<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 QUARTER ENDED OCTOBER 31, 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)
400 ROBSON STREET, VANCOUVER, BRITISH COLUMBIA, CANADA V6B 2B4
(Address of Principal Executive Offices; Zip Code)
Registrant's telephone number, including area code: (604) 688-9994
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 DECEMBER 14, 1999,
THERE WERE 21,385,357 SHARES OUTSTANDING OF THE COMPANY'S COMMON STOCK.
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
GLOBAL MEDIA CORP.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
(in US dollars)
OCTOBER 31 JULY 31
1999 1999
$ $
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT
Cash and cash equivalents 1,797,883 5,649,073
Short-term investments 240,000 240,000
Trade and other receivables 101,670 84,336
Prepaid expenses 18,501 37,760
- -------------------------------------------------------------------------------------------------------
2,158,054 6,011,169
Capital assets [NOTE 4] 3,989,948 1,537,434
- -------------------------------------------------------------------------------------------------------
6,148,002 7,548,603
- -------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT
Accounts payable and accrued liabilities 471,554 368,094
Due to affiliated company [NOTE 5] 135,870 132,946
Due to shareholders [NOTE 5] 225,128 221,091
- -------------------------------------------------------------------------------------------------------
832,552 722,131
- -------------------------------------------------------------------------------------------------------
Commitments and contingencies [NOTE 8]
Convertible preferred shares [NOTE 7] - 7,089,775
SHAREHOLDERS' EQUITY
Convertible preferred shares [NOTE 7] 7,210,871 -
100,000,000 authorized, 8,500 issued and outstanding
Common shares, par value $0.001 each, 200,000,000 authorized, 12,707 12,658
20,705,456 and 20,656,331 issued and outstanding [NOTE 6]
- -------------------------------------------------------------------------------------------------------
7,223,578 12,658
- -------------------------------------------------------------------------------------------------------
Additional paid in capital [NOTE 7] 2,661,310 2,617,109
Deficit (4,569,438) (2,893,070)
- -------------------------------------------------------------------------------------------------------
5,315,450 (263,303)
- -------------------------------------------------------------------------------------------------------
6,148,002 7,548,603
- -------------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES
2
<PAGE>
GLOBAL MEDIA CORP.
CONSOLIDATED STATEMENTS OF LOSS
AND COMPREHENSIVE LOSS
(Unaudited)
<TABLE>
<CAPTION>
(in US dollars)
FOR 3 MONTHS
ENDED OCTOBER 31
1999 1998
$ $
- --------------------------------------------------------------------------------------------
<S> <C> <C>
SALES 13,645 -
COST OF SALES 72,790 -
- --------------------------------------------------------------------------------------------
GROSS PROFIT (LOSS) (59,145) -
- --------------------------------------------------------------------------------------------
OPERATING EXPENSES
Depreciation and amortization [NOTE 7] 91,584 13,047
General and administrative 290,091 90,369
Sales and marketing 547,134 8,702
Shareholder communications 67,200 40,969
Stock options compensation [NOTE 6] - 548,800
Technical operations and development 507,756 -
- --------------------------------------------------------------------------------------------
1,503,765 701,887
LOSS FROM CONTINUING OPERATIONS
AND BEFORE OTHER ITEMS (1,562,910) (705,100)
- --------------------------------------------------------------------------------------------
OTHER ITEMS
Interest 12,273 -
Foreign exchange (4,635) (3,213)
- --------------------------------------------------------------------------------------------
LOSS AND COMPREHENSIVE LOSS BEFORE
DISCONTINUED OPERATIONS (1,555,272) (705,100)
DISCONTINUED OPERATIONS [NOTES 1 AND 3] - (7,049)
- --------------------------------------------------------------------------------------------
LOSS AND COMPREHENSIVE LOSS FOR THE QUARTER (1,555,272) (712,149)
- --------------------------------------------------------------------------------------------
LOSS PER COMMON SHARE (0.08) (0.04)
- --------------------------------------------------------------------------------------------
WEIGHTED AVERAGE SHARES USED IN THE COMPUTATION
OF LOSS PER SHARE 20,680,894 19,890,831
- --------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES
3
<PAGE>
GLOBAL MEDIA CORP.
CONSOLIDATED STATEMENTS OF
SHAREHOLDERS' EQUITY (DEFICIENCY)
(Unaudited)
<TABLE>
<CAPTION>
(in US dollars)
PREFERRED STOCK COMMON STOCK ADDITIONAL RETAINED
------------------------- -------------------------- PAID-IN EARNINGS
SHARES AMOUNT SHARES AMOUNT CAPITAL (DEFICIT)
# $ # $ $ $
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, JULY 31, 1998 - - 19,890,831 11,892 543,525 (661,996)
Preferred shares issued [NOTE 7] 8,500 7,089,775 - - - -
Warrants issued on financing [NOTE 7] - - - - 1,000,000 -
Stock options exercised - - 765,500 766 392,484 -
Compensatory stock options - - - - 681,100 -
Loss for the year - - - - - (2,231,074)
- ------------------------------------------------------------------------------------------------------------------------------
BALANCE, JULY 31, 1999 8,500 7,089,775 20,656,331 12,658 2,617,109 (2,893,070)
Stock options exercised - - 49,125 49 44,201 -
Loss for the quarter - - - - - (1,555,272)
Accrued dividends (121,096) - - - (121,096)
- ------------------------------------------------------------------------------------------------------------------------------
BALANCE, OCTOBER 31, 1999 8,500 7,210,871 20,705,456 12,707 2,661,310 (4,569,438)
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES
4
<PAGE>
GLOBAL MEDIA CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
(in US dollars)
FOR 3 MONTHS
ENDED OCTOBER 31
1999 1998
$ $
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Loss for the quarter (1,555,272) (712,149)
Items not requiring an outlay of funds
Share option compensation expense [NOTE 6] - 548,800
Share option professional fees expense [NOTE 6] - 12,600
Amortization 91,584 13,633
- -------------------------------------------------------------------------------------------------------------
(1,463,688) (137,116)
Changes in non-cash operating working capital
Other receivable (17,334) (320)
Inventory - 1,199
Prepaid expenses 19,259 7,641
Accounts payable and accrued liabilities 103,460 117,504
- -------------------------------------------------------------------------------------------------------------
CASH USED IN OPERATING ACTIVITIES (1,358,303) (11,092)
- -------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Capitalized development costs (2,145,170) -
Purchase of capital assets (402,099) (26,524)
- -------------------------------------------------------------------------------------------------------------
Cash used in investing activities (2,547,269) (26,524)
- -------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Advances from (to) shareholders 2,924 (68,127)
Advances from affiliated company 4,037 151,431
Stock options exercised 44,250 -
- -------------------------------------------------------------------------------------------------------------
CASH PROVIDED BY FINANCING ACTIVITIES 51,211 83,304
- -------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash 3,171 5,985
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS DURING THE QUARTER (3,851,190) 51,673
Cash and cash equivalents, beginning of quarter 5,649,073 14,996
- -------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF QUARTER 1,797,883 66,669
- -------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL CASH FLOW DISCLOSURE
Interest - paid - 1,765
- -------------------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES
5
<PAGE>
The following notes are to be read in conjunction with the notes to our audited
financial statements contained in our Annual Report on Form 10-KSB, filed with
the Securities and Exchange Commission on November 1, 1999.
1. NATURE OF BUSINESS
Global Media Corp. (the "Company") was incorporated on April 8, 1997 in the
State of Nevada and is headquartered in Vancouver, B.C., Canada. The Company was
previously engaged in the marketing of satellite programming and hardware and
providing call center services [see note 3]. The Company discontinued its
satellite line of business by the end of fiscal 1998, and the call center
business during the third quarter of fiscal 1999. During the third quarter of
fiscal 1999, the company adopted an internet-focused business plan. Since then,
it has been engaged primarily in the development of an electronic commerce web
site, the development of a broadcast network over the internet, including
streaming services, a customized media player and simulated live internet-only
radio stations, and the development of templates for the application of the
e-commerce back-end system to multiple sites on the internet.
On May 18, 1999 a beta version of the e-commerce web site was launched and in
September 1999, trial implementations were started for network associate
e-commerce storefronts. Also on August 31, 1999, the beta implementation of the
Global Media Broadcast Network began with the launch of three live network
associate stations. In October, 1999, ten simulated live stations were launched
by the Company and integrated into the Global Media Player, currently still
under development.
2. SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements have been prepared in conformity with
accounting principles generally accepted in the United States.
COMPARATIVE FIGURES
Certain amounts for 1999 have been reclassified to conform with the current
quarter's presentation.
LOSS PER SHARE
Basic and fully diluted earnings per share has been computed using the weighted
average number of common shares outstanding during the applicable period. The
effect of common stock options and warrants would be anti-dilutive and therefore
is not included in the calculation of fully diluted earnings per share.
3. DISCONTINUED OPERATIONS
The Company withdrew from the home satellite business in late fiscal 1998, and
the call center business during the third quarter of fiscal 1999, and has
therefore accounted for these businesses as discontinued operations, segregated
in the accompanying consolidated statements of loss and comprehensive loss.
6
<PAGE>
4. CAPITAL ASSETS
<TABLE>
<CAPTION>
ACCUMULATED NET BOOK
COST AMORTIZATION VALUE
$ $ $
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
OCTOBER 31, 1999
Broadcast network development 2,849,973 - 2,849,973
Communications infrastructure 90,599 52,850 37,749
Computer hardware 599,717 92,007 507,710
Leasehold improvements 31,989 3,503 28,486
Office furniture and equipment 107,596 10,282 97,314
Software 93,790 20,933 72,857
Web site development 528,111 132,252 395,859
- ----------------------------------------------------------------------------------------
4,301,775 311,827 3,989,948
- ----------------------------------------------------------------------------------------
JULY 31, 1999
Broadcast network development 704,803 - 704,803
Communications infrastructure 89,391 44,463 44,928
Computer hardware 295,417 59,834 235,583
Leasehold improvements 14,925 2,269 12,656
Office furniture and equipment 50,661 6,477 44,184
Software 73,450 15,484 57,966
Web site development 525,859 88,545 437,314
- ----------------------------------------------------------------------------------------
1,754,506 217,072 1,537,434
- ----------------------------------------------------------------------------------------
</TABLE>
5. RELATED PARTY TRANSACTIONS
[i] AMOUNTS DUE TO SHAREHOLDER AND AFFILIATED COMPANY
As part of the Securities Purchase Agreement with RGC International
Investors LDC ("RGC") [see note 7], the Company agreed to restructure
the amounts due to a shareholder and an affiliated company. The
agreement provided that one half of the amounts due to the shareholder
and affiliated company will be repaid by the issue of common stock at a
conversion price of $6.25 per share, which was the average closing bid
prices of the common shares reported on the OTC Bulletin Board for the
three consecutive days ended April 30, 1999.
On July 26, 1999, the Company entered into an agreement with the
shareholder to convert 50% of the amount due plus interest of $16,455
(for a total of $127,000) into common stock. The remaining $127,000
will be repaid in four quarterly installments of $31,750 beginning
October 31, 1999 and ending on July 31, 2000. As of October 31, 1999,
the shares had not been issued and no repayment had occurred.
On July 26, 1999 the Company entered into an agreement with the
affiliated company to convert 50% of the amount due plus interest of
$8,413 (for a total of $74,886) into common stock. The remaining
$74,886 will be repaid in four quarterly installments of $18,722
beginning October 31, 1999 and ending on July 31, 2000. As of October
31, 1999, the shares had not been issued and no repayment had occurred.
6. SHARE CAPITAL
STOCK OPTION PLANS
As of October 31, 1999, the Company had stock options outstanding under two
plans: 194,000 pertain to the 1998 Stock Option Plan and 3,115,075 pertain to
the 1999 Stock Option Plan. Both plans are administered by the Board of
Directors who have sole discretion and authority, subject to the plans, to
determine awards including the conditions of exercise.
7
<PAGE>
The 1998 plan, which became effective on August 21, 1998, provided for the
issuance of 1,000,000 options within a period of 10 years from the effective
date. All 1,000,000 options were granted during the 1999 fiscal year at an
exercise price of $0.50 per share, of which 980,000 were granted to employees
and 20,000 were granted to outside contractors. All options vested immediately.
During the current quarter, 43,500 of these options were exercised. The 194,000
outstanding options have a remaining life of approximately nine months.
At the time of granting options under the 1998 plan, the Company's shares were
not yet publicly traded. On the first day of public trading, the Company's
shares had a closing market price of $1.06 per share. The Company recognized
compensation expense in the first quarter of the 1999 fiscal year of $548,800
for the granting of these options to employees in accordance with APB 25. In
addition, the Company recognized compensation expense of $12,600 in the first
quarter of the 1999 fiscal year for the granting of 20,000 options to outside
contractors in accordance with SFAS 123.
The 1999 plan, which became effective on March 24, 1999, provides for the
issuance of a total of 4,000,000 options, within a period of 10 years from the
effective date. During the current quarter, 1,200 options at an exercise price
of $6.63, 15,000 at an exercise price of $7.00, 77,000 at an exercise price of
$8.00 and 8,000 at an exercise price of $6.06 were granted, of which 9,200
options were granted to independent contractors. Of the 3,123,700 options
granted in total, 2,034,200 options vest immediately and 1,089,500 vest on a
quarterly basis over one year. The options expire five years from the date of
grant. During the current quarter, 5,625 of the $4.00 options were exercised
providing proceeds of $22,500.
Activity in the stock option plans for the current quarter and prior year is as
follows:
<TABLE>
<CAPTION>
2000 1999
----------------------------- --------------------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
OPTIONS EXERCISE PRICE OPTIONS EXERCISE PRICE
# $ # $
<S> <C> <C> <C> <C>
Outstanding, beginning of quarter 3,257,000 3.81 - -
Granted 101,200 7.68 4,022,500 3.18
Exercised (49,125) 0.90 (765,500) 0.51
- ---------------------------------------------------------------------------------------------------------------------------
Outstanding, end of quarter 3,309,075 3.97 3,257,000 3.81
- ---------------------------------------------------------------------------------------------------------------------------
Options exercisable at the end of the quarter 2,727,284 3.78 2,497,167 3.67
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
ACCOUNTING FOR STOCK BASED COMPENSATION
The Company applies APB 25 in accounting for its stock option plans for grants
to employees. Where the exercise price is equal to or greater than the fair
value of the stock at the date of the grant, no compensation is recorded. When
the exercise price is less than the fair value, compensation expense for each
option granted is recorded to the extent that the fair value exceeds the
exercise price.
7. CONVERTIBLE PREFERRED SHARES
On May 6, 1999, the Company entered into a Securities Purchase Agreement and
ancillary agreements with RGC International Investors LDC ("RGC") pursuant to
which the Company issued, for cash, a convertible debenture to RGC in the
aggregate principal amount of $8,500,000 at an interest rate of 5%. On July 19,
1999, the debenture was converted into 8,500 convertible preferred shares with a
dividend rate of 5%. The convertible preferred shares are convertible from time
to time at RGC's option into shares of the Company at the lesser of a fixed
conversion
8
<PAGE>
price or a variable conversion price based on the market price of the common
shares at the time of conversion. Under the terms of the convertible
preferred shares, because the Company's common shares were not approved for
trading on the Nasdaq Stock Market by November 6, 1999, the conversion price
of the preferred shares changed to the lesser of:
[a] 80% of the average of the seven consecutive lowest closing bid prices
of the common shares reported on the OTC Bulletin Board (or Nasdaq
Stock Market) during the 35 trading days ending one day prior to the
date that RGC exercises its right to convert; or
[b] 110% of the average closing bid price of the common shares over the ten
trading days ending on November 6, 1999, or $6.435
The preferred shares include an investment option, exercisable by RGC at the
time of conversion, to acquire a number of additional common shares equal to the
number of common shares with respect to which RGC is converting the preferred
shares, at an exercise price equal to the conversion price. This investment
option has a three year term.
The preferred shares have a three year term, after which any previously
unconverted portion is converted automatically into common shares under the same
conversion terms described above.
In connection with the financing, RGC also received warrants to purchase 680,000
common shares of the Company at an exercise price of $8.3475. The warrants have
a five year term.
The proceeds from RGC have been allocated to preferred shares and additional
paid in capital in accordance with their fair values at the date of issuance. In
addition, the Company agreed to provide the financing agents warrants to
purchase 62,769 common shares at an exercise price of $8.125 which expire in
five years. During the current quarter, $52,202 of finance costs were expensed.
The remaining unamoritzed finance costs are presented as a reduction of the
carrying value of the preferred shares.
During the current quarter, amortization expense of $84,018 was recorded in the
statement of loss, as the proceeds allocated to additional paid in capital were
considered a discount to be amortized over the term of the financing.
As of October 31, 1999, the carrying value of the convertible preferred shares
was comprised of the following:
<TABLE>
<CAPTION>
OCTOBER 31 July 31
1999 1999
$ $
- -------------------------------------------------------------------------------
<S> <C> <C>
Fair value upon issuance 7,500,000 7,500,000
Accrued interest on debenture 101,528 101,528
Accrued dividend payable 121,096 -
Amortization of discount 67,580 67,580
Less: deferred financing costs (579,333) (579,333)
- -------------------------------------------------------------------------------
7,210,871 7,089,775
- -------------------------------------------------------------------------------
</TABLE>
As at July 31, 1999, there existed a mandatory liquidation event with respect to
this financing which was outside of the control of the Company. This mandatory
liquidation event was that the
9
<PAGE>
preferred shares would be mandatorily redeemed should the Company fail to
obtain effectiveness with the Securities and Exchange Commission (SEC) of its
registration statement on Form SB-2 which registered for resale the common
shares issuable upon exercise of the preferred shares. As a result, the
convertible preferred shares were required to be classified as mezzanine
equity as there was a potential mandatory redemption event as at July 31,
1999. On August 26, 1999, the Company's Form SB-2 registration statement was
declared effective by the SEC. As a result, the preferred shares from this
date onwards have been classified as shareholders' equity.
8. COMMITMENTS AND CONTINGENCIES
[i] The Company received notice from an interested party on September 27,
1999 that it believes the Company to be in violation of certain
registered trademarks which it possesses in certain Canadian provinces.
While no legal proceedings have been initiated by this party, the
notice represents an asserted claim that is reasonably possible of
assertion. Management believes the claim is without merit and if
asserted, will not be successful. However, Management believes that if
successfully asserted, the impact of the claim will be immaterial.
[ii] Except as described in Note 10[i], no commitments outside of the
regular course of business were entered into during the quarter.
[iii] 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 development of the
Global Media Player and Broadcast Network. Under the terms of the
agreement, the Company was 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. At October 31, 1999, the remaining
balance of the commitment was $825,000 and is only payable based on the
satisfactory completion of the project.
9. INCOME TAXES
For financial reporting purposes, a valuation allowance has been established for
all deferred tax assets due to the uncertainty of realization.
10. SUBSEQUENT EVENTS
[i] STANDARD STRATEGIC INVESTMENT AGREEMENT
On October 7, 1999, the Company entered into a letter of intent for a
strategic relationship with Standard Radio Inc. ("Standard"). This
transaction was closed as of December 7, 1999. Under the terms of this
transaction, Standard invested $2 million into the Company and received
338,983 restricted common shares of the Company with piggy-back
registration rights. Standard also committed to cause all radio
stations owned by it at the time or during the three years following,
to become network associates in the Global Media E-Commerce Network and
Global Media Broadcast Network.
In connection with the agreement, on December 7, 1999 the Company
acted to increase the number of authorized directors by one and
appointed Standard's Chief Executive Officer to the Company's Board
of Directors. Upon accepting his position on the Board, this person
received 125,000 options pursuant to the 1999 Stock Option Plan at
an exercise price equal to the closing price of the common stock on
the OTC Bulletin Board on the date of the grant. The options will
vest over a three year period on a quarterly basis from the date of
grant and will expire five years from the grant date.
10
<PAGE>
Furthermore, effective December 7, 1999 the Company and each of the
six general managers of the Standard radio stations, Standard's
national program director and the general manger of Standard's
syndication division entered into consulting agreements. In
consideration of services to be performed under these agreements,
the Company granted each individual options to acquire up to 20,000
shares pursuant to the 1999 Stock Option Plan at an exercise price
equal to the closing price of the common stock on the OTC Bulletin
Board on the date of the grant. The options will vest over a one
year period from the date of grant depending on certain performance
criteria being met, and will expire five years from the grant date.
[ii] OPTIONS
Subsequent to quarter end, RGC International Investors LDC ("RGC")
exercised its investment options to purchase 164,217 common shares
of the Company, in conjunction with conversion of preferred shares.
[see note 7] The Company received net proceeds of $668,399 from the
investment option exercises.
11
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
- -------------------------------------------------------------------------------
NOTE: 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
QUARTER ENDED OCTOBER 31, 1999
During the quarter ended October 31, 1999, we made significant strides
towards building our e-commerce and streaming infrastructure and expanding
our clientele of network and broadcast associates. As of October 31, 1999, we
had signed up 59 network associates (representing 104 unique e-commerce sites
and 12 broadcast associates). Of these, 68 e-commerce sites were online and 3
broadcasting associates were streaming by quarter end. This compares to 19
network associates signed up as of July 31, 1999, none of which were
implemented at that time.
Subsequent to quarter end, we have experienced significant growth. As of
December 10, 1999, we have signed up 96 network associates (representing 148
unique e-commerce sites and 26 broadcast associates). We commenced the
quarter with 39 full time staff and ended the quarter with 81. We currently
employ 105 full time staff members.
Also during the first quarter of fiscal 2000, we launched 10 proprietary
simulated live internet-only radio stations on RealNetwork's Broadcasting
Network. Subsequent to the end of the first quarter, these 10 stations were
added to the station directory of the RealPlayer 7 streaming media player,
which was launched by RealNetworks on November 8, 1999.
OUR BUSINESS
We sell music CDs and cassettes, home videos and digital video discs (DVDs),
books and other entertainment products. Sales are made through our own online
store and through the private-label storefronts which we create for the
network associates in our Global Media Network program. Visitors to those
storefronts can place merchandise orders from the storefront on our network
associates' Web sites, which we then process through our e-commerce backend
solution and fulfill through our fulfillment partners.
We also offer an award winning streaming media broadcasting solution to radio
and television stations and internet sites through our Global Media Broadcast
Network program. The centerpiece of our Broadcast Network solution is the
Global Media Player, a streaming media player that is being developed for us
by RealNetworks, Inc. The Global Media Player is private-label branded for
our broadcasting associates and enables listeners to stream live and
simulated
12
<PAGE>
live audio, video and other multimedia content such as radio feeds from our
10 proprietary music stations and from the stations of each of our broadcast
associates.
We launched our Broadcast Network program with the beta version of the Global
Media Player in October 1999, and expect to incorporate the commercial version
into our Broadcast Network on December 21, 1999. When our Broadcast Network is
integrated with our e-commerce solution, our network associates can offer their
customers a tightly integrated entertainment and online shopping experience. For
example, accessing our Broadcast Network will enable a network associate's
customers to listen to live music programming through the Global Media Player
and purchase CDs of the featured artists at the same time.
We launched a beta version of our own e-commerce site in May 1999 to demonstrate
our e-commerce solution, and commercially launched our own online store in
September 1999. We significantly revised our online store on November 29, 1999
to offer greater functionality and ease of use. Our online store combines an
extensive catalogue of music, books, videos and other entertainment products,
with easy-to-use navigation and search capabilities and entertainment-focused
content. Additionally, visitors can download the Global Media Player for free.
We are continuing the further development of our online store and e-commerce
backend to provide additional features and content, and expect that these
enhancements will improve the revenue generating potential of our own store and
the stores of our network associates.
Since our inception, we have incurred significant losses, including losses
from our discontinued operations. SEE "Discontinued Operations." Since the
third quarter of fiscal 1999, these losses have resulted primarily from costs
related to developing our e-commerce products and our Web sites, developing
or acquiring technologies to be used in our business and general corporate
overhead. To date, we have generated minimal revenues from our new operations.
We expect to continue incurring net losses for the foreseeable future, as we
plan to invest in:
- - promoting our network associate program;
- - completing, launching and marketing our Broadcast Network;
- - enhancing our e-commerce site and improving its reliability and
functionality;
- - developing our infrastructure and applications;
- - marketing and promotion; and
- - hiring additional employees.
We believe these expenditures are necessary to attract more customers to our
site and the Web sites of our network associates, and to generate greater online
revenues.
Our revenues for the foreseeable future will derive primarily from advertising
and product sales and will depend primarily on the number of network and
broadcast associates that we sign up, the number of listeners on our simulated
live stations, the number of visitors that we are able to attract to our online
store and that our network associates are able to attract to their stores, and
on how many of those visitors purchase our products. Our Broadcast Network
revenues will also depend to a significant extent on our ability to attract
customers (such as radio and television stations) for these streaming media
services. We have recently initiated a program to market streaming media
consulting services and expect that over time this service line could become a
significant revenue contributor. We cannot forecast with any degree of certainty
the number of
13
<PAGE>
visitors to our online store or the stores of our network associates, the
number of visitors that will become customers, the number of customers we
will be able to secure for our streaming media services, or the amount of
entertainment product sales and streaming media services revenues. If our
revenue growth is slower than anticipated or our operating expenses exceed
our expectations, our losses will be significantly greater. We may never
achieve or sustain profitability.
We were incorporated in April 1997 and acquired Westcoast Wireless Cable Ltd. in
May 1997 from our controlling shareholder. We discontinued Westcoast's
historical operations, the sale and servicing of direct-to-home satellite
broadcast hardware and programming services, in the fourth quarter of fiscal
1998, and discontinued our other historical operations, the operation of a
call center, in the third quarter of fiscal 1999. SEE "Discontinued Operations."
Because of the development stage of our business and the seasonality inherent
in a retail business, our results of operations discussed below are not
necessarily indicative of the results you should expect for any future
comparable period. SEE " - Seasonality." Inflation has not historically had
any material effect on our operations.
RESULTS OF CONTINUING OPERATIONS
- -------------------------------------------------------------------------------
NOTE: The financial results contained in the following discussion have been
restated to exclude our discontinued call center and home satellite
businesses.
- -------------------------------------------------------------------------------
QUARTER ENDED OCTOBER 31, 1999 COMPARED TO QUARTER ENDED OCTOBER 31, 1998
SALES. Revenues of $13,645 were generated from our e-commerce and
broadcasting operations in the first quarter of fiscal 2000, compared to none
in the first quarter of fiscal 1999. Our internet-focused business did not
commence until the third quarter of fiscal 1999. SEE " - Recent Events."
COST OF SALES. Expenditures of $72,790 were recorded in the first
quarter of fiscal 2000, compared to none in the first quarter of fiscal 1999,
due primarily from incurring minimum contractual broadcasting related charges
that were payable as we continued to develop our network.
OPERATING EXPENSES. Our operating expenses increased 114% to $1,503,765
in the first quarter of fiscal 2000, from $701,887 in the first quarter of
fiscal 1999. This increase was due primarily to increased legal, accounting and
other expenses related to being a public reporting company, expenses related to
our new Vancouver, B.C. facility and personnel, capital assets and other costs
associated with the development and launch of our internet sites and our network
associate programs, as follows:
- - Amortization increased to $91,584 in the first quarter of fiscal 2000,
from $13,047 in the first quarter of fiscal 1999, due primarily to the
acquisition of additional capital assets.
- - General and administrative expenses increased 221% to $290,091 in the
first quarter of fiscal 2000, from $90,369 in the first quarter of
fiscal 1999, due primarily to the costs associated with multiple office
locations and the administration required for a significantly larger
organization.
14
<PAGE>
- - Sales and marketing expenses increased to $547,134 in the first quarter
of fiscal 2000, compared to $8,702 in the first quarter of fiscal 1999.
The increase was primarily due to the costs associated with attending
industry related conferences, marketing of the Network Associate
program and travel relating to the development of strategic alliances
and potential financing sources.
- - Shareholder communication expenses increased 64% to $67,200 in the
first quarter of fiscal 2000, from $40,969 in the first quarter of
fiscal 1999, due primarily to the costs of being a publicly-traded
company for the full quarter versus a partial quarter in the prior
year.
- - Technical operations and development expenses were $507,756 in the
first quarter of fiscal 2000, as compared to none in the first quarter
of fiscal 1999. These expenses were primarily due to the costs of
developing our e-commerce and streaming media technologies.
- - We incurred no stock option compensation expenses in the first quarter
of fiscal 2000, compared to $548,800 in the first quarter of fiscal
1999 as the result of issuing stock options in fiscal 1999 to certain
of our officers and employees for less than the market trading price of
our common stock on the date we began trading on the OTC Bulletin
Board.
INTEREST. We earned $12,273 in interest income in the first quarter of
fiscal 2000, compared to none in the first quarter of fiscal 1999, on the funds
received from our convertible debenture and warrant offering to RGC. SEE "-
Liquidity and Capital Resources."
NET LOSS FROM CONTINUING OPERATIONS. We experienced a $1,555,272 net
loss from continuing operations for the first quarter of fiscal 2000, up 121%
from our $705,100 net loss from continuing operations for the first quarter of
fiscal 1999, due primarily to the increase in operating expenses as we
implemented our internet-focused business plan.
NET LOSS FROM ALL OPERATIONS. We experienced a $1,555,272 net loss from
all operations for the first quarter of fiscal 2000, up 118% from our $712,149
net loss from all operations for the first quarter of fiscal 1999. SEE
"- Discontinued Operations."
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------------------------------------------------------
NOTE: The financial results contained in the following discussion have been
restated to exclude our discontinued call center and home satellite
businesses. This section should be read in conjunction with "- Results
of Continuing Operations" above.
- -------------------------------------------------------------------------------
QUARTER ENDED OCTOBER 31, 1999 COMPARED TO QUARTER ENDED OCTOBER 31, 1998
FINANCING ACTIVITIES. We financed our operations and capital
expenditures in first quarter fiscal 2000 primarily from existing cash
resources. Cash received upon the exercise of stock options was $44,250 in first
quarter fiscal 2000, due to the exercise of 49,125 stock options. No stock
options were exercised in first quarter fiscal 1999.
CAPITAL EXPENDITURES AND COMMITMENTS. Our capital expenditures
increased to $2,547,269 in first quarter fiscal 2000, from $26,524 in first
quarter fiscal 1999, primarily as the result of capitalized development costs
for our Broadcast Network and Global Media Player, and computer hardware,
software and operating equipment purchases. As of October 31, 1999, we had no
material commitments outstanding for purchases of additional capital assets,
except for $825,000 due under our April 20, 1999 engagement of RealNetworks to
perform consulting
15
<PAGE>
services in connection with the design and development of our Broadcast
Network and Global Media Player.
WORKING CAPITAL (DEFICIENCY). At October 31, 1999, we had working
capital of $1,325,502 and a working capital ratio of 2.59. This represents an
improvement from our October 31, 1998 working capital deficiency of $436,869 and
working capital ratio of 0.14.
RECENT EVENTS
OFFERING TO RGC INTERNATIONAL INVESTORS LDC.
OFFERING. In May 1999, we raised $8.5 million through the sale of a
convertible debenture, in the original principal amount of $8.5 million, to RGC
International Investors LDC. On July 19, 1999, we exercised our right to convert
the debenture into 8,500 shares of our Series A convertible preferred stock. In
the offering, we also issued RGC a five-year warrant to purchase 680,000 shares
of common stock at $8.3475 per share. In addition, we granted RGC the option,
exercisable simultaneously with conversion of the Series A preferred stock into
common stock, to purchase an equal number of additional shares of common stock
at a per share price equal to the conversion price in effect at the time of
conversion. Without giving effect to the accrual of additional amounts on the
stated value of the Series A preferred stock since May 6, 1999, the exercise in
full of the these investment options could result in up to an additional $8.5
million being invested by RGC. With full exercise of warrants and options, the
potential total investment by RGC would be $22.7 million. Subsequent to the
quarter end, RGC exercised options for the purchase of 164,217 common shares,
providing additional cash proceeds of $668,399 to us.
TERMS OF PREFERRED STOCK. The stated value of each share of Series A
preferred stock ($1,000), plus an amount accruing thereon at the rate of 5%
per annum, is convertible from time to time into shares of our common stock
based upon the lesser of a fixed conversion price or a variable conversion
price. In accordance with the terms of the Series A preferred stock, the
fixed conversion price and the applicable percentage of the future market
price used in the variable conversion price calculation was adjusted downward
since our common stock was not listed on the Nasdaq National Market or the
Nasdaq SmallCap Market by November 6, 1999. See "Note 7 to Financial
Statements." The decrease in the fixed and variable conversion prices will
increase the number of shares of common stock issuable upon conversion, which
could cause substantial additional dilution to other holders of our common
stock. The Series A preferred stock has no voting rights, except that the
holders of the Series A preferred stock have the right to vote on issues
directly affecting the Series A preferred stock as a class. Under certain
circumstances, we may be required to redeem the Series A preferred stock upon
the occurrence of certain events that are within our control. To the extent
not previously converted, the shares of Series A preferred stock will
automatically convert into common stock on May 6, 2002.
NASDAQ LISTING. We filed a listing application with Nasdaq on
November 15, 1999, for inclusion on its Small Cap market. However, there is
no assurance that our application will be approved.
REGISTRATION OF UNDERLYING COMMON SHARES. Effective as of August 26,
1999, we registered 7,443,153 shares of our common stock which the selling
holders of those shares may acquire on conversion or exercise of shares of the
outstanding Series A convertible preferred stock, related warrants and related
investment options. As of December 9, 1999, RGC had converted a total of 650
shares of our Series A preferred stock into 164,217 shares of common
16
<PAGE>
stock, had exercised investment options to purchase 164,217 shares of our
common stock, and had exercised none of the related warrants.
LAUNCH OF E-COMMERCE SITE.
We launched a beta version of our online store in May 1999 and commercially
launched it in September 1999. We adopted an initial pricing policy intended to
result in a small initial volume of transactions while site development and
systems integration was fully completed. We do not anticipate earning
significant e-commerce revenues until we launch a substantial number of private
label online stores for associates participating in our network associate
program.
STRATEGIC RELATIONSHIP WITH STANDARD RADIO INC.
On December 7, 1999, we entered into a strategic relationship with Standard
Radio Inc. We expect this relationship to provide significant opportunities for
future revenues and growth, in addition to the initial cash investment. In that
transaction (a) Standard invested $2,000,000 in exchange for 338,983 shares of
our common stock at a purchase price of $5.90 per share, (b) Standard's
president and chief executive officer, Gary Slaight, was appointed to a seat on
our Board of Directors and granted options to purchase 125,000 shares of common
stock, (c) we entered into agreements with eight members of Standard's
management team under which they will serve on a marketing advisory committee to
Global Media and will promote our solutions to other radio stations in North
America, for which each will receive unvested options to purchase up to 20,000
shares of our common stock, (d) Standard agreed to cause each of the radio
stations owned and controlled by it now and for the next three years to become
e-commerce and broadcast associates of Global Media, and (e) Standard received
the right to approve agreements between us and radio stations which compete in
the same genre and locale as each of Standard's stations in Canada.
FUTURE CAPITAL REQUIREMENTS
We expect negative cash flow from operations to continue for fiscal 2000, as we
continue to develop and market our internet-focused operations, and anticipate
achieving break-even in fiscal 2001 and profitability during fiscal 2002. We
currently anticipate that approximately $4 million of additional funds will be
required to meet our anticipated needs for working capital, capital expenditures
and business expansion through fiscal 2000. However, we expect to meet this need
through the exercise of existing options and warrants.
We may need to raise additional funds in order to fund more rapid expansion, to
develop new or enhanced services or products, to respond to competitive
pressures or to acquire complementary products, businesses or technologies. If
additional funds are raised through the issuance of equity or convertible debt
securities, the percentage ownership of our current stockholders will be
reduced, stockholders may experience additional dilution and such securities may
have rights, preferences and privileges senior to those of our common stock.
There can be no assurance that additional financing will be available on terms
favorable to us or at all. If adequate funds are not available or are not
available on acceptable terms, we may not be able to develop or enhance services
or products, respond to competitive pressures, fund expansion or take advantage
of unanticipated acquisition opportunities. Such inability could negatively
impact our business.
17
<PAGE>
SEASONALITY
We expect our operating results to fluctuate significantly from period to
period. Both seasonal fluctuations in internet usage and traditional retail
seasonality may affect our business. Internet usage generally declines during
the summer. Sales in the traditional retail book and music industries usually
increase significantly in the fourth calendar quarter of each year and are
correspondingly lower in other quarters. If similar seasonal patterns emerge in
e-commerce, our revenues may vary significantly from period to period.
FOREIGN CURRENCY TRANSLATION
We have translated our monetary assets and liabilities which are denominated in
a foreign currency into U.S. dollars at the period-end exchange rates. We have
translated our income and expense items at the average exchange rates prevailing
during the fiscal period. Exchange gains and losses arising on translation are
reflected in net income for the period.
DISCONTINUED OPERATIONS
We were previously engaged in the marketing of satellite programming and
hardware and providing call center services. We withdrew from the home
satellite business in late fiscal 1998, and the call center business during
the third quarter of fiscal 1999, and therefore have accounted for these
businesses as discontinued operations. The consolidated statements of loss
report $7,049 of net loss from these discontinued operations for the quarter
ended October 31, 1998. This loss figure represents $20,130 of revenues from
the discontinued call center operations offset by an equal amount of
operating expenses, plus $7,049 of charges and closing adjustments relating
to the discontinued satellite operations.
18
<PAGE>
RISKS ASSOCIATED WITH THE YEAR 2000
We have assessed the year 2000 readiness of the software, computer technology
and other systems that we use internally. Based on our review, we do not believe
that we have material exposure to the year 2000 issue with respect to our own
information systems since our existing systems correctly define the year 2000.
We have inquired of our material vendors as to the year 2000 compliance of their
own systems or whether they have or finalized any contingency plans to address
year 2000 problems that may arise. We have received information from our
material vendors Baker & Taylor, Valley Media, Muze, RealNetworks and MCI
Worldcom, asserting that they are year 2000 compliant or nearing completion. We
are currently unable to predict the extent to which the year 2000 issue will
affect our other suppliers, or the extent to which we would be vulnerable to our
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 our systems
could have a material adverse effect on us.
We also depend on the year 2000 compliance of the computer systems and financial
services used by consumers. A significant disruption in the ability of consumers
to reliably access the Internet or portions of it or to use their credit cards
would have an adverse effect on demand for our products and services. We
anticipate that most of the sales through our e-commerce sites will be made with
credit cards. Our business and results of operations therefore may be materially
adversely affected to the extent that our customers are unable to use their
credit cards due to year 2000 issues that are not rectified by 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 our ability to generate sales.
We have not developed a contingency plan to address situations that may
result if we, our suppliers or the credit card systems used by our customers
are unable to achieve year 2000 compliance. The failure if we, our suppliers
or the credit card systems used by our customers to achieve year 2000
compliance could have a material adverse effect on our business.
19
<PAGE>
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, we may be subject to legal proceedings and claims which may
have a material adverse effect on our business. We are not aware of any current
legal proceedings or claims that will have, individually or in the aggregate, a
material adverse effect on our business, prospects, financial condition or
results of operations.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On December 7, 1999, we entered into a strategic relationship with Standard
Radio Inc. In that transaction Standard invested $2,000,000 into Global Media
in exchange for 338,983 shares of Common Stock at a purchase price of $5.90
per share. This sale was made under the exemption from registration provided
for non-public offerings by Section 4(2) of the Securities Act of 1933 and
Rule 506 of Regulation D thereunder.
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 DESCRIPTION
<S> <C>
10.24 Strategic Investment Agreement dated December 7, 1999,
between Global Media and Standard Radio Inc.
10.25 Co-Marketing and Sale Agreement dated December 7, 1999, between
Global Media and Standard Radio Inc.
10.26 Form of Consulting Agreement between Global
Media and individual consultants under Strategic Investment
Agreement.
27 Financial Data Schedule.
</TABLE>
B. REPORTS ON FORM 8-K.
None during the reporting period.
20
<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: December 15, 1999 /s/ L. James Porter
----------------------------------------------
L. James Porter
Chief Financial Officer
(Principal Financial and Accounting Officer,
and authorized signatory for the registrant)
21
<PAGE>
EXHIBIT INDEX
The following documents are filed as exhibits to this Quarterly Report:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<S> <C>
10.24 Strategic Investment Agreement dated December 7, 1999,
between Global Media and Standard Radio Inc.
10.25 Co-Marketing and Sale Agreement dated December 7, 1999,
between Global Media and Standard Radio Inc.
10.26 Form of Consulting Agreement between Global
Media and individual consultants under Strategic Investment
Agreement.
27 Financial Data Schedule.
</TABLE>
22
<PAGE>
EXHIBIT 10.24
THE SHARES HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF
1933 OR THE SECURITIES LAWS OF ANY STATE (THE "SECURITIES LAWS"). THE SHARES
ARE BEING OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES LAWS. THE SHARES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION ("SEC"), ANY STATE
SECURITIES COMMISSION OR OTHER REGULATORY AUTHORITY, NOR HAVE ANY OF THOSE
AGENCIES PASSED UPON OR ENDORSED THE MERITS OF THIS OFFERING. ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL. THE SHARES CANNOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS THAT TRANSACTION IS REGISTERED OR
EXEMPT FROM REGISTRATION UNDER THE SECURITIES LAWS, AND THE HOLDER HAS PROVIDED
THE COMPANY WITH A LEGAL OPINION ACCEPTABLE TO THE COMPANY TO THAT EFFECT.
STRATEGIC INVESTMENT AGREEMENT
This STRATEGIC INVESTMENT AGREEMENT ("AGREEMENT") is made as of
December 7, 1999, by and between GLOBAL MEDIA CORP., a Nevada corporation
("COMPANY"), and STANDARD RADIO INC., a corporation continued under the laws of
the Province of Ontario, Canada ("STANDARD").
RECITALS
The Company and Standard desire to enter into a strategic relationship
pursuant to which (a) Standard will enter into co-marketing and sale
arrangements for the establishment in respect of certain radio stations owned by
Standard of private label e-commerce and broadcasting capabilities on such
Standard stations' web sites and (b) the Company will sell to Standard, and
Standard will purchase from the Company, shares of the Company's common stock,
par value $.001 per share (the "COMMON STOCK"), pursuant to the terms and
conditions of this Agreement (the "INVESTMENT"). The Investment is being made
in reliance on exemptions from registration and applicable state securities laws
under the United States Securities Act of 1933, as amended (the "SECURITIES
ACT") and the securities laws of the Providence of Ontario, Canada. The shares
subject to this Agreement have not been registered under the Securities Act, or
under the state securities laws of any state of the United States (collectively,
the "Securities Laws".
B. In connection with the strategic relationship, the Company has
agreed to provide Standard with board representation and certain employees of
Standard will enter into consulting arrangements with the Company to provide
strategic advice on product development intitiatives of the Company and market
the Global Media Network to other radio stations.
AGREEMENT
In consideration of the mutual covenants and agreements set forth in this
Agreement and other good and valuable consideration, the receipt and adequacy of
which the parties acknowledge, the parties agree as follows:
1
<PAGE>
ARTICLE 1
PURCHASE AND SALE OF STOCK
1.1 PURCHASE OF COMMON STOCK. On the terms and subject to the
conditions contained in this Agreement, the Company shall sell and deliver to
Standard, and Standard shall purchase from the Company, 338,983 shares of Common
Stock (the "SHARES").
1.2 PURCHASE PRICE. Standard shall pay to the Company a per share
purchase price of U.S. $5.90, for a total purchase price of U.S. $2,000,000 for
the Shares (the "PURCHASE PRICE"). Standard shall pay the Purchase Price to the
Company by wire transfer in United States dollars at Closing.
1.3 DELIVERY OF CERTIFICATES. The Company will cause its transfer
agent to prepare a certificate or certificates representing the Shares, which
certificate(s) shall be delivered to Standard at the Closing upon the Company's
confirmed receipt of the Purchase Price.
ARTICLE 2
CLOSING
Closing of the transactions contemplated in this Agreement (the
"CLOSING") shall take place at the offices of Davis Wright Tremaine LLP at 10:00
a.m. on December 3, 1999, or at such other place, date, and time as may be
agreed upon by the parties (the "CLOSING DATE").
ARTICLE 3
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY
To induce Standard's execution of this Agreement and consummation of the
transactions contemplated by this Agreement, the Company represents, warrants
and covenants as follows:
3.1 CORPORATE ORGANIZATION; AUTHORIZATION. The Company is duly
incorporated, validly existing and in good standing as a corporation under the
laws of the State of Nevada and has full corporate power and authority to enter
into this Agreement and to issue and sell the Shares. The Company has taken all
action required by applicable law, its governing charter, or otherwise to
authorize the execution and delivery of this Agreement and the consummation of
the transactions contemplated by this Agreement. This Agreement has been duly
executed and delivered by the Company and constitutes a valid and binding
agreement of the Company, enforceable in accordance with its terms. The
execution of this Agreement and the consummation of the transactions
contemplated by this Agreement, will not result in the breach of any term or
provision of, constitute an event of default under, or require the consent or
approval of any third-party pursuant to any material contract, agreement, or
instrument to which the Company is a party or to which any of its properties or
operations are subject other than the consent of RGC International Investors
LDC, as contemplated in Section 7.3.1.
3.2 CAPITAL STOCK. The Company has authorized capital stock
consisting of 200,000,000 shares of Common Stock and 100,000,000 shares of
Preferred Stock, of which 8,500 had been designated Series A Convertible
Preferred Stock. As of October 25, 1999, the Company had 20,710,456 outstanding
shares of Common Stock and 8,500 outstanding shares of its Series A Convertible
Preferred Stock.
2
<PAGE>
3.3 REPORTING COMPLIANCE. The Common Stock is registered pursuant to
Section 12 of the Securities Exchange Act of 1934, as amended (the "EXCHANGE
ACT"), and the Company has filed all materials required to be filed pursuant to
Section 13(a) or 15(d) of the Exchange Act for a period of at least 12 months
immediately preceding the date of this Agreement.
3.4 DISCLOSURE. The Company has delivered to Standard a copy of the
Company's Annual Report on Form 10-K as filed in the SEC on November 1, 1999 and
its final Prospectus filed with the SEC on September 2, 1999, relating to the
offering for resale of shares of Common Stock issuable to RGC International
Investors LDC upon conversion of its shares of Series A Convertible Preferred
Stock and the exercise of investment options and warrants related thereto (the
"Disclosure Documents"). The information concerning the Company set forth in
the Disclosure Documents was, as of the date thereof, complete and accurate in
all material respects and, to the best of the Company's knowledge, did not
contain any untrue statement of a material fact or omit to state a material fact
required to make the statements made, in light of the circumstances under which
they were made, not misleading. Upon request, the Company shall provide to
Standard any additional reports filed with the SEC after the date of this
Agreement but prior to the Closing Date.
3.5 CHARACTERISTICS OF THE SHARES. The Shares, when issued and
delivered to Standard, will be duly and validly authorized and issued, fully
paid, and nonassessable. There are no preemptive rights to acquire Common Stock
of the Company, other than certain rights which have been, or prior to the
Closing will be, waived by the holders thereof.
3.6 CONSENTS . Except for the consent of the holder of the Company's
Series A Convertible Preferred Stock, no consent or approval by any third person
or public authority is required to authorize, or is required in connection with,
the execution, delivery or performance of this Agreement by the Company.
ARTICLE 4
REPRESENTATIONS, WARRANTIES AND COVENANTS OF STANDARD
As an inducement to the Company to sell and issue the Shares to Standard,
and with the intent that the Company rely on the accuracy thereof, Standard
represents, warrants and covenants as follows:
4.1 ORGANIZATION. Standard is duly organized and validly existing
under the laws of the jurisdiction of its organization. Standard has the
requisite power and is duly authorized under all applicable laws, regulations
and ordinances, to acquire the Shares. The execution, delivery and performance
of this Agreement will not violate any provision of Standard's governing charter
or any other contractual or legal obligation of Standard.
4.2 APPROVAL OF AGREEMENT. Standard has taken all action required by
applicable law, its governing charter, or otherwise to authorize the execution
and delivery of this Agreement and the consummation of the transactions
contemplated by this Agreement. This Agreement is the legal, valid, and binding
obligation of Standard, enforceable in accordance with its terms. Standard is
not required to obtain the authorization, approval, consent, or order of, or
make a registration or filing with, any court or other regulatory or
governmental body in connection with
3
<PAGE>
the execution and delivery by Standard of this Agreement and the consummation
by Standard of the transactions contemplated by this Agreement. The
execution of this Agreement and the consummation of the transactions
contemplated by this Agreement, will not result in the breach of any term or
provision of, constitute an event of default under, or require the consent or
approval of any third-party pursuant to, any material contract, agreement, or
instrument to which Standard is a party or to which any of its properties or
operations are subject.
4.3 RISK FACTORS. Standard has been informed and fully understands
that there are significant risks associated with purchasing the Shares as set
forth in the Disclosure Documents, which factors Standard has considered
carefully before executing this Agreement.
4.4 STANDARD'S FINANCIAL CONDITION. Standard certifies that it is an
"accredited investor", as that term is defined in Regulation D under the
Securities Act. Standard is capable of bearing the economic risk and the burden
of an investment in the Shares, including, but not limited to, the possibility
of the complete loss of the Purchase Price. Standard understands that there are
substantial restrictions on the transferability of the Shares which may make the
liquidation of the investment represented by the Shares impossible for the
immediate future.
4.5 DISCLOSURE. Standard has received copies of the Disclosure
Document. All documents requested by Standard have been made available for
inspection and copying and Standard has been supplied with all of the additional
information concerning the Shares and the Company that Standard has requested.
4.6 NO REGISTRATION. Standard acknowledges that the Shares are being
issued without being registered under the Securities Laws. The Shares are being
acquired by Standard for its own account, for investment (and not on behalf of,
or with a view toward distribution to, any other person) under exemptions from
the registration provisions of the Securities Laws. Standard acknowledges that
it must therefore hold the Shares indefinitely unless they are subsequently
registered under the Securities Laws or exemptions from such registration are
available, and that the Company will place stop transfer instructions with
respect to the Shares. Except as otherwise provided in this Agreement, the
Company is under no obligation (a) to register the Shares or take any other
action which would make an exemption from registration available, or (b) to
cause or permit the Shares to be transferred in the absence of such registration
or an opinion satisfactory to the Company's counsel that an exemption is
available.
4.7 EXCLUSIVE RELIANCE ON THIS AGREEMENT; NO ORAL REPRESENTATIONS. In
making the decision to purchase the Shares, Standard has relied exclusively upon
the information provided by this Agreement, the Disclosure Document, information
in any books, records or documents of the Company provided by the Company to
Standard in connection with this Agreement, and any investigations made by
Standard. Standard confirms that it is not relying upon any oral
representations or statements made by the Company or by any other person in
purchasing the Shares.
4.8 RULE 144. Standard acknowledges that the Shares are restricted
securities, as defined in Rule 144 under the Securities Act, that the Shares may
not be resold in reliance on Rule 144 for at least one year after issuance, and
that once the Shares are eligible for resale under Rule 144, they will be
subject to certain resale restrictions contained in Rule 144, including
4
<PAGE>
volume limitations and restrictions on the manner of resale, until they have
been held for two years as provided in Rule 144. If Standard is an affiliate
of the Company for purposes of Rule 144, Standard understands that certain
restrictions on resale would continue to apply under Rule 144 for so long as
Standard is an affiliate. Standard acknowledges that it will be an affiliate
of the Company for so long as Mr. Slaight or another nominee of Standard,
sits on the Company's Board of Directors, whether pursuant to SECTION 5.2 or
otherwise.
4.9 LEGEND . Standard acknowledges that the certificates representing
the Shares will bear substantially the following legend until such legend can be
removed under applicable securities laws:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF ANY STATE AND WERE
OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENT OF
THE ACT AND SUCH LAWS. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR
OTHER REGULATORY AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED
UPON OR ENDORSED THE MERITS OF THESE SECURITIES. ANY REPRESENTATION TO THE
CONTRARY IS UNLAWFUL. THESE SECURITIES CANNOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF TO ANY PERSON OR ENTITY UNLESS SUBSEQUENTLY REGISTERED UNDER THE
ACT, AND/OR THE LAWS OF CERTAIN STATES, OR UNLESS AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE AND THE HOLDER HAS PROVIDED THE COMPANY WITH A LEGAL
OPINION ACCEPTABLE TO THE COMPANY TO THAT EFFECT.
4.10 FURTHER ACTIONS . Standard shall execute and deliver to the
Company, at or prior to the Closing, such further letters of representation,
acknowledgment, suitability or the like, as the Company and its counsel may
reasonably request in connection with the Company's reliance on exemptions from
registration under the Securities Laws.
4.11 NO OTHER ASSURANCES . The Company and Standard acknowledge that
the basis for relying on exemptions from registration or qualifications are
factual, depending on the conduct of the various parties, and that no legal
opinion or other assurance will be required or given to the effect that the
transactions contemplated hereby are in fact exempt from registration or
qualification.
ARTICLE 5
OTHER AGREEMENTS
5.1 PIGGYBACK REGISTRATION RIGHTS.
5.1.1 NOTICE; REGISTRATION. Subject to SECTIONS 5.1.2 THROUGH
5.1.4, if the Company decides to register any of its Common Stock either for its
own account or the account of any of its other security holders, then the
Company will:
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(a) promptly give written notice of the proposed
registration to Standard, which includes a list of the jurisdictions in which
the Company intends to attempt to qualify such securities under applicable state
securities laws (the "REGISTRATION NOTICE"); and
(b) include in such registration (and any related
qualification or other compliance filing under applicable state securities
laws), and in any underwriting involved in the registration, all or any portion
of the Shares as are specified in a written request made by Standard to the
Company within 30 days after receipt of the Registration Notice.
5.1.2 EXCEPTIONS. SECTION 5.1.1 does not apply to (a)
registrations relating solely to employee benefit plans, or (b) registrations on
any form that does not permit secondary sales.
5.1.3 TERMINATION. The registration rights granted under
SECTION 5.1.1 will expire upon the shorter of (a) three years after the Closing
Date, or (b) such time as Standard may dispose of all of its Shares it then owns
in a single three month period under Rule 144 of the Securities Act.
5.1.4 UNDERWRITTEN OFFERINGS. Notwithstanding SECTION 5.1.1, if
the registration described in the Registration Notice involves an underwriting,
then (a) the Company shall so advise Standard in the Registration Notice, and
(b) Standard's rights to registration pursuant to SECTION 5.1.1 shall be
conditioned upon Standard's participation, and inclusion of the Shares, in the
underwriting as follows:
(a) Standard and the Company (and any other security
holders proposing to distribute their securities through such underwriting)
shall enter into an underwriting agreement in customary form with the
representatives of the underwriter or underwriters selected for such
underwriting by the Company.
(b) Notwithstanding any other provisions of this
Section, if the representatives of the underwriter or underwriters determine in
good faith that marketing factors make it advisable to impose a limitation on
the number of secondary shares to be underwritten, the number of such secondary
shares, if any, that may be included in the registration and underwriting on
behalf of such holders, and any other security holders proposing to distribute
their securities of the Company through such underwriting shall be allocated in
proportion, as nearly as practicable, to the respective amounts of securities
that they had requested to be included in such registration at the time of
filing the registration statement.
(c) If Standard disapproves of the underwriting terms,
it may elect to withdraw from the registration by written notice to the Company
and the representatives of the underwriter or underwriters.
5.2 BOARD REPRESENTATION.
5.2.1 APPOINTMENT. Subject to closing of the Investment, the
Company will appoint Gary Slaight, Standard's president, to fill a vacant
position on the Company's board of directors for a term beginning as of the
day after the Closing Date and continuing until the next annual shareholder
meets and until his successor is duly elected and qualified. For the shorter
of
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(a) three years after the Closing Date, or (b) as long as Standard owns at
least 25% of the Shares, the Company will nominate Mr. Slaight or another
mutually-acceptable designee of Standard) for election to the Company's board
of directors.
5.2.2 OPTION GRANT. Upon Mr. Slaight initially accepting a
position on the Company's board of directors, the Company will grant to Mr.
Slaight non-qualified options to purchase 125,000 shares of Common Stock,
pursuant to the Company's 1999 Stock Option Plan, for an exercise price equal to
the closing sales price of the Common Stock on the OTC Bulletin Board on the
date of grant. These options will vest over three years, in equal quarterly
installments commencing three months after the Closing Date.
5.3 CO-MARKETING AND SALES AGREEMENTS. Standard will, with respect to
all radio stations owned or controlled by it, including those which may
become owned or controlled by it now or during the three years following the
Closing Date (the "Standard Stations"), execute and deliver to the Company
the Co-Marketing And Sales Agreement in substantially the form attached as
EXHIBIT A (the "CO-MARKETING AGREEMENT"). For a period of three years
commencing on the Closing Date, the Company will obtain Standard's approval
before entering into any network associate agreements with radio stations
located in Canada which are "direct competitors" of Standard. For these
purposes, a "direct competitor" shall mean another radio station in the same
metropolitan market as a Standard Station which offers substantially the same
programming genre as such Standard Station. In an effort to avoid future
disputes over whether a particular radio station is a "direct competitor" of
Standard, following the Closing the parties shall cooperate in good faith to
prepare a mutually agreeable list of other radio stations in the existing
markets of the Standard Stations which meet the definition of a "direct
competitor" set forth above.
5.4 CONSULTING AGREEMENT. Each of the following management personnel
of Standard (collectively, the "CONSULTANTS") will enter into a Consulting
Agreement in substantially the form attached as EXHIBIT B (the "CONSULTING
AGREEMENT"):
J.J. Johnson
J.M. Heimrath
Gary Russell
Marty Forbes
Pat Holiday
Lee Sterry
Eric Stafford
Rob Braide
ARTICLE 6
INDEMNIFICATION BY THE COMPANY
6.1 INDEMNIFICATION BY THE COMPANY. The Company will indemnify and
hold harmless Standard and its Affiliates from and against any Claims to which
any of them may become subject under applicable law (including the Securities
Act and the Exchange Act) and will reimburse them for any legal or other
expenses reasonably incurred by them in connection
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with the investigation or defense of any Claims arising out of or are based
upon any breach of the Company's representations and warranties set forth in
Article 3.
ARTICLE 7
CONDITIONS PRECEDENT TO OBLIGATIONS
7.1 COMPANY'S CLOSING CONDITIONS. The obligation of the Company to
close the transactions contemplated under this Agreement is subject to the
fulfillment, on or before Closing, of each of the following conditions, unless
waived in writing:
7.1.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Standard contained in SECTION 4 shall be true and correct on and
as of the Closing with the same effect as though such representations and
warranties had been made on and as of the Closing.
7.1.2 PERFORMANCE. All covenants, agreements and conditions
contained in this Agreement to be performed by Standard on or prior to the
Closing shall have been performed or complied with in all material respects.
7.1.3 PURCHASE PRICE. The Company has confirmed receipt of the
Purchase Price.
7.1.4 OTHER DOCUMENTS. Standard has delivered to the Company
(a) a Co-Marketing Agreement which has been fully executed by Standard, and
(b) a Consulting Agreement which has been fully executed by each of the
Consultants and Standard.
7.2 STANDARD'S CLOSING CONDITIONS. The obligation of Standard to
close the transactions contemplated under this Agreement are subject to the
fulfillment, on or before the Closing, of each of the following conditions,
unless waived in writing:
7.2.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company contained in SECTION 3 shall be true and correct on
and as of the Closing with the same effect as though such representations and
warranties had been made on and as of the Closing.
7.2.2 PERFORMANCE. All covenants, agreements and conditions
contained in this Agreement to be performed by the Company on or prior to the
Closing shall have been performed or complied with in all material respects.
7.2.3 OFFICER'S CERTIFICATE. The Company shall have delivered to
the Purchasers a certificate signed by the Company's President or Secretary
which certifies (a) the resolutions of the Company's board of directors which
authorize the execution, delivery and performance of the Agreements and the
issuance and sale of the Shares, and (b) the truth and accuracy of SECTIONS
7.2.1 AND 7.2.2.
7.2.4 BOARD OF DIRECTORS. Effective as of the Closing, the
Company's board of directors shall have appointed Gary Slaight to fill a vacant
position on the Board until the next annual meeting of shareholders or until his
successor is duly elected and qualified.
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7.2.5 STOCK CERTIFICATE. The Company has executed and delivered
a stock certificate representing the Shares to Standard.
7.2.6 OTHER DOCUMENTS. The Company has executed and delivered to
Standard (a) a Co-Marketing Agreement, (b) the Consulting Agreement and stock
option letter agreements with each of the Consultants as set forth in
Section 5.4, and (c) a stock option letter Agreement with Mr. Slaight pursuant
to SECTION 5.2.2 of this Agreement.
7.3 CONDITION TO BOTH PARTIES OBLIGATIONS. The obligations of each
party to close the transactions contemplated under this Agreement are subject to
the satisfaction, at or before the Closing Date, of the following conditions,
unless waived in writing:
7.3.1 CONSENT. The holder of the Company's Series A preferred
stock has consented in writing to the Investment and this Agreement, and has
waived its rights to any dilution or price protection to which it may be
entitled in connection with the consummation of the Investment. A copy of such
consent shall be delivered to Standard at the Closing.
7.3.2 PENDING CLAIMS. No claim, action, suit, investigation, or
proceeding is pending against Standard or the Company for the purpose of
enjoining or preventing the consummation of the transactions contemplated in
this Agreement or otherwise claiming that either this Agreement or the
consummation of the transactions contemplated in this Agreement are illegal.
7.3.3 OTHER ITEMS. Each party has received such further
documents, certificates or instruments relating to the transactions contemplated
by this Agreement as the other party may reasonably request.
ARTICLE 8
TERMINATION
8.1 RIGHT TO TERMINATE. Notwithstanding anything to the contrary in
this Agreement, this Agreement may be terminated and the transactions
contemplated in this Agreement abandoned at any time prior to Closing:
8.1.1 MUTUAL CONSENT. By mutual written consent of the parties;
8.1.2 NO APPROVALS. By either party due to the Company's
inability (through no fault of the Company) to obtain any required consents;
8.1.3 DELAY. By either party if the Closing has not occurred by
November 30, 1999. However, the right to terminate this Agreement under this
SECTION 8.1.3 shall not be available to any party whose failure to fulfill any
obligation under this Agreement has been the cause of, or resulted in, the
failure of the Closing to occur on or before such date;
8.1.4 COURT ORDER. By either party if a court or governmental
agency of competent jurisdiction shall have issued an order, decree, or ruling
permanently restraining, enjoining, or otherwise prohibiting the transactions
contemplated by this Agreement, and such order, decree, ruling, or other action
shall have become final and nonappealable;
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8.1.5 BREACH BY THE COMPANY. By Standard if the Company breaches
any of the Company's representations or warranties in any material respect or
fails to comply in any material respect with any of the Company's covenants or
agreements contained in this Agreement; or
8.1.6 BREACH BY STANDARD. By the Company if Standard breaches
any of Standard's representations or warranties in any material respect or
fails to comply in any material respect or fail to comply in any material
respect with any of Standard's covenants or agreements contained in this
Agreement.
8.2 EFFECT OF TERMINATION. The party choosing to terminate this
Agreement under SECTION 8.1 must give prior written notice of termination to the
other party. The parties will thereafter be released from all liabilities and
obligations arising under this Agreement, unless termination arises from a
breach of this Agreement or except as otherwise provided in this Agreement.
Nothing in this Agreement will relieve any party from liability for any willful
breach of this Agreement.
ARTICLE 9
GENERAL PROVISIONS
9.1 AMENDMENT OR WAIVER. Every right and remedy provided in this
Agreement shall be cumulative with every other right and remedy, whether
conferred in this Agreement, at law, or in equity, and may be enforced
concurrently with any right conferred by this Agreement, and no waiver by any
party of the performance of any obligation by the other shall be construed as a
waiver of the same or any other default then, theretofore, or thereafter
occurring or existing. This Agreement may be amended by a writing signed by the
parties, with respect to any of the terms contained in this Agreement, and any
term or condition of this Agreement may be waived or the time for performance
thereof may be extended by a writing signed by the party or parties for whose
benefit the provision is intended.
9.2 ATTORNEYS' FEES. In the event any party institutes and prevails
in any action or suit to enforce this Agreement or to secure relief from any
default under or breach of this Agreement, the defaulting or breaching party or
parties shall reimburse the nonbreaching party or parties for all costs,
including without limitation reasonable attorneys' fees incurred in connection
with such dispute and in enforcing or collecting any judgment rendered pursuant
to such dispute.
9.3 GOVERNING LAW. This Agreement shall in all respects, including
all matters of construction, validity, and performance, be governed by, and
construed and enforced in accordance with, the laws of the State of Nevada,
without reference to any rules governing conflicts of laws.
9.4 NO BROKERS. Standard and the Company agree that no third person
has in any way brought the parties together or been instrumental in the
negotiation, execution, or consummation of this Agreement. Standard and the
Company each agree to indemnify the other against any claim by any third person
for any commission, brokerage, finders fee, or other payment with respect to
this Agreement or the transactions contemplated hereby based upon any
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alleged agreement or understanding between such party and such third person,
whether expressed or implied, arising from the actions of such party. The
covenants set forth in this SECTION 9.4 shall survive the Closing Date and
the consummation of the transactions contemplated by this Agreement.
9.5 NO PUBLIC ANNOUNCEMENT. Neither of the parties to this Agreement
shall, without the approval of the other party, make any press release or other
public announcement concerning the transactions contemplated by this Agreement
unless that party has first provided a copy of such press release or public
announcement to the other party at least three days prior to release. However,
nothing contained in this Agreement shall prohibit any party from making any
public disclosure or announcement which is required by law or shall prohibit the
Company from making a public announcement on or after the Closing Date with
respect to the completion of the Investment.
9.6 NOTICES. All notices, demands, requests, or other communications
required or authorized under this Agreement shall be deemed given sufficiently
if in writing and if personally delivered; if sent by facsimile transmission,
confirmed with a written copy thereof sent by overnight express delivery; if
sent by registered mail or certified mail, return receipt requested and postage
prepaid; or if sent by overnight express delivery:
IF TO STANDARD: WITH A COPY TO:
Mr. David Coriat
Standard Radio Inc. Standard Radio Inc.
2 St. Clair Avenue West
2 St. Clair Avenue West Toronto, Ontario
Toronto, Ontario Canada M4V 1L6
Canada M4V 1L6 Facsimile: 416-323-6828
Facsimile: 416-323-6828
Attention: Mr. Gary Slaight
IF TO THE COMPANY: WITH A COPY TO:
Davis Wright Tremaine LLP
Global Media Corp. 1501 Fourth Avenue, Ste. 2600
Seattle, Washington 98101-1688
400 Robson Street Facsimile: 206-628-7699
Vancouver, BC V6B 2B4 Attention: Eric DeJong, Esq. or
CANADA Eugenie D. Mansfield, Esq.
Facsimile: 604-688-6994
Attention: ____________________
or such other addresses and facsimile numbers as shall be furnished in writing
by any party in the manner for giving notices hereunder. Any such notice,
demand, request, or other communication shall be deemed to have been given as of
the date personally delivered or on the first business day after a legible copy
sent by facsimile transmission is received, three days after the date mailed by
registered or certified mail, or on the first business day after the date sent
by overnight delivery.
9.7 SURVIVAL; LIABILITY. The representations and warranties of the
respective parties as set forth in this Agreement shall survive the Closing and
consummation of the transactions
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contemplated by this Agreement for a period of two years from the date of
this Agreement. The Company's cumulative liability to Standard for breaches
of this Agreement shall not exceed the Purchase Price.
9.8 THIRD-PARTY BENEFICIARIES. This Agreement is solely between the
Company and Standard, and no director, officer, stockholder, employee, agent,
independent contractor or any other person or entity shall be deemed to be a
third-party beneficiary of this Agreement, otherwise than as provided in
Section 6.
9.9 INDEPENDENT COUNSEL. Standard acknowledges that the Company has
recommended that it obtain independent legal advice regarding this Agreement,
and that it has had an adequate opportunity to do so. Standard acknowledges
that Davis Wright Tremaine LLP, legal counsel for the Company, has not
represented Standard.
9.10 ENTIRE AGREEMENT. This Agreement and the documents to be
delivered pursuant to this Agreement, represent the entire agreement between the
parties relating to their subject matter, and supercede in its entirety the
Confidential Term Sheet for Strategic Partnership entered into between the
parties as of October 8, 1999. There are no other courses of dealing,
understanding, agreements, representations, or warranties, written or oral,
except as set forth in this Agreement.
9.11 COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original and all of which taken
together shall be but a single instrument.
Executed as of the date first set forth above.
INVESTOR:
STANDARD RADIO, INC.
By: /s/ David Coriat
-------------------------------
Name: David Coriat
-----------------------------
Title: Exec. VP
----------------------------
COMPANY:
GLOBAL MEDIA CORP.
By: /s/ L. James Porter
-------------------------------
Name: L. James Porter
-----------------------------
Title: Chief Financial Officer
----------------------------
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EXHIBIT A
CO-MARKETING AND SALES AGREEMENT
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EXHIBIT B
CONSULTING AGREEMENT
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EXHIBIT 10.25
CO-MARKETING AND SALES AGREEMENT
THIS AGREEMENT dated as of December 7, 1999 (the "AGREEMENT") between Global
Media Corp. ("US", "WE" and "OUR"), a duly incorporated company under the laws
of the State of Nevada, and Standard Radio Inc., a corporation continued under
the laws of the Province of Ontario, Canada ("YOU" and "YOUR").
WHEREAS:
A. We operate a server on the internet which allows for the digital delivery,
distribution, transmission and telecommunication of information via the
internet, including, without limitation, audio information and visual
information, and which allows for the secure ordering of, and for the secure
payment for, products and services via the internet, including, without
limitation, compact discs, digital video discs, videotapes and books; and
B. Each of the parties desires to enter into a relationship whereby you refer
persons to us via a visit by such persons to or within your web site or channel
and via our server (a "REFERRAL"), so that
(i) we may sell products or services to those persons in consideration of
you receiving a referral fee (the "REFERRAL FEE"), and
(ii) we provide you with the means for persons who visit you at your web
sites or channels, seamlessly, to order products or services from us,
to receive such products or services from us via the internet or other
means and to pay us for those products or services while maintaining
the overall look and feel of your web sites or channels (the "BASIC
BENEFITS") We will provide each of the radio stations which you
currently own or control, or in the future own or control, (but not
for any internet-only radio stations, which will be governed by a
separate agreement) ("your stations") with the same Basic Benefits
that we offer any other Network Associate;
THEREFORE, IN CONSIDERATION of the promises, representations, warranties,
covenants and agreements contained in this Agreement and other good and valuable
consideration (the receipt and sufficiency of which is hereby acknowledged by
each party), the parties agree as follows:
1. BECOMING A NETWORK ASSOCIATE
(a) DEFINITION OF "NETWORK ASSOCIATE": "Network Associate" means an
independent contractor who refers persons to us via a visit by such persons to
or within its
Network Associate:
Initial:__________________ 1
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web site or channel and via our server, so that we may seamlessly sell products
or services to those persons.
(b) CONDITIONS FOR ACCEPTANCE: We may reject any web site or channel,
actual or proposed, if such website or channel is unsuitable. Unsuitable web
sites or channels include, but are not limited to those that:
(i) promote sexually explicit materials;
(ii) promote violence;
(iii) promote discrimination based on race, sex, religion,
nationality, disability, sexual orientation or age;
(iv) promote illegal activities; or
(v) violate intellectual property rights.
2. PAYMENT AND INVOICING
(a) FEE STRUCTURE: There are no licensing fees to you for the Basic
Benefits. We reserve the right to introduce a charge and, thereafter to change
the charges to you, in respect of the Benefits and to change the Referral Fee
rate, provided that in the event of any such charge or change being made which
is unacceptable to you, you shall be entitled to withdraw from this Agreement.
(b) ADDITIONAL FEATURES: You may request that additional features that
we may offer from time to time, such as audio samples and video samples,
("ADDITIONAL FEATURES") be made available to you in order to enhance your web
sites or channels, and we may charge you a fee for making those Additional
Features available to you. You agree that we have no obligation to make any
Additional Features available to you and we reserve the right to discontinue any
Additional Feature at any time; correspondingly, you are entitled to decline any
such Additional Features if you so wish.
(c) STREAMING: During the term of this Agreement, we will provide you
with all applicable streaming features offered by us to any Network Associate
("Streaming Features"). For the first (1st) year of the Agreement, such
Streaming Features will be offered to you at our cost for providing such
Streaming Features. For the second (2nd) and third (3rd) years of the Agreement,
the Streaming Features will be offered to you at the greater of (i) our cost of
providing the Streaming Features; or (ii) seventy five percent (75%) of the
lowest streaming media fee charged by Global Media to any Network Associate
receiving the same or similar features.
(d) PAYMENT: If money is owed to us by virtue of any Additional
Features made available to you, you shall pay monthly in arrears for such
Additional Features.
(e) FAILURE TO PAY: We may suspend the Basic Benefits or any Additional
Features at any time for your failure to pay. However, the following schedule
may also be followed: if your account is two (2) months past due, the Basic
Benefits or any Additional Feature may be
Network Associate:
Initial:__________________ 2
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suspended; and when your account becomes three (3) or more months past due the
Basic Benefits or any Additional Feature may be cancelled and all data may be
removed.
3. REFERRAL FEES
(a) RATE: Subject to the limitations below, we will pay to you a
Referral Fee of 60% of our Gross Margin (the "REFERRAL RATE") in respect of any
sales that resulted from a Referral to us by you, provided in each case the
Gross Margin in respect to any sales or any group of sales shall not be less
than zero, unless agreed upon otherwise with you. In this Agreement,
(i) "GROSS MARGIN" means Gross Sales minus Sales Costs and Delivery
Charges to us,
(ii) "GROSS SALES" means the money actually received by us for products or
services purchased from us by persons on the basis of a Referral to us
by you,
(iii) "SALES COST" means the cost of a product or service sold as a result
of a Referral to us by you, which shall be the invoiced cost to us of
the product or service, and
(iv) "DELIVERY CHARGE" means any amount charged to us by a third party in
connection with our fulfilment of a Referral to us by you, including
applicable sales taxes and duties, shipping, handling, gift wrapping
and similar charges, bad debts and returned goods charges, and any
fees owing, by operation of law or otherwise, to an artist or an
artists' collective society for the use of an artist's image and/or
the digital delivery, distribution, transmission or telecommunication,
in whole or in part, of musical, artistic, dramatic or literary works
or sound recordings, cinematographic works or other subject-matter.
(b) PAYMENT RECEIVED BEFORE REFERRAL FEE PAID: Only products or
services that are sold by us, on the basis of a Referral by you, and for which
we have actually received payment, will qualify for a Referral Fee.
(c) PRICES: The prices for products and services which are sold by
us on the basis of a Referral from you shall be set exclusively by Global
Media Corp.
(d) SALE OF PRODUCTS BELOW COST: We reserve the right to sell
products and services below our cost in order to provide an incentive for
greater aggregate sales on your Site. In no event shall you be obligated to
pay us in the event that the Gross Margin in any particular month is less
than zero.
4. REFERRAL FEE PAYMENT
We will pay you Referral Fees on a monthly basis. Approximately thirty (30) days
following the end of each month, we will credit your bank account or issue you a
cheque for the Referral
Network Associate:
Initial:__________________ 3
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Fee earned on products or services that we provided, shipped or digitally
delivered, distributed, transmitted or telecommunicated during that month, less
any taxes that we are required by law to withhold related to payment of such
Referral Fee or otherwise to the sale of a product or service. If products that
generated a Referral Fee are returned by the customer, we will deduct the
corresponding Referral Fee from your next monthly payment. If there is no
subsequent payment from which to make such a deduction on the month in which it
is due, we will send you a bill for that amount, which bill must be paid within
thirty (30) days after receipt.
5. CUSTOMERS
(a) OUR POLICIES APPLY: Our rules, policies and operating procedures
concerning customer orders, customer service, product sales and product returns
will apply to Referrals to us by you. We may change such rules, policies and
operating procedures at any time.
(b) WE PROCESS ORDERS: We will process product and service orders
placed by customers who place orders via your web sites or channels. We reserve
the right to reject orders that do not comply with any reasonable requirements
that we periodically may establish. We will be responsible for all aspects of
order processing and fulfilment. Among other things, we will prepare order
forms, process payments, cancellations and returns and handle customer service.
We will track sales made to customers who purchase products or services via your
web sites or channels to our web site and will send you reports summarising this
sales activity. You shall, however, have the right to request information with
respect to the computation of such report information, and to conduct an audit
of such information, provided that such audit shall not take place more than
once every six (6) calendar months.
(c) CUSTOMER'S PERSONAL INFORMATION: You shall have right and title
over all individual personal information collected by us from your storefront
web pages. We shall not use this individual personal information for any reason
without your prior written consent. Notwithstanding the foregoing, we shall have
the right to use this individual personal information for internal purposes or
we may aggregate the information and use the aggregated information for any
purpose so long as no individual person is separately identifiable by such
aggregated information.
6. CONTENT
(a) ADVERTISING: We and you shall provide advertising, and divide any
revenue earned from such advertising, in accordance with the terms and
conditions detailed in Schedule A attached hereto.
(b) NETWORK IDENTIFICATION: You also must display the phrase "Global
Media Network" at a mutually agreed upon spot on your homepages or channel
transmissions which hyperlinks to a description of the Network on our web site.
We may modify the text or graphic image of such phrase and of such description
from time to time.
Network Associate:
Initial:__________________ 4
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(c) LIMITED LICENSE: We grant you a non-exclusive, non-transferrable,
right to use the images and phrases referred to in this section, and such other
images and phrases for which we grant express permission, solely for the purpose
set out in this section. You may not modify any such image or phrase in any way
and you must comply with our usage requirements, if any. We reserve all of our
rights and interests in such images and phrases, including all trade names,
trade-marks, copyrights and other intellectual property rights. We may revoke
this license at any time upon expiration of this Agreement.
(d) RIGHT OF FIRST REFUSAL: We will not commercially launch any
Additional Features or other new products or services that are logically
implemented on a station by station basis on the web sites of any other Network
Associates that are located in Canada, unless and until such developments have
been made available for thirty (30) days to the web sites of your stations
located in Canada.
7. RESPONSIBILITY FOR YOUR SITE
(a) DEVELOPMENT, OPERATION AND MAINTENANCE OF ANY WEBSITE DEVELOPED BY
YOU OR A THIRD PARTY OR ON YOUR BEHALF: You will be solely responsible for the
development, operation and maintenance of your web site or channel, and for all
content that appears on your web sites or channels, other than as provided in
Section 7(b). Such responsibility shall include, but not be limited to:
(i) creating and posting or transmitting product descriptions to your web
sites or channels;
(ii) the accuracy and appropriateness of content on your web sites or
channels (including, among other things, all product-related content);
(iii) ensuring that content on your web sites or channels does not violate
or infringe upon the rights of any third party (including copyrights,
trade-marks, privacy or other personal or proprietary rights); and
(iv) ensuring that content on your web sites or channels is not libellous
or otherwise illegal.
(b) GLOBAL MEDIA WILL MAINTAIN RESPONSIBILITY FOR DEVELOPMENT,
OPERATION AND MAINTENANCE FOR THE PAGES ON YOUR STOREFRONT: Global Media will be
solely responsible for the development, operation and maintenance of your
storefront pages and for all content that appears on your storefront site or
links provided by Global Media, subject to the restrictions contained in
Schedule A. Such responsibility shall include, but not be limited to:
(i) creating and posting or transmitting product descriptions to your
storefront pages;
(ii) the accuracy and appropriateness of content on your storefront pages
(including, among other things, all product-related content);
Network Associate:
Initial:__________________ 5
<PAGE>
(iii) ensuring that content on your storefront pages does not violate or
infringe upon the rights of any third party (including copyrights,
trade-marks, privacy or other personal or proprietary rights); and
(iv) ensuring that content on your storefront pages is not libellous or
otherwise illegal.
(c) SITE MONITORING: We have the right at any and all times to monitor
your web sites or channels in order to determine if you are in compliance with
the terms of this Agreement. We shall have no obligations with respect to the
content available on your web sites or channels, including, but not limited to,
any duty to review or monitor any such content. We reserve the right to
discontinue the Basic Benefits or any Additional Features if we determine that
your web sites or channels violates any of the above-stated terms or is
objectionable, offensive or otherwise violates a law or our policy, provided
that proper notice has been received by you from us and a commercially
reasonable period has elapsed to cure such violation.
(d) LICENSE TO USE LICENSEE MARKS: You grant us a non-exclusive license
to use your names (the "LICENSEE MARKS") only in connection with advertising,
marketing, promoting and publicising in any manner our rights hereunder. We
shall obtain your prior consent before using your titles, logos and trademarks.
Notwithstanding anything herein to the contrary, we shall not be required to
advertise, market, promote or publicise your status as a Network Associate. You
hereby represent and warrant that, to the best of your knowledge, you are the
sole and exclusive owner of the Licensee Marks, titles, logos and trademarks and
have the right and power to grant to us the license to use same in the manner
contemplated herein, and that such grant does not or will not (i) breach,
conflict with or constitute a default under any agreement or other instrument
applicable to you or binding upon you, or (ii) infringe upon any trade-mark,
trade name, service mark, copyright or other proprietary right of any other
person or entity. This license shall terminate upon the effective date of the
expiration or termination of this Agreement. We similarly represent and warrant
to You that we have the right to use any names, titles, logos and trademarks
expressly or implicitly licensed by us to you pursuant to this Agreement.
(e) THIRD PARTY RIGHTS: Third party works, subject-matter, inventions
and marks licensed by us to Network Associates may be governed by separate
end-user licenses. You agree to be bound by the terms of such end-user licenses
regarding the applicable works, subject-matter, inventions and marks to the
extent you are reasonably capable following notice to by us of the terms of any
such end-user licenses.
8. RELATIONSHIP OF PARTIES
You and we are independent contractors, and nothing in this Agreement will
create any partnership, joint venture, agency, franchise, principal-agent or
employment relationship between you and us. You shall have no authority to make
or accept any offers or representations on our behalf, nor we on your behalf.
You and we each agree not to make
Network Associate:
Initial:__________________ 6
<PAGE>
any statement, whether on a web site, channel or otherwise, that reasonably
would contradict anything in this Section.
9. TERM OF THIS AGREEMENT
The term of this Agreement will begin upon our acceptance of your Network
Associate application and shall continue for the following three (3) years. This
Agreement is automatically renewable for subsequent one-year periods, unless you
or we give written notice of termination thirty (30) days prior to the renewal
date. Upon delivery of such notice of termination, we shall have the full
thirty-day period to cease the Basic Benefits and any Additional Features. You
are only eligible to earn Referral Fees on our sales of products or services
occurring during the term, and fees earned up to the date of termination will
remain payable only if the related orders are not cancelled or returned. We may
withhold your final payment for a reasonable time to ensure that the correct
amount is paid.
10. MODIFICATION OF THIS AGREEMENT
We may modify any of the terms and conditions regarding the Basic Benefits or
Additional Features by posting a change notice or a new schedule on our web
site, provided that any modifications shall not provide you with materially
fewer Basic Benefits or Additional Features. Unless otherwise agreed upon in
writing, modifications may not, however, include, changes in the scope of
available Referral Fees, fee schedules and the procedures for payments between
the parties. If any modification is unacceptable to you, you may terminate this
Agreement by giving us written notice of termination within thirty (30) days of
our posting a change notice or a new agreement on our web site. Upon delivery of
such notice of termination, we shall have thirty (30) days to cease the Basic
Benefits and any Additional Features. Your failure to give notice of termination
following the ninety-day period after our posting of a change notice or a new
schedule on our web site will constitute binding acceptance of the change.
11. GENERAL TERMS AND CONDITIONS
(a) INDEMNIFICATION: You hereby agree to indemnify, defend and hold
harmless us and our shareholders, officers, directors, employees, agents,
associates, successors and assigns from and against any and all claims, losses,
liabilities, damages or expenses (including reasonable legal fees) of any nature
whatsoever incurred or suffered by us (collectively, the "LOSSES"), in so far as
such Losses (or actions in respect thereof) arise out of or are based on (i) any
claim or threatened claim that our use of your Marks infringes on the rights of
any third party, (ii) the breach of any representation, warranty, covenant or
agreement made by you herein, or (iii) any claim related to your web sites or
channels.
(b) LIMITATION OF LIABILITY: Neither of us will be liable to the other
for indirect, special or consequential damages (or any loss of revenue, profits
or data) caused in connection with this Agreement, even if advised of the
possibility of such damages. Further,
Network Associate:
Initial:__________________ 7
<PAGE>
the aggregate liability arising from either of us with respect to this Agreement
will not exceed the total Referral Fees paid or payable to you under this
Agreement.
(c) INDEMNITY TO YOU. We hereby agree to indemnify, defend and hold
harmless you and your shareholders, officers, directors, employees and agents
from and against (i) all claims, losses, damages, liabilities or expenses
suffered by you insofar as such amounts are claimed by a third party are in
respect of the sales by us of any product or service as provided for under this
Agreement; (ii) any claim or threatened claim that your use of our Marks
infringes on the rights of any third party or (iii) any claim related to our web
site.
(d) DISCLAIMERS: We make no express or implied warranties or
representations to you with respect to the Basic Benefits or any Additional
Features to you or any products or services sold by us (including, without
limitation, warranties of fitness, merchantability, non-infringement or any
implied warranties arising out of a course of performance, dealing or trade
usage). In addition, we make no representation that the operation of your web
site or channel or our web site will be uninterrupted or error-free, and we will
not be liable for the consequences of any interruptions or errors. In no event
shall we be liable for any loss of data, email or files or for any virus
infection delays or performance problems due to power outages, acts of God,
telecommunications failures, theft or destruction of property. Further, in no
event shall we be liable for any delay, failure, claim, liability, loss or
damage caused, whether directly or indirectly, by your, our or any third party's
compliance with any enactment, regulatory order or request of any government
authority or agency.
(e) CONFIDENTIALITY: We may disclose to you certain information as a
Network Associate, which information we consider to be confidential (herein
referred to as "CONFIDENTIAL INFORMATION"). For purposes of this Agreement, the
term "Confidential Information" shall include, but not be limited to (i) any
modifications to the terms and provisions of this Agreement made specifically by
us for your web sites or channels and not generally available to other Network
Associates or affiliates, (ii) web site, channel, business and financial
information relating to us or our Network Associates or affiliates, (iii) vendor
lists relating to us or our Network Associates (other than you) or affiliates,
and (iv) our or Network Associates' pricing and sales information, and shall
also include any information that we designate as confidential during the term
of this Agreement. You agree not to disclose any Confidential Information and
that such Confidential Information shall remain strictly confidential and secret
and shall not be used, directly or indirectly, by you for your own business
purposes or for any other purpose except and solely to the extent that any such
information is generally known or available to the public or if same is required
by law or legal process, provided that the customer information provided by us
to you shall not be deemed Confidential Information and there shall be no
restriction on your use of such information except as is required by law or
legal process. We likewise agree to use information provided by you to us in the
same fashion, and to require any Network Associate to whom our Confidential
Information is provided to be similarly bound. Notwithstanding the foregoing,
each party is hereby authorized to deliver a copy of any such information (i) to
any person pursuant to an order issued by any court or administrative agency,
(ii) to its accountants, lawyers or other professional advisors on a
confidential basis, and (iii) otherwise as required
Network Associate:
Initial:__________________ 8
<PAGE>
by applicable law. We make no warranty, expressed or implied, with respect to
any Confidential Information delivered hereunder, including implied warranties
of merchantability, fitness for a particular purpose or freedom from patent,
trade-mark or copyright infringements, whether arising by law, custom or
conduct, or as to the accuracy or completeness of such information and we shall
not have any liability to you or to any other person resulting from your or such
third person's use of such information.
(f) INDEPENDENT INVESTIGATION: You acknowledge that you have read this
Agreement, understand it in its entirety and agree to all of its terms and
conditions. You have independently evaluated the desirability of becoming a
Network Associate and are not relying on any representation, guarantee or
statement other than as set forth in this Agreement.
(g) ENTIRE AGREEMENT: This Agreement constitutes the entire agreement
between you and us and supersedes all prior communications, representations,
understandings and agreements whether verbal or written between you and us with
respect to the subject-matter hereof.
(h) REPRESENTATIONS AND WARRANTIES: You and we hereby represent and
warrant that (i) you and we are free to enter into this Agreement and are not
subject to any obligation or disability which will or might interfere with your
or our ability to comply with any of the material terms and conditions hereof,
and (ii) you and we have not made, and will not make, any agreement, assignment
or licence which will conflict with or impair the complete enjoyment of the
rights granted to us or you herein.
(i) FURTHER ASSURANCES: You and we each agree to take all such actions
and execute all such documents within your and our power as may be necessary or
desirable to carry out or implement and give full effect to the provisions and
intent of this Agreement.
(j) NOTICES: All notices, requests and other communications between you
and us will be deemed to have been delivered if made in writing and either
mailed by registered mail and received within seven (7) days or actually
delivered, faxed or electronically mailed to the other party at the applicable
address or fax number provided below.
(k) ASSIGNMENT AND BENEFIT: Neither of us may assign this Agreement or
any portion hereof, by operation of law or otherwise, without the prior written
consent of the other, not to be unreasonably withheld, conditioned or delayed.
Notwithstanding the foregoing, you or we may assign this Agreement to a parent,
subsidiary, affiliate, or corporation controlling, controlled by, or under
common control with you or us, a successor corporation related to you or us by
merger, consolidation, or government action, or a purchaser of all of your or
our assets, provided that the assignor continues to be bound by the terms of
this Agreement. This Agreement will inure to the benefit of and be binding upon
the parties and their respective heirs, executors, administrators, successors
and assignees, as applicable.
Network Associate:
Initial:__________________ 9
<PAGE>
(l) SEVERABILITY: If any provision of this Agreement is determined at
any time by a court of competent jurisdiction to be invalid, illegal or
unenforceable, such provision or part thereof shall be severable from this
Agreement and the remainder of this Agreement will be construed as if such
invalid, illegal or unenforceable provision or part thereof had been deleted
herefrom.
(m) NUMBER: Words importing the singular include the plural and vice
versa in this Agreement.
(n) DISPUTE SETTLEMENT: Any and all disputes, claims or controversies
arising out of or in connection with this Agreement, or in respect of any
defined legal relationship associated therewith or derived therefrom, will be
referred to and finally resolved by arbitration.
(o) GOVERNING LAW: This Agreement and all matters arising hereunder
shall be governed by and construed in accordance with the laws of the State of
Nevada and the laws of the United States of America applicable therein. Any
dispute or claim arising out of or in connection with this Agreement shall be
finally settled by binding arbitration under the Commercial Rules of the
American Arbitration Association by one arbitrator appointed in accordance with
said rules. Judgment on the award rendered by the arbitrator may be entered in
any court having jurisdiction thereof.
By signing in the spaces provided below, you and we accept and agree to all of
the terms and conditions of this Agreement as of the date first written above.
Per: /s/ L. James Porter /s/ David Coriat
------------------------------------- ----------------------------------
GLOBAL MEDIA CORP STANDARD RADIO INC.
400 Robson Street 2 St. Clair Ave. W.
Vancouver, British Columbia Toronto, Ontario
Canada V6B 2B4 Canada M4V 1L6
www.globalmediacorp.com
- -----------------------
fax 604-688-9996 fax 416-323.6828
tel. 604.688.9994 tel. 416.960.9911
- -------------------------------------------------------------------------------
Network Associate:
Initial:__________________ 10
<PAGE>
SCHEDULE A
ADVERTISING
1. The Network Associate reserves the rights to all advertising space within
its existing webpages.
2. Global Media reserves the rights to all advertising space within the
Network Associate's storefront pages, provided that Network Associate shall
have the right to determine the total number and size of the advertisements
placed on the Network Associate's storefront pages. Notwithstanding the
foregoing, Network Associate shall have the right to sell advertising for
the banner advertisement space located at the bottom of the web page.
Notwithstanding anything else to the contrary, neither party shall sell or
otherwise offer advertising to an advertiser that would conflict with an
advertiser who has an exclusive right to advertise on the Network Associate
or Global Media websites or channels. In the event of such conflict, the
party shall immediately remove such advertising from the Network
Associate's storefront pages.
Each party will split the Net Advertising Revenue 50-50 with the other for
the advertising spaces on the Global Media Storefront page(s). Global Media
retains the right to change the structure of how the ads are placed within
the storefront pages, subject to Global Media obtaining approval from the
Network Associate prior to making any material changes, such approval not
to be unreasonably withheld, conditioned or delayed. "Advertising Revenue"
shall be defined as the revenue actually received by Global Media from the
sale and placement of advertisements for third parties run on the Global
Media Storefront. "Net Advertising Revenue" shall mean any Advertising
Revenue less any taxes and third party advertising fees and commissions.
Revenue attributable to or imputed from self-promotional advertisements of
Global Media on the Global Media Storefront shall not be within the meaning
of Net Advertising Revenue.
3. Global Media reserves the rights to all advertising space on the Global
Media media player ("Player"), provided that Global Media shall provide
Network Associate with 50% of the Net Advertising Revenue from the Player.
Notwithstanding the foregoing, Global Media shall not sell any advertising
on the Player that includes an audio component that would interrupt or
interfere with the audio stream of Network Associate's content unless such
audio component of the advertisement is engaged by a user's affirmative
click-through to the advertisement. Global Media also shall not sell any
advertising on the Player that will conflict with an exclusive granted by
Network Associate. In no event shall Global Media record, sell, resell, or
substitute advertising for, any of Network Associate's content streamed
through the Player.
4. Global Media may ask the Network Associate to provide an image space on
each of its websites or channels at no cost to us. Such image space shall
be used for advertising or other purposes intended to generate revenue or
other benefits. The Network Associate may make the image space available to
Global Media at the Network Associate's sole
Network Associate:
Initial:__________________ 11
<PAGE>
discretion. In the event that Global Media uses this image space for
advertising, you shall be entitled to fifty percent (50%) of the Net
Advertising Revenue generated from such image space. In the event Global
Media uses such image space for other purposes, Global Media and the
Network Associate shall mutually agree on how to split any revenue
generated from the image. In the event that Global Media defaults under
this Agreement, Global Media shall cease the use of such image space.
Network Associate:
Initial:__________________ 12
<PAGE>
EXHIBIT 10.26
CONSULTING AGREEMENT
THIS AGREEMENT is entered into as of December __, 1999 by
________________ ("Consultant") and GLOBAL MEDIA CORP., a Nevada corporation
(the "Company").
1. TERM OF AGREEMENT.
(a) TERMINATION UPON NOTICE. This Agreement may be terminated
at any time by Consultant or by the Company by giving the other party 30 days'
advance notice in writing.
(b) EXPIRATION DATE. This Agreement shall terminate on
December __, 2002, if not terminated earlier under Subsection (a) above.
(c) FEES AND EXPENSES. Upon the termination of this Agreement
under Subsection (a) or (b) above, Consultant shall only be entitled to his
vested options as set forth in Section 4(a) below and to reimbursement of
expenses which were incurred before the termination becomes effective and which
are reimbursable under Section 4(b) below.
2. SCOPE OF SERVICES.
(a) PROMOTION OF GLOBAL MEDIA NETWORK. Consultant will use his
best efforts to (i) assist the Company in promoting the Global Media Network and
the Global Media Broadcast Network to potential network associates, (ii)
introduce the Company's representatives to Consultant's contacts in the radio
industry who are or may know potential network associates, and (c) facilitate
the successful consummation of agreements with potential network associates whom
the Consultants have introduced to the Company.
(b) ADVISORY COMMITTEE PARTICIPATION. Consultant agrees to
serve on an ad hoc advisory committee ("Advisory Committee") to review and
provide customer-centric feedback on features of the Company's e-commerce and
broadcasting systems, particularly new developments prior to their commercial
implementation. In such capacity, Consultant will make himself reasonably
available on an as-needed basis to review and consult with the Company on such
features. In addition, during the year following the date of this Agreement,
Consultant agrees to attend, either in person or telephonically, up to six
meetings of the Advisory Committee with representatives of the Company. It is
expected that three meetings will occur during the first quarter following the
date of this Agreement, with one meeting per quarter thereafter.
(c) TIME AND EFFORT. It is anticipated that Consultant will
devote an average of approximately ten hours per month to the performance of
services described in Subsections (a) and (b). Consultant agrees to use his
best efforts to perform such services. Consultant shall be responsible for
maintaining, at his own expense, a place of work, any necessary equipment and
supplies, and appropriate communications facilities.
1
<PAGE>
3. WORK FOR OTHERS.
The Company recognizes and agrees that Consultant may perform services
for other persons, provided that such services do not represent a conflict of
interest. In particular, the Company acknowledges that Consultant is a
full-time employee of Standard Radio Inc.
4. COMPENSATION AND EXPENSES.
(a) OPTION COMPENSATION. The Company shall grant Consultant
options to purchase up to 20,000 shares of its common stock, par value $0.001
per share ("Common Stock"), at an exercise price per share equal to the closing
sales price of the Company's Common Stock on the OTC Bulletin Board as of the
date of this Agreement. Such options shall be granted pursuant to the Company's
1999 Stock Option Plan and its standard form stock option agreement; with such
variations as are necessary to implement the following terms with respect to the
circumstances under which the options shall become vested and exercisable:
(i) options to purchase 1,500 shares shall vest for each
meeting of the Advisory Committee actually attended
in person or telephonically;
(ii) options to purchase 1,000 shares shall vest for each
personal introduction to a Decision Maker of a
Prospect, as each of such terms is defined below,
which personal introduction is confirmed in writing
by Consultant in a written notice to the Chief
Financial Officer of the Company; and
(iii) options to purchase 1,500 shares shall vest upon the
execution by Global Media and a Prospect of one or
more network associate agreements,
subject to the maximum number of options set forth above.
"Prospect" means an entity that owns or operates radio stations that
Consultant believes in good faith will be interested in subscribing to the
Global Media e-commerce network and/or the Global Media broadcast network,
where Global Media does not have a then-existing relationship with or contact
at such entity or its constituent radio stations. "Decision Maker" means a
person within the Prospect's organization with management level
responsibility for business or corporate or whose primary job
responsibilities otherwise include the power to decide whether or not to
pursue a contractual relationship with Global Media , and does not include
persons who serve in solely an administrative role within the Prospect's
organization.
(b) EXPENSES. Upon presentation by Consultant of an invoice
accompanied by supporting documentation satisfactory to the Company, the Company
shall reimburse Consultant monthly for reasonable expenses, including (without
limitation) travel expenses, incurred directly on behalf of the Company in
connection with the performance of services hereunder.
2
<PAGE>
5. NO EMPLOYEE BENEFITS.
Consultant shall not be eligible to participate in any of the Company's
employee benefit plans, fringe benefit programs, group insurance arrangements or
similar programs.
6. INDEPENDENT CONTRACTOR.
In performing services for the Company pursuant to this Agreement,
Consultant shall act in the capacity of an independent contractor with respect
to the Company and not as an employee of the Company. As an independent
contractor, Consultant shall accept any directions issued by the Company
pertaining to the goals to be attained and the results to be achieved by him or
her but shall be solely responsible for the manner and hours in which he or she
will perform his or her services under this Agreement.
7. COMPLIANCE WITH LEGAL REQUIREMENTS.
The Company shall not provide workers' compensation, disability
insurance, unemployment compensation coverage nor any other statutory benefit to
Consultant. To the extent applicable, Consultant shall comply at his expense
with all applicable provisions of workers' compensation laws, unemployment
compensation laws, federal, provincial and local income tax laws, and all other
applicable federal, provincial and local laws, regulations and codes relating to
terms and conditions of employment required to be fulfilled by employers or
independent contractors.
8. NONDISCLOSURE.
During the term of this Agreement and thereafter, Consultant shall not,
without the prior written consent of the Company, disclose or use for any
purpose (except in the course of his service under this Agreement and in
furtherance of the business of the Company) confidential information or
proprietary data of the Company, except as required by applicable law or legal
process; provided, however, that "confidential information" shall not include
any information known generally to the public or ascertainable from public or
published information (other than as a result of unauthorized disclosure by
Consultant) or any information of a type not otherwise considered confidential
by persons engaged in the same business or a business similar to that conducted
by the Company. Consultant agrees to deliver to the Company at the termination
of his or her service, or at any other time that the Company may request, all
memoranda, notes, plans, records, reports and other documents (and copies
thereof) relating to the business of the Company which he or she may then
possess or have under his or her control.
9. MISCELLANEOUS PROVISIONS.
(a) NOTICE. Notices and all other communications contemplated
by this Agreement shall be in writing and shall be deemed to have been duly
given when personally delivered or when mailed by certified mail, return receipt
requested and postage prepaid. In the case of Consultant, mailed notices shall
be addressed to him or her at the address which he or she most recently
communicated to the Company in writing. In the case of the Company, mailed
notices shall be addressed to its corporate headquarters, and all notices shall
be directed to the attention of its Chief Financial Officer.
3
<PAGE>
(b) WAIVER. No provision of this Agreement shall be modified,
waived or discharged unless the modification, waiver or discharge is agreed to
in writing and signed by Consultant and by an authorized officer of the Company.
No waiver by either party or any breach of, or compliance with, any condition or
provision of this Agreement by the other party shall be considered a waiver of
any other condition or provision or of the same condition or provision at
another time.
(c) WHOLE AGREEMENT. No agreements, representations or
understandings (whether oral or written and whether express or implied) which
are not expressly set forth in this Agreement have been made or entered into by
either party with respect to the subject matter hereof.
(d) CHOICE OF LAW. The validity, interpretation, construction
and performance of this Agreement shall be governed by the laws of the State of
Nevada (other than their choice-of-law provisions).
(e) SEVERABILITY. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision hereof, which shall remain in full force and effect.
(f) ASSIGNMENT AND SUCCESSORS. Neither party shall assign any
right or delegate any obligation hereunder without the other party's written
consent, and any purported assignment or delegation by a party hereto without
the other party's written consent shall be void. This Agreement shall be
binding upon and inure to the benefit of the Company and its successors and
Consultant, his or her heirs, executors, administrators and legal
representatives.
IN WITNESS WHEREOF, each of the parties has executed this Agreement, in
the case of the Company by its duly authorized officer.
GLOBAL MEDIA CORP.
By:_______________________________________ ______________________________
Robert Fuller, Chief Executive Officer Consultant
4
<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
QUARTER AND THREE MONTHS ENDED OCTOBER 31, 1999, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-2000
<PERIOD-START> AUG-01-1999
<PERIOD-END> OCT-31-1999
<CASH> 1,797,883
<SECURITIES> 0
<RECEIVABLES> 9,243
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,158,054
<PP&E> 4,301,775
<DEPRECIATION> 311,827
<TOTAL-ASSETS> 6,148,002
<CURRENT-LIABILITIES> 832,552
<BONDS> 0
0
7,210,871
<COMMON> 12,707
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 6,148,002
<SALES> 0
<TOTAL-REVENUES> 13,645
<CGS> 72,790
<TOTAL-COSTS> 72,790
<OTHER-EXPENSES> 1,503,765
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,555,272)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,555,272)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,555,272)
<EPS-BASIC> (0.08)
<EPS-DILUTED> (0.08)
</TABLE>
