on Form 10-QSB.
(3) Subject to a request for confidential treatment filed with the SEC
contemporaneously with this quarterly report on Form 10-QSB.
b. REPORTS ON FORM 8-K.
None during the reporting period.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Exchange Act, the registrant has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Date: June 14, 1999 /s/ L. James Porter
--------------------------------------------
L. James Porter
Chief Financial Officer
(Principal Financial and Accounting Officer,
and authorized signatory for the registrant)
<PAGE>
EXHIBIT INDEX
The following documents are filed as exhibits to this Quarterly Report:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DOCUMENT
- ------- --------
<S> <C>
4.1 1999 Directors and Officers Stock Option Plan (1)
10.1 Secured Promissory Note, dated November, 1998, from the Company to
Rolling Oaks Enterprises, LLC. (2)
10.2 Security Agreement, dated November 30, 1998, from the Company to
Rolling Oaks Enterprises, LLC. (2)
10.3 Streaming Media Services Agreement, dated April 19, 1999, between
the Company and RealNetworks, Inc. (2) (3)
10.4 Letter agreement for consulting services from RealNetworks, Inc. to
the Company, dated and accepted on April 20, 1999. (2) (3)
10.5 Letter from RealNetworks, Inc. to the Company, dated and accepted on
June 4, 1999, amending the April 20, 1999 letter agreement. (2) (3)
27 Financial Data Schedule. (2)
</TABLE>
------------------------------------------
(1) Incorporated by reference to the Company's Form S-8 Registration Statement
filed with the SEC via Edgar on March 24, 1999.
(2) Filed with this quarterly report on Form 10-QSB.
(3) Subject to a request for confidential treatment filed with the SEC
contemporaneously with this quarterly report on Form 10-QSB.
<PAGE>
EXHIBIT 10.1
SECURED PROMISSORY NOTE
This Secured Promissory Note ("Secured Promissory Note") dated
November 18, 1998, is made and entered into by and between GLOBAL MEDIA CORP.,
a [Nevada corporation] ("Maker") and ROLLING OAKS ENTERPRISES, LLC, a California
limited liability company ("Holder").
RECITALS
A. Maker has applied to Holder for a loan (the "Loan") in the original
principal amount of the Principal Amount (as defined below), to be made by
Holder pursuant to the terms hereof.
B. The Loan will be secured by a first priority lien on all of the
fixed assets of Maker and a pledge of One Million (1,000,000) shares of Maker's
common stock.
C. Holder is willing to make the Loan to Maker, and Maker has agreed
to accept the Loan, under the terms and conditions as set forth herein and in
the Loan Documents (as defined below).
AGREEMENT
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. DEFINITIONS. For the purposes of this Secured Promissory Note, the
following terms shall have the following meanings:
1.1 "INTEREST" means interest on the unpaid Principal Amount
calculated as simple interest at the rate of twenty-four percent (24%) per
annum, which shall accrue commencing as of the date of this Secured Promissory
Note.
1.2 "LOAN DOCUMENTS" means this Note, the Security Agreement of
even date herewith executed by Maker, as Borrower, in favor of Secured Party, as
Secured Party, and the Stock Pledge Agreement of even date herewith executed by
Maker, as Pledgor, and Secured Party as Secured Party.
1.3 "PRINCIPAL AMOUNT" means the total amount of Five Hundred
Thousand Dollars (US$500,000).
1.4 "ORIGINATION FEE" means one percent (1%) of the Principal
Amount, which shall be deducted from the Principal Amount.
2. PAYMENT OF INTEREST AND PRINCIPAL AMOUNT TO HOLDER.
<PAGE>
2.1 The Principal Amount and all accrued and unpaid interest
shall be due and payable by Maker on the date which is twelve (12) months
following the date of this Secured Promissory Note (the "Maturity Date").
2.2 Maker may, at its option and at any time following the
execution hereof, prepay all or a portion of the balance of the Principal
Amount, PROVIDED, HOWEVER, that if such pre-payment is made within ninety (90)
days of the date hereof, such prepayment shall be accompanied by a yield
maintenance fee of five percent (5%) of the gross amount pre-paid by Maker. The
parties expressly acknowledge and agree that such yield maintenance fee does not
constitute a penalty, but a reasonable estimate of losses which would reasonably
be sustained by Holder upon such pre-payment. Any prepayment hereunder shall
first be applied to unpaid interest and then to the unpaid Principal Amount.
2.3 All payments made by Maker under this Secured Promissory
Note to Holder shall be made at the office of Holder at the address set forth
below, or at such other address as Holder may designate.
2.4 All payments made to Holder hereunder shall be in such coin
or currency of the United States of America as shall be legal tender for the
payment of public and private debts on the date of each such payment.
3. DEFAULT; REMEDIES.
3.1 Each of the following events shall be an "Event of Default":
(i) Default in the payment of the Principal Amount and
any and all accrued and unpaid interest on or before the Maturity Date; or
(ii) Default in the performance of any other obligations
of Maker hereunder; or
(iii) If Maker and any Guarantor shall (i) apply for or
consent to the appointment of a receiver, trustee or liquidator; (ii) admit in
writing its inability to pay his debts as they mature; (iii) make a general
assignment for the benefit of creditors; (iv) be adjudicated a bankrupt or
insolvent; (v) file a voluntary petition in bankruptcy or petition or answer
seeking a reorganization or an arrangement with its creditors; or (vi) take
advantage of any bankruptcy, reorganization, insolvency, readjustment of debt,
dissolution or liquidation law or statute or file and answer admitting the
material allegations of a petition filed against it in any proceeding under any
such law; or
(iv) An order, judgment or decree shall be entered,
without the application, approval or consent of the Maker or any Guarantor, by
any court or competent jurisdiction, approving a petition seeking reorganization
of the Maker or any Guarantor, or appointing a receiver, trustee or liquidator
for the Maker or any Guarantor, and such order, judgment or decree shall
continue unstayed and in effect for a period of sixty (60) days.
3.2 In the event of any Event of Default, Holder may notify
Maker, in writing, of such Event of Default and, if such Event of Default is
left uncured by maker for five (5)
2
<PAGE>
calendar days with respect to an Event of Default under paragraph 3.1(i) hereof
and thirty (30) calendar days with respect to any other Event of Default
hereunder, after the receipt of such notice by Maker, then Holder may, at its
discretion, declared this Secured Promissory Note to be immediately due and
payable, without presentment, demand, protest, or other notice of any kind, all
of which are hereby expressed waived.
4. REPRESENTATIONS AND WARRANTIES.
4.1 Maker hereby represents and warrants to Holder as follows:
(i) ORGANIZATION; CORPORATE AUTHORITY; GOOD STANDING.
Maker is a duly organized corporation, validly existing and in good standing
under the laws of the law State of [Nevada] and has all requisite power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted or contemplated. Maker has all requisite power and
authority to execute and deliver this Secured Promissory Note, to perform its
obligations hereunder and to consummate the transactions contemplated hereby.
(ii) CORPORATE ACTIONS; NO CONFLICT. The execution,
delivery and performance by Maker and the consummation of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporation action on the part of Maker. This Secured Promissory Note has been
duly and validly executed and delivery by Maker and, when executed and delivered
in accordance with its terms, shall constitute the valid and binding obligations
of Maker, enforceable in accordance with the terms hereof. Neither the
execution, delivery or performance by Maker of this Secured Promissory Note nor
the consummation by Maker of the transactions contemplated hereby, nor
compliance by Maker with any provision hereof will (i) violate or result in a
breach of any provision of the Articles of Incorporation or Bylaws of Maker, in
each case as in effect on the date hereof, or (ii) conflict with any law,
statute, ordinance, rule, regulation, order, writ, judgment, injunction, award,
decree, concessions, grant, franchise, restriction or agreement of, from or with
any governmental authority applicable to Maker. No permit, consent or approval
of or by, or any notification of or filing with, any person or entity is
required in connection with the execution, delivery or performance by Maker, or
the consummation of the transaction contemplated hereby.
(iii) USE OF PROCEEDS. Without Holder's consent, Maker
shall not use any funds provided by Holder under the terms hereof to pay, in
whole or in part, any outstanding loans existing as of the date hereof (this
shall not include any payments required to be made to suppliers or creditors in
the normal course of business, including without limitation, equipment
lease/finance payments). Other than as stated in the preceding paragraph, there
shall be no limitation as to the application of the proceeds of this Secured
Promissory Note.
4.2 REPRESENTATIONS AND WARRANTIES OF HOLDER. Holder hereby
represents and warrants to Maker as follows:
(i) ORGANIZATION; CORPORATE AUTHORITY; GOOD STANDING.
Holder is a duly organized limited liability company, validly existing and in
good standing under the Laws of the State of California and has all requisite
power and authority to own, lease and operate its properties and to carry on its
business as now being conducted or contemplated. Holder has all
3
<PAGE>
requisite power and authority to execute and deliver this Secured Promissory
Note, to perform its obligations hereunder and to consummate the transactions
contemplated hereby.
(ii) COMPANY ACTIONS; NO CONFLICT. The execution,
delivery and performance by Holder and the consummation of the transactions
contemplated hereby have been duly and validly authorized by all necessary
company action on the part of Holder. This Secured Promissory Note has been
duly and validly executed by Holder and, when executed and delivered in
accordance with its terms, shall constitute the valid and binding obligations of
Holder, enforceable in accordance with the terms thereof. Neither the
execution, delivery or performance by Holder of this Secured Promissory Note nor
the consummation by Holder of the transactions contemplated hereby, nor
compliance by Holder with any provision hereof will (i) violate or result in a
breach of any provision of the Articles of Incorporation or Operating Agreement
or Holder, in each case as in effect of the date hereof, or (ii) conflict with
any law, statute, ordinance, rule, regulation, order, writ, judgment,
injunction, award, decree, concession, grant, franchise, restriction or
agreement of, from or with any governmental authority applicable to Holder.
5. MISCELLANEOUS.
5.1 NOTICES. All payments or other communications which are
required or permitted hereunder shall be in writing and shall be deemed to have
been given if (i) personally delivered or sent by telecopier, (ii) sent by
nationally-recognized overnight courier or (iii) sent by registered or certified
mail, postage prepaid, return receipt requested, addressed as follows:
If to Maker to: with a second coy to:
-------------- --------------------
Global Media Corp.
83 Victoria Crescent
Nanaimo, BC V9R 5B9
Canada
Attention: Mr. Michael Metcalfe
If to Holder to: with a second coy to:
--------------- --------------------
Rolling Oaks Enterprises, Inc. Matthew S. Meza, Esq.
1501 Main Street, Suite 201 Shumaker Sragow & Steckbauer, LLP
Venice, CA 90291 300 South Grand Ave., Suite 1400
Attention: Brian C. Sullivan Los Angeles, CA 90071
Facsimile # (213) 629-4520
or such other address as the party to whom notice is to be given may have
furnished to each other party to whom notice is to be given may have
furnished to each other party in writing in accordance herewith. Any
such payments, notices or other communications shall be deemed to have
been received (i) when delivered, if personally delivered or sent by
telecopier, (ii) on the business day after dispatch, if sent by
nationally recognized, overnight courier and (iii) on the third business
day following the date on which the piece
4
<PAGE>
of mail containing such payment, notices or other communications is
posted, if sent by mail.
5.2 CONFIDENTIALITY. The provisions of this Secured Promissory
Note are deemed confidential and may not be revealed to any third party, except
to the extent that such disclosure is required by law or made to agents or
representatives of each party hereto, permitted under a provision hereof. No
press release or other public announcement may issue or be caused to be issued
without the prior written consent of the Holder and Maker.
5.3 WAIVER. No waiver of any provisions of or default under
this Secured Promissory Note shall affect the right of any party thereafter to
enforce such provisions or to exercise any right or remedy in the event of any
other default, whether or not similar.
5.4 SUCCESSORS AND ASSIGNS; ASSIGNMENT. This Secured Promissory
Note shall be binding upon, inure to the benefit of, and be enforceable by the
parties hereto and their respective successors and assigns. This Secured
Promissory Note may not be assigned by Maker without the prior written consent
of Holder, which may be given or withheld in Holder's sole and absolute
discretion.
5.5 HOLDER'S ATTORNEYS' FEES. Maker agrees to pay Holder its
reasonable attorneys' fees relating to the negotiations, review and consummation
relating to this Secured Promissory Note and other documents and transactions
contemplated hereby.
5.6 COUNSEL. All parties hereto represent that, prior to
execution hereof, they have had the benefit of independent and separate legal
counsel in reviewing this Secured Promissory Note and have not, in whole or in
part, relied upon the advice or counsel of any attorney, agent or other
representative of another party hereto.
5.7 COSTS OF COLLECTION; ATTORNEYS' FEES. Maker agrees to pay
all costs of collection, including reasonable attorneys' fees incurred by the
Holder of this Secured Promissory Note in collecting or enforcing this Secured
Promissory Note, whether in connection with a reorganization, bankruptcy or
other similar proceeding, or upon default.
5.8 COMPLETE AGREEMENT. This Agreement and the other Loan
Documents constitute the complete and exclusive statement of agreement among the
parties hereto with respect to the matters set forth herein and thereon. This
Agreement and the other Loan Documents replace and supersede all prior
agreements by and among the parties hereto. This Agreement and other Loan
Documents supersede all prior written and oral statements and no representation,
statement, or condition or warranty not contained herein or thereon will be
binding on any party hereto or have any force or effect whatsoever.
5.9 GENDER AND NUMBER IN NOUNS AND PRONOUNS. Common nouns and
pronouns shall be deemed to refer to the masculine, feminine, neuter, singular,
and plural, as the context may require. The singular shall include the plural
and the masculine gender shall include the feminine and neuter, and vice versa,
as the context may require.
5
<PAGE>
5.10 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.
5.11 SEVERABILITY. If any provision of this Agreement is held to
be illegal, invalid, or unenforceable under the present or future laws effective
during the term of this Agreement, such provision will be fully severable, this
Agreement will be construed and enforced as if such illegal, invaid, or
unenforceable provision had never comprised a part of this Agreement; and the
remaining provisions of this Agreement will remain in full force and effect and
will not be affected by the illegal, invalid, or unenforceable provision or by
its severance from this Agreement. Furthermore, in lieu of such illegal,
invalid, or unenforceable provision, there will be added automatically as part
of this Agreement a provision as similar in terms to such illegal, invalid, or
unenforceable provision as may be possible and be legal, valid, and enforceable.
5.12 AMENDMENTS. All amendments to this Agreement must be in
writing and signed by all of the parties hereto.
5.13 MULTIPLE COUNTERPARTS. This Agreement may be executed in
several counterparts, each of which shall be deemed an original, and all such
counterparts shall constitute one and the same instrument. In making proof
hereof, it will be necessary to produce only one copy hereof signed by the party
to be charged.
5.14 CONSTRUCTION. The provision of this Secured Party Note
shall be construed according to their fair meaning and neither for nor against
any party hereto irrespective of which party caused such provision, or this
Secured Promissory Note, in its entirety to be drafted.
5.15 GOVERNING LAW. This Secured Promissory Note and the rights
and obligations of the parties hereunder shall be construed in accordance with,
and be governed by, the laws of the State of California.
5.16 MAXIMUM RATE OF INTEREST. This Note is subject to the
express condition that at no time shall Maker be obligated or required to pay
interest on the Principal Amount at a rate which could subject Holder to either
civil or criminal liability as a result of being in excess of the maximum
interest rate at which Maker is permitted by applicable law to contract or agree
to pay. If by the terms of this Note, Maker is at any time required or
obligated to pay interest on the Principal Amount at a rate in excess of such
maximum rate, then the rate of interest under this Note shall be deemed to be
immediately reduced to such maximum rate and all previous payments in excess of
the maximum rate shall be deemed to have been payments in reduction of the
Principal Amount and not on account of the interest due hereunder.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Secured
Promissory Note as of the date first-above written:
Maker: GLOBAL MEDIA CORP.
a
----------------------------------------
By: /s/ Michael Metcalfe
--------------------------------------
Michael Metcalfe
Its President
By: /s/ Winston V. Barta
--------------------------------------
Winston V. Barta
Its Secretary
Holder: ROLLING OAKS ENTERPRISES, INC.
a California limited liability company
By:
--------------------------------------
Brian C. Sullivan
Its Manager
<PAGE>
EXHIBIT 10.2
SECURITY AGREEMENT
This Security Agreement ("Agreement") dated November 30, 1999, by and
between GLOBAL MEDIA CORP., a [Nevada corporation] ("Borrower") and ROLLING OAKS
ENTERPRISES, LLC, a California limited liability company ("Secured Party").
RECITALS
A. Secured Party has made a loan to Borrower in the original principal
amount of Five Hundred Thousand Dollars ($500,000.00), which loan is evidenced
by that certain Promissory Note, executed by the Borrower in favor of Secured
Party, dated November __, 1998, in the original amount of Five Hundred Thousand
Dollars ($500,000) (the "Note").
B. Borrower desires to guarantee and secure Borrower's obligations
under the Note by, among other collateral the pledge of the personal property,
more particularly described in this Agreement.
NOW, THEREFORE, the parties agree as follows:
1. GRANT OF SECURITY INTEREST. Borrower, in consideration of Secured
Party advancing the Loan to Borrower, hereby grants, conveys, and assigns to
Secured Party as security for Borrower's faithful performance of its obligations
under the Note, all of Borrower's existing and future right, title and interest
in,, to and under the property listed in Section 2 of this Agreement.
2. PROPERTY. The property subject to the security interest granted in
Section 1 (the "Collateral") is the personal property, as described in more
detail on EXHIBIT A attached hereto.
3. COVENANTS OF BORROWER. Borrower agrees and covenants as follows:
3.1 OWNERSHIP OF COLLATERAL. Borrower is the sole owner of the
Collateral and will defend the Collateral against the claims and demands of all
other persons at any time claiming the same or any interest therein.
3.2 SALE OR REMOVAL OF COLLATERAL PROHIBITED. Borrower shall
not sell, encumber, pledge, mortgage, assign, grant a security interest in, or
otherwise transfer the Collateral without the prior written consent of Secured
Party which consent may be given or withheld by Secured Party in its sole and
absolute discretion.
3.3 PERFECTION OF SECURITY INTEREST. Borrower agrees to execute
and file financing statements, and do whatever may be necessary under the
applicable Uniform Commercial Code in the state where the Collateral is located,
to perfect and continue Secured Party's interest in the Collateral, all at the
Borrower's expense. Borrower hereby constitutes and appoints Secured Party as
its true and lawful attorney, irrevocably, with the full power, but not
obligation to take any action, which Secured Party may deem necessary or
advisable, including, but not limited to filing of a financial statement in
connection with the Collateral.
<PAGE>
4. FORBEARANCE BY SECURED PARTY NOT A WAIVER. Any forbearance by
Secured Party in exercising any right or remedy hereunder, or otherwise afforded
by applicable law, shall not be a waiver of or preclude the exercise of any
other right or remedy. The acceptance by Secured Party of payment of any sum
secured by this Agreement and the Loan Documents after the due date of such
payment shall not be a waiver of Secured Party's right to either require prompt
payment when due of all other sums so secured or to declare a default for
failure to make prompt payment. The payment of taxes or other liens or charges
by Secured Party shall not be a waiver of Secured Party's right to accelerate
the maturity of the indebtedness secured by this Agreement.
5. UNIFORM COMMERCIAL CODE SECURITY AGREEMENT. This Agreement is
intended to be a security agreement pursuant to the Uniform Commercial Code for
any of the items specified above as part of the Collateral which, under
applicable law, may be subject to a security interest pursuant to the Uniform
Commercial Code, and Borrower hereby grants Secured Party a security interest in
said items. Borrower agrees that Secured Party may file any appropriate
document in the appropriate index as a financing statement for any of the items
specified above as part of the Collateral. In addition, Borrower agrees to
execute and deliver to Secured Party, upon Secured Party's request, any
financing statements, as well as extensions, renewals and amendments thereof,
and reproductions of this Agreement in such form as Secured Party may require to
perfect a security interest with respect to said items. Borrower shall pay all
costs of filing such financing statements and any extensions, renewals,
amendments, and releases thereof, and shall pay all reasonable costs and
expenses of any record searches for financing statements Secured Party may
reasonably require. Without the prior written consent of Secured Party,
Borrower shall not create or suffer to be created pursuant to the Uniform
Commercial Code any other security interest in the Collateral, including
replacements and additions thereto. Upon the occurrence of an event of default
under the Loan Documents, Secured Party shall have the remedies of a secured
party under the Uniform Commercial Code and, at Secured Party's option, may also
invoke the other remedies provided in this Agreement as to such items. In
exercising any of said remedies, Secured Party may proceed against any items
specified above as part of the Collateral separately or together and in any
order whatsoever, without in any way affecting the availability of Secured
Party's remedies under the Uniform Commercial Code or of the other remedies
provided in this Agreement or the Note.
6. DEFAULT BY BORROWER. Upon and at any time following any default of
the Borrower under the Note, Secured Party may, at its option, proceed directly
and at once, without notice, against Borrower to collect and recover the full
amount of the liability under the Note, or any portion thereof, without
proceeding against any other person, (i) the right to have other property of
Borrower first applied to the discharge of such indebtedness, and (ii) the
pleading of any statute of limitations as its defense to the obligation
hereunder.
7. INDEBTEDNESS. The word "indebtedness" as used in this Agreement
includes not only debts voluntarily contracted, but every debt, obligation or
liability however arising and whether the same be due or owing absolute or
contingent, determined or inchoate, and this Agreement shall extent to and cover
all renewals and extensions of any claims or demands guaranteed under this
instrument.
2
<PAGE>
8. RIGHTS OF SECURED PARTY.
8.1 Upon Borrower's default Secured Party may sell all or any
part of the Collateral. Secured Party shall give Borrower reasonable notice of
the time and place of any sale or of the time which any private sale or other
disposition of the Collateral is to be made, and notice given at least 10 days
before the time of the sale or other disposition shall be conclusively presumed
to be reasonable.
8.2 Payment shall be in cash or by certified check immediately
following the close of the sale.
8.3 Notwithstanding any provision of this Agreement, Secured
Party shall be under no obligation to offer to sell the Collateral. In the
event Secured Party offers to sell the Collateral, Secured Party will be under
no obligation to consummate a sale of the Collateral if, in its reasonable
business judgment, none of the offers received by it reasonably approximates the
fair value of the Collateral.
8.4 In the event Secured Party elects not to sell the
Collateral, Secured Party may elect to follow the procedures set forth in the
Uniform Commercial Code for retaining the Collateral in satisfaction of
Borrower's obligation, subject to the Borrower rights under such procedures.
9. WAIVER OF MARSHALLING. Notwithstanding the existence of any other
security interest in the Collateral held by Secured Party or by any other party,
Secured Party shall have the right to determine the order in which any or all of
the Collateral shall be subjected to the remedies provided by this Agreement.
Secured Party shall have the right to determine the order in which any or all
portions of the indebtedness secured by this Agreement are satisfied from the
proceeds realized upon the exercise of the remedies provided in this Agreement.
Borrower and any party who consents to this Agreement, and any party who now or
hereafter acquires a security interest in the Collateral and who has actual or
constructive notice of this Agreement, hereby waives any and all right to
require the marshalling of assets in connection with the exercise of any of the
remedies permitted by applicable law or by this Agreement.
10. REMEDIES CUMULATIVE. Each remedy provided in this Agreement is
distinct and cumulative to all other rights or remedies under this Agreement or
afforded by law or equity, and may be exercised concurrently, independently, or
successively, in any order whatsoever.
11. MISCELLANEOUS.
11.1 HEADINGS. All headings herein are inserted only for
convenience and each of reference and are not to be considered in the
construction or interpretation of any provision of this Agreement.
11.2 SEVERABILITY. If any provision of this Agreement is held to
be illegal, invalid or unenforceable under the present or future laws effective
during the term of this Agreement, such provision will be fully severable; this
Agreement will be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a part of this Agreement; and the
remaining provisions of this Agreement will remain in full force and effect
3
<PAGE>
and will not be affected by the illegal, invalid, or unenforceable provision or
by its severance from this Agreement.
11.3 ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement with respect to the subject matter hereof between the parties hereto
and shall supersede and completely replace any prior agreement or
understandings, written or oral, between the parties hereto regarding the
subject matter hereof, and any such prior agreements or understanding shall be
of no further force or effect. This Agreement may only be modified by an
agreement or understanding in writing executed by all parties hereto.
11.4 MULTIPLE COUNTERPARTS. This Agreement may be executed in
several counterparts, each of which shall be deemed an original, and all such
counterparts shall constitute one and the same instrument. In making proof
hereof, it will be necessary to produce only one copy hereof signed by the party
to be charged.
11.5 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with, the laws of the State of California.
IN WITNESS WHEREOF, the parties hereto have executed this Security
Agreement as of the date first set forth above.
BORROWER: GLOBAL MEDIA CORP., a __________
By: /s/ Michael Metcalfe
----------------------------------------
Michael Metcalfe
President
By: /s/ Winston V. Barta
----------------------------------------
Winston V. Barta
Secretary
SECURED PARTY: ROLLING OAKS ENTERPRISES, LLC, a
California limited liability company
By:
----------------------------------------
Brian C. Sullivan
Manager
4
<PAGE>
EXHIBIT A
GLOBAL MEDIAL CORP.
SCHEDULE OF CAPITAL ASSETS
JULY 31, 1998
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
ITEM 1 Capital Assets CAN EXCHANGE US
--------------------- EQUIVALENT RATE EQUIVALENT
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Office Equipment
- ---------------------------------------------------------------------------------------------------------------------------
Call Center Furniture (20
partitioned desks) 13,498.52
- ---------------------------------------------------------------------------------------------------------------------------
Island Business Products - file
cabinets 2,248.97
- ---------------------------------------------------------------------------------------------------------------------------
Island Business Products - chairs
257.55
- ---------------------------------------------------------------------------------------------------------------------------
Island Business Products - desk
802.50
- ---------------------------------------------------------------------------------------------------------------------------
Island Business Products - misc
213.06
- ---------------------------------------------------------------------------------------------------------------------------
Cliff Baker - book rack 140.19
- ---------------------------------------------------------------------------------------------------------------------------
Promark Construction - boardroom
table, lunch benches, lockers,
glass partition, 20 chairs, 2
building signs 8,144.10
- ---------------------------------------------------------------------------------------------------------------------------
Panasonic Photocopier 2,241.65
- ---------------------------------------------------------------------------------------------------------------------------
4-Drawer Filing Cabinet 255.72 27,802.26 1,450.39 19,168.82
---------- ----------
- ---------------------------------------------------------------------------------------------------------------------------
Total Office Equipment 27,802.26 1,450.39 19,168.82
---------- ----------
- ---------------------------------------------------------------------------------------------------------------------------
Leasehold Improvements
- ---------------------------------------------------------------------------------------------------------------------------
From Reception Area 2,795.94
- ---------------------------------------------------------------------------------------------------------------------------
Promark Construction -
partitions, doors, lighting,
lumber, ceiling tiles 5,561.05
- ---------------------------------------------------------------------------------------------------------------------------
Promark Construction - carpeting
and tiles 4,284.12 12,541.11 1,459.39 8,715.66
-------- ---------- ----------
- ---------------------------------------------------------------------------------------------------------------------------
Total Leasehold Improvements 12,541.11 1,450.39 8,715.66
---------- ----------
- ---------------------------------------------------------------------------------------------------------------------------
Computer Hardware
- ---------------------------------------------------------------------------------------------------------------------------
2 IBM Aptiva Computers and
Monitors (Pentium) 6,148.94
- ---------------------------------------------------------------------------------------------------------------------------
2 AST Computers and Monitors
(486) 3,540.00
- ---------------------------------------------------------------------------------------------------------------------------
AST Computer and Monitor
(Pentium) 2,054.00
- ---------------------------------------------------------------------------------------------------------------------------
1 Okidata Printer 406.00
- ---------------------------------------------------------------------------------------------------------------------------
1 Printer (Brother HL-730 Plus) 785.00
- ---------------------------------------------------------------------------------------------------------------------------
McDermid & St. Lawrence -
Computer 785.00
- ---------------------------------------------------------------------------------------------------------------------------
Citibank - VISA - satellite
internet downlink 691.46
- ---------------------------------------------------------------------------------------------------------------------------
Robert Fuller - 10 modems for
progressive dialer 360.35
- ---------------------------------------------------------------------------------------------------------------------------
Network Router Hub 2,187.87
- ---------------------------------------------------------------------------------------------------------------------------
Waterstreet - Computer Backup
System, 3 Fax Modems,
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
ITEM 1 Capital Assets CAN EXCHANGE US
--------------------- EQUIVALENT RATE EQUIVALENT
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Network Systems Rack, 1
Pentium Computer 3,598.00 20,406.61 1,450.39 14,069.74
-------- ---------- ----------
- ---------------------------------------------------------------------------------------------------------------------------
Total Computer Hardware 20,406.61 14,069.74
---------- ----------
- ---------------------------------------------------------------------------------------------------------------------------
Computer Software
- ---------------------------------------------------------------------------------------------------------------------------
Data Base Management 3,271.00
- ---------------------------------------------------------------------------------------------------------------------------
Abacus Accounting 1,895.00
- ---------------------------------------------------------------------------------------------------------------------------
Microsoft Office - Multi Office
License 2,250.00
- ---------------------------------------------------------------------------------------------------------------------------
Customer Ordering System 901.50
- ---------------------------------------------------------------------------------------------------------------------------
Quick Books 175.00
- ---------------------------------------------------------------------------------------------------------------------------
PC Quote 1,058.23
- ---------------------------------------------------------------------------------------------------------------------------
Mastercard - Extractor Pro 605.47 10,156.20 1,450.39 7,002.39
------ ---------- ----------
- ---------------------------------------------------------------------------------------------------------------------------
Total Computer Software 10,156.20 1,450.39 7,002.39
---------- ----------
- ---------------------------------------------------------------------------------------------------------------------------
Call Center - Development
- ---------------------------------------------------------------------------------------------------------------------------
BC Telephone - 3 telephones 184.73
- ---------------------------------------------------------------------------------------------------------------------------
BC Telephone - install phone
lines 40.00
- ---------------------------------------------------------------------------------------------------------------------------
Orion 2000 Technologies - install
virtual server 500.00
- ---------------------------------------------------------------------------------------------------------------------------
Winston Barta - internet design 1,000.00
- ---------------------------------------------------------------------------------------------------------------------------
Vic Bergeron - reconfigure server 500.00
- ---------------------------------------------------------------------------------------------------------------------------
BC Telephone - hook up lines 2,584.60
- ---------------------------------------------------------------------------------------------------------------------------
J. Dumont Consulting - computer 1,920.00
- ---------------------------------------------------------------------------------------------------------------------------
ProNet Communications - internet
set up 502.90
- ---------------------------------------------------------------------------------------------------------------------------
Dennis Morgan - internet design 1,000.00
- ---------------------------------------------------------------------------------------------------------------------------
Winston Barta - internet design 2,000.00
- ---------------------------------------------------------------------------------------------------------------------------
Winston Barta - internet design 1,389.02
- ---------------------------------------------------------------------------------------------------------------------------
Winston Barta - internet design 1,500.00
- ---------------------------------------------------------------------------------------------------------------------------
Steven Bubalo - team of testers
for system 11,424.00
- ---------------------------------------------------------------------------------------------------------------------------
Steven Bubalo - team of testers
for system 1,000.00
- ---------------------------------------------------------------------------------------------------------------------------
Promark Construction - computer
consultant 6,000.00
- ---------------------------------------------------------------------------------------------------------------------------
Simmer Systems Mgmt - misc
supplies 475.77
- ---------------------------------------------------------------------------------------------------------------------------
CTI Telephone - testing 1,801.52
- ---------------------------------------------------------------------------------------------------------------------------
Winston Barta - database design 2,500.00
- ---------------------------------------------------------------------------------------------------------------------------
Winston Barta - database design 1,500.00
- ---------------------------------------------------------------------------------------------------------------------------
Simmer Systems Mgmt - misc
supplies 323.92
- ---------------------------------------------------------------------------------------------------------------------------
BC Telephone - ISDN line 2,566.59
- ---------------------------------------------------------------------------------------------------------------------------
CTI Telephone - testing system 1,453.99
- ---------------------------------------------------------------------------------------------------------------------------
CTI Telephone - testing system 861.90
- ---------------------------------------------------------------------------------------------------------------------------
Winston Barta - database design 1,750.00
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
ITEM 1 Capital Assets CAN EXCHANGE US
--------------------- EQUIVALENT RATE EQUIVALENT
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Winston Barta - database design 1,750.00
- ---------------------------------------------------------------------------------------------------------------------------
BC Telephone - testing system 2,329.39
- ---------------------------------------------------------------------------------------------------------------------------
Winston Barta - database design 2,000.00
- ---------------------------------------------------------------------------------------------------------------------------
Winston Barta - misc parts 597.70
- ---------------------------------------------------------------------------------------------------------------------------
Steven Bubalo - software
development 1,459.16
- ---------------------------------------------------------------------------------------------------------------------------
Scott Simmer - software
development 4,200.00
- ---------------------------------------------------------------------------------------------------------------------------
Scott Simmer - software
development 1,400.00
- ---------------------------------------------------------------------------------------------------------------------------
Winston Barta - database design 3,500.00
- ---------------------------------------------------------------------------------------------------------------------------
Scott Simmer - software
development 1,500.00
- ---------------------------------------------------------------------------------------------------------------------------
Promark Construction
- running wiring for network 3,560.50
- database development 5,000.00
- network cards 1,800.13
- ---------------------------------------------------------------------------------------------------------------------------
Scott Simmer - Telephone System
Layout 4,500.00
- ---------------------------------------------------------------------------------------------------------------------------
Steven Bubalo - Wiring Telephone
Systems 10,500.00
- ---------------------------------------------------------------------------------------------------------------------------
Scott Simmer - Computer System
Layout 4,500.00
- ---------------------------------------------------------------------------------------------------------------------------
Scott Simmer - Wiring Telephone
System 2,437.50
- ---------------------------------------------------------------------------------------------------------------------------
Steven Bubalo - Wiring Telephone
System with Computers 3,000.00
- ---------------------------------------------------------------------------------------------------------------------------
Scott Simmer - Data Base Spec
Design - Software 25,850.00
- ---------------------------------------------------------------------------------------------------------------------------
Gary Gantz - Wiring Computer
outlets from Server 25,850.00
- ---------------------------------------------------------------------------------------------------------------------------
0.00 133,363.32 1,450.39 91,949.97
----
- ---------------------------------------------------------------------------------------------------------------------------
Total Call Center - Development 133,363.32 1,450.39 91,949.97
---------- ----------
- ---------------------------------------------------------------------------------------------------------------------------
Tim Stewart - 10 computers,
printers, scanner, 10 telephones
with control box 39,088.50
- ---------------------------------------------------------------------------------------------------------------------------
BC Telephone - 3 telephones 802.50
- ---------------------------------------------------------------------------------------------------------------------------
J Dumont Consulting - 2 computers 4,299.26
- ---------------------------------------------------------------------------------------------------------------------------
J Dumont Consulting - Panasonic
main telephone system 5,143.53
- ---------------------------------------------------------------------------------------------------------------------------
The Communication Connection -
headsets 802.50
- ---------------------------------------------------------------------------------------------------------------------------
Canadian Communication - headsets 1,588.80
- ---------------------------------------------------------------------------------------------------------------------------
J Dumont Consulting - 1 computer 2,204.76
- ---------------------------------------------------------------------------------------------------------------------------
J Mann - 40 telephones and 2
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
ITEM 1 Capital Assets CAN EXCHANGE US
--------------------- EQUIVALENT RATE EQUIVALENT
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
control boxes 12,000.00
- ---------------------------------------------------------------------------------------------------------------------------
J Dumont - Hard Drive 479.94
- ---------------------------------------------------------------------------------------------------------------------------
J Dumont - 4 Pentium Computers
with Monitors 7,587.84
- ---------------------------------------------------------------------------------------------------------------------------
J Dumont - Computer Fax Server 3,060.90
- ---------------------------------------------------------------------------------------------------------------------------
Waterstreet - 1 Pentium Computer
with Monitor 2,228.62 80,287.15 1,450.39 55,355.56
-------- ---------- ----------
- ---------------------------------------------------------------------------------------------------------------------------
Total Call Center - Equipment/Hardware 80,287.15 1,450.39 55,355.56
---------- ----------
- ---------------------------------------------------------------------------------------------------------------------------
Call Center - Equipment/Software
- ---------------------------------------------------------------------------------------------------------------------------
Tim Stewart - 10 stations
user/licenses for (NT Windows,
Goldmine, Faxrush, Call Comando) 17,628.25
- ---------------------------------------------------------------------------------------------------------------------------
Citibank - VISA - proxy server
software 580.72
- ---------------------------------------------------------------------------------------------------------------------------
Scott Simmer 1,532.26
- ---------------------------------------------------------------------------------------------------------------------------
Simmer Systems - upgrade to 20
users for Goldmine 4,092.60 24,033.83 1,450.39 16,570.60
-------- ---------- ----------
- ---------------------------------------------------------------------------------------------------------------------------
Total Call Center - Equipment/Software 24,033.83 1,450.39 16,570.60
---------- ----------
- ---------------------------------------------------------------------------------------------------------------------------
Web Site - Software
- ---------------------------------------------------------------------------------------------------------------------------
2 B's Communications 2,000.00
- ---------------------------------------------------------------------------------------------------------------------------
2 B's Communications 3,093.00 5,093.00 1,450.39 3,511.47
-------- ---------- ----------
- ---------------------------------------------------------------------------------------------------------------------------
Total Web Site - Software 5,093.00 1,450.39 3,511.47
---------- ----------
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS 313,783.48 1,450.39 216,344.21
---------- ----------
- ---------------------------------------------------------------------------------------------------------------------------
ITEM 2
- ---------------------------------------------------------------------------------------------------------------------------
1,000,000 Global Media Shares
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE>
GLOBAL MEDIA CORP.
RENTAL SUMMARY
LEASE: 5 year term began Oct. 1, 1997 at the end of 2 month fixturing
period, and has 5 year option to renew.
RATE: 1. BASE RENT -- $8.00 per sq. ft. beginning Oct. 1, 1997 to be
paid as follows:
YEAR 1 AND 2
a) $16,000 annual base rent portion to be paid monthly in advance
at $1,333.33 per month.
b) $29,736 annual base rent portion to be paid in advance by
company stock at $0.50 per share and due upon company registration
with a stock exchange and share issuance.
YEAR 3 THROUGH 5
Base rent at $8.00 per sq. ft. due monthly in advance at $3,811.33
per month.
2. TRIPLE NET expenses to be paid monthly in advance concurrently
with the base rent figure above, with estimated expenses for 1998
as per lease clause 2, 4 and 6 estimated at $6.00 per sq. ft., or
$34,302.00 annually or $2,858.50 monthly.
3. GST on the whole of base rent and triple net expenses as above,
totaling 7% of $4,191.83 or $293.43 monthly.
MONTHLY RENT AMOUNT DUE
<TABLE>
<S> <C>
Base $1,333.33
Triple Net $2,858.50
GST $ 293.43
---------
Total $4,485.26
</TABLE>
<PAGE>
Exhibit 10.3
REAL BROADCAST NETWORK
STREAMING MEDIA SERVICES AGREEMENT
WITH
GLOBAL MEDIA CORP.
APRIL 19, 1999
PREPARED BY:
RICHARD EASTERN
SENIOR ACCOUNT EXECUTIVE
REALNETWORKS, INC.
1111 THIRD AVENUE
SEATTLE, WA 98101
TEL: (206) 674-2248
FAX: (206) 674-2697
[email protected]
Page 1
<PAGE>
This Streaming Media Services Agreement ("Agreement") is effective
as of the last date signed below, by and between GLOBAL MEDIA CORP., with its
principal place of business at 83 Victoria Crescent, Nanaimo, British
Columbia, Canada V9R 5B9 ("Company"), and RealNetworks, Inc., a Washington
corporation with its principal place of business at 1111 Third Avenue, Suite
2900, Seattle, Washington 98101 ("RN"). Company desires that RN supply
certain streaming media services in connection with the Internet products or
activities of Company, and RN desires to supply such services. In
consideration of the mutual promises and covenants contained herein, the
parties agree as follows:
1. DEFINITIONS
1.1 "Content" means all audio, video or other streaming materials
supplied by or for Company to RN in connection with the performance of
Services by RN pursuant to this Agreement.
1.2 "Services" means the services to be provided by RN to Company
pursuant to this Agreement, as more fully described in Exhibit 2 attached
hereto.
1.3 "Site" means the World Wide Web site located at WWW.GMCCORP.COM
and affiliated radio station sites.
1.4 "System" means the equipment and communication network via which
Services are provided, as more fully described in Exhibit 2.
2. COMPANY OBLIGATIONS
2.1 SUPPLY OF CONTENT. Company shall supply Content to RN via
telephone line, ISDN, frame relay, satellite feed or via FTP, according to
the schedule and specifications to be agreed to by the parties.
2.2 LICENSE GRANT. Company hereby grants RN, during the term of this
Agreement, the nonexclusive, worldwide, royalty-free right and license to:
2.2.1 use, reproduce, encode, transmit, publicly perform,
publicly display and distribute Content as necessary or desirable for RN's
performance of Services under this Agreement; and
2.2.2 use the trademarks, logos and trade names of Company and
any third-parties contained in the Content solely in connection with RN's
performance of Services.
2.3 RESPONSIBILITY FOR CONTENT AND THE SITE. Except for the Services
to be provided by RN hereunder, as between Company and RN, Company shall be
completely and solely responsible for all matters relating to Content and the
Site, including, without limitation, all costs, activities, obligations and
liabilities associated with the creation, production, editing, supply,
correction and maintenance of the Content and the Site. Company shall notify
RN when it desires to remove material from Content or the Site, which
material RN shall promptly remove. RN assumes no responsibility for editing,
reviewing, controlling or conducting any other activities associated with
publishing any Content, or (except for the Services) operating or maintaining
the Site, nor shall it have any liability to any third party in connection
with such activities. Company shall have the right to alter, modify or delete
Content under its control at any time, or, if RN's assistance is needed, upon
prior notice to RN.
2.4 SUPPORT. Company shall provide RN with reasonable support and
assistance, as set forth in Exhibit 1 hereto, in connection with RN's
provision of Services throughout the term of this Agreement.
2.5 CLEARANCE. Company shall be solely responsible for obtaining any
necessary rebroadcast or retransmission rights or permissions if it desires
RN to acquire any broadcast signals using DBS, and shall bear all costs,
obligations and liabilities associated therewith.
2.6 ATTRIBUTION. Company agrees to indicate on its Site that the
Content is being delivered on the Real Broadcast Network. Company must
indicate which publicly available files are in the RealAudio (.ra) or
RealVideo (.rm) format. RN hereby grants Company a non-exclusive, limited
license to use, and
Page 2
<PAGE>
(.ra) or RealVideo (.rm) format. RN hereby grants Company a non-exclusive,
limited license to use, and Company agrees that Company shall always use,
RN's trademarks in accordance with RN's Trademark and Logo Usage Policy at
HTTP://WWW.REAL.COM/CORPORATE/LOGOS/POLICY.HTML., and for the sole purpose of
informing web page visitors that RealAudio or RealVideo content is available
at Company's web page. Company agrees that it shall not use any RN trademark
in a way that may imply that it is an agency or branch of RN, or that may
imply that RN endorses, is affiliated with, or sponsors Company or Company's
products, without RN's express written permission. Company also agrees that
Company may not link directly to any media file or .ram file made available
from the RN website.
2.7 EXCLUSIVITY. Company agrees that RN will be the exclusive
provider of streaming media services to Company during the Term.
3. RN OBLIGATIONS
3.1 SERVICES. RN shall supply the Services to Company, and perform
such Services in a workmanlike manner in accordance with the standards
generally prevailing in the industry for similar services. RN shall use
commercially reasonable best efforts to maintain the System and provide the
Services in accordance with Exhibit 2, but shall not be liable to Company or
any third party for any failure to do so due to reasons: (i) beyond RN's
reasonable control, (ii) arising from other than RN's obligations as
expressly set forth in Exhibit 2, (iii) arising in connection with viewer and
listener use of Content in excess of the maximum burstable System capacity
level, and/or (iv) arising from or in connection with problems attributable
to Content. Company acknowledges that RN may use third-party service
providers to supply certain components of the System or the Services.
3.2 REPORTING. RN will generate daily on-line reports, accessible
via a web page, that include the total number of viewers and listeners
accessing the Content and the average time duration observed by RN with
respect to each Content piece.
4. FEES AND PAYMENT
4.1 FEES. Pricing for the Services ("Service Fees") shall be as set
forth in Exhibit 3 attached hereto.
4.2 PAYMENT. RN shall invoice Company for Service Fees performed on
a monthly basis. Company shall pay all taxes, duties and similar charges that
apply to or arise from this Agreement, excluding taxes on RN's income. All
invoices are due and payable in full within 30 calendar days of the invoice
date, to the account and in the manner designated by RN. Notwithstanding the
termination provisions of this Agreement, RN reserves the right to terminate
its Services and this Agreement immediately without further notice if payment
is not received in accordance with invoice terms. Invoiced amounts not paid
when due shall be subject to late fees equal to the lower of 1.5% per month
or the maximum amount allowed by applicable law. Termination of this
Agreement and/or payment of such late fees shall not prejudice any other
rights or remedies that may be available to RN with respect to any nonpayment
or late payment of applicable Service Fees. Service Fee payments are
nonrefundable and not subject to offset.
5. PROPRIETARY RIGHTS
5.1 COMPANY'S OWNERSHIP. As between RN and Company, Company shall be
the sole owner of all right, title and interest in and to Content and the
Site, and all copyrights and other intellectual property rights therein.
Company shall retain title to and ownership in information relating to
viewers and listeners; provided, however, that RN shall have the
nonexclusive, perpetual, irrevocable, royalty-free, worldwide right to use
viewer and listener data and statistics gathered by the System or obtained by
RN during the performance of the Services.
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5.2 RN'S OWNERSHIP. RN shall be the sole owner of all right, title
and interest in and to the System, computer programs, materials, processes
and other works of authorship developed or used by or for RN in connection
with the Content, the Site and/or the provision of Services hereunder, and
all copyrights, patents and other intellectual property rights therein.
6. WARRANTIES AND INDEMNIFICATION
6.1 CONTENT AND AUTHORIZATION WARRANTIES.
6.1.1 Company warrants and represents that: (i) the Content and
any portion thereof does not in any way violate any existing law, infringe
upon or misappropriate any copyright, patent, trademark, trade secret, right
of publicity, right or privacy or other proprietary rights of any third
party, either in whole or in part; (ii) the Content contains no matter which,
if published, will be libelous or defamatory; (iii) it has obtained or will
obtain all necessary consents, licenses, permissions and releases necessary
to grant RN the rights granted hereunder; (iv) the Content complies with all
federal, state and local laws and regulations (including those governing
export and import) that are applicable to the transmission or use of the
Content as permitted or contemplated by this Agreement for each country in
which the Content is intended to be transmitted or delivered; (v) there exist
no outstanding obligations to accord credit to any third party with respect
to, or to respect any third party's rights against changes to, the Content;
(vi) it has the full power and authority to enter into this Agreement and to
perform its obligations hereunder; and (v) Company is solely responsible for,
and has paid or will promptly pay, all amounts due any third-party content
provider or other person or entity that has a right to receive any royalty or
other payment as a result of the transmission or other use of the Content as
contemplated by or provided under this Agreement. Notwithstanding the
foregoing, Company shall not be liable for any material inserted in the
Content by RN other than as supplied, permitted or instructed by Company.
6.1.2 RN warrants and represents that: (i) to the best of its
knowledge, the System does not in any way violate any existing law, infringe
upon or misappropriate any third party proprietary rights, either in whole or
in part; (ii) it has all necessary right, title and interest in and to the
System, including, without limitation, the right to grant Company the rights
granted hereunder; and (iii) it has the full power and authority to enter
into this Agreement and to perform its obligations hereunder.
6.2 INDEMNITIES.
6.2.1 Company hereby agrees to indemnity, hold harmless and
defend RN, its affiliated companies and partners, and their respective
officers, directors, employees and agents from and against any and all
claims, damages, costs and expenses, including reasonable attorneys' fees and
litigation expenses, arising out of or in connection with any Content or the
Site, or act or failure to act of Company or any person or entity other than
RN, or act by RN pursuant to this Agreement or as otherwise instructed or
authorized by Company, including, without limitation: (i) infringement or
violation, or alleged infringement or violation, of any copyright, patent,
trademark, trade secret, right of publicity, right of privacy, or other
third-party proprietary rights; (ii) unfair trade practice, defamation or
misrepresentation; or (iii) Company's breach of the warranties and
representations in Section 6.1.1 and/or the obligations in Section 4.2.
6.2.2 RN hereby agrees to indemnify, hold harmless and defend
Company, its affiliated companies and partners, and their respective
officers, directors, employees and agents from and against any and all
claims, damages, costs and expenses, including reasonable attorneys' fees and
litigation expenses, arising out of or in connection with (i) RN's breach of
the warranties and representations in Section 6.1.2; (ii) any material
inserted in the Content by RN other than as supplied, permitted or instructed
by Company; or (iii) infringement or violation of any copyright, patent,
trademark or trade secret of any third party.
6.2.3 The parties' obligations of indemnification under this
Section 6.2 shall apply to any claims brought by one party against the other
with respect to the indemnified claims. The
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indemnifying party's obligations under this Section 6.2 shall be subject to
the indemnified party providing the indemnifying party (i) reasonably prompt
written notice of any such claim or action and permit the indemnifying party,
through its counsel, to answer and defend such claim or action, and (ii) with
all reasonably required information, assistance and authority to assist in
defending such claim or action. The indemnified party, at its own expense,
shall have the right to employ separate counsel and participate in the
defense thereof. The indemnifying party shall reimburse the indemnified party
upon demand for any payments made or loss suffered by it at any time after
the date hereof based on the judgment of any court of competent jurisdiction
or pursuant to a bona fide compromise or settlement of claims in respect to
any damages to which the foregoing relates and to which the indemnifying
party agrees in writing in advance.
7. CONFIDENTIALITY
"Confidential Information" means any term of this Agreement and any
proprietary information or data, either oral or written, received from and
designated as confidential by the disclosing party. It does not, however,
include information that (i) is already known by the recipient, (ii) becomes
publicly known through no wrongful act of the recipient, or (iii) is received
by the recipient from a third party without similar restriction and without
breach of this Agreement. Each party agrees that it will use the same care to
protect against the unauthorized duplication, use, publication or disclosure
of any such Confidential Information of the other party as it uses to protect
its own proprietary and confidential information, and will not use or
disclose such Confidential Information except in connection with and in
furtherance of the purposes of this Agreement, unless authorized in writing
by the other party. All materials, including copies and summaries, containing
the other party's Confidential Information shall be destroyed or returned to
such party, as instructed by such party, by the recipient promptly upon
termination of this Agreement.
8. TERM AND TERMINATION
8.1 TERM. Unless sooner terminated as provided herein, the initial
term of this Agreement shall commence on the last date signed and accepted by
both parties below and expire THREE YEARS thereafter. This Agreement will
renew automatically for successive terms of the same duration unless and
until Company provides written notification to RN that it desires to
terminate this Agreement, effective 30 days from the date that notice is
received by RN.
8.2 TERMINATION FOR BREACH. If either party breaches any material
provision of this Agreement and such breach has not been cured within 10 days
after the non-breaching party has given written notice to the breaching party
of such breach, then the non-breaching party may terminate this Agreement
effective upon three business days' written notice to the breaching party.
8.3 TERMINATION FOR INSOLVENCY. Either party may, at its option and
upon written notice, terminate this Agreement, effective immediately, should
the other party (i) admit in writing its inability to pay its debts generally
as they become due; (ii) make a general assignment for the benefit of its
creditors; (iii) institute proceedings to be adjudicated a voluntary
bankrupt, or consent to the filing of a petition of bankruptcy against it;
(iv) seek reorganization under any bankruptcy act, or consent to the filing
of a petition seeking such reorganization; or (v) have a decree entered
against it by a court of competent jurisdiction appointing a receiver,
liquidator, trustee or assignee in bankruptcy or in insolvency covering all
or substantially all of such party's property or providing for the
liquidation of such party's property or business affairs, provided such
decree is not dismissed within 45 days.
8.4 EFFECT OF TERMINATION. Upon termination or expiration of this
Agreement for any reason, the licenses granted in Section 2.2 shall
terminate, and RN shall remove all Content from the System within 30 days
following such termination or expiration; provided, however, that Company
shall incur any Service Fees accrued during such 30-day period. Except as
provided in Section 8.3, the termination or expiration of this Agreement
shall have no effect on Company's obligation to pay for Services performed
prior to the effective date of such termination or expiration. The provisions
of Sections 5 through 11 shall survive the termination or expiration of this
Agreement.
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9. WARRANTY DISCLAIMER AND LIMITATIONS OF LIABILITY
9.1 WARRANTY DISCLAIMER. EXCEPT AS SPECIFICALLY SET FORTH ABOVE,
NEITHER PARTY MAKES ANY WARRANTY, AND BOTH PARTIES HEREBY DISCLAIM ALL OTHER
WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, ANY IMPLIED
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, WITH
RESPECT TO CONTENT OR SERVICES TO BE PROVIDED HEREUNDER.
9.2 LIMITATION OF LIABILITY. NEITHER PARTY SHALL BE LIABLE TO THE
OTHER IN TORT, CONTRACT OR UNDER ANY OTHER LEGAL THEORY FOR ANY
CONSEQUENTIAL, INCIDENTAL, PUNITIVE OR SPECIAL LOSS OR DAMAGE ARISING OUT OF
OR IN CONNECTION WITH THIS AGREEMENT, EVEN IF APPRISED OF THE LIKELIHOOD OF
SUCH DAMAGE OCCURRING.
10. NOTICE
Any notice to be given to either party shall be sufficiently given
on the date of mailing if sent to such party by facsimile, receipt of which
is confirmed by return facsimile, or if delivered personally with receipt
acknowledged, or sent by first-class registered or certified mail, overnight
courier, or the equivalent, return-receipt requested, postage or charges
prepaid, addressed to such party at the address set forth above, to the
attention of Kelly Jo MacArthur, VP and General Counsel of RN, and for
Company.
11. MISCELLANEOUS
This agreement and Exhibits 1-3 attached hereto, incorporated herein
by this reference, constitute the final agreement between the parties, and
supersede and cancel all prior negotiations, understandings, correspondence
and agreements, oral and written, express or implied, between the parties
relating to the subject matter hereof, and shall be binding only when
executed by both parties hereto. No waiver, amendment or modification of any
provision of this Agreement shall be effective unless it is in a document
that expressly refers to this Agreement and is signed by both parties.
Failure or delay by either party in exercising any rights or remedy under
this Agreement shall not operate as a waiver of any such right or remedy. If
any provision of this Agreement shall be held by a court of competent
jurisdiction to be illegal, invalid or unenforceable, the legality, validity
and enforceability of the remaining provisions shall not, in any way, be
affected or impaired thereby. This Agreement shall be governed by the laws of
the State of Washington, excluding that body of law known as conflicts of
law. Any and all unresolved disputes arising under this Agreement shall be
submitted to arbitration in the State of Washington. The arbitration shall be
conducted under the rules then prevailing of the American Arbitration
Association. The award of the arbitrator shall be binding and may be entered
as a judgment in any court of competent jurisdiction.
IN WITNESS WHEREOF, the parties have executed this Agreement by their duly
authorized representatives the day and year first written below.
REALNETWORKS, INC. Company GLOBAL MEDIA CORP.
----------------------------
By: Ian Freed By: Michael Metcalfe
------------------------------- --------------------------------
Name
General Manager, RBN President
--------------------------------
/S/ IAN W. FREED Title
-------------------------------
Signature /S/ MICHAEL METCALFE
--------------------------------
4/20/99 Signature
-------------------------------
Date 20 APRIL 99
--------------------------------
Date
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BILL TO INFORMATION:
--------------------
Name: _____________________________
Title: ____________________________
Address: __________________________
City: _____________________________
State: ____________________________
Zip Code: _________________________
Phone: ____________________________
Fax: ______________________________
Email: ____________________________
PO Number (if available): _________
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EXHIBIT 1
COMPANY SUPPORT
PREPARING AUDIO AND VIDEO
1. Company will provide all on-demand media files using the Encoding Software
(e.g., audio, video, animation and other media file types as they become
supported by the Real Broadcast Network and as Company may then elect to
provide) encoded in the file format appropriate for each stream type to the
Broadcast Operations Center (BOC) via the File Transfer Protocol (FTP).
2. Company agrees to utilize the virtual file name convention established by
RN for all streaming media files, including those encoded by RN and those
encoded by Company.
3. Company agrees to furnish RN with the URL for each live or simulated live
stream remotely encoded by Company. Using the conventions established by
RBN operations.
FEED ACQUISITION
4. Company shall take the appropriate measures to ensure that all live or
simulated live feeds will be delivered continuously to the BOC 24
hours/day, 7 days/week, except for scheduled maintenance. If feed is
provided to RN via satellite and Company intends to utilize transmission
methods which are proprietary or uncommon, Company agrees to provide the
receiver equipment to RN and to allow adequate time for setup and testing
of equipment prior to delivery of live content.
5. At Company's election, Company agrees to deliver live feeds to the BOC via
satellite, frame relay or ISDN.
6. Company will encode feeds to be delivered to BOC via ISDN and dedicated
frame relay. If program archive is desired, Company will be responsible for
archiving live broadcasts and delivering the files to the BOC via FTP.
7. Company agrees to provide the following to RN prior to the delivery of any
live feed to the BOC via frame relay:
- Dedicated point-to-point frame relay connection between Company's
encoder and BOC Exact date and time of frame relay activation.
- At least sixty (60) calendar days notice for before activation of
full-time (24 hrs/day, 7 days/week) feed delivery.
- At least 15 minutes of full system testing time at least five working
days before activation of full-time feed delivery. Working day is
defined as Monday - Friday, 9am - 6pm, Pacific Time.
- Company agrees to utilize frame relay equipment that has been certified
by Real Broadcast Network (RBN) Operations. Both parties shall be
responsible to ensure that Company's live feeds can interface with the
RBN frame relay system.
8. Company shall provide the following to RN prior to the delivery of any live
feed to the BOC via ISDN:
- Dedicated point-to-point ISDN connection between Company's encoder and
BOC
- Exact date, time and duration of ISDN call.
- At least five working days notice for single events, and seven working
days notice for multiple events
- Calling ISDN number. For Church pricing located in Exhibit 3, Individual
churches are responsible for calling into BOC at time of event.
- At least 15 minutes of full system testing time at least 2 working days
in advance of any event that uses a new or unique configuration. Full
system tests require Company to make content available via ISDN
utilizing the same telephone number which will be used for the actual
event. Working day is defined as Monday - Friday, 9am - 6pm, Pacific
Time.
- Company agrees to utilize ISDN equipment that has been certified by
Real Broadcast Network (RBN) Operations. Both parties shall be
responsible to ensure that Company's live feeds can interface with the
RBN ISDN system.
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9. Company shall provide the following to RN prior to the delivery of any live
feed to the BOC via satellite:
- Exact date & time of satellite transmission
- At least 5 working days notice for single events, and 7 working days
notice for multiple events
- Satellite name, coordinates, transponder number, required receiver
type, decoder type and decoder authorization (if required).
- At least 30 minutes of full system testing time at least 2 working days
in advance of any Event that uses a new or unique configuration. Full
system tests require company to uplink content to satellite utilizing
same transponder and encoding system as that which will be used for the
actual event.
GENERAL TERMS
10. Upon notification by RN, Company shall use commercially reasonable best
efforts to remove Content files from RBN system that meet either of the
following criteria:
- Content files that have not been accessed for 6 months.
- Content files for which no public URLs exist.
11. Company gives permission to RealNetworks to use sample media clip and
company logo for promotional purposes. RN will adhere to company trademark
and usage policies.
12. Company will be the first point of contact for all customer service issues
including but not limited to RBN installation, Real Player, and sales
questions. RBN technical support will be available if additional support is
needed for RBN related services.
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EXHIBIT 2
RN OBLIGATIONS
SERVICES
1. RN will use commercially reasonable means to serve as many simultaneous
streams as are required to meet the demand for live and on-demand content.
2. RN will provide setup support and provide 24x7 network management and
monitoring support.
3. RN will provide Company the URL for each live stream encoded by RN within
the Broadcast Operations Center.
4. RN will provide usage statistics for all Company content hosted on Real
Broadcast Network. RN will provide Company with daily online reports.
5. RN will provide storage up to the amount listed in Exhibit 3 for encoded
live and on-demand files.
6. RN will deliver the Broadcast Services in accordance with published
specifications and the provisions of Exhibit 3.
7. RN will serve live and stored content 24 hours per day, 7 days per week
except for at times of scheduled maintenance for the term of the agreement.
8. RN agrees to make commercially reasonable efforts to promote Company
programming on various RealNetworks web sites, including RealGuide and
others. RN agrees to list Company properties in all relevant categories in
all guide listings and searches including RealGuide. Additional promotion
is contingent on the nature of the Global Media programming; on available
space on RealGuide and future promotional vehicles; and on Global Media
notifying RN of programming Global Media wishes to promote at least one
week in advance for scheduled events and as quickly as possible for
breaking news. Global Media may notify RN of specific audio and video
programming by sending email to [email protected].
9. RN and Company will treat the terms of this agreement as confidential
information.
10. RN will encode feeds acquired from satellite transmission.
11. RN will provide encoding software to Company for use in creating on-demand
files in accordance with the terms of RN's software licensing agreement.
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PRICING
GENERAL TERMS
Special charges may apply if RealNetworks needs to acquire special equipment to
serve Company's needs. These charges will be discussed with Company prior to
Company's performing any obligations under this Agreement.
1. Pricing as follows:
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[Omitted confidential information has been filed separately with the
Securities and Exchange Commission]
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[Omitted confidential information has been filed separately with the
Securities and Exchange Commission]
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Exhibit 10.4
[REALNETWORKS LETTERHEAD]
April 20, 1999
Global Media Corporation
83 Victoria Crescent
Nanaimo, British Columbia
Canada V9R 5B9
Dear Michael Metcalfe:
This letter shall serve as a formal Agreement between RealNetworks, Inc.
("RN") and Global Media Corporation ("Customer"). Customer desires that RN
perform consulting services in connection with the Global Media Broadcast
Network project ("Broadcast Network") as set forth below.
1. SERVICES. RN shall provide the Services set forth on Attachment A
hereto and shall deliver to Customer all work product and results of such
Services (the "Deliverables") according to the Delivery Schedule set forth on
Attachment A. Customer acknowledges that its timely provision of and
unimpeded access to office accommodations, facilities, equipment, assistance,
cooperation, complete and accurate information and data from its officers,
agents, and employees, and suitably configured computer products are
essential to performance of any Services within the timeframe set forth in
this Agreement and that RN shall not be liable for any deficiency in
performing Services if such deficiency results from Customer's failure to
provide such full cooperation. With respect to the performance of Services,
Customer will not direct or supervise RN's employees or staff at Customer's
premises with respect to said individuals' tasks or responsibilities without
RN's express written consent.
2. ACCEPTANCE. In the event Customer fails to notify RN of any
difficulties or problems with the Deliverables within 30 days after
installation thereof, Customer shall be deemed to have accepted the
Deliverables. Prior to acceptance of such Deliverables, RN shall have the
right to repair or replace the Deliverables at its discretion. Upon
acceptance of such Deliverables, RN shall be under no obligation to repair or
replace such Deliverables.
3. FEES AND PAYMENT.
a. PROGRESS PAYMENTS. Customer will pay RN according to the Payment
Schedule set forth on Attachment A. By executing this Agreement, Customer
confirms the budget for the work, and the charges and purchases set forth in
Appendix A hereto. If Customer wishes to enlarge the scope of the Services
or implement additional features or subtasks, the parties shall agree upon
the costs therefor in advance in writing.
b. EXPENSES. Customer will reimburse RN for incidental expenses and
disbursements incurred by RN related to supplies, media (disks and CD-ROM
costs), travel and related lodging and meals, shipping, telephone charges,
and any other incidental expenses incurred in the performance of the
Services. RN shall bear sole responsibility for expenses incurred to acquire
the necessary tools to perform the Services. If RN needs to procure any
third party computer software, hardware, other office supplies or any other
subcontracted services or products to implement, perform, or install items
set forth in Attachment A, the cost of which will exceed $1000, RN will
notify Customer in advance, and obtain approval for the amount of the
purchase plus any applicable sales tax.
c. BILLING. RN will invoice Customer for expenses and any third
party purchases on a monthly basis. The invoice will include a report
itemizing the expenses and third party purchases. Customer shall pay all
invoices within 30 days of receipt, and shall not make any deductions thereto.
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d. TAXES. The charges do not include taxes or duties. If RN is
required to pay or collect any local, value added, goods and services, or any
other similar taxes or duties based on Services provided under this
Agreement, then such taxes and/or duties shall be billed to and paid by
Customer. This shall not apply to taxes based on RN's income.
4. CHANGE REQUESTS AND COOPERATION. Customer's request for any change in
Services must be in writing; this requirement pertains to all such requests
including but not limited to requests for changes in project plans, scope,
specifications, schedule, designs, or requirements. RN shall not be
obligated to perform tasks described in Customer's request until the parties
agree in writing to the proposed change.
5. NON-SOLICITATION. Customer will not enter into any separate
agreements, written or oral, with current or former employees or staff of RN
without RN's express written consent during the term of this Agreement and
for two (2) years from RN's completion of work performed for Customer by RN
under this or other agreements.
6. TERM; TERMINATION.
a. TERM. This Agreement shall commence as of the Effective Date and
shall remain in effect until the earlier of RN's completion of the Services,
or until terminated in accordance with this Section 4.
b. TERMINATION BY RN. Failure of Customer to make payments to RN in
accordance with this Agreement shall be considered substantial nonperformance
and cause for termination. If Customer fails to make payments when due, RN
may, upon seven days' written notice to Customer suspend performance under
this agreement. Unless payment in full is received by RN within seven days
of the date of the notice, the suspension shall take effect without further
notice. In the event of a suspension of services, RN shall have no liability
to Customer for delay or damage caused Customer because of such suspension of
services.
c. TERMINATION BY CUSTOMER. Customer shall have the right at any
time to terminate this Agreement on twenty-one (21) days' written notice. In
the event of such termination, and provided termination is not as a result of
RN's unremedied breach of this Agreement, Customer shall pay RN then accrued
payments due under the Delivery Schedule, plus the pro-rated portion of the
next payment, if any, due with respect to items being worked on up to the
time of termination, plus reimbursable expenses, plus twenty percent (20%) of
the total charges due through the date of the termination. Should Customer
wish to delete specific subtasks, Customer will notify RN immediately in
writing. As long as said deletions represent less than twenty percent of the
labor cost for the project, Customer shall not be liable for the twenty
percent termination charge.
d. TERMINATION FOR BREACH. Either party may terminate this
Agreement upon seven (7) days' written notice to the other party in the event
the other party materially breaches this Agreement and fails to cure such
breach within fifteen (15) days' written notice from the non-breaching party.
7. SOFTWARE LICENSE.
a. All right, title and interest in and to the Deliverables is owned
by, and shall remain with, RN; provided, however, that Customer shall have
the perpetual, non-exclusive, royalty-free right to use such Deliverables for
internal use in connection with the Broadcast Network project. No license or
other rights in the Deliverables is granted hereby.
b. The Services provided under this Agreement may be in support of
Customer's license to use computer software programs, owned or distributed by
RN, under a separate software license agreement. The software license
agreement shall govern all use by Customer of such programs. Neither this
Agreement nor any Ordering Document includes the grant of any license or any
other rights for such programs.
c. Any Services acquired from RN shall be bid separately from such
program licenses, and Customer may acquire either Services or such program
licenses without acquiring the other.
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8. WARRANTY. RN represents, warrants and covenants that: (i) any
Deliverables, information or materials developed for, or any advice provided
to RN, shall not rely or in any way be based upon confidential or proprietary
information or trade secrets obtained or derived by RN from sources other
than RN unless RN has received specific authorization in writing to use such
proprietary information or trade secrets; (ii) RN will not enter into any
contracts or otherwise obligate Customer in any way without Customer's
express approval; and (iii) RN will perform the Services consistent with
generally accepted industry practices. Customer must report any deficiencies
in the Services to RN in writing within thirty (30) days of completion of the
Services in order to receive warranty remedies. THE WARRANTY HEREIN IS
EXCLUSIVE AND IN LIEU OF ALL OTHER WARRANTIES, WHETHER EXPRESS OR IMPLIED,
INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE. FOR ANY BREACH OF THE ABOVE WARRANTY, CUSTOMER'S
EXCLUSIVE REMEDY, AND RN'S ENTIRE LIABILITY, SHALL BE THE RE-PERFORMANCE OF
THE SERVICES. IF RN FAILS OR IS UNABLE TO RE-PERFORM THE SERVICES AS
WARRANTED, CUSTOMER SHALL BE ENTITLED TO RECOVER THE FEES PAID TO RN FOR THE
DEFICIENT SERVICES.
9. RESPONSIBILITY FOR CUSTOMER CONTENT AND SITES; INDEMNIFICATION. Except
for the Services to be provided by RN hereunder, as between Customer and RN,
Customer shall be completely and solely responsible for all matters relating
to any content or material ("Content") owned or used by Customer in
connection with any equipment provided by RN, and in connection with
Customer's Internet web site, intranet, or extranet system (collectively,
"Sites"). Customer shall remain solely responsible and liable for the
Content and the Sites, and RN assumes no responsibility for editing,
reviewing, controlling or any other activities associated with the use or
publication of any of the Content, the operation and maintenance of
Customer's Sites, and shall have no liability to any third party in
connection with such activities, whether or not RN undertakes such
responsibilities. Customer hereby agrees to indemnify, hold harmless and
defend RN and its employees, contractors and agents from all claims, damages,
costs and expenses, including reasonable attorneys' fees and litigation
expenses, arising out of or in connection with any Content or the Site.
10. CONFIDENTIAL INFORMATION. From the date of execution hereof for a
period of five (5) years from termination of this Agreement, neither party
shall use, disclose, or permit any person to obtain any confidential
information of the other party, including any materials developed or
generated hereunder (whether or not such confidential information is in
written or tangible form), except as specifically authorized by such party.
As used herein, confidential information shall mean a whole or any portion or
phase of any marketing plans, business plans, sales information, customer
lists, scientific or technical information, design, process, procedure,
formula, or improvement relating to the development, design, construction,
and operation of a program that is valuable and not generally known to a
party's competitors and any other information of a party of which the other
party becomes aware of as a result of this Agreement and which is indicated
to be confidential or, if not so indicated, which could reasonably be
interpreted to be confidential. The parties agree that, in the event of a
breach or threatened breach of the terms of this confidentiality provision,
the non-breaching party shall be entitled to an injunction prohibiting any
such breach. Any such relief shall be in addition to and not in lieu of any
appropriate relief in the way of money damages. The parties acknowledge that
Confidential Information is valuable and unique and that disclosure in breach
of this confidentiality provision will result in irreparable injury to its
owner.
11. NO ASSIGNMENT. Neither party shall assign, transfer or otherwise
dispose of this Agreement or any rights or duties hereunder without the prior
written consent of the other.
12. LIMITATION OF LIABILITY. IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR
ANY INDIRECT, INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES, OR DAMAGES FOR
LOSS OF PROFITS, REVENUE, DATA, OR USE, INCURRED BY EITHER PARTY OR ANY THIRD
PARTY, WHETHER IN AN ACTION IN CONTRACT OR TORT, EVEN IF THE OTHER PARTY OR
ANY OTHER PERSON HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. RN'S
LIABILITY FOR DAMAGES HEREUNDER SHALL IN NO EVENT EXCEED THE AMOUNT OF FEES
PAID BY CUSTOMER UNDER THE APPLICABLE ORDERING DOCUMENT.
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13. MISCELLANEOUS. This Agreement and Attachment A attached hereto and
incorporated herein constitute the entire agreement between the parties, and
supersedes any and all agreements, whether written or oral, and may only be
amended or modified by a written instrument signed by both parties. Any
controversy, dispute or question arising out of, in connection with or in
relation to this Agreement or its interpretation, performance or
nonperformance, or any breach thereof, shall be determined by arbitration in
the County of King, State of Washington, in accordance with the rules then
obtaining of the American Arbitration Association. The cost and expenses of
such arbitration shall be paid by the party against whom the arbitrator
renders a decision. The decision of the arbitrator shall be final and
binding upon the parties hereto and may be entered as a final decree or
judgment in any court of competent jurisdiction. It is expressly agreed that
the terms and conditions of this Agreement and any Ordering Document
supersede the terms of Customer's purchase order.
If the terms of this Letter Agreement are acceptable to you, please sign and
date where indicated below and return to RN.
Sincerely,
RealNetworks, Inc.
By: /s/ MARTIN SCHWARZ
--------------------------
Martin Schwarz
General Manager, Consulting Group
Accepted and Agreed to
this _____ day of April, 1999.
Customer: Global Media Corporation
By: /s/ MICHAEL METCALFE
---------------------------
Print Name: MICHAEL METCALFE
-------------------
Title: PRESIDENT
------------------------
EFFECTIVE DATE: 20 APRIL 1999
---------------
4
<PAGE>
Exhibit 10.5
[REAL NETWORKS LOGO]
ATTACHMENT A
PROPOSAL FOR GLOBAL MEDIA
BROADCAST NETWORK SERVICES
Prepared for Global Media Corporation
April 20, 1999
This document contains proprietary information belonging to RealNetworks,
Inc. No use or disclosure of the information contained herein is permitted
without the prior written consent of RealNetworks, Inc.
<PAGE>
PROPOSAL FOR GLOBAL MEDIA BROADCAST NETWORK SERVICES [REAL NETWORKS LOGO]
- -------------------------------------------------------------------------------
1.0 BACKGROUND
Per several discussions held between RealNetworks and Global Media
Corporation (Global Media), Real Networks is proposing a build out of a new
service for Global Media for the private branded delivery of audio and video
content from radio stations (and TV stations) to Internet consumers. The new
service is referred to as the Global Media Broadcast Network (GMBN) in this
scope of work and proposal.
The overall objective of Global Media is to quickly bring to market a service
for radio stations and TV stations to deliver audio/video content on the
Internet with a unique revenue share model for the radio station owners,
advertisers and Global Media. Global Media anticipates launching a service
that will attract tens of thousands of content providers (stations and group
owners) to use the Global Media player faceplate, encoder services and
delivery network for delivery of content on the web.
The consumer, using a personal computer on the Internet, will be offered
several unique services within the player including listening to any of the
live radio stations, simulated live (on-demand) playlists of music, and video
(TV or similar programming). Along with listening/viewing this traditional
content the consumer/user can "interact" with the player and the "experience"
by viewing album covers, voting for songs, see scrolling text messages,
participate in live DJ chat, purchase consumer goods and content on-line,
view advertising, and build personal preferences for their own environment.
The current strategy of Global Media is to announce the GMBN service within
the next 30 days and begin leveraging RealNetworks assets (such as RBN and
RealNetworks Consulting) to build out the GMBN in 1999. RealNetworks
Consulting (RN Consulting) will provide services and application development
to turnkey the design, architecture, programming/coding, testing,
installation, deployment, launch and training/turn-over of the GMBN for a
successful launch of this first-to-market offering on the Internet.
2.0 GLOBAL MEDIA BROADCAST NETWORK OVERVIEW
Global Media requires a number of key systems to be designed and developed to
build the Global Media Broadcast Network. The following diagram provides a
general overview of the critical components to be developed and integrated
into the GMBN:
[THE GLOBAL MEDIA BROADCAST NETWORK GRAPHIC]
Page 2 of 10
<PAGE>
PROPOSAL FOR GLOBAL MEDIA BROADCAST NETWORK SERVICES [REAL NETWORKS LOGO]
- -------------------------------------------------------------------------------
Global Media requires RN Consulting to design, architect, prototype,
application program, test, install, deploy and project manage the integration
of each of these functional components of the Global Media Broadcast Network.
Global Media will be responsible for the content (radio and TV stations),
commerce (e-catalog, e-commerce, back-end systems), advertising (ad
inventory, ad database, etc.) and operation of the entire system. Likewise,
Global Media representatives will be required to be assigned to the project
to approve storyboards, make design and architectural designs, provide
interfaces to back-end systems, assign resources to be trained, managed and
to operate the GMBN system, procure hardware/software, assign resources for
the physical deployment of the system, and related services.
RealNetworks Consulting will be responsible for turnkey development and
installation of the following components:
- Global Media Player
- Radio Station Encoder Station
- HeadEnd Manager (and interface to Real Broadcast Network service)
- Ad Server Integration
- Commerce Server Integration
- Global Media Guide
- On-Demand Content Manager
- Live DJ Application
- Jukebox Application
- Project Management
Each of these components will be developed with scalability in mind (i.e.,
support for tens of thousands of stations) operation using RBN (for network
and delivery transport system), management by Global Media resources (tools
to automate and allow Global Media personnel to manage the system after
deployment), and allow for future expansion (architecture that allows adding
features or enhancements to the Broadcast Network operations and "user
experience" on future projects with RealNetworks).
3. SCOPE OF WORK
3.1 PROJECT PHASES
An overview of the tasks and functions (scope of work) to be performed by
RealNetworks Consulting is presented in this section. The project is to be
accomplished with four (4) critical phases:
<TABLE>
<CAPTION>
- -------- --------------------------------------------------- ----------------------------------
PHASE DESCRIPTION SCHEDULE (CURRENT ESTIMATE)
- -------- --------------------------------------------------- ----------------------------------
<S> <C> <C>
Phase 1 Basic RBN Hosting and Basic Player for Global Media Project Start Date (April '99)
Phase 2 First Major Code Release: Initial Player, HeadEnd, Start Date + 3 months (July '99)
Encoder, Ad and Commerce Services
Phase 3 Second Major Code Release: Enhanced Player, Start Date + 5 months (Sept '99)
HeadEnd, Encoder, Ad and Commerce Services; Initial
DJ, On-Demand Manager, JukeBox and Guide
Phase 4 Final Code Release: All Components Production-ready Start Date + 8 months (Dec '99)
- -------- --------------------------------------------------- ----------------------------------
</TABLE>
Page 3 of 10
<PAGE>
PROPOSAL FOR GLOBAL MEDIA BROADCAST NETWORK SERVICES [REAL NETWORKS LOGO]
- -------------------------------------------------------------------------------
3.2 PROJECT DEPLOYMENT METHODOLOGY
The following provides a summary of the methodology used for the project to
deliver the turnkey Global Media Broadcast Network system in a timely fashion.
- - Needs Analysis and System Component Design
- General business analysis (audience, business model, future plans)
- Functional systems requirements analysis (GMBN components and back-end
systems)
- System and network infrastructure analysis (confirm RBN specifications
for GMBN)
- Infrastructure design (LAN, WAN, splitters, load balancing, etc., for
GMBN)
- Server system designs (encoder servers, multicast & on-demand media
servers, data base servers, archive servers, web servers and other
servers)
- Component application storyboards and functional system design
specifications for each component (player, encoder, headend, ad
server, commerce server, guide, on-demand manager, live DJ, jukebox)
- Specifications for the live and on-demand broadcast system
administration and operations; content management, reporting and usage
system; back-office systems integration and any third party product
integration
- ISP and broadband vendor system integration design (as necessary with
RBN)
- Develop master project schedule and master test plan (schedule and
draft)
- Provide procurement assistance
- Consultation on Global Media systems integration (commerce,
accounting/pay per view, ad management, web, data base, user
profiling, station acquisition, etc.)
- Initial deployment of Real Broadcast Network (RBN) hosting services
and basic player functions (Phase 1)
DELIVERABLES: SYSTEM DESIGN DOCUMENT, DETAILED PROJECT SCHEDULE/PLAN, AND
PHASE 1 DEPLOYMENT
- - Software Component Development
- Rapid application prototyping (and some joint application prototyping
with Global Media on ad serving and commerce systems) including:
- Application programming
- Scripting, batch processes
- API/SDK integration
- development, customization and integration of all components
into the GMBN
- Systems integration and application development for integration to
Global Media supplied systems (ad service commerce server, master web
service, and other non-RealNetworks/Real Broadcast Network
components)
- Global Media Broadcast Network administration and operations
customization including monitoring, content acquisition, content
distribution, system management, scheduling, usage, reporting, etc.
- Back-end systems integration and customization
- - DELIVERABLES: COMPONENT CODE DROPS
- - System Deployment
- Centralized servers, encoders, and systems staging, configuration,
installation, testing, validation, system documentation, and shipping
- Integration and installation tasks at Real Broadcast Network
- Configuration, installation, testing, validation,
modification/customization, documentation of Global Media Broadcast
Network Operations Center (NOC)
Page 4 of 10
<PAGE>
PROPOSAL FOR GLOBAL MEDIA BROADCAST NETWORK SERVICES [REAL NETWORKS LOGO]
- -------------------------------------------------------------------------------
- Coordination of on-site deployments (radio/TV stations) including
technical support, dial-in testing, validation/testing, training, etc.
- Broadcast Network operations and administration software installation,
configuration and integration
- GMBN scheduling, monitoring and reporting application installation,
configuration and integration
- Encoder monitoring and player monitoring system integration
- Content management system installation, configuration and integration
DELIVERABLES: INSTALLATION OF THE GMBN NETWORK OPERATIONS CENTER
- - Testing
- Unit (component) testing
- System (integrated components and back-end systems) testing
- Operational readiness testing (ORT) on GMBN
DELIVERABLES: PHASE 2 DEPLOYMENT OF INITIAL PLAYER, HEADEND MANAGER, RADIO
STATION ENCODER AND AD SERVER/COMMERCE COMPONENTS
DELIVERABLES: PHASE 3 DEPLOYMENT OF PRODUCTION-READY COMPONENTS AND
INITIAL VERSIONS OF DJ, JUKEBOX, ON-DEMAND MANAGER AND GUIDE
COMPONENTS.
- - Training and Documentation
- Complete component training
- Broadcast Network system administration and operations training
- Customized scheduling, monitoring and reporting training
- Remote site logistics, troubleshooting methods and consultation
- Content creation and content management training
- System documentation
- Post-deployment software support and maintenance
DELIVERABLES: PHASE 4 DEPLOYMENT OF TURNKEY PRODUCTION-READY AND SCALABLE
GMBN SYSTEM WITH ALL COMPONENTS TESTING COMPLETE
The main deliverable from this methodology and the associated deliverables is
a turnkey, RealNetworks G2-enabled Broadcast Network system customized for
Global Media which will operate and manage the thousands of content sources
and manage the streaming of media onto the Internet via RBN. The
production-ready deployment of the GMBN will result in delivering a
compelling user experience for consumer listening/viewing of the Global Media
private branded content. This system should result in garnering advertising
revenues and consumer goods commerce revenues for Global Media (and their
affiliates) resulting from this consumer usage model.
3.3 COMPONENT FUNCTIONAL SPECIFICATIONS
This section outlines each of the major system components for the Global
Media Broadcast Network and the key tasks and deliverables to be developed by
RealNetworks Consulting.
[Omitted confidential information has been filed separately with the
Securities and Exchange Commission]
Page 5 of 10
<PAGE>
PROPOSAL FOR GLOBAL MEDIA BROADCAST NETWORK SERVICES [REAL NETWORKS LOGO]
- -------------------------------------------------------------------------------
3.4 REALNETWORKS PROJECT TEAM
From the tasks and requirements listed above, a team of RealNetworks
Consulting resources is required to satisfy the multiple design and
deployment activities for the Global Media Broadcast Network system. Based
on the requirements and tasks outlined for Global Media, and RealNetworks
Consulting past experience of similar systems deployments, it is estimated
that a team of six to ten RealNetworks Consulting resources will be required
for the GMBN project. These individuals include a combination of project
management, senior software development programmers, web programming team,
database architect and specialists, QA/test engineers, systems consultants
and system engineers.
A full time Project Manager will be assigned as the overall program manager
for the project. The Project Manager will augment and supplement Global
Media's existing staff with specialized expertise on streaming media,
networking (LAN/WAN/Internet), content publishing/creation, broadcast
services, software development, business processes/systems policies, and
related knowledge transfer to Global Media's staff throughout the project
term. This individual will be an integral part of the Consulting Team and
have an on-site presence at Global Media to deliver the necessary expertise
for the various phases of the project and GMBN solution.
It is estimated that the RealNetworks G2 Broadcast Network system for Global
Media will require approximately eight (8) calendar months to complete and
deliver; from analysis to final testing/deployment with the team proposed.
It may be necessary to introduce a number of RealNetworks Consulting
resources into the project at peak deliverable periods in addition to the
assigned project team. A detailed scope of work and project schedule will be
developed/delivered upon completion of the initial needs analysis tasks.
In addition to the skills maintained by the Project Manager and RN Consulting
resources assigned to the Global Media project, the team will also have
access to subject matter experts within the RealNetworks Consulting group
(consultants and developers), RealNetworks core technology group (software
developers), RBN group (system operators and consultants), and related
divisions within RealNetworks to develop, customize and deploy the GMBN
system specific to Global Media's requirements. The team assigned to Global
Media will act as a conduit for critical thinking, analysis, solutions,
recommendations and experience to Global Media's project team appropriately.
4.0 COSTS AND SCHEDULE
[Omitted confidential information has been filed separately with the
Securities and Exchange Commission]
Page 6 of 10
<PAGE>
[REAL NETWORKS LOGO]
June 4, 1999
Global Media Corporation
83 Victoria Crescent
Nanaimo, British Columbia Canada V9R 5B9
Dear Michael Metcalfe:
This Amendment No. 1 is the first amendment to the letter agreement dated
April 20, 1999 (the "Agreement"), by and between RealNetworks, Inc. ("RN"),
and Global Media Corporation ("Customer").
The parties hereby amend Attachment A of the Agreement as follows:
1. The following is inserted as new Section 1.1:
1.1 Project Acceleration Background
Based on recent activities in the marketplace and discussions between
Global Media and RealNetworks, Global Media Corporation has requested
that RealNetworks accelerate the current Global Media Broadcast Network
Services project to be able to bring a product out quicker to market.
RealNetworks has analyzed it's current project schedule and resource
commitments and has identified a means to accelerate the schedule and
delivery of product to allow Global Media to quickly sign up licensee's
and increase their effectiveness in building a media portal solution
for radio groups around the country.
2. The following is inserted as new Section 3.5
3.5 Acceleration Scope of Work
RealNetworks proposes to accelerate the delivery of the live station
experience by implementing a fast track, parallel prototype development
effort with another team of software development engineers and experts
managed by the RealNetworks Consulting group. This new prototype
development effort is in addition to the existing project schedule and
resources currently allocated to the project for the existing scheduled
deliverables.
The main deliverables from the accelerated live station prototype
development includes the following two deliverables:
Accelerated player system:
- Station Guide
- A RealPlayer event renderer to Show ads and Station Information
(pseudo synchronized with the audio stream)
- Static e-comm link
- Station Logo and Skin (5 samples will be developed by RealNetworks)
Server+ Backend System:
- Live station encoder, with Live Ad+Station Info stream
- Station Manager (functional administrative interface of input of all
station information)
- Guide Manager
- SMIL (and HTML) server.
The team necessary for the deliverables above includes:
2 Full time Software Development Engineers (C++, Win32)
3 Web Developer (Javascript, server-side script, HTML)
<PAGE>
4 Flash/SMIL Developer
5 Accelerated Team Software Project Manager (Half time, estimated)
6 Part-time (overtime) of existing Lead Developers on original project
The development schedule is anticipated to occur in two phases. The
first phase will be completed within approximately six (6) weeks with
the initial player and server/backend system. The second phase will be
to provide technical support with a principal software development
engineer for an additional two (2) weeks after phase 1. At the
completion of this effort, the original effort of the Global Media
Broadcast Network Services project will synchronize with the accelerated
project team.
The deployment of the player and server systems will be dependent on
Global Media also accelerating their deployment of hardware, software,
network and related equipment necessary for the new software to operate
on. Likewise, this project schedule is dependent on the initial 25
radio stations selected by Global Media to have appropriate connectivity
for signal acquisition and signal sourcing for the backend server system.
3. The following is inserted as new Section 4.1:
4.1 PROJECT ACCELERATION COST SUMMARY
The costs for the accelerated project team proposed to Global Media for
both phases of the development effort for both Phase 1 (initial six week
effort) and Phase 2 (technical support for two weeks) deliverables over
the next eight (8) weeks is $355,000.00. This is a fixed fee cost to
rapidly prototype, develop and deploy the player and server/backend
system on an accelerated effort, above and beyond the original scope of
work as well as to provide basic technical support for this effort.
The term of the project is anticipated to begin June 4, 1999 with first
delivery of the player/server system by July 16, 1999. The completion of
the accelerated project team deliverables is anticipated to be by the
end of July/beginning of August, 1999.
The payment schedule for the Project Acceleration services from
RealNetworks Consulting are as follows:
- 50% payable on July 16, 1999 (Phase 1 complete)
- 50% payable at beginning of August (Phase 2 complete)
4. The payment schedule at the end of Section 4.0 is replaced in its entirety
with the following payment schedule:
The following outlines the payment schedule and deliverable milestones
for all Deliverables:
<TABLE>
<CAPTION>
- ------------------- -------------- -----------------------------------------------
PAYMENT DUE DATE SERVICE AMOUNT DELIVERABLE
- ------------------- -------------- -----------------------------------------------
<S> <C> <C>
June 4, 1999 $330,000.00 Project Start Date (Phase 1)
July 16, 1999 $177,500.00 Phase 1 Complete - Initial 6 week effort
July 21, 1999 $990,000.00 Phase 2 Deliverable - First Major Code Release
August 2, 1999 $177,500.00 Phase 2 Complete - Technical Support
September 21, 1999 $1,155,000.00 Phase 3 Deliverable - Second Major Code Release
December 21, 1999 $825,000.00 Phase 4 Deliverable - Project complete
TOTAL SERVICES $3,655,000.00
- ------------------- -------------- -----------------------------------------------
</TABLE>
All other terms and conditions of the Agreement shall remain in full
force and effect except as modified by this Amendment No. 1. In the event of
any inconsistencies between this Amendment No. 1 and the Agreement, this
Amendment No. 1 shall prevail.
In witness whereof, the parties have caused this Amendment No. 1 to be
executed on this ______________ day of June, 1999.
REALNETWORKS, INC. GLOBAL MEDIA CORPORATION.
By: /s/ By: /s/ MICHAEL METCALFE
------------------------------- -----------------------------
Title: VICE PRESIDENT Title: PRESIDENT
---------------------------- --------------------------
Date: JUNE 4, 1999 Date: 4 JUNE 99
---------------------------- --------------------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS OF GLOBAL MEDIA CORP. FOR THE
NINE MONTHS ENDED APRIL 30, 1999, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUL-31-1999
<PERIOD-START> AUG-01-1998
<PERIOD-END> APR-30-1999
<CASH> 85,299
<SECURITIES> 0
<RECEIVABLES> 28,993
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 120,714
<PP&E> 678,807
<DEPRECIATION> 151,865
<TOTAL-ASSETS> 647,656
<CURRENT-LIABILITIES> 1,111,890
<BONDS> 0
0
0
<COMMON> 12,546
<OTHER-SE> (476,780)
<TOTAL-LIABILITY-AND-EQUITY> 647,656
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 623,939
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 47,283
<INCOME-PRETAX> (671,222)
<INCOME-TAX> 0
<INCOME-CONTINUING> (671,222)
<DISCONTINUED> (2,080)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (673,302)
<EPS-BASIC> (.03)
<EPS-DILUTED> (.03)
</TABLE>
