U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
Registration Statement on Form 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL
BUSINESS ISSUERS
IMMEDIATE ENTERTAINMENT GROUP, INC.
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(Name of Small Business Issuer as specified in its charter)
NEVADA 87-0558367
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(State or other jurisdiction of (I.R.S. incorporation or
organization) Employer I.D. No.)
N/A
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(SEC File No.)
Paul Ehrlichstrasse 17
63322 Rodermark
Germany
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(Address of Principal Executive Office)
Issuer's Telephone Number, including Area Code: 49-6074-89180
Securities registered pursuant to Section 12(b) of the Exchange Act:
None
Securities registered pursuant to Section 12(g) of the Exchange Act:
$0.001 par value common stock
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Title of Class
DOCUMENTS INCORPORATED BY REFERENCE: See the Exhibit Index herein.
<PAGE>
PART I
Item 1. Description of Business.
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Business Development.
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Organization, Securities Offerings and Amendments to Articles of
Incorporation.
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Immediate Entertainment Group, Inc. (the "Company") was organized
under the laws of the State of Nevada on May 10, 1996, under the name
"Diversified Research, Inc." The Company was incorporated for the primary
purposes of evaluating the business operations of various European record and
publishing companies and engaging in any other lawful business authorized by
the State of Nevada or any other jurisdiction in which the Company may be
authorized to do business.
The Company is authorized to issue a total of 50,000,000
shares of common voting stock having a par value of one mill ($0.001) per
share, with no pre-emptive rights or cumulative voting rights. Copies of
the Company's initial Articles of Incorporation and its Bylaws are
attached hereto and are incorporated herein by this reference. See the
Exhibit Index, Part III.
At the Company's inception, the Board of Directors authorized the
issuance of 200,000 "unregistered" and "restricted" shares of its common stock
to two directors and executive officers who may be deemed to have been
promoters or founders of the Company, for the total consideration of
US$10,000. At the same time, the Board of Directors authorized the President
to conduct an offering of 300,000 shares of the Company's common stock at a
price of US$0.10 per share, in reliance on the exemption from registration
provided by Section 4(6) of the Securities Act of 1933, as amended (the "1933
Act"), and Rule 504 of Regulation D of the Securities and Exchange Commission
(the "Commission"). The offering was completed in August, 1996, with the
Company receiving gross proceeds of US$30,000 from the sale of 300,000 shares
of its common stock.
At a special meeting held on October 15, 1996, the Company's Board
of Directors unanimously resolved to commence an offering of a minimum of
100,000 shares and a maximum of 300,000 shares of its common stock under Rule
504 of Regulation D of the Commission, to non-residents of the United States,
at a price of US$ 3 per share, in order to raise a minimum of US$300,000 and a
maximum of US$ 900,000. This second securities offering was closed in
approximately July, 1997, with the sale of an aggregate of 300,000 shares of
the Company's common stock to non-United States residents. The Company
received gross proceeds of US$900,000 from the offering, before deduction of
legal and accounting fees, costs and commissions.
On March 24, 1997, the Company filed with the Nevada Secretary of
State an Amendment to its Articles of Incorporation, by which the Company's
name was changed to "Immediate Entertainment Group, Inc."
Mergers and Reorganizations.
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At its October 15, 1996, special meeting, the Company's Board of
Directors unanimously resolved to adopt a Plan and Agreement of Reorganization
whereby the Company would acquire all of the issued and outstanding capital
stock of Dolphin Studios Musikproduktions GmbH, a corporation organized under
the laws of the Federal Republic of Germany ("Dolphin Studios"), in exchange
for the issuance of 2,000,000 "unregistered" and "restricted" shares of the
Company's common stock to MBO GmbH ("MBO"), a corporation organized under the
laws of the Federal Republic of Germany, which was the sole stockholder of
Dolphin Studios (the "Dolphin Studios Plan").
The Dolphin Studios Plan was completed on October 22, 1996, with
Dolphin Studios becoming a wholly-owned subsidiary of the Company. A copy of
the Dolphin Studios Plan is attached hereto and is incorporated herein by this
reference. See the Exhibit Index, Part III.
On February 28, 1997, the Company completed a Plan and Agreement of
Reorganization with Chartware Media Corporation (then known as "Immediate
Music Corporation"), a Delaware corporation ("CMC"), whereby the Company
acquired all of the issued and outstanding capital stock of CMC in exchange
for the issuance of 3,500,000 "unregistered" and "restricted" shares of the
Company's common stock to CMC (the "CMC Plan"). CMC subsequently distributed
these shares of the Company's common stock to its former stockholders on a pro
rata basis. In connection with the CMC Plan, on March 24, 1997, the Company
changed its name to "Immediate Entertainment Group, Inc." Copies of the CMC
Plan and the Amendment to the Articles of Incorporation effecting the
Company's name change are attached hereto and are incorporated herein by this
reference. See the Exhibit Index, Part III.
CMC was incorporated under the laws of the State of Delaware on June
11, 1993, under the name "Immediate Records, Inc." On or about January 8,
1998, its Certificate of Incorporation was amended to change CMC's name to
"Chartware Media Corporation."
CMC owns all of the issued and outstanding capital stock of the
following corporations: (i) Chartware Record Service GmbH, a corporation
organized under the laws of the Federal Republic of Germany ("Chartware");
(ii) Music Action Limited, a corporation organized under the laws of England
and Wales ("MAC"); and (iii) Chartware Records Limited (formerly known as
"Immediate Records Limited"), a corporation organized under the laws of
England and Wales ("CRL"). At the time of the Company's acquisition of CMC,
MAC and CRL were wholly-owned subsidiaries of CMC. The Board of Directors of
CMC approved the acquisition of Chartware at a special meeting held on April
29, 1997.
See the heading "Business" of this caption and Exhibit 21 of this
Registration Statement for a description of the businesses of CMC and its
wholly-owned subsidiaries.
The Company is presently negotiating for the merger of a German
music television network with and into the Company. Should such an
acquisition be consummated prior to the effective date of this Registration
Statement, the Company will file an amendment hereto disclosing such
consummation; if consummated after the effective date hereof, the Company will
file with the Commission a Current Report on Form 8-K disclosing the terms of
the acquisition. However, there can be no assurance that any such acquisition
will be completed or that, if it is, the operations of the acquired entity
will be profitable to the Company.
In anticipation of the completion of the above-referenced merger, on
February 3, 1998, the Company entered into a letter agreement with Freedom of
Choice Fund Management Ltd. of Melbourne, Australia ("Freedom of Choice"), by
which Freedom of Choice agreed to arrange a financing facility of US$
1,000,000 to fund the operations of the German music television network. In
consideration of Freedom of Choice's obligations in this regard, the Company
issued 100,000 "unregistered" and "restricted" shares of its common stock to
National Mutual Trustees, Ltd., which may be deemed to be an affiliate of
Freedom of Choice, on February 23, 1998.
On February 27, 1998, the Company entered into a Memorandum of
Understanding with Momentum Capital Funding Corp. and Phillip G. Cook and
Power Capital Partnership, Inc.(collectively, the "Consultants"). The
Memorandum provides for the Consultants to raise up to US$ 5,500,000 to fund
the working capital of the German television network pursuant to the
tentative, non-binding agreement of the parties. In consideration of these
services, the Consultants are to receive up to US$ 60,000 in cash; 175,000
shares of the Company's common stock; and warrants to purchase an additional
175,000 shares of the Company's common stock for a period of two years at the
market price of such common stock on the day that the funds are provided.
Changes of Control During the Past Three Years.
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Pursuant to the Bylaws of the Company and applicable provisions of
the Nevada Revised Statutes, the following changes of control of the Company
have occurred during the past three years:
(i) In connection with the Dolphin Studios Plan, MBO became the
majority stockholder of the Company;
(ii) In connection with the CMC Plan, the former stockholders of
CMC collectively acquired a controlling interest in the Company;
(iii) Also in connection with the CMC Plan, Roger Lund and Toni
Carter resigned as directors and executive officers of the Company and the
following persons were designated, in seriatim, to serve in the capacities
indicated: Michael Berresheim (Chairman of the Board of Directors); Anthony
Calder (President and Director); Evert Wilbrink (Vice President and Director);
and Geraldine Blecker (Secretary/Treasurer and Director).
(iv) Messrs. Calder and Wilbrink resigned their positions in
November, 1997; Mr. Berresheim and Christoph Berger were appointed President
and Vice President, respectively, in November, 1997. David Howar was also
appointed a director of the Company at this time.
See the caption "Security Ownership of Certain Beneficial Owners and
Management," Part I, Item 4 of this Registration Statement.
Sales of "Unregistered" and "Restricted" Securities During the Past Three
Years.
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See the caption "Recent Sales of Unregistered Securities," Part II,
Item 4 of this Registration Statement.
Business.
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General. The Company, through its wholly-owned subsidiaries, is
active in the financing, production, administration, licensing, promotion and
distribution of media software and audio products, such as CD's, CD-ROM's,
CD-I,vinyl, mini-disks and other analog and digital devices for the music and
entertainment industry. The Company develops artists and concepts for
exploitation through its world-wide distribution network, but its activities
principally take place in Germany, England, the United States, Canada,
Australia, Austria and Switzerland. European distribution currently accounts
for approximately two-thirds of the Company's total distribution.
The Company's principal activity is the production, acquisition and
distribution of audio and video CD's as well as CD-ROM. In general, the
Company engages artists and producers to create recordings or acquires
previously completed recordings and new masters for reproduction and
distribution. For example, on March 28, 1997, Beacon Studios Management
Corporation, a corporation organized under the laws of the British Virgin
Islands("Beacon Studios"), executed an Assignment assigning to the Company all
of its copyrights and related rights to a catalog of approximately 272 master
digital sound recordings and approximately 3900 record titles (the "Beacon
Studios catalog"), in consideration of the issuance of 500,000 "unregistered"
and "restricted" shares of the Company's common stock pursuant to Regulation S
of the Commission. These shares were issued on September 24, 1997. See the
caption "Recent Sales of Unregistered Securities," Part II, Item 4 of this
Registration Statement.
Pursuant to an Assignment dated December 17, 1997, the Company
acquired from Music Avenue of America Corporation, a corporation organized
under the laws of the State of Delaware, all copyrights and related rights to
a catalog consisting of approximately 206 master digital recordings and
approximately 3,296 titles (the "Music Avenue catalog"), in consideration of
the issuance of 328,000 "unregistered" and "restricted" shares of the
Company's common stock; these shares were issued on February 20, 1998. See
the caption "Recent Sales of Unregistered Securities," Part II, Item 4 of this
Registration Statement.
The Beacon Studios catalog and the Music Avenue catalog consist of a
wide variety of musical styles, including, for example, big bands, blues,
Christmas, classical, country, dance, jazz, karaoke, opera, orchestral, pop
and reggae. Copies of the Beacon Studios Assignment and the Music Avenue
Assignment, without schedules, are attached hereto and are incorporated herein
by this reference. See the Exhibit Index, Part III.
The Company licenses master recordings from the repertoire owners or
acquires completed master recordings at recording cost plus an "all-in"
royalty to the producer. Aggregate royalties payable to owners of such master
recordings range from 10% to 30% based on the distributor's price to dealers.
The master recordings are preferably acquired under exclusive arrangements,
which gives the Company the exclusive right to produce and market the
particular recordings for a specific period of time, ranging from one year to
seven years. The Company is also obliged to pay other costs for the
exploitation of the master recordings, such as mechanical royalties, which are
paid according to national statutory rates. See the heading "Patents,
Trademarks, Licenses, Franchises, Concessions, Royalty Agreements or Labor
Contracts, Including Duration" of this caption.
In specific cases, the Company also enters into non-exclusive
agreements, sharing exploitation rights within a territory with other
competitors. This generally involves compiling albums of past hits and
selling these with promotional support through special marketing and/or radio
and TV campaigns.
Upon the acquisition of a master recording, the Company can handle
mastering and manufacturing for CD's as well as the design of covers and
labels in-house. Chartware, the Company's manufacturing division, stores the
CD's until orders for the products are received.
The Company releases albums in most musical genres, but is
especially experienced in marketing heavy metal, disco/dance/techno, rhythm &
blues, and classical music.
The Company promotes its artists through radio and television, free
publicity in the press, print advertising, and through concert tours of the
artists involved. The Company retains independent promotion consultants to
assist its in-house staff, part-time employees and interns.
Cable TV operations such as MTV, VH1, and VIVA provide significant
exposure to new music consumer groups, opening up additional markets to
artists in all fields of contemporary music. The Company from time to time
produces promotional video tapes featuring its performers for presentation in
these media. The Company exploits all other customary marketing methods to
expose its artists and products. Promotion is coordinated with distributors
and retailers, who in turn cooperate with displays and in-store appearances by
the artists.
On December 23, 1997, the Company commenced a joint venture in
Germany to produce German "Schlager" (i.e., folk) music and artists. The
joint venture provides for the Company to provide studio time and CD
manufacturing and television media services, and for the other joint venturer,
Karlheinz Balzer of Neu Isenburg, Germany, to supply the artists and print
promotion. The joint venture is known as "Deutsche Media AG" and operates
from the Company's facility in Rodermark, Germany. See the caption
"Description of Property," Part I, Item 3 of this Registration Statement.
Principal Products or Services and their Markets. The Company's
products and services are focused principally on the music and entertainment
industry and are conducted through its wholly-owned subsidiaries. See Exhibit
21 of this Registration Statement for a description of the principal products
or services of each of these subsidiaries.
Distribution Methods of the Products or Services. The Company
distributes its releases mainly through independent distributors who, in turn,
resell the products to retail outlets. The Company has arrangements with over
50 distributors and licensees throughout the world. European distributors
handle accounts for approximately two-thirds of the Company's business.
Payment terms with distributors are normally 30 to 60 days, net. From time to
time, the Company changes distributors in order to maximize its market-share
and limit its financial risks. In accordance with industry practice, the
Company gives credit to its distributors for merchandise returned by their
accounts. See the heading "Returns Policy" under the caption "Risk Factors,"
herein.
The Company's wholly-owned subsidiary, CRL, is party to an Agreement
with BMG Entertainment International UK & Ireland Limited, a corporation
organized under the laws of England ("BMG"), which granted to BMG the
exclusive right to distribute CRL's musical and video recordings in the United
Kingdom for a period of two years, commencing September 1, 1996. The
Agreement provides for the Company to pay to BMG a domestic fee of 12% of the
gross invoice value of recordings shipped during a given month. If the
aggregate gross invoice value of sales by BMG during a given contract year
exceeds 1,000,000 British pounds or 2,000,000 British pounds, the domestic fee
for the following year shall be reduced to 11% or 10%, respectively. CRL is
also required to pay a promotional fee of 5% of dealer price for certain
promotional sales and a 5% stock transfer charge for the return of overstocked
recordings to CRL. A copy of the BMG Agreement is attached hereto and is
incorporated herein by this reference. See the Exhibit Index, Part III.
The Company promotes its recordings primarily through radio and
television advertising, but also advertises in trade publications, magazines,
including music-oriented magazines, and general circulation newspapers. The
Company also uses promotional video tapes.
Status of any Publicly Announced New Product or Service. None; not
applicable.
Competitive Business Conditions. The Company and its operating
subsidiaries will face competition from major foreign and domestic record
companies, music manufacturers, artists, producers and talents which are far
better known, experienced, well financed, and talent-laden than are the
Company's relatively small, newly-formed and under-capitalized operations.
The recording studios with which it competes include Sony Records, MCA, WEA,
Rhino Records, Motown Records and numerous others of similar reputation and
capital. As a small publisher, marketer and producer of music, neither the
Company nor its start-up subsidiaries can be expected to present substantial
competition to these competitors. However, the Company believes there is a
small market niche into which its products can be successfully promoted and
marketed, though no assurance can be given that such will be the case. See
the headings "Competition" and "Intense Competition and Rapid Technological
Change" under the caption "Risk Factors," herein.
Sources and Availability of Raw Materials and Names of Principal
Suppliers. The Company purchases its CD's from the manufacturing plant that
is owned and operated by Chartware, its wholly-owned subsidiary. Although the
Company believes that these supplies will continue at favorable terms, there
can be no assurance of this. Although management believes that the Company
could establish satisfactory relationships with other suppliers and
manufacturers should its current relationship be interrupted, the Company
could experience substantial disruption and resulting loss of sales in the
event of an unexpected change in suppliers. In addition, demand for certain
critical items required in the manufacture and pressing of CD's and CD-ROM's
may from time to time exceed supply; this imbalance may cause Chartware's CD
production plant to be unable to obtain sufficient numbers of these items to
meet its needs. To date, the Company's operations have not been materially
adversely effected by such shortages; however, there can be no assurance that
shortages will not occur in the future or that, if they do, such shortages
will not have a material adverse impact on the Company's operations.
Furthermore, as with most other CD plants, Chartware may from time to time
experience difficulty in hiring and retaining experienced personnel, which may
have an adverse impact on the profitability of its CD manufacturing
operations. See the headings "Dependence on Certain Suppliers" and "Possible
Shortages of Materials and Personnel" of the caption "Risk Factors," below.
Dependence on One or a Few Major Customers. The Company distributes
its products through a network of over 50 independent distributors, who in
turn sell the products to retail outlets. Management believes that the
wholesale and retail markets for recordings are sufficiently diffuse that the
loss of one or more distributors or retail outlets will not seriously impact
the Company's sales. However, a change in musical tastes or a general decline
in demand for recordings may have a substantial adverse impact on the
Company's operations.
Patents, Trademarks, Licenses, Franchises, Concessions, Royalty
Agreements or Labor Contracts, including Duration. The Company, through CRL,
its music publishing subsidiary, is party to an AP.2A Agreement for the
Manufacture and Distribution of Records for Retail Sale to the Public for
Private Use (the "AP.2A Agreement"), as promulgated by the British Mechanical-
Copyright Protection Society Ltd. ("MCPS"). The AP.2A Agreement requires the
Company to obtain a license from MCPS for the manufacture of any musical disk
in the United Kingdom which reproduces one or more musical works within the
repertoire of MCPS with a view to its retail sale to the public for private
use. Royalties payable in connection with such a license are typically 8.5%
of the published dealer's price for the recording in question, multiplied by
the number of disks for which the license is granted. The copyright
protection societies of other nations similarly regulate the manufacture and
sale of musical recordings in those nations. Such societies include, for
example, GEMA in Germany and BMI and ASCAP in the United States.
Need for Any Governmental Approval of Principal Products or
Services. The manufacture and sale of musical recordings is subject to the
licensing requirements imposed by the copyright protection society of each
nation. These societies are not governmental entities but their licensing
requirements do apply to the operations of any record company operating within
their jurisdictions. See the heading "Patents, Trademarks, Licenses,
Franchises, Concessions, Royalty Agreements or Labor Contracts, including
Duration" of this caption.
Effect of Existing or Probable Governmental Regulations on the
Business. On the effectiveness of its Registration Statement on Form 10-SB,
the Company will be subject to Regulation 14A of the Commission, which
regulates proxy solicitations. Section 14(a) of the Securities Exchange Act
of 1934, as amended (the "1934 Act"), requires all companies with securities
registered pursuant to Section 12(g) thereof to comply with the rules and
regulations of the Commission regarding proxy solicitations, as outlined in
Regulation 14A. Matters submitted to stockholders of the Company at a special
or annual meeting thereof or pursuant to a written consent will require the
Company to provide its stockholders with the information outlined in Schedules
14A or 14C of Regulation 14; preliminary copies of this information must be
submitted to the Commission at least 10 days prior to the date that definitive
copies of this information are forwarded to stockholders.
The Company will also be required to file annual reports on Form
10-KSB and quarterly reports on Form 10-QSB with the Commission on a regular
basis, and will be required to timely disclose certain events (e.g., changes
in corporate control; acquisitions or dispositions of a significant amount of
assets other than in the ordinary course of business; and bankruptcy) in a
Current Report on Form 8-K.
Management believes that these obligations will increase the
Company's annual legal and accounting costs, but it is expected that revenues
will be sufficient to meet these costs.
Research and Development. None; not applicable.
Costs and Effects of Compliance with Environmental Laws. The
Company is required to disclose its CD manufacturing operations in a filing
with the local authorities in Rodermark, Germany. The cost of this filing is
minimal. The manufacturing facilities are subject to a bi-annual inspection
by these authorities to ensure compliance with environmental regulations. The
Company has never been in violation of these regulations. See the caption
"Description of Property," Part I, Item 3 of this Registration Statement.
Number of Total Employees and Number of Full-time Employees.
Collectively, the Company and its wholly-owned subsidiaries employ 30 people.
On a subsidiary-by-subsidiary basis, the Company's employment figures are as
follows: (i) Dolphin Studios - two full-time and four part-time employees;
(ii) Chartware - 20 full-time and five part-time employees; (iii) CRL - two
full-time employees; (iv) Immediate (Swiss) - one full-time employee; and (v)
MAC - three full-time employees. Due to overlapping employment for certain
individuals, the total employment figures of the Company's subsidiaries exceed
30.
Risk Factors.
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The Company's present and proposed business operations will be
highly speculative and subject to the same types of risks inherent in any new
or unproven venture, as well as risk factors particular to the industries in
which it will operate, and will include, among other things, those types of
risk factors outlined below.
Developmental Stage Company. The Company was only recently
organized and has only a limited operating history. Although Dolphin Studios
and others of the Company's operating subsidiaries do have limited operating
experience, they too must be deemed to be developmental stage companies.
Taken together, the Company and its subsidiaries must be considered to be in
an early formative stage. There can be no assurance that the Company's
business plans will prove successful, or that the Company or its wholly-owned
subsidiaries will be able to operate profitably.
Future Sales of Common Stock. Michael Berresheim currently
beneficially owns 2,341,985 shares of the common stock of the Company, or
approximately 27% of its outstanding voting securities. Commencing in March,
1998, and subject to compliance with the applicable provisions of Rule 144 of
the Securities and Exchange Commission, Mr. Berresheim may begin selling up
to one percent of the outstanding securities of the Company in any three-month
period. Such sales could have a substantial adverse effect on any
public market that may exist in the Company's common stock. Sales of any of
these shares by Mr. Berresheim could adversely affect the ability of the
Company to secure the necessary debt or equity financing for the Company's
proposed business operations. For additional information concerning the
present market for shares of common stock of the Company, see the caption
"Market Price of and Dividends on the Company's Common Equity and Other
Stockholder Matters," Part II, Item 1 of this Registration Statement. For
information regarding common stock ownership of Mr. Berresheim, see the
caption "Security Ownership of Certain Beneficial Owners and Management,"
Part I, Item 4 of this Registration Statement.
Dilution. Depending on the nature and extent of services
rendered, the Company may compensate present management and directors for
services rendered or to be rendered. If this compensation takes the form of
an issuance of the Company's common stock to such persons, this would have
the effect of diluting the holdings of the Company's other stockholders. In
addition, the Company may issue stock in connection with future acquisitions.
For a discussion of the issuances of common stock to the Company's directors
and executive officers, see the caption "Recent Sales of Unregistered
Securities," Part II, Item 4 of this Registration Statement.
Competition. There are numerous corporations, firms and
individuals which are engaged in the type of business activities in which the
Company is presently engaged. Many of those entities are more experienced and
possess substantially greater financial, technical and personnel resources
than the Company or its subsidiaries. While the Company hopes to be
competitive with other similar companies, there can be no assurance that such
will be the case.
Limited and Volatile Market for Common Stock. The Company's common
stock is quoted on the OTC Bulletin Board of the National Association of
Securities Dealers, Inc. (the "NASD") under the symbol "IEGP" and on the Third
Market segment on the Frankfurt Stock Exchange; however, there is currently no
"established trading market" for such common stock and there can be no
assurance that any such market will ever develop or be maintained. Any market
price for shares of common stock of the Company is likely to be very volatile,
and numerous factors beyond the control of the Company may have a significant
effect. In addition, the stock markets generally have experienced, and
continue to experience, extreme price and volume fluctuations which have
affected the market price of many small capital companies and which have often
been unrelated to the operating performance of these companies. These broad
market fluctuations, as well as general economic and political conditions, may
adversely affect the market price of the Company's common stock in any market
that may develop. For additional information regarding the market for the
Company's common stock, see the caption "Market Price of and Dividends on the
Company's Common Equity and Other Stockholder Matters," Part II, Item 1 of
this Registration Statement.
Risks of "Penny Stock." The Company's common stock may be deemed
to be "penny stock" as that term is defined in Reg. Section 240.3a51-1 of the
Securities and Exchange Commission. Penny stocks are stocks (i) with a price
of less than five dollars per share; (ii) that are not traded on a
"recognized" national exchange; (iii) whose prices are not quoted on the
NASDAQ automated quotation system (NASDAQ-listed stocks must still meet
requirement (i) above); or (iv) of an issuer with net tangible assets less
than US$2,000,000 (if the issuer has been in continuous operation for at least
three years) or US$5,000,000 (if in continuous operation for less than three
years), or with average annual revenues of less than US$6,000,000 for the last
three years.
Section 15(g) of the 1934 Act and Reg. Section 240.15g-2 of the
Commission require broker-dealers dealing in penny stocks to provide potential
investors with a document disclosing the risks of penny stocks and to obtain a
manually signed and dated written receipt of the document before effecting any
transaction in a penny stock for the investor's account. Potential investors
in the Company's common stock are urged to obtain and read such disclosure
carefully before purchasing any shares that are deemed to be "penny stock."
Moreover, Reg. Section 240.15g-9 of the Commission requires
broker-dealers in penny stocks to approve the account of any investor for
transactions in such stocks before selling any penny stock to that investor.
This procedure requires the broker-dealer to (i) obtain from the investor
information concerning his or her financial situation, investment experience
and investment objectives; (ii) reasonably determine, based on that
information, that transactions in penny stocks are suitable for the investor
and that the investor has sufficient knowledge and experience as to be
reasonably capable of evaluating the risks of penny stock transactions; (iii)
provide the investor with a written statement setting forth the basis on which
the broker-dealer made the determination in (ii) above; and (iv) receive a
signed and dated copy of such statement from the investor, confirming that it
accurately reflects the investor's financial situation, investment experience
and investment objectives. Compliance with these requirements may make it more
difficult for investors in the Company's common stock to resell their shares
to third parties or to otherwise dispose of them.
Dependence on Certain Suppliers. The Company purchases its CD's from
Chartware's plant. Although the Company believes that Chartware will continue
to supply the Company at favorable terms, there can be no assurance that it
will continue to do so. Although the Company believes that it could establish
satisfactory relationships with other suppliers and manufacturers should its
current relationship with Chartware be interrupted, the Company could
experience substantial disruption and resulting loss of sales in the event an
unexpected change in suppliers becomes necessary.
Possible Shortages of Materials and Personnel. Demand for certain
critical items required in the manufacture and pressing of CD's and CD-ROM's
may from time to time exceed supply; this imbalance can result in the
inability of the Company, through Chartware's operating CD plant, to obtain
sufficient numbers of these items to meet its needs. To date, the Company's
operations have not been materially adversely effected by such shortages. As
with most other CD manufacturers, Chartware may from time to time experience
difficulty in hiring and retaining experienced personnel, which may have an
adverse impact on the profitability of its CD manufacturing operations.
Dependence on Key Employees. Historically, the Company has been
heavily dependent on the ability of its President and Chairman of the Board,
Michael Berresheim, as well as on the experience of Christoph Berger, its Vice
President; Wolfgang Munz, its Chief Financial Officer; and Geraldine Blecker,
a director, to contribute essential technical and marketing experience. In
the event of future growth in administration, marketing, manufacturing and
customer support functions, the Company may have to increase the depth and
experience of its management team by adding new members. The Company's success
will depend to a large degree upon the active participation of its key
officers and employees. The Company intends to apply for "key-man" life
insurance on the lives of its directors. Loss of services of any of the
current officers and directors could have a significant adverse effect on the
operations and prospects of the Company. There can be no assurance that it
will be able to employ qualified persons on acceptable terms to replace
officers that become unavailable.
Multi-Media. The Company believes that CD's and CD-ROM will be
the front-line product of the second half of the 1990's and that CD-ROM
software carriers will combine audio and video clips with programming
software on one or more regular CD's. Sound bytes, biographies of artists,
rock software programs, games, clip art, show information and song titles and
interactive remix facilities can be integrated within the CD-ROM format.
However, the multi media industry is dependent on relatively large
investments and the Company's relative lack of capital will likely limit its
business opportunities in this regard.
Returns Policy. It is common practice in the music industry for
manufacturers to permit retailers to return unsold merchandise. In keeping
with this industry practice, the Company gives credit to its distributors for
merchandise returned by their accounts. Because the Company has had a limited
history of operations, it has not determined the likely return rate on its
sales. Although as standard policy the Company considers 20% reserves from
revenues for these returns to be reasonable, there can be no assurance that
the level of returns will not exceed these reserves in the future. In the
event that the amount reserved proves to be inadequate, the Company's
operating results will be adversely effected.
Future Capital Requirements. The Company's plan of operation calls
for it to acquire audio and visual master recordings to increase its catalog.
Depending upon the commercial success of its acquisitions, the Company may
need to raise additional capital in the future. Should such need arise, the
Company may sell additional shares of its common stock which would reduce the
proportional interest of its existing stockholders. See the Risk Factor
"Dilution" of this caption.
Trademarks. The Company uses the following brand-names: MMS
Records; Frankfurt Beat; Mausoleum; Actual; 4th Dimension; SilenZ; and
Allemania. Although the Company has used these names without adverse claim,
there can be no assurance that the Company will be successful in defending
against any possible claim for trademark infringement; the Company may be
required to change the name of one or more labels or be liable for damages in
the event that it is unsuccessful in its defense of any such claim.
Piracy and Home-Taping. The Company and its wholly-owned
subsidiaries operate in an industry in which revenues can be adversely
effected by the unauthorized reproduction of recordings for commercial sale,
commonly referred to as "piracy," and by home-taping for personal use.
Intense Competition and Rapid Technological Change. The record
industry is highly competitive and the Company will have to compete with a
multitude of similar companies, possessing substantially greater financial,
personnel, technological and marketing resources. It is particularly
difficult for small independent companies to compete with such major
companies for recording artists, radio air time and floor space for their
releases in retail outlets. The Company is not a significant factor in the
industry. There is no assurance that the Company will be able to compete in
such an environment.
Product Transition. Rather than simply acquiring already completed
master recordings for a set price plus royalties, the Company intends to
become more involved in the actual production of master recordings. This
aspect of the recording business will require management to approve specific
projects and to contract with recording artists, musicians and producers to
produce master recordings. The artists and producers will receive fees plus a
percentage of the proceeds received by the Company from distribution of such
recordings. The fee and the royalty arrangements will be negotiated on a case
by case basis. The Company may produce some or most of its own recordings at
Dolphin Studios. With the highly competitive environment in the music
industry, there can be no assurance that any such new product line will
achieve market acceptance and generate the level of sale and income
anticipated by the Company.
Current Expenditures in Anticipation of Future Growth. The Company
has recently increased its marketing budget for the purpose of promoting
sales of selected products that management has identified as possible hits.
These expenditures have adversely affected the Company's results of
operations. There can be no assurance that the Company's new products will
achieve sufficient market acceptance to support this increased level of
expenditures.
Financing Arrangements. The Company's German subsidiaries have
facilities to draw up to DM 250,000 (approximately US$140,000) from
Commerzbank of Frankfurt, Germany; these facilities are personally guaranteed
by Mr. Munz. No other major bank facilities are in place yet. The Bavarian
Union Bank of Munich, Germany, holds a mortgage in the amount of DM 1,375,000
(approximately US$ 750,000) on the Company's real estate in Rodermark,
Germany. This mortgage is personally guaranteed by Messrs. Berresheim and
Thomas Rehart. The Sparkasse Langen Seligenstadt ("Sparkasse Langen"), the
record title holder to certain CD manufacturing equipment securing a loan from
Top Disc Optical Data Produktions GmbH, a German corporation ("Top Disc"), has
sold such equipment to Chartware under the supervision of the German
bankruptcy court. The purchase price was DM 2,400,000 (approximately US$
1,350,000), with an option to purchase an additional CD monoline in 1997. In
September, 1997, the Company exercised this option and has entered into an
agreement to purchase the monoline for DM 1,400,000 (approximately US$
790,000), plus tax. The Company has made a down payment of DM 500,000, and
the Company intends to make monthly payments of DM 100,000; if possible, the
Company will make larger payments in order to complete the payments as soon
as possible. The Company expects to reach a definitive agreement with
Sparkasse Langen in the next several weeks. In addition, the Company
currently owes approximately DM 600,000 (approximately US$ 340,000) to MBO
for the purchase of a Neve console owned by Dolphin Studios. The Company has
also entered into a lending agreement with MMS Holding Corporation, an Idaho
corporation ("MMS"), which is the record owner of 14% of the Company's issued
and outstanding common stock, by which MMS agreed to lend to the Company up
to US$ 2,500,000, which may be converted to equity in the Company at an
agreed price of US$ 4 per share. The issuance of shares pursuant to this
option would result in additional dilution to existing stockholders. See the
Risk Factor "Dilution" of this caption and the caption "Certain Relationships
and Related Transactions," Part I, Item 7 of this Registration Statement.
Investing and Financing Activities. The Company has credit
facilities which are secured by the Company's assets as described above. The
Company's wholly-owned subsidiary, MAC, is also authorized to raise
additional capital, which it plans to invest mainly in master recordings,
through a media investment fund which it offers exclusively in Germany. This
fund is a tax deductible fund and is offered by prospectus, to German
residents only, in accordance with applicable laws thereof. The MAC fund is
authorized to raise up to DM 30,000,000 (approximately US$ 16,500,000), of
which 15% has been allocated to payment of administrative costs and 10% has
been allocated to sales commissions and consulting. It is expected that the
first proceeds of the MAC fund will be received in the first quarter of 1998.
In addition, the Board of Directors of the Company has authorized the
offering of up to 1,000,000 shares of common stock pursuant to Regulation S
of the Commission. The sales of these securities will have the effect of
diluting the holdings of existing stockholders. See the Risk Factor
"Dilution" of this caption and the caption "Management's Discussion and
Analysis or Plan of Operation," Part I, Item 2 of this Registration
Statement.
Record Business. The Company anticipates substantial costs with
respect to the production, acquisition, promotion and distribution of its
recordings; a majority of these costs will have to be paid regardless of the
recordings' success. As is generally the case throughout the record industry,
the Company expects that only a small percentage of its recordings will
generate significant profits. The ability to generate profit depends upon
many factors which may be beyond the control of the Company's management.
These factors include, but are not limited to, acquisition and distribution
costs; the success of advertising and promotional activities (which require
substantial expenditures); the efforts of domestic and foreign distributors;
the existence of favorable critical reviews; the ability to obtain radio air
time for the Company's products; and the buying habits of the public.
Conflicts of Interest; Related Party Transactions. The Company is
presently seeking additional potential acquisition targets and the
possibility exists that it may acquire or merge with a business or company in
which the its executive officers, directors, beneficial owners or their
affiliates may have an ownership interest. Such a transaction may occur if
management deems it to be in the best interests of the Company and its
stockholders. A transaction of this nature would present a conflict of
interest to those parties with a managerial position and/or an ownership
interest in both the Company and the acquired entity, and may compromise
management's fiduciary duty to the Company's stockholders. An independent
appraisal of the acquired company may or may not be obtained in the event a
related party transaction is contemplated.
Item 2. Management's Discussion and Analysis or Plan of Operation.
- -------------------------------------------------------------------
Plan of Operation.
- ------------------
In the next 12 months, the Company, through its operating
subsidiaries, intends to expand its product distribution network by entering
into contracts with additional distributors. Subject to the availability of
sufficient funds, the Company also plans to purchase additional music
catalogs and enter into recording contracts with artists. In this regard,
the Company intends to seek out artists from among the many who have been
released by other record companies in the past five years. The Company also
intends to commence the business of producing and synchronizing music for
movies, television and video productions and to produce compact disks and
CD-ROM at the Chartware manufacturing plant. In addition, the Company intends
to finalize the terms of the German music television acquisition and to
complete such acquisition in the near future, although there can be no
assurance that it will be consummated. See the heading "Business
Development" of the caption "Description of Business," Part I, Item 1 of this
Registration Statement.
The ability to conduct these operations will depend on the
Company's ability to obtain sufficient funding. The Board of Directors has
authorized the Company to undertake an offering of up to 1,000,000 shares of
the Company's common stock at a price of US$ 3 per share, pursuant to
Regulation S of the Commission. The sales of such securities will be subject
to the execution and delivery of Regulation S subscription agreements
providing for a "restrictive" legend to be imprinted on each stock
certificate, the receipt of an acceptable opinion from counsel satisfactory
to the Company that such legend may be removed and that after such removal
the shares may be resold in compliance with Section 5 of the 1933 Act or an
exemption from such registration provisions and that any resales be effected
in compliance with the applicable terms and provisions of Rule 144 of the
Commission. However, there can be no assurance that the Company will be able
to successfully raise this capital or that, if it does, it will be able to
operate profitably.
The Company expects to commence the offering following the filing
of this Registration Statement. In the event that it is commenced before the
effective date hereof, the Company will file an amendment to this
Registration Statement disclosing such commencement; if it is commenced
following such effective date, the Company will make such disclosure in a
Current Report on Form 8-K.
During the next 12 months, the Company plans to realize operating
efficiencies by maintaining a relatively small staff that is experienced in
all phases of the music and entertainment business and by maintaining close
controls over production costs.
Results of Operations.
- ----------------------
For the years ended December 31, 1997 and 1996, the Company and its
wholly-owned subsidiaries realized net sales of US$ 3,632,885 and US$
390,769, respectively. Taking into account costs of sales and expenses, the
Company's net loss in these periods totaled US$ 302,211 (US$ 0.05 per
share)and US$ 286,038 (US$ 0.14 per share), respectively.
In the next twelve months, management intends to increase the
Company's liquidity by increasing sales volume, reducing administrative costs
and improving cash flows. The Company is also preparing to commence an
offering of up to US$ 3,000,000 of its common stock pursuant to Regulation S
of the Commission. See the heading "Plan of Operation" of the caption
"Management's Discussion and Analysis or Plan of Operation," Part I, Item 2
of this Registration Statement. However, as noted, the Company has
experienced recurring operating losses and there can be no assurance that it
will be able to meet its operating costs and to operate at a profit.
Item 3. Description of Property.
- ---------------------------------
The Company owns an office, CD manufacturing facility and warehouse
located in Rodermark, Germany. The facility consists of approximately 25,000
square feet in total. The property is mortgaged to the Bavarian Union Bank
of Munich, Germany, in the amount of DM 1,375,000 (approximately US$
750,000), with an interest rate of 6%. Mortgage payments total DM 11,400
(approximately US$ 6,400) per month.
MAC leases approximately 1350 square feet of office space in
Rodermark, Germany, at a rate of DM 1500 (approximately US$ 850) per month.
The term of the lease is three years, terminating August 31, 2000.
Dolphin Studios leases its office and studio facilities in
Morfelden-Walldorf, Germany, from MBO at a rate of DM 7,000 (approximately
US$ 3,900) per month. The leased facilities consist of approximately 5,000
square feet of space containing office space and four studios and two control
rooms with digital and analog recording and outboard equipment and
peripherals. The property contains an additional 10,000 square feet of floor
space, which Dolphin Studios has the option of leasing if the space becomes
necessary. See the heading "Transactions with Management and Others" of the
caption "Certain Relationships and Related Transactions," Part I, Item 7 of
this Registration Statement.
On January 19, 1998, Computer Marketing and Engineering Co. Ltd.
("Comenco") and CRL executed a License whereby Comenco granted to CRL the use
of two offices located at 63 Kew Green, Kew, Richmond, Surrey, England. The
Comenco License provides for CRL to have possession of these offices for a
period of three months, commencing on the date of the License, at a rental of
750 British pounds per month.
The Company subleases from Howard Bronson Associates office space
located at 6 East 45th Street, New York, New York, at a monthly rate of US$
500, plus US$ 300 per month for telephone and reception services. The
premises consist of 180 square feet of office space. The lease is for a six
month term.
The Company has entered into a service agreement with Christoph
Berger which provides for the Company to pay DM 20,000 (approximately US$
11,300) to Mr. Berger per month as salary and for use of Mr. Berger's office
in Niederurnen, Switzerland, including use of office personnel and telephone.
The office consists of approximately 5,000 square feet. Mr. Berger is a
director and executive officer of the Company and is the President of CMC.
Item 4. Security Ownership of Certain Beneficial Owners and Management.
- ------------------------------------------------------------------------
Security Ownership of Certain Beneficial Owners.
- ------------------------------------------------
The following table sets forth the shareholdings of those persons
who own more than five percent of the Company's common stock as of February
27, 1998:
<TABLE>
<CAPTION>
Number Percentage
Name and Address of Shares Beneficially Owned of Class
- ---------------- ---------------------------- --------
<S> <C> <C>
Michael Berresheim 2,341,985 (1) 26.8%
Eppsteinerstrasse 17
60323 Frankfurt
Germany
MMS Holding Corporation 1,206,198 13.8%
56 West 400 South, Suite 260
Salt Lake City, Utah
84111
--------- -----
TOTALS 2,341,985 (2) 26.8% (2)
</TABLE>
(1) Of this amount 35,000 shares each are beneficially owned by Mr.
Berresheim's three children (105,000 shares total). An additional 1,206,198
of these shares are beneficially owned by MMS, of which Mr. Berresheim is the
President.
(2) Due to Mr. Berresheim's "control" relationship to MMS, Mr.
Berresheim may be deemed to be the beneficial owner of the shares of the
Company owned of record by MMS and such shares have been included in Mr.
Berresheim's stockholdings in this table. In order to avoid double counting
of these shares, the 1,206,198 shares held of record by MMS have not been
included in the "Totals" section of this table.
Security Ownership of Management.
- ---------------------------------
The following table sets forth the shareholdings of the Company's
directors and executive officers as of February 27, 1998:
<TABLE>
<CAPTION>
Number Percentage
Name and Address of Shares Beneficially Owned of Class
- ---------------- ---------------------------- ----------
<S> <C> <C>
Michael Berresheim 2,341,985 (1) 26.8%
Eppsteinerstrasse 17
60323 Frankfurt
Germany
Geraldine Blecker 15,000 0.2%
Eichwaldstrasse 46
60385 Frankfurt
Germany
Wolfgang Munz 250,000 (2) 2.9%
Odenwaldring 65
64859 Eppertshausen
Germany
Christoph Berger 10,000 0.1%
Windeggstrasse 16
8862 Niederurnen
Switzerland
----- -----
All directors and executive
officers as a group (4) 2,616,985 30.0%
</TABLE>
(1) Of this amount 35,000 shares each are beneficially owned by Mr.
Berresheim's three children (105,000 shares total). An additional 1,206,198
of these shares are beneficially owned by MMS, of which Mr. Berresheim is the
President.
(2) Of this amount, 50,000 shares are beneficially owned by Mr. Munz'
wife.
See the caption "Directors, Executive Officers, Promoters and
Control Persons," below, for information concerning the offices or other
capacities in which the foregoing persons serve with the Company.
Changes in Control.
- -------------------
There are no present arrangements or pledges of the Company's
securities which may result in a change in control of the Company.
Item 5. Directors, Executive Officers, Promoters and Control Persons.
- -------- -------------------------------------------------------------
Identification of Directors and Executive Officers.
- ---------------------------------------------------
The following table sets forth the names of all current directors
and executive officers of the Company. These persons will serve until the
next annual meeting of the stockholders (held on the third Friday in April of
each year) or until their successors are elected or appointed and qualified,
or their prior resignation or termination.
<TABLE>
<CAPTION>
Date of Date of
Positions Election or Termination
Name Held Designation or Resignation
- ---- ---- ----------- --------------
<S> <C> <C> <C>
Michael Berresheim President 11/97 *
Chairman 3/97 *
David Howar Fmr. Vice Pres. 11/97 3/98
Former Director 11/97 3/98
Geraldine Blecker Secretary/ 3/97 *
Treasurer 3/97 *
Director 3/97 *
Wolfgang Munz Director 12/97 *
Thomas Rehart Former Director 9/97 2/98
Christoph Berger Director 9/97 *
Anthony Calder Former President 3/97 11/97
Former Director 3/97 11/97
Evert Wilbrink Former Vice Pres. 3/97 11/97
Former Director 3/97 11/97
Roger Lund Former President 5/96 3/97
Former Director 5/96 3/97
Toni Carter Former Secretary 5/96 3/97
Former Director 5/96 3/97
</TABLE>
* These persons presently serve in the capacities
indicated.
Business Experience.
- --------------------
Michael Berresheim, President and Chairman of the Board. Mr.
Berresheim is 43 years of age. He has been active in the music business for
over 18 years. In 1977, he set up his own studio in Frankfurt where he
developed a major German act called Rodgau Monotones. Since then, Mr.
Berresheim has been co-manager of numerous international artists, including
ex-members of bands like Whitesnake, Iron Maiden, Toto, Michael Schenker and
Motorhead, as well as the Far Corporation, which had a mega-hit with the
Frank Farian-produced "Stairway to Heaven." Mr. Berresheim's experience
producing numerous rock music videos placed him in demand to provide
companies like Volkswagen, Mercedes, Adidas, Man and IBM with visual
marketing concepts. In the 1980's, Mr. Berresheim was an associate of
Filmtrax, the No. 1 independent film music publisher in Europe. During the
same period, he was involved in raising funding for and actively promoting
DCC-Dunhill Compact Classics, a company in Los Angeles which is still highly
regarded in the recording industry. Mr. Berresheim has been a rock artist
himself, a producer of numerous successful recordings and, when he has any
spare time, he can be found experimenting with new concepts at Dolphin
Studios. Mr. Berresheim is married, lives in Frankfurt, and has three sons.
Geraldine Blecker, Secretary/Treasurer and Director. Ms. Blecker,
age 45, resides in Frankfurt, Germany. She attended the Pasadena Playhouse,
with studies in music and dramatic art. She later graduated from Polle
College, in Dorset, England with a degree in Journalism and English
Literature. Ms. Blecker has been involved in all phases of the music
industry for the past 23 years and currently is managing a music publishing
company with distribution throughout Europe.
Wolfgang Munz, Chief Financial Officer and Director. Mr. Munz is
47 years old. He is a graduate of the Technical University of Darmstadt.
Mr. Munz began his career in 1970 as a research and development employee with
a manufacturer of nautical components, and has also worked in managerial
positions for such companies as Rutgerswerke AG, Thomas Bettes GmbH, and
Accumulatorenfabrik Sonnenschein GmbH. Mr. Munz' employment history since
1990 includes positions as business manager for Europe for electrical and
chemical technical products at Kopp AG and Werner & Mertz GmbH.
Christoph Berger, Vice President and Director of A & R. Mr. Berger,
age 41, founded the first Swiss music magazine, "Music Scene Schweiz," in
1978. From 1983 to 1988, he was the Managing Director of Roba Music,
Switzerland, and was responsible for A & R matters for Roba Music of Hamburg,
Germany. During this period, Mr. Berger handled the careers of artists such
as Udo Lindenberg, Billy Ocean, Iron Maiden, Samantha Fox, Vicky Leandros,
Don Dokken, Munchener Freiheit and Erdal Kizilcay. In 1989, Mr. Berger
formed CMC Music Ltd., signing artists such as Warrant, Yngwie Malmsteen,
Slaughter, Kix, Deep Purple, Iron Maiden and Yes. In late 1995, BMG
International acquired a 50% interest in CMC and Mr. Berger moved to Denmark,
where he became international general manager of the unrelated company CMC
Music AS. At CMC Music AS, Mr. Berger helped to re-establish the careers of
Kenny Rogers, John Denver, Roberto Blanco, Sailor, Suzi Quatro and Dr. Hook.
After CMC Music AS was sold to EMI Records in August 1997, Mr. Berger brought
his talents to the Company.
Significant Employees.
- ----------------------
Other than its current directors and executive officers, the
Company has no employees who are expected to make a significant contribution
to the Company's business. However, see the heading "Dependence on Key
Employees" of the caption "Risk Factors" of this Registration Statement.
Family Relationships.
- ---------------------
There are no family relationships between any directors or
executive officers of the Company, either by blood or by marriage.
Involvement in Certain Legal Proceedings.
- -----------------------------------------
Except as stated below, during the past five years, no present or
former director, executive officer or person nominated to become a director
or an executive officer of the Company:
(1) was a general partner or executive officer of any business
against which any bankruptcy petition was filed, either at the time of the
bankruptcy or two years prior to that time;
(2) was convicted in a criminal proceeding or named subject to a
pending criminal proceeding (excluding traffic violations and other minor
offenses);
(3) was subject to any order, judgment or decree, not subsequently
reversed, suspended or vacated, of any court of competent jurisdiction,
permanently or temporarily enjoining, barring, suspending or otherwise
limiting his involvement in any type of business, securities or banking
activities; or
(4) was found by a court of competent jurisdiction (in a civil
action), the Securities and Exchange Commission or the Commodity Futures
Trading Commission to have violated a federal or state securities or
commodities law, and the judgment has not been reversed, suspended or
vacated.
Michael Berresheim, the Company's President and Chairman of the
Board of Directors, was an executive officer of Top Disc, which filed
bankruptcy proceedings in December, 1996. Top Disc is a wholly-owned
subsidiary of MMS.
A prosecutorial investigation is currently pending in Germany with
respect to the activities of MMS and Top Disc regarding alleged copyright
violations, investment fraud and violation of provisions of Germany's
bankruptcy laws. All of the alleged violations relate to Top Disc's pressing
of CD's for King Records, a Bulgarian music company with no affiliation to
Top Disc, MMS, the Company or any of its subsidiaries. The German prosecutor
received evidence that King Records may not have paid royalties to the
Bulgarian copyright society for certain recordings and that its arrangement
with Top Disc for the production of CD's of such recordings violated
applicable copyright laws. Under German law, the investigation pertains to
Mr. Berresheim personally as the principal executive officer of MMS. No
formal charges have been brought and Mr. Berresheim expects that the
investigation will be terminated shortly with no charges being brought due to
evidence that King Records was not in violation of the Bulgarian copyright
laws.
In connection with this investigation, the German mechanical rights
association ("GEMA") made allegations of copyright violations by Top Disc;
these allegations have been withdrawn.
Item 6. Executive Compensation.
- --------------------------------
The following table sets forth the aggregate compensation paid
by the Company for services rendered during the periods indicated:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term Compensation
Annual Compensation Awards
Payouts
- -----------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Securities All
Other Underlying Other
Name and Year or Annual Restricted Options/LTIP Compen-
Principal Period Salary Bonus Compen- Stock SAR's (#)Payouts sation
Position Ended ($) ($) sation($) Awards($)
($)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Michael 12/31/96 -0- -0- -0- -0- -0- -0- -0-
Berresheim, 12/31/97 $ 60,000 -0- -0- -0- 200,000 -0- -0-
President and shares(1)
Chairman
David Howar, 12/31/96 -0- -0- -0- -0- -0- -0- -0-
Fmr. Vice Pres. 12/31/97 -0- -0- -0- 5,000 -0- -0- -0-
Former Director shares
Geraldine 12/31/96 -0- -0- -0- -0- -0- -0- -0-
Blecker, 12/31/97 $ 5,000 -0- -0- -0- 30,000 -0- -0-
Sec./Treas., shares(2)
Director
Wolfgang Munz, 12/31/96 -0- -0- -0- -0- -0- -0- -0-
Director 12/31/97 $100,000 -0- -0- 50,000 -0- -0- -0-
shares
Thomas Rehart, 12/31/96 -0- -0- -0- -0- -0- -0- -0-
Former Director 12/31/97 $ 60,000 -0- -0- -0- 100,000 -0- -0-
shares(1)
Christoph Berger12/31/96 -0- -0- -0- -0- -0- -0- -0-
Director 12/31/97 $ 35,000 -0- -0- -0- 20,000 -0- -0-
shares
Anthony Calder, 12/31/96 -0- -0- -0- -0- -0- -0- -0-
Former President12/31/97 $ 60,000 -0- -0- -0- 100,000 -0- -0-
Former Director shares(1)
Evert Wilbrink, 12/31/96 -0- -0- -0- -0- -0- -0- -0-
Former Director 12/31/97 $ 60,000 -0- -0- -0- 100,000 -0- -0-
shares(1)
</TABLE>
(1) Options to purchase 100,000 of these shares were exercised at a
price of US$ 0.001 per share, and the underlying shares were issued on
September 24, 1997. See the caption "Recent Sales of Unregistered
Securities," Part II, Item 4 of this Registration Statement.
(2) Options to purchase 15,000 of these shares were exercised at a
price of US$ 0.01 per share, and the underlying shares were issued on
November 5, 1997. See the caption "Recent Sales of Unregistered Securities,"
Part II, Item 4 of this Registration Statement.
Compensation of Directors.
- --------------------------
On December 23, 1997, the Company's Board of Directors resolved to
issue 5,000 and 50,000 "unregistered" and "restricted" shares of its common
stock to Messrs. Howar and Munz in consideration of their agreements to serve
on the Board. See the caption "Recent Sales of Unregistered Securities,"
Part II, Item 4 of this Registration Statement.
Employment Contracts and Termination of Employment and Change-in-Control
Arrangements.
- -------------
Effective November 15, 1997, the Company entered into an Employment
Agreement and Contract with its President, Michael Berresheim. The Agreement
provides for an employment term of three years, commencing November 15, 1997,
with Mr. Berresheim to receive a salary of US$ 72,000 per year, payable in
equal monthly installments. In addition, at every calendar year end, Mr.
Berresheim is to be granted an option to purchase 100,000 "unregistered" and
"restricted" shares of common stock at a price of $0.001 per share. Either
party may terminate the Agreement upon 90 days' notice; termination by the
Company shall be for good cause only, and in such event Mr. Berresheim will
be entitled to receive $18,000, representing his pay during the 90 day notice
period.
Mr. Munz is also party to an Employment Agreement, dated January
28, 1998, with Chartware. This Agreement provides for an employment period
in the event that Mr. Munz does not give notice of his intention to terminate
the Agreement at least six months before the end of the initial term. The
Agreement provides for a salary of DM 8500 (approximately US $4,300) per
month, payable at the end of each month. In addition, Mr. Munz is entitled
to payment of DM 0.015 (approximately US $0.009) per CD produced by Chartware
for third parties.
Item 7. Certain Relationships and Related Transactions.
- --------------------------------------------------------
Transactions with Management and Others.
- ----------------------------------------
Except as stated below, there have been no material transactions,
series of similar transactions, currently proposed transactions, or series of
similar transactions, to which the Company or any of its subsidiaries was or
is to be a party, in which the amount involved exceeded US$60,000 and in
which any director or executive officer, or any security holder who is known
to the Company to own of record or beneficially more than five percent of the
Company's common stock, or any member of the immediate family of any of the
foregoing persons, had a material interest.
The Dolphin Studios property in Morfelden-Walldorf, Germany is
owned by MBO. MBO is controlled by a family trust organized and controlled
by Michael Berresheim, the Company's President and Chairman of the Board of
Directors. Dolphin Studios pays rent of DM 7000 per month (approximately US$
3,950) to MBO.
MBO also holds a promissory note of Dolphin Studios in the amount
of DM 1,010,000 (approximately US$569,000), of which approximately DM 654,000
(approximately US$ 368,000) was owing as of June 30, 1997. The note bears
interest at the rate of 6.5% per year, and provides for an initial payment of
DM 350,000 (approximately US$ 197,000) on June 1, 1996, with monthly payments
of DM 18,333 (approximately US$ 10,000) due monthly, commencing on January 1,
1997. The note matures on December 31, 1997. As of June 30, 1997, Dolphin
Studios had made the initial DM 654,000 payment and one additional payment of
DM 5,400 (approximately US$ 3,000) only.
Chartware has been engaged by Top Disc and MMS to press CD's. As
of June 30, 1997, Top Disc was indebted to Chartware in the amount of US$
339,516 for pressings done in 1995 and 1996. Due to Top Disc's bankruptcy,
Chartware will receive payment of this receivable net of a 70% allowance, and
the receivable is carried on Chartware's books net of this allowance.
Payment will be made through the German bankruptcy courts.
As of December 31, 1996, MMS was indebted to Chartware in the
amount of US$ 312,797 for CD pressings; this amount increased to US$ 668,489
as of June 30, 1997. In addition, at June 30, 1997, MMS was indebted to
Dolphin Studios in the amount of US$ 155,391 for use of the recording
facilities at Dolphin Studios.
On June 23, 1997, Chartware executed a note in the amount of DM
100,000 (approximately US$ 56,000), payable to MMS. The note bears interest
at the rate of 7% per annum; interest payments are due annually and principal
is payable on December 31, 2000. The note evidences borrowings that were
used to fund Chartware's operating costs.
As of the date of this Registration Statement, the Company has
received loans totaling approximately US$ 2,000,000 from MMS for
miscellaneous expenses. The parties have agreed that MMS shall have an
option to convert up to US$ 2,500,000 in Company debt into equity in the
Company, at a conversion rate of US$ 4 per share. As of December 31, 1997,
the Company had issued 500,000 "unregistered" and "restricted" shares of
common stock to MMS in consideration of the conversion of all of the then-
outstanding debt of Company to MMS. See the caption "Recent Sales of
Unregistered Securities," Part I, Item 4 of this Registration Statement.
On December 31, 1995, Dolphin Studios executed a note payable to
MMS in the amount of DM 136,000 (approximately US$ 76,000). This note
represents borrowings by Dolphin Studios to fund operating costs and the
purchase of equipment. The note was paid in full during the December 31,
1996, calendar year, through services rendered to MMS by Dolphin Studios.
Certain Business Relationships.
- -------------------------------
Except as stated under the heading "Transactions with Management
and Others," above, there have been no material transactions, series of
similar transactions, currently proposed transactions, or series of similar
transactions, to which the Company or any of its subsidiaries was or is to be
a party, in which the amount involved exceeded US$60,000 and in which any
director or executive officer, or any security holder who is known to the
Company to own of record or beneficially more than five percent of the
Company's common stock, or any member of the immediate family of any of the
foregoing persons, had a material interest.
Indebtedness of Management.
- ---------------------------
Except as stated under the heading "Transactions with Management
and Others," above, there have been no material transactions, series of
similar transactions, currently proposed transactions, or series of similar
transactions, to which the Company or any of its subsidiaries was or is to be
a party, in which the amount involved exceeded US$60,000 and in which any
director or executive officer, or any security holder who is known to the
Company to own of record or beneficially more than five percent of the
Company's common stock, or any member of the immediate family of any of the
foregoing persons, had a material interest.
Parents of the Issuer.
- ----------------------
The Company has no parents, except to the extent that Mr.
Berresheim and MMS may be deemed to be parents of the Company by virtue of
their stock holdings. See the captions "Business Development" and "Security
Ownership of Certain Beneficial Owners and Management" of this Registration
Statement.
Transactions with Promoters.
- ----------------------------
Except as stated under the heading "Transactions with Management
and Others," above, there have been no material transactions, series of
similar transactions, currently proposed transactions, or series of similar
transactions, to which the Company or any of its subsidiaries was or is to be
a party, in which the amount involved exceeded US$60,000 and in which any
promoter or founder, or any member of the immediate family of any of the
foregoing persons, had a material interest. However, see the caption
"Transactions with Management and Others" of this Registration Statement.
Item 8. Description of Securities.
- -----------------------------------
The Company has one class of securities authorized, consisting of
50,000,000 shares of one mill ($0.001) par value common voting
stock. The holders of the Company's common stock are entitled to
one vote per share on each matter submitted to a vote at a meeting of
stockholders. The shares of common stock do not carry cumulative voting
rights in the election of directors.
Stockholders of the Company have no pre-emptive rights to acquire
additional shares of common stock or other securities. In the event of
liquidation of the Company, the shares of common stock are entitled to share
equally in corporate assets after satisfaction of all liabilities. Except as
stated under the caption "Recent Sales of Unregistered Securities," Part II,
Item 4 of this Registration Statement, all shares of the common stock now
outstanding are fully paid and non-assessable.
MMS has loaned the Company US$ 2,000,000 to pay for miscellaneous
expenses. The Company has granted to MMS the option to convert up to US$
2,500,000 in Company debt into equity at a price of US$ 4 per share. As of
the date of this Registration Statement, MMS has converted the entire amount
of outstanding debt into equity totaling 500,000 shares of "unregistered" and
"restricted" common stock. In addition, the Company is party to an
Employment Agreement and Contract with its President, Michael Berresheim,
which provides for Mr. Berresheim to receive options to purchase 100,000
"unregistered" and "restricted" shares at a price of $0.001 per share;
options to purchase 100,000 such shares are currently outstanding. Mr.
Berresheim is to receive a new 100,000 share option at the end of each
calendar year. Christoph Berger is the holder of an option to acquire 20,000
"unregistered" and "restricted" shares, and Geraldine Blecker holds an option
to acquire 15,000 such shares. See the captions "Certain Relationships and
Related Transactions, Part I, Item 7; and "Recent Sales of Unregistered
Securities," Part I, Item 4; and "Executive Compensation," Part I, Item 6 of
this Registration Statement.
In connection with a Professional Service Agreement between the
Company and GlobeMedia AG, of Zug, Switzerland, on February 3, 1998, the
Company granted to GlobeMedia options to purchase 100,000 "unregistered" and
"restricted" shares of common stock at a price of US$ 2.50 per share,
exercisable for a period of one year. The Professional Service Agreement
further provides for GlobeMedia to provide public relations services to the
Company for a monthly fee of US$ 2500, with reimbursement of up to US$ 1500
in expenses per month. The term of the Professional Service Agreement is one
year, with automatic renewal for additional one year terms unless either
party terminates the Agreement not less than 60 days before the end of the
then-current term.
There is no provision in the Company's Articles of Incorporation,
as amended, or Bylaws, that would delay, defer, or prevent a
change in control of the Company.
PART II
Item 1. Market Price of and Dividends on the Company's Common Equity and
Other Stockholder Matters.
- --------------------------
Market Information.
- -------------------
Since October 23, 1996, the Company's common stock has been quoted
on the OTC Bulletin Board of the NASD under the symbol "IEGP." Its common
stock is also listed on the Third Market Segment of the Frankfurt Stock
Exchange in Germany. However, the market for shares of the Company's common
stock is extremely limited. No assurance can be given that the present
limited market for the Company's common stock will continue, and the sale of
"unregistered" and "restricted" shares of common stock pursuant to Rule 144
of the Securities and Exchange Commission by members of management, MMS or
others may have a substantial adverse impact on any such public market. See
the Risk Factor "Future Sales of Common Stock" under the caption "Description
of Business," and the caption "Recent Sales of Unregistered Securities," Part
II, Item 4 of this Registration Statement.
The Company's common stock has been quoted on the OTC Bulletin
Board of the NASD only since October 23, 1996. The high and low bid prices
for shares of the Company's common stock for each quarter beginning with the
quarter ended December 31, 1996, and the period from January 2, 1998, to
January 9, 1998, are as follows:
<TABLE>
<CAPTION>
Bid
Quarter ending: High Low
- --------------- ---- ---
<S> <C> <C>
October 23, 1996, Unpriced Unpriced
to December 31, 1996
March 31, 1997 Unpriced Unpriced
June 30, 1997 4.25 3
September 30, 1997 6.25 4.25
December 31, 1997 5.875 1
January 2, 1998, 2.6875 1.25
to January 9, 1998
These bid prices were obtained from the National Quotation Bureau,
Inc. (the "NQB") and do not necessarily reflect actual transactions, retail
markups, markdowns or commissions.
No assurance can be given that any "established public market" will
develop in the Company's common stock, regardless of whether its current and
proposed business operations are successful, or, if any such market does
develop, that it will be sustained for any period of time.
Holders.
- --------
The number of record holders of the Company's securities as of the
date of this Registration Statement is approximately 499.
Dividends.
- ----------
The Company has not declared any cash dividends with respect to its
common stock and does not intend to declare dividends in the foreseeable
future. The policy of the Company is to reinvest any profits into further
acquisitions. There are no material restrictions limiting, or that are likely
to limit, the Company's ability to pay dividends on its securities.
Item 2. Legal Proceedings.
- ---------------------------
The Company and its wholly-owned subsidiaries are not parties to
any pending legal proceeding. To the knowledge of management, no federal,
state or local governmental agency is presently contemplating any proceeding
against the Company or any of its subsidiaries. No director, executive
officer or affiliate of the Company or owner of record or beneficially of
more than five percent of the Company's common stock is a party adverse to
the Company or has a material interest adverse to the Company in any
proceeding. However, see the heading "Involvement in Certain Legal
Proceedings" of the caption "Directors, Executive Officers, Promoters and
Control Persons," Part I, Item 5 of this Registration Statement.
Item 3. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
- ---------------------
There have been no changes in the Company's principal independent
accountant in the past two fiscal years or as of the date of this
Registration Statement.
Item 4. Recent Sales of Unregistered Securities.
- -------------------------------------------------
Date Number of Aggregate
Name Acquired Shares Consideration
- ---- -------- ------ -------------
MBO GmbH 1/28/97 2,000,000 Dolphin Plan
Howard C. Bronson 2/10/97 50,000 Services
Immediate Music Corp. 3/24/97 3,500,000 CMC Plan
Ash & Co. 6/3/97 100,000 (1) Services
Howard C. Bronson 6/3/97 25,000 Services
Beacon Studios 9/24/97 500,000 Beacon Studios
Assignment
Michael Berresheim 9/24/97 100,000 US$ 100
(option exercise)
Thomas Rehart 9/24/97 100,000 US$ 100
(option exercise)
Anthony Calder 9/24/97 100,000 US$ 100
(option exercise)
Evert Wilbrink 9/24/97 100,000 US$ 100
(option exercise)
Falken 10/27/97 250,000 Services
Vermogensberatung
Geraldine Blecker 11/5/97 15,000 US$ 150
(option exercise)
MMS Holding 11/5/97 500,000 US$ 2,000,000
Corporation (debt retirement)
Music Avenue 2/20/98 328,000 Music Avenue
assignment
Wolfgang Munz 12/23/97 50,000 Services
David Howar 12/23/97 5,000 Services
National Mutual 2/23/98 100,000 Services
Trustees, Ltd.
(1) Due to the termination of the Company's financial consulting
agreement with Ash & Co., effective December 12, 1997, the Company has
requested that the shares issued to it be returned for cancellation.
With the exception of the shares issued to Ash & Co., which the
Company has requested be returned for cancellation, these shares are
fully-paid. In addition, each of these persons was a director or officer of
the Company and/or had access to all material information regarding the
Company prior to the offer or sale of these securities. Such offers and
sales are believed to have been exempt from the registration requirements of
Section 5 of the Securities Act of 1933 pursuant to Sections 3(b) and/or 4(2)
thereof, and from similar states' securities laws, rules and regulations
requiring the offer and sale of securities by available state exemptions from
such registration. See the heading "Business Development" under the caption
"Description of Business," Part I, Item 1 of this Registration Statement.
Item 5. Indemnification of Directors and Officers.
- ---------------------------------------------------
Section 78.751(1) of the Nevada Revised Statutes ("NRS") authorizes
a Nevada corporation to indemnify any director, officer, employee, or
corporate agent "who was or is a party or is threatened to be made a party to
any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, except an action by or
in the right of the corporation" due to his corporate role. Section 78.751(1)
extends this protection "against expenses, including attorneys' fees,
judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with the action, suit or proceeding if he acted
in good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful."
Section 78.751(2) of the NRS also authorizes indemnification of the
reasonable defense or settlement expenses of a corporate director, officer,
employee or agent who is sued, or is threatened with a suit, by or in the
right of the corporation. The party must have been acting in good faith and
with the reasonable belief that his actions were not opposed to the
corporation's best interests. Unless the court rules that the party is
reasonably entitled to indemnification, the party seeking indemnification
must not have been found liable to the corporation.
To the extent that a corporate director, officer, employee, or
agent is successful on the merits or otherwise in defending any action or
proceeding referred to in Section 78.751(1) or 78.751(2), Section 78.751(3)
of the NRS requires that he be indemnified "against expenses, including
attorneys' fees, actually and reasonably incurred by him in connection with
the defense."
Section 78.751 (4) of the NRS limits indemnification under Sections
78.751 (1) and 78.751(2) to situations in which either (1) the stockholders,
(2)the majority of a disinterested quorum of directors, or (3) independent
legal counsel determine that indemnification is proper under the
circumstances.
Pursuant to Section 78.751(5) of the NRS, the corporation may
advance an officer's or director's expenses incurred in defending any action
or proceeding upon receipt of an undertaking. Section 78.751(6)(a) provides
that the rights to indemnification and advancement of expenses shall not be
deemed exclusive of any other rights under any bylaw, agreement, stockholder
vote or vote of disinterested directors. Section 78.751(6)(b) extends the
rights to indemnification and advancement of expenses to former directors,
officers, employees and agents, as well as their heirs, executors, and
administrators.
Regardless of whether a director, officer, employee or agent has
the right to indemnity, Section 78.752 allows the corporation to purchase and
maintain insurance on his behalf against liability resulting from his
corporate role.
Article V of the Company's Bylaws reiterates the provisions of
Section 78.751(1) of the NRS. Furthermore, Article V of the Company's
Articles of Incorporation provides that "no shareholders or directors of the
corporation shall be individually liable for the debts of the corporation or
for monetary damages arising from the conduct of the corporation."
PART F/S
Index to Financial Statements
Report of Certified Public Accountants
Financial Statements
- --------------------
(i) Audited Financial Statements
Consolidated Financial Statements
for the Years Ended December 31, 1996,
and December 31, 1995
---------------------
Independent Auditors' Report
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Stockholders'
Equity
Consolidated Statements of Cash Flows
Notes to the Consolidated Financial
Statements
PART III
Item 1. Index to Exhibits.
- ---------------------------
The following exhibits are filed as a part of this Registration
Statement:
</TABLE>
<TABLE>
<CAPTION>
Exhibit
Number Description*
- ------ ------------
<S> <C>
2.1 Dolphin Studios Plan
2.2 CMC Plan
3.1 Articles of Incorporation
3.2 Amendment to Articles of Incorporation
3.3 Bylaws
10.1 Agreement with Falken Vermogensberatung, dated March 3, 1997
10.2 Beacon Studios Assignment
10.3 Music Avenue Assignment
10.4 Agreement with Falken Vermogensberatung, dated August 2, 1997
10.5 BMG Agreement
10.6 Agreement with Porter Bibb
21 Subsidiaries of the Registrant
27 Financial Data Schedule
</TABLE>
* Summaries of all exhibits contained within this
Registration Statement are modified in their
entirety by reference to these Exhibits.
SIGNATURES
In accordance with Section 12 of the Securities
Exchange Act of 1934, the Registrant has caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto
duly authorized.
IMMEDIATE ENTERTAINMENT
GROUP, INC.
Date: March 8, 1998 By /s/ Michael Berresheim
---------------- ------------------------
Michael Berresheim, President
and Chairman
Date: March 8, 1998 By /s/ Geraldine Blecker
---------------- ------------------------
Geraldine Blecker,
Secretary/Treasurer and Director
Date: March 8, 1998 By /s/ Wolfgang Munz
---------------- ------------------------
Wolfgang Munz, Chief Financial
Officer and Director
<PAGE>
[Jones, Jensen & Company letterhead]
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Immediate Entertainment Group, Inc. & Subsidiaries
Frankfurt, Germany
We have audited the accompanying consolidated balance sheets of Immediate
Entertainment Group, Inc. and Subsidiaries as of December 31, 1996 and the
related consolidated statements of operations, stockholders' equity and cash
flows for the years ended December 31, 1996 and 1995. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall consolidated financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Immediate Entertainment Group, Inc. and Subsidiaries as of December 31,
1996 and the consolidated results of their operations and their and cash
flows for the years ended December 31, 1996 and 1995, in conformity with
generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 11 to
the consolidated financial statements, the Company's recurring losses from
operations and working capital deficit raise substantial doubt about its
ability to continue as a going concern. Management's plans concerning these
matters are also described in Note 11. The consolidated financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
/s/Jones, Jensen & Company
Jones, Jensen & Company
October 3, 1997
<PAGE>
IMMEDIATE ENTERTAINMENT GROUP, INC.
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
<PAGE>
<TABLE>
IMMEDIATE ENTERTAINMENT GROUP, INC.
AND SUBSIDIARIES
Consolidated Balance Sheets
<CAPTION>
ASSETS
December 31,
1997 1996
(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash $ 123,016 $ 55,454
Inventory (Note 1) 203,585 -
Accounts receivable, net (Note 1) 683,973 6,533
Prepaid expenses 90,775 5,978
Total Current Assets 1,101,349 67,965
PROPERTY AND EQUIPMENT (Notes 1 and 2) 2,906,778 675,179
OTHER ASSETS
Music catalogues, net (Note 3) 3,670,076 585,164
Related party receivables (Note 4) 1,707,755 221,942
Deposits 42,583 357
Total Other Assets 5,420,414 807,463
TOTAL ASSETS $ 9,428,541 $ 1,550,607
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 1,503,142 $ 78,919
Accrued expenses 502,231 57,608
Related party payables (Note 6) - 652,960
Shareholder loans (Note 7) 94,641 -
Unearned revenues (Note 8) 114,680 -
Notes payable, current portion (Note 5) 105,249 51,234
Total Current Liabilities 2,319,943 840,721
LONG-TERM LIABILITIES
Notes payable (Note 5) 788,425 -
Total Liabilities 3,108,368 840,721
COMMITMENTS AND CONTINGENCIES (Note 9)
STOCKHOLDERS' EQUITY
Common stock, $0.001 par value;
50,000,000 shares
authorized, 8,521,722 and
2,500,000 shares issued
and outstanding, respectively 8,522 2,500
Additional paid-in capital 7,021,728 1,182,758
Currency translation adjustment 66,880 (626)
Accumulated deficit (776,957) (474,746)
Total Stockholders' Equity 6,320,173 709,886
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 9,428,541 $ 1,550,607
</TABLE>
<PAGE>
IMMEDIATE ENTERTAINMENT GROUP, INC.
AND SUBSIDIARIES
Consolidated Statements of Operations
<TABLE>
For the Years Ended
December 31,
1997 1996 1995
(Unaudited)
<S> <C> <C> <C>
NET SALES $ 3,632,885 $ 390,769 $ 191,898
COST OF SALES 686,998 115,619 79,350
GROSS MARGIN 2,945,887 275,150 112,548
EXPENSES
Selling, general and
administrative 2,604,478 299,216 44,736
Depreciation and
amortization expense 587,431 211,204 93,885
Total Expenses 3,191,909 510,420 138,621
LOSS BEFORE OTHER INCOME
(EXPENSES) (246,022) (235,270) (26,073)
OTHER INCOME (EXPENSES)
Interest income 26 25 12
Interest expense (46,348) (44,857) (24,397)
Foreign currency exchange loss (9,867) - -
Loss on disposition of assets - (5,936) -
Total Other Income
(Expenses) (56,189) (50,768) (24,385)
LOSS BEFORE INCOME TAXES (302,211) (286,038) (50,458)
PROVISION FOR INCOME TAXES (Note 1) - - -
NET LOSS $ (302,211) $ (286,038) $ (50,458)
NET LOSS PER SHARE $ (0.05) $ (0.14) $ (0.03)
WEIGHTED AVERAGE SHARES 5,510,861 2,083,333 2,000,000
</TABLE>
<TABLE>
<PAGE>
IMMEDIATE ENTERTAINMENT GROUP, INC.
AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
<CAPTION>
Additional Currency
Common Stock Paid-in Translation Accumulated
Shares Amount Capital Adjustment Deficit
<S> <C> <C> <C> <C> <C>
Balance, December
31, 1994 2,000,000 $ 2,000 $ 30,155 $ (2,863) $ (138,250)
Additional paid in
capital contri-
buted by shareholder - - 17,930 - -
Currency translation
adjustment - - - (40) -
Net loss for the
year ended
December 31, 1995 - - - - (50,458)
Balance, December
31, 1995 2,000,000 2,000 48,085 (2,903) (188,708)
Common stock issued
to acquire Dolphin
Studios GmbH 500,000 500 (500) - -
Acquisition of
Immediate Music
Corporation - - 917,509 - -
Additional paid in
capital contri-
buted by shareholder - - 217,664 - -
Currency translation
adjustment - - - 2,277 -
Net loss for the year
ended
December 31, 1996 - - - - (286,038)
Balance,
December 31, 1996 2,500,000 $ 2,500 $1,182,758 $ (626) $ (474,746)
Common stock issued
to acquire Digital
Masters catalogues
(Note 3) 828,000 828 3,639,172 - -
Common stock issued
to acquire
Immediate Music 3,500,000 3,500 (3,500) - -
Chartwear Record
Service (Note 1) - - (1,428,330) - -
Immediate Records,
LTD (Note 1) - - (134,856) - -
Common stock issued
for cash 798,722 799 3,509,751 - -
Common stock issued
for services 895,000 895 256,733 - -
Currency translation
adjustment - - - 67,506 -
Net loss for the
year ended
December 31, 1997 - - - - (302,211)
Balance, December
31, 1997 8,521,722 $ 8,522 $7,021,728 $ 66,880 $(776,957)
</TABLE>
<TABLE>
<PAGE>
IMMEDIATE ENTERTAINMENT GROUP, INC.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
<CAPTION>
For the Years Ended
December 31,
1997 1996 1995
(Unaudited)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (302,211) $ (286,038) $ (50,458)
Adjustments to reconcile net
loss to net net cash provided
by operating activities:
Common stock issued for
services rendered - 3,948 -
Depreciation and amortization 587,431 211,204 93,885
Loss on sale of assets - 5,936 -
Change in Assets and Liabilities:
(Increase) decrease in accounts
receivable 409,672 (262) 21,721
(Increase) decrease in prepaid
expenses (84,797) (5,978) -
(Increase) decrease in other
assets (30,442) 11,759 (11,759)
(Increase) decrease in deposits - (357) -
(Increase) decrease in
inventory 30,864 - -
(Increase) decrease in
related party receivables (1,311,255) (221,942) (1,377)
Increase (decrease) in
related party payables (1,070,960) - -
Increase (decrease) in
unearned revenues 114,680 - -
Increase (decrease) in
accounts payable 900,102 71,148 (20,560)
Increase (decrease) in
accrued expenses (485,880) 27,341 4
Net Cash Provided (Used) by
Operating Activities (1,242,796) (183,241) 31,456
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets (1,079,043) - -
Sale of property and equipment - 12,346 -
Net Cash Provided (Used) by
Investing Activities (1,079,043) 12,346 -
CASH FLOWS FROM FINANCING ACTIVITIES
Capital contributed by shareholder - 198,206 -
Proceeds from sale of
common stock 3,510,550 325,837 -
Proceeds from notes payable - - 87,598
Cash acquired with subsidiary 199,402 - -
Payment on notes payable (1,320,551) (300,184) (117,284)
Net Cash Provided (Used) by
Financing Activities $2,389,401 $ 223,859 $ (29,686)
NET INCREASE IN CASH $ 67,562 $ 52,964 $ 1,770
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 55,454 2,490 720
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 123,016 $ 55,454 $ 2,490
SUPPLEMENTAL CASH FLOW INFORMATION
CASH PAID FOR
Interest $ 46,348 $ 44,416 $ 37,919
Income taxes $ - $ - $ -
NON-CASH FINANCING ACTIVITIES
Property and equipment
purchased under
notes payable $ - $ 660,661 $ -
Shareholder payable
converted to equity $ - $ 22,018 $ 17,930
Shares issued to acquire
Digital Masters
Catalogue $3,640,000 $ - $ -
Common stock issued to
acquire
Immediate Music $ - $ - $ -
</TABLE>
<PAGE>
IMMEDIATE ENTERTAINMENT GROUP, INC.
AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
NOTE 1 -ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Organization
The consolidated financial statements include those of Immediate Entertainment
Group, Inc. (Formerly Diversified Research, Inc.) and its wholly-owned
subsidiaries, Dolphin Studios GmbH (Dolphin), Immediate Music Corporation
(IMC) Chartwear Record Service GmbH (CRS) and Immediate Records Ltd. (IRL).
Collectively, they are referred to herein as "the Company".
Immediate Entertainment Group, Inc. was incorporated under the laws of the
State of Nevada on May 10, 1996 as Diversified Research, Inc. Immediate
Entertainment Group, Inc. was incorporated for the purpose of creating a
vehicle to obtain capital to seek out, investigate and acquire interests in
products and businesses which may have a potential for profit.
Dolphin, a wholly-owned subsidiary, was incorporated under the laws of the
Federal Republic of Germany on July 1, 1993, Dolphin operates a recording
studio where it produces music recordings and digitally remasters existing
recordings.
On October 22, 1996, the Company completed an Agreement and Plan of
Reorganization whereby Immediate Entertainment Group, Inc. issued 2,000,000
shares of its common stock in exchange for all of the outstanding common stock
of Dolphin. The reorganization was accounted for as a recapitalization of
Dolphin because the shareholders of Dolphin control the Company after the
acquisition. Therefore, Dolphin is treated as the acquiring entity.
Accordingly, there was no adjustment to the carrying value of the assets or
liabilities of Immediate Entertainment Group, Inc. Immediate Entertainment
Group, Inc. is the surviving entity for legal purposes and Dolphin is the
surviving entity for accounting purposes.
IMC, a wholly-owned subsidiary, was incorporated under the laws of the State
of Delaware on August 21, 1996 for the purpose of creating a vehicle to raise
capital to acquire licenses to distribute musical recordings and to acquire
other entities in the record industry.
On February 28, 1997, the Company completed a Plan and Agreement of
Reorganization whereby Immediate issued 3,500,000 shares of its common stock
in exchange for all of the outstanding common stock of IMC. The
reorganization was accounted for as a pooling of interests and accordingly,
all prior financial statements have been restated to include IMC.
CRS, a wholly-owned subsidiary of IMC, was incorporated under the laws of the
Federal Republic of Germany on March 3, 1995. CRS produces and distributes
compact discs.
IRL, a wholly-owned subsidiary of IMC, was incorporated under the laws of the
United Kingdom on February 1, 1996. IRL markets and licenses music recordings
in the United Kingdom.
On January 1, 1997, IMC acquired IRL by issuing 100,000 shares of its common
stock and by assuming debts of IRL totaling approximately $44,000. The
acquisition was accounted for as a purchase and results of operations of IRL
since the date of acquisition are included in the consolidated financial
statements.
b. Accounting Method
The Company's financial statements are prepared using the accrual method of
accounting. The Company has elected a December 31 year end.
c. Cash and Cash Equivalents
Cash equivalents include short-term, highly liquid investments with maturities
of three months or less at the time of acquisition.
d. Accounts Receivable
Accounts receivable are shown net of an allowance for doubtful accounts of
$42,988 and $6,001 at December 31, 1997 and December 31, 1996 respectively.
e. Loss Per Share
The computations of loss per share of common stock are based on the weighted
average number of shares outstanding during each period presented.
f. Principles of Consolidation
The consolidated financial statements include those of Immediate Entertainment
Group, Inc. and its wholly-owned subsidiaries, Dolphin Studios GmbH, Immediate
Music Corporation, Chartwear Record Service GmbH, and Immediate Records, Ltd.
All significant intercompany transactions and accounts have been eliminated in
the consolidation.
For the Company's foreign subsidiaries, the functional currency has been
determined to be the local currency. Accordingly, assets and liabilities are
translated at year-end exchange rates, and operating statement items are
translated at average exchange rates prevailing during the year. The
resultant cumulative translation adjustments to the assets and liabilities are
recorded as a separate component of stockholders' equity. Exchange
adjustments resulting from foreign currency transactions are included in the
determination of net income (loss). Such amounts are immaterial for all
periods presented.
In accordance with Statement of Financial Accounting Standards No. 95,
"Statement of Cash Flows," cash flows from the Company's foreign subsidiary
are calculated based upon the local currencies. As a result, amounts related
to assets and liabilities reported on the statements of cash flows will not
necessarily agree with changes in the corresponding balances on the balance
sheets.
g. Property and Equipment
Property and equipment are stated at cost. Expenditures for small tools,
ordinary maintenance and repairs are charged to operations as incurred. Major
additions and improvements are capitalized. Depreciation is computed using
the straight-line and accelerated methods over estimated useful lives as of 4
to 5 years.
Depreciation expense for the years ended December 31, 1996 and 1995 was
$211,204 and $93,885, respectively.
h. Revenue Recognition
Revenue is recognized upon completion of recording projects, and delivery
of products.
i. Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimate.
j. Concentrations of Risk
Foreign Currency Translation
Since the subsidiaries of the company are German and English companies whose
financial statements must be translated into U.S. Dollars to conform with the
requirements of the Securities and Exchange Commission, major changes in the
currency exchange rate between German Marks, British Pounds and U.S. Dollars
may have a significant impact on operations of the Company. Although the
Company does not anticipate the currency exchange rate to be significantly
different over the next 12 months, no such assurances can be given.
Cash
As of December 31, 1997, the Company had demand deposits of $123,067 in German
banks which are not subject to FDIC regulations.
Sales
The Company's primary operations are located in Rodermark Germany. Sales are
concentrated in Germany, with some sales in other countries in Western
Europe. The Company's sales are dependant upon the economy in the area.
Accounts Receivable
Credit losses, if any, have been provided for in the financial statements and
are based on management's expectations. The Company's accounts receivable are
subject to potential concentrations of credit risk. The Company does not
believe that it is subject to any unusual, or significant risk in the normal
course of its business.
k. Income Taxes
No provision for income taxes has been accrued because the Company has net
operating losses from inception. The net operating loss carryforwards of
approximately $800,000 at December 31, 1997, expire in 2012. No tax benefit
has been reported in the consolidated financial statements because the Company
is uncertain if the carryforwards will expire unused. Accordingly, the
potential tax benefits are offset by a valuation account of the same amount.
l. Inventory
Inventories are stated at the lower of cost or market value using the
first-in, first-out method of valuation. Inventory is shown net of an
allowance for obsolescence of $61,028 at December 31, 1997.
NOTE 2 -PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at December 31, 1996:
December 31,
1996
Recording studio equipment $ 1,025,631
Other production equipment 81,822
Leasehold improvements 7,482
1,114,935
Less accumulated depreciation (439,756)
$ 675,179
NOTE 3 -MUSIC CATALOGUES
The Company has acquired several music catalogues through the issuance of
stock. The catalogues were valued at $585,164, net of accumulated
amortization of $0, at December 31, 1996. The catalogues will be amortized
over a 40 year estimated useful life using the straight line method beginning
in 1997. Amortization for the year ended December 31, 1996 was $0.
NOTE 4 -RELATED PARTY RECEIVABLES
The Company engages in business transactions with companies which are related
through common control. These transactions resulted in balances due to the
Company of $1,707,755 and $221,942 as of December 31, 1997 and December 31,
1996, respectively. The amounts have been classified as non-current because
it is not likely that the amounts will be repaid during the following business
cycle. The amounts are non-interest bearing and are due upon demand.
NOTE 5 - NOTES PAYABLE
Notes payable at December 31, 1996 consisted of the following:
December 31,
1996
Note payable to a bank secured by property
and equipment, interest at 8% on the outstanding
balance, principal and interest payments of $4,823
due monthly, maturing November 15, 1997. $ 51,234
Total notes payable 51,234
Less: current portion (51,234)
Long-term notes payable $ -
Maturities of long-term debt are as follows:
Year ending December 31;
1997 $ 51,234
1998 -
1999 -
2000 -
2001 and thereafter -
Total $ 51,234
NOTE 6 -RELATED PARTY PAYABLES
The Company has received loans from companies related through common control.
Balance of these loans was $652,960 as of December 31, 1996. The loans carry
interest rates of 6.5% to 7.5% and are due upon demand.
NOTE 7 - SHAREHOLDER LOANS
The Company received loans from shareholders during the year ended December
31, 1997 which were converted to common stock. (See Note 12)
NOTE 8 - UNEARNED REVENUES
The Company received $114,680 as a prepayment of royalties to be earned as
recordings are sold. Revenue will be recognized based on the reported sales
of the recordings which were sublicensed.
NOTE 9 -COMMITMENTS AND CONTINGENCIES
The Company leases office and studio space under a non-cancellable operating
lease. The lease calls for monthly payments of $3,736 and expires June 30,
1998. Future minimum lease payments are as follows:
Amount
1997 $ 44,832
1998 22,416
Total $ 67,248
Rent expense for the years ended December 31, 1996 and 1995 was $57,748 and
$28,087, respectively.
NOTE 10 -RELATED PARTY TRANSACTIONS
The Company engaged in business transactions with certain companies which are
related parties due to common ownership and control. Sales of goods and
services of $350,937 and $48,598 were made to related parties during 1996 and
1995, respectively.
NOTE 11 -GOING CONCERN
These consolidated financial statements are presented on the basis that the
Company is a going concern. Going concern contemplates the realization of
assets and the satisfaction of liabilities in the normal course of business
over a reasonable length of time. The Company has experienced recurring
operating losses and has a working capital deficit which together raise
substantial doubt about its ability to continue as a going concern.
Management is presently pursuing plans to increase sales volume, reduce
administrative costs, and improve cash flows as well as obtain additional
financing through stock offerings. The ability of the Company to achieve its
operating goals and to obtain such additional finances, however, is uncertain.
NOTE 12 -STOCK ISSUANCES
a.On August 28, 1997, the Board of Directors resolved to issue options to
buy 400,000 shares of the Company's common stock at an exercise price of $0.01
per share to officers of the Company as compensation for services to be
rendered. The Board of Directors also resolved to issue 100,000 shares of
the Company's common stock to Chartware Record Services GmbH (CRS) to be used
as collateral on a line of credit of CRS.
b.On September 19, 1997, the Board of Directors resolved to issue 500,000
shares of the Company's common stock to MMS Holding Corporation as repayment
for shares of MMS which were issued to the benefit of the Company. The Board
of Directors also resolved to establish Immediate Swiss AG, a Delaware
Corporation as a wholly-owned subsidiary.
NOTE 13 -OPERATIONS IN DIFFERENT INDUSTRIES (Unaudited)
Industry Product and/or Service
Digital Recording and Remastering Digital Recordings
Compact Disc Production and
Distribution Compact Discs
Total sales by industry includes sales to outside customers and other entities
related through common control. There were no intersegment sales during the
year ended December 31, 1997.
Certain financial information concerning the Company's operations in different
industries is as follows:
<TABLE> Industry Segments
Digital Compact Disk Adjustments
Recording and Production and and
Remastering Distribution Eliminations Total
<S> <C> <C> <C> <C>
Year ended December 31, 1997:
Net sales to
outside customers $ 387,963 $ 3,244,922 $ - $ 3,632,885
Net sales
(or transfers)
between segments - - - -
Total net sales$ 387,963 $ 3,244,922 $ - $ 3,632,885
Operating income
(loss) applicable
to industry
segments $ 77,258 $ 267,565 $ - $ 344,823
General corporate
expenses not
allocated to
industry segments 590,845
Operating income (loss) $ (246,022)
Financial expense (income) $ 56,189
December 31, 1997
Assets applicable to
industry segments $ 939,673 $5,791,890 $ (13,163) $ 6,718,400
General corporate assets 2,710,141
Total assets $ 9,428,541
Depreciation and
amortization $ 164,432 $ 405,723 $ 17,276 $ 587,431
Property and
equipment
acquisitions $ 303,472 $ 775,571 $ 1,079,043
</TABLE>
Segment information is not disclosed for the year ended December 31, 1996 as
there was only one industry segment prior to January 1, 1997.
NOTE 14 -PROFORMA COMBINED STATEMENTS OF OPERATIONS
The historical information contained herein has been combined on a proforma
basis. The purchase of CRS was effective January 1, 1997 and the purchase of
IRL was effective January 1, 1997. The purchases have been presented as
though they were effective January 1, 1996 and 1995. All significant
accounting policies for CRS and IRL are the same as the Company's defined in
Note 1.
<TABLE>
For the Year ended December 31, 1996
Proforma Proforma
IEG CRS IRL Adjustments Combined
(Unaudited)(Unaudited)(Unaudited)(Unaudited)
<S> <C> <C> <C> <C> <C>
NET SALES $ 390,769 $2,136,011 $ - $ - $ 2,526,780
COST OF SALES 115,619 371,138 - - 486,757
GROSS MARGIN 275,150 1,764,873 - - 2,040,023
EXPENSES 510,420 2,529,991 134,856 - 3,175,267
LOSS FROM OPERATIONS (235,270) (765,118) (134,856) - (1,135,244)
OTHER INCOME
(EXPENSE) (50,768) (32,297) - - (83,065)
NET LOSS $ (286,038) $ (797,415)$(134,856) $ - $(1,218,309)
NET LOSS PER
SHARE $ (0.20)
</TABLE>
<TABLE>
For the Year ended December 31, 1995
Proforma Proforma
IEG CRS IRL Adjustments Combined
(Unaudited)(Unaudited) (Unaudited)(Unaudited)
<S> <C> <C> <C> <C> <C>
NET SALES $ 191,898 $ 649,415 $ - $ - $ 841,313
COST OF SALES 79,350 409,255 - - 488,605
GROSS MARGIN 112,548 240,160 - - 352,708
EXPENSES 138,621 881,777 - - 1,020,398
LOSS FROM OPERATIONS (26,073) (641,617) - - (667,690)
OTHER INCOME
(EXPENSE) (24,385) (6,073) - - (30,458)
NET LOSS $ (50,458)$(647,690) $ - $ - $ (698,148)
NET LOSS PER
SHARE $ (0.12)
</TABLE>
Plan and Agreement of Reorganization
By Exchange By DIVERSIFIED RESEARCH, INC.
A Nevada Corporation
Of its voting stock for Stock in and of
DOLPHIN STUDIOS, GmbH, A German Corporation
This Agreement is made and entered into by and between Diversified
Research, Inc., a Nevada corporation (hereinafter sometimes called
"Diversified"), Dolphin Studios, GmbH, a German corporation, (hereinafter
sometimes called "Dolphin"), and MBO GmbH, a German corporation (hereinafter
"Stockholder"), this 22nd day of October, 1996.
Article I
Plan Adopted
Section 1.01: Plan of Reorganization.
A plan of reorganization of Diversified and Dolphin is hereby adopted as
follows:
a. Stockholder will transfer to Diversified all of its right, title, and
interest in and to shares representing paid up capital of DM 350,000
comprising one hundred percent (100%) of the issued and outstanding shares
thereof, pursuant to the terms and conditions hereinafter set forth.
b. In exchange for the shares transferred by Dolphin pursuant to this
agreement, Diversified will cause to be issued and delivered to Stockholder
or its designee Two Million (2,000,000) shares of Diversified's On Mil
($0.001) par value common stock constituting Eighty percent (80.00%) of the
total shares of Diversified which will be outstanding immediately after
closing. The said common stock of Diversified shall, when issued, be fully
paid and non-assessable.
Closing Date
Section 1.02:
Subject to the conditions set forth herein, the plan of reorganization
shall be closed and consummated on or before October 10, 1996, at such
place as may be fixed by mutual consent of the parties. The date of such
consummation is the "Closing Date" or "Closing" as referred to herein.
Article II
Covenants, Representations, and Warranties of Diversified Legal
Status
Section 2.01:
Diversified is a corporation duly organized, validly existing and in
good standing under the laws of Nevada with lawful power to conduct all
businesses in which it is engaged in all jurisdictions in which it is
found.
Section 2.02:
Diversified has an authorized capitalization of Fifty Million
(50,000,000) common shares of On Mil ($0.001) par value. There are
presently Five Hundred Thousand (500,000) shares thereof outstanding.
Diversified warrants that there will immediately after the closing of
this agreement, be not more than Two Million Five Hundred Thousand
(2,500,000) common shares outstanding. There are no further contracts
or other documents requiring the issuance of further shares of
Diversified. There are no outstanding options, warrants, or securities
convertible into common stock of Diversified.
Financial Condition
Section 2.03:
The financial statement of Diversified which is attached hereto as
Exhibit 1, fully and accurately represents the financial condition of
Diversified at the date indicated.
Performance Not Violative of Any Instrument
Section 2.04:
The performance of Diversified of its obligations under this agreement
will not result in any breach of the terms of the conditions of, or
constitute a default under, and agreement or instrument to which
Diversified is a party, or by the terms of which Diversified is bound.
Material Contracts
Section 2.05:
Diversified is not, and at the closing date will not be a party to, or
bound by any material, oral, or written contract for the employment of
any officer or employee or commitment for any special bonus,
compensation or severance pay, or any pension, profit-sharing,
retirement, or stock purchase plan with its employees or others; or any
contract with any labor union.
Litigation
Section 2.06:
There are not now, and at the closing there will not be any material
claims, actions, proceedings, or investigations pending or threatened
against Diversified in any court or regulatory agency, nor any orders,
writs, or injunctions issued out of any such court or agency affecting
Diversified.
Taxes
Section 2.07:
Diversified does not owe any state, federal, or local taxes and has
filed all tax returns required to be filled by it excepting those
related to accrued taxes for the current year, filings on which are not
yet due.
Securities to be Issued
Section 2.08:
The shares of Diversified to be issued pursuant to this agreement are
of On Mil ($0.001) par value and have equal voting rights as all other
shares of Diversified outstanding. Dolphin and Stockholder hereby
acknowledge their awareness that said shares will not, when issued, have
been registered under either the Securities Act of 1933 or under the
Uniform Securities Act of any state; but are being issued in reliance
on the exemption from federal regulation provided by Section 4(2) of the
Securities Act of 1933 for transactions not involving any public
offering and from state registration by applicable isolated transaction
exemptions. In connection therewith, Stockholder acknowledges, warrants,
and represents as follows:
a. It has received and reviewed, as to Diversified, certain information
prepared by Diversified pursuant to Rule l5c2-11 of the Exchange Act,
including certified financial statements, prior to the completion of
this transaction.
b. Stockholder is a person or business entity managed by persons of
sufficient business experience to evaluate this transaction. Stockholder
is financially able to bear the risk of its investment in Diversifieds
common shares.
c. Stockholder is purchasing Diversified's shares for its own account,
for purposes of investment and not with a view to distribution, except
as hereinafter noted.
d. Stockholder consents to the placement on each certificate
representing its shares of Diversified of a standard form investment
legend stating that the shares are not registered under the Securities
Act of 1993 and cannot be sold, hypothecated, or transferred without
registration or under an appropriate exemption from registration.
Stockholder acknowledges its familiarity with Rule 144 under the
Securities Act of 1933 which generally governs resale of restricted
securities, and further concedes that Diversified has not represented,
directly or indirectly, that the exemption provided by that rule will
ever be available to Stockholder or its assignees.
e. Stockholder hereby consents to the placement of"stop-transfer"
instructions as to all shares issued to it hereunder.
Article III
Access to Business Records of Diversified Pending the Closing
Section 3.01:
Diversified will afford Dolphin and Stockholder or their accredited
representatives, pending closing, full access during normal business
hours to all properties, books, accounts, contracts, commitments, and
records of every kind of Diversified.
Section 3.02:
In addition, Diversified will permit Dolphin and Stockholder to make
extracts or copies of all such documents and to supply such additional
information or material as may be reasonably necessary to fully inform
Dolphin and Stockholder of the condition of Diversified. All such
information shall be held in confidence.
Article IV
Covenants, Representations, and Warranties of Dolphin
Legal Status
Section 4.01:
Dolphin is a corporation duly organized existing, and in good standing
under the laws of Germany, with legal authority to enter into this
transaction.
Corporate Approval
Section 4.02:
Dolphin warrants that it has taken all corporate actions and duly
adopted all resolutions required by its charters and by-laws to permit
its officers to enter into this transaction as its authorized agents.
Material Contracts
Section 4.03:
Dolphin is not, and at the closing date will not be a party to, or bound
by any material, oral, or written contract for the employment of any
officer or employee or commitment for any special bonus, compensation
or severance pay; or any pension, profit-sharing, retirement, or stock
purchase plan with its employees or others; or any contract with any
labor union.
Litigation
Section 4.05:
There are not now, and at the closing there will not be any material
claims, actions, proceedings, or investigations pending or threatened
against Dolphin in any court or regulatory agency which would bar or
infringe the conveyances contemplated hereby or the value of the assets
conveyed.
Taxes
Section 4.06:
Dolphin does not owe any state, federal, or local taxes, and has filed
all tax returns required to be filed by it.
Article V
Conduct of Business of Dolphin Pending the Closing
Section 5.01:
Dolphin shall be entitled to conduct their regular and ordinary business
pending the closing.
Miscellaneous
Section 6.01: Notices.
Any notice or other communications required hereby shall be deemed
delivered when deposited into the custody of Federal Express, DHL or
Airbourne Freight, delivery prepaid, addressed to the respective
corporate and individual parties hereto as set forth on Exhibit 2
hereto.
Section 6.02: Entire Agreement Counterparts.
This instrument and the exhibits and schedules hereto contain the entire
agreement of the parties. It may be executed in any number of
counterparts, each of which shall be deemed original, but such
counterparts together constitute only one and the same instrument.
Section 6.03: Controlling Law.
The validity, interpretation of terms and performance of this
agreement shall be governed by and constructed under the laws of
Nevada, U.S.A.
WHEREFORE, we have set our hands hereto this 22nd day of October,
1996.
DIVERSIFIED RESEARCH, INC.
By:/s/
DOLPHIN STUDIOS, GmbH
By:/s/
STOCKHOLDER
/s/
Plan and Agreement of Reorganization
By Exchange By DIVERSIFIED RESEARCH, INC.
A Nevada Corporation
Of its voting stock for Stock in and of
IMMEDIATE MUSIC CORP., a Delaware Corporation
Diversified Research, Inc., a Nevada corporation (hereinafter
sometimes called "Diversified") and Immediate Music Corp., a Delaware
corporation, (hereinafter sometimes called "Immediate") hereby agree as
follows:
Article I
Plan Adopted
Section 1.01: Plan of Reorganization.
A plan of reorganization of Diversified and Immediate is hereby adopted
as follows:
a. Immediate will transfer to Diversified all of their right, title, and
interest in and to comprising one hundred percent (100%) of the issued
and outstanding shares thereof, pursuant to the terms and conditions
hereinafter set forth.
b. In exchange for the shares transferred by Immediate pursuant to this
agreement, Diversified will cause to be issued and delivered to
Immediate, three million five hundred thousand (3,500,000) shares of
Diversified's One Mil ($0.001) par value common stock, constituting
56.45 percent (56.45%) of the total shares of Diversified which will be
outstanding immediately after closing.
Additionally, the Diversified will file the appropriate documents with
the Nevada Secretary of State to change the name of Diversified to
Immediate Music Corp. The said common stock of Diversified shall, when
issued, be fully paid and nonassessable.
Closing Date
Section 1.02:
Subject to the conditions set forth herein, the plan of reorganization
shall be closed and consummated on or before February 28, 1997, at such
place as may be fixed by mutual consent of the parties. The date of such
consummation is the "Closing Date" or "Closing" as referred to herein.
Article II
Covenants, Representations, and Warranties of Diversified
Legal Status
Section 2.01:
Diversified is a corporation duly organized, validly existing and in
good standing under the laws of Nevada with lawful power to conduct all
businesses in which it is engaged in all jurisdictions in which it is
found.
Section 2.02:
Diversified has an authorized capitalization of Fifty Million
(50,000,000) common shares of One Mil ($0.001) par value. There are
presently Two Million (2,700,000) shares thereof outstanding.
Diversified warrants that there will immediately after the closing of
this agreement, be not more than six million two hundred thousand
(6,200,000) common shares outstanding. There are no further contracts
or other documents requiring the issuance of further shares of
Diversified. There are no outstanding options, warrants, or securities
convertible into common stock of Diversified.
Financial Condition
Section 2.03:
The financial statement of Diversified which is attached hereto as
Exhibit 1, fully and accurately represents the financial condition of
Diversified at the date indicated.
Violative of Any Instrument
Section 2.04:
The performance of Diversified of its obligations under this agreement
will not result in any breach of the terms of the conditions of, or
constitute a default under, and agreement or instrument to which
Diversified is a party, or by the terms of which Diversified is bound.
Material Contracts
Section 2.05:
Diversified is not, and at the closing date will not be a party to, or
bound by any material, oral, or written contract for the employment of
any officer or employee or commitment for any special bonus,
compensation or severance pay; or any pension, profit-sharing,
retirement, or stock purchase plan with its employees or others; or any
contract with any labor union.
Litigation
Section 2.06:
There are not now, and at the closing there will not be any material
claims, actions, proceedings, or investigations pending or threatened
against Diversified in any court or regulatory agency, nor any orders,
writs, or injunctions issued out of any such court or agency affecting
Diversified.
Taxes
Section 2.07:
Diversified does not owe any state, federal, or local taxes and has
filed all tax returns required to be filled by it excepting those
related to accrued taxes for the current year, filings on which are not
yet due.
Securities to be Issued
Section 2.08:
The shares of Diversified to be issued pursuant to this agreement are
of One Mil ($0.001 ) par value and have equal voting rights as all other
shares of Diversified outstanding. Immediate hereby acknowledges its
awareness that said shares will not, when issued, have been registered
under either the Securities Act of 1933 or under the Uniform Securities
Act of any state; but are being issued in reliance on the exemption from
federal regulation provided by Section 4(2) of the Securities Act of
1933 for transactions not involving any public offering and from state
registration by applicable isolated transaction exemptions. In
connection therewith, Immediate acknowledges, warrants, and represents
as follows:
It has received and reviewed, as to Diversified, certain information
prepared by Diversified pursuant to Rule 15c2-11 of the Exchange Act,
including certified financial statements, prior to the completion of
this transaction.
Immediate is a business entity managed by persons of sufficient business
experience to evaluate this transaction. Immediate is financially able
to bear the risk of its investment in Diversified's common shares.
Immediate is purchasing Diversified's shares for its own account, for
purposes of investment and not with a view to distribution, except as
hereinafter noted.
Immediate consents to the placement one each certificate representing
their shares of Diversified of a standard form investment legend stating
that the shares are not registered under the Securities Act of 1993 and
cannot be sold, hypothecated, or transferred without registration or
under an appropriate exemption from registration. Immediate acknowledges
its familiarity with Rules 144 and 237 of the Securities Act of 1934
which generally govern resale of restricted securities, and further
concedes that Diversified has not represented, directly or indirectly,
that the exemption provided by either rule will ever be available to
Immediate or its assignees. Immediate intends to transfer the shares
issued to it hereunder pro rata, to its stockholders; and intends to
rely on applicable "private offering" and/or isolated transactions in
so doing one million five hundred thousand shares (1,500,000) will be
issued and outstanding prior to the reorganization. In delivering such
shares to its stockholders, Immediate agrees to take all reasonable
measures to insure that those stockholders are taking their shares for
investment and not with a view to distribution, that they understand the
rules limiting secondary transfer of the shares, and that the
certificates bear appropriate restrictive legends.
Immediate hereby consents to the placement of "stop-transfer"
instructions as to all shares issued to it hereunder and agrees to
procure consent to such instructions from its transferees.
Article III
Access to Business Records of Diversified Pending the Closing
Section 3.01:
Diversified will afford Immediate or its accredited representatives,
pending closing, full access during normal business hours to all
properties, books, accounts, contracts, commitments, and records of
every kind of Diversified.
Section 3.02:
In addition, Diversified will permit Immediate to make extracts or
copies of all such documents and to supply such additional
information or material as may be reasonably necessary to fully
inform Immediate of the condition of Diversified. All such
information shall be held in confidence.
Article IV
Covenants, Representations, and Warranties of Immediate
Legal Status
Section 4.01:
Immediate is a corporation duly organized existing, and in good
standing under the governing laws of the state of Delaware with
legal authority to enter into this transaction.
Corporate Approval
Section 4.02:
Immediate warrants that it has taken all corporate actions and duly
adopted all resolutions required by its charters and by-laws to permit
its officers to enter into this transaction as its authorized agents.
Material Contracts
Section 4.03:
Immediate is not, and at the closing date will not be a party to, or
bound by any material, oral, or written contract for the employment of
any officer or employee or commitment for any special bonus,
compensation or severance pay; or any pension, profit-sharing,
retirement, or stock purchase plan with its employees or others; or any
contract with any labor union.
Litigation
Section 4.05:
There are not now, and at the closing there will not be any material
claims, actions, proceedings, or investigations pending or threatened
against Immediate in any court or regulatory agency which would bar or
infringe the conveyances contemplated hereby or the value of the assets
conveyed.
Taxes
Section 4.06:
Immediate does not owe any state, federal, or local taxes, and has
filed all tax returns required to be filed by it.
Article V
Conduct of Business of Immediate Pending the Closing
Section 5.01:
Immediate shall be entitled to conduct their regular and ordinary
business pending the closing.
Miscellaneous
Section 6.01: Notices.
Any notice or other communications required hereby shall be deemed
delivered when deposited in the United States mails for transmittal
by certified or registered mail, postage prepaid, return receipt
requested, addressed to the respective corporate and individual
parties hereto as set forth on Exhibit 2 hereto.
Section 6.02: Entire Agreement Counterparts.
This instrument and the exhibits and schedules hereto contain the
entire agreement of the parties. It may be executed in any number of
counterparts, each of which shall be deemed original, but such
counterparts together constitute only one and the same instrument.
Section 6.03: Controlling Law.
The validity, interpretation of terms and performance of this
agreement shall be governed by and constructed under the laws of
Nevada. WHEREFORE, we have set our hands hereto this 28th day of
February, 1997.
Attest DIVERSIFIED RESEARCH, INC.
Geraldine Blecker, Secretary By: Evert Wilbrink, President
Attest
IMMEDIATE MUSIC CORP.
By:
, Director
President
Witness
, Vice President
ARTICLES OF INCORPORATION
OF
DIVERSIFIED RESEARCH, INC.
THE UNDERSIGNED person, acting as sole incorporator
under applicable provisions of the Nevada Business Corporation Act,
does hereby adopt the following Articles of Incorporation for said
corporation.
ARTICLE I
NAME
The name of the corporation is DIVERSIFIED RESEARCH, INC.
ARTICLE II
DURATION
The duration of the corporation is perpetual.
ARTICLE III
PURPOSES
The specific purpose for which the corporation is
organized is to evaluate the business operations of various record
and publishing companies located throughout Europe.
(a) To engage in any and all activities as may be
reasonably related to the foregoing and following purposes.
(b) To purchase, own and develop real and personal
property, to enter into leases, contracts and agreements, to open
bank accounts and to conduct financial transactions.
(c) To engage in any all other lawful purposes, activities and
pursuits, which are substantially similar to the foregoing, or which
would contribute to accomplishment of the expressed purposes of the
corporation.
(d) To change its primary business purpose from time to time as
may to the Board of Directors seem appropriate.
(e) To engage in any other lawful business authorized by the laws
of Nevada or any other state or other jurisdiction in which the
corporation may be authorized to do business.
ARTICLE IV
CAPITAL
The corporation shall have authority to issue Fifty Million
(50,000,000) common shares, one mil (.001) par value. There shall be
only one class of authorized shares, to wit: common voting stock. The
common stock shall have unlimited voting rights provided in the Nevada
Business Corporation Act.
None of the shares of the corporation shall carry with them the
pre-emptive right to acquire additional or other shares of the
corporation. There shall be no cumulative voting of shares.
ARTICLE V
INDEMNIFICATION OF DIRECTORS
No shareholders or directors of the corporation shall be
individually liable for the debts of the corporation or for monetary
damages arising from the conduct of the corporation.
ARTICLE VI
BY-LAWS
Provisions for the regulation of the internal affairs of the
corporation not provided for in these Articles of Incorporation
shall be set forth in the By-Laws.
ARTICLE VII
REGISTERED OFFICE AND AGENT
The address of the corporation's initial registered office
shall be 3230 East Flamingo Road, Suite 156, Las Vegas, NV 89121.
The corporation's initial registered agent at such address shall be
Gateway Enterprises, Inc.
I hereby acknowledge and accept appointment as corporation
registered agent:
Gateway Enterprises, Inc.
/s/Sherrill N. Hughes
ARTICLE VIII
INCORPORATORS
The identity and address of the incorporators are:
Roger Lund (President)
1935 East Vine Street
Suite 400
Salt Lake City, UT 84121
Toni Carter (Secretary)
1392 South Wasatch Drive
Salt Lake City, Utah 84108
The initial Board of Directors shall be comprised of Two (2)
persons. The aforesaid incorporators shall be the initial Directors
of the corporation and shall act as such until the corporation shall
have conducted its organizational meeting or until one or more
successors shall have been elected and ~accepted their election as
directors of the corporation.
/s/Roger Lund
/s/Toni Carter
IN WITNESS WHEREOF, I, Roger Lund, have executed these
Articles of Incorporation in duplicate this 29th day of April, 1996,
and say:
That I am the incorporator herein; that I have read the above
and foregoing Articles of Incorporation; that I know the contents
thereof and that the same is true to the best of my knowledge and
belief, excepting as to matters herein alleged on information and
belief, and as to those matters I believe them to be true.
/s/Roger Lund
State of Utah )
ss ):
County of Salt Lake )
Subscribed and sworn before me this 29th day of April, 1996 by
Roger Lund.
/s/Lane Clissold
Notary Public
IN WITNESS WHEREOF, I, Toni Carter, have executed these Articles of
Incorporation in duplicate this 29th day of April, 1996, and say:
That I am the incorporator herein; that I have read the above and
foregoing Articles of incorporation; that I know the contents thereof and
that
the same is true to the best of my knowledge and belief, excepting
as to matters herein alleged on information and belief, and as to
those matters I believe them to be true.
State of Utah )
ss ):
County of Salt Lake )
Subscribed and sworn before me this 29th day of April 1996 by
Toni Carter.
Lane Clissold
Notary Public
AMENDMENT TO THE
ARTICLES OF INCORPORATION OF
DIVERSIFIED RESEARCH; INC:
The undersigned, being the duly constituted officers of Diversified
Research, Inc. acting pursuant to applicable of the Nevada Revised
Business Corporation Act, do hereby adopt the following Articles of
Amendment to the Articles of Incorporation of Diversified Research,
Inc.
1.) Article I of the original Articles of Incorporation is
hereby repealed in its entirety and the following Article I is hereby
substituted therefore as if it had been set forth in the original
Articles of Incorporation.
ARTICLE I
NAME
The name of the corporation is IMMEDIATE ENTERTAINMENT GROUP, INC.
2.) The foregoing amendment was duly adopted on March 3, 1997
by the vote of the majority of the outstanding shares of the
corporation.
3.) On the date the amendment was adopted, there were
(6.2000.000) common shares of the corporation outstanding each of which was
entitled to vote one vote on the amendment. Of these, (5.700.000),
which represents a majority of the issued and outstanding voted in
favor of the Amendment. No shares were voted against.
4.) The foregoing vote was sufficient under the Charter and
Bylaws of the corporation to adopt the aforesaid Amendment to the
Articles of Incorporation of the corporation.
IN WITNESS WHEREOF, we, Evert Wilbrink and Geraldine Blecker, have
executed the Amended Articles of Incorporation in duplicate this day
of March, 1997 and say:
That we are, respectively, the President and Secretary/Treasurer of
the corporation; that we have read the above and foregoing Amendment
to the Articles of Incorporation thereof; know the contents thereof
and that the same is true to the best of my knowledge and belief,
excepting as to matters herein alleged on information and belief,
and as to those matters I believe them to be true.
/s/Evert Wilbrink (President)
/s/Geraldine Blecker(Sec./Treas.)
Subscribed and sworn before me this _th day of March, 1997 by Evert
Wilbrink and Geraldine Blecker.
BY-LAWS
of
DIVERSIFIED RESEARCH, INC.
ARTICLE I - OFFICES
Section 1. The principal office of the corporation in the State
of Utah shall be at 1935 East Vine Street, Suite 400, Salt Lake City,
Utah 84121. The officer in charge thereof is Roger Lund.
Section 2. The corporation may have such other offices within or
without the state as the board of directors may from time to time
designate.
ARTICLE II - STOCKHOLDERS
Section 1. Annual Meeting. The annual meeting of the stockholders
shall be held at the corporate office on the third Friday of April of
each year beginning in 1996, at the hour of 10:00 a.m., or at such
other time as may be fixed by the board of directors, for the purpose
of electing directors and for the transaction of such other business
as may come before the meeting. If the election of directors shall not
be held on the day designated herein for the annual meeting or at any
adjournment thereof, the board of directors shall cause the election
to be held at a special meeting of the stockholders as soon thereafter
as may be convenient.
Section 2. Special Meetings. Special meetings of the
stockholders, for any purpose or purposes, unless otherwise prescribed
by statute, may be called by the president or by any director, and
shall be called by the president at the written request of fifteen
percent (15%) of all outstanding shares of the corporation entitled to
vote at the meeting. Unless requested by stockholders entitled to cast
a majority or all the votes entitled to be cast at the meeting, a
special meeting need not be called to consider any matter which is
substantially the same as a matter voted on at any meeting of
stockholders held during the preceding twelve months.
Section 3. Place of Meeting. The board of directors may designate
any place, either in
Section 4. Notice of Meeting. Written notice stating the place, day
and hour of the meeting and, in case of a special meeting, the purpose or
purposes for which the meeting is called, shall, unless otherwise prescribed
by statute, be delivered not less than ten nor more than fifty days before the
meeting, either personally or by mail, to each stockholder of record entitled
to vote at such meeting. If mailed, such notice shall be deemed to be
delivered ten days after it has been deposited in the United States Mail,
addressed to the stockholder at his address as it appears on the share
registry of the corporation, with postage thereon prepaid.
Section 5. Closing of Transfer Books or Fixing of Record Date. For any
purpose requiring identification of shareholders, the record date shall be
established by the board of directors, and shall be not more than twenty days
from the date on which any such purpose is to be accomplished. Absent a
resolution establishing any such date, the record date shall be deemed to be
the date on which any such action is accomplished.
Section 6. Voting List. The corporation shall maintain a stock ledger
which contains:
(1) The name and address of each stockholder.
(2) The number of shares of stock of each class which the
stockholder holds.
The stock ledger shall be in written form and available for visual
inspection. The original or a duplicate of the stock ledger shall be kept at
the principal office of the corporation.
Section 7. Quorum. A majority of the outstanding shares of the
corporation entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of stockholders. If less than a majority of
the outstanding shares are represented at a meeting, a majority of the shares
so represented may adjourn the meeting from time to time without further
notice. At such adjourned meeting at which a quorum shall be presented or
represented, any business may be transacted which might have been transacted
at the meeting as originally noticed. The stockholders present at a duly
organized meeting may continue to transact business until adjournment,
notwithstanding the withdrawal of enough stockholders to reduce the number of
stockholders present to less than a quorum.
Section 8. Proxies. At all meetings of stockholders, a stockholder may
vote in person or by proxy executed in writing by the stockholder or by his
duly authorized attorney in fact. Such proxy shall be filed with the
secretary of the corporation before or at the time of the meeting. A proxy
shall be void one year after it is executed unless it shall, prior to the
expiration of one year, have been renewed in writing. All proxies shall be
revocable.
Section 9. Voting of Shares. Each outstanding share entitled to vote
shall be entitled to one vote upon each matter submitted to a vote at a
meeting of stockholders.
Section 10. Informal Action by Stockholders. Any action required or
permitted to be taken at a meeting of the stockholders, except matters as to
which dissenting stockholders may hold a statutory right of appraisal, may be
taken without a meeting if a consent in writing, setting forth the action so
take, shall be signed by a majority of the stockholders entitled to vote with
respect to the subject matter thereof. Notice of any such action shall be
provided to stockholders in the manner set forth in Section 4 of these
By-laws, within ten days of the effective date of the action.
Section 11. Cumulative Voting. There shall be no cumulative voting of
shares.
Section 12. Removal of Directors. At a meeting called expressly for
that purpose, directors may be removed with or without cause, by a vote of the
holders of a majority of the shares entitled to vote at an election of
directors.
ARTICLE III - DIRECTORS
Section 1. The business and affairs of this corporation shall be
managed by its Board of Directors, which may be no less than ~ne nor more than
three in number. The directors need not be residents of this state or
stockholder in the corporation. They shall be elected by the stockholders at
the annual meeting of stockholder of the corporation. Each director shall be
elected for the term of one year, and until his successor shall have been
elected and accepted his election to the Board in writing.
Section 2. The number of directors may be increased or decreased from
time to time by the vote of a majority of the outstanding shares of the
corporation.
Section 3. Regular meetings. A regular meeting of the board of
directors shall be held without any notice other than this by-law immediately
after, and at the same place as, the annual meeting of stockholders. The board
of directors may provide, by resolution, the time and place for the holding of
additional regular meetings without notice other than such resolution.
Section 4. Special Meetings. Special meetings of the board of directors
may be called by or at the request of the president or any director. The
person or persons calling any such meeting may fix the time and place of the
meeting.
Section 5. Notice. Notice of any special meeting shall be given at
least five days previously thereto by written notice delivered personally,
mailed or delivered by fax to each director at his business address. Notices
shall be deemed to have been delivered when transmitted personally or by fax,
and two days after mailed. Any director may waive notice of any meeting so
long as such waiver is in writing. The business to be conducted at any special
meeting need not be specified in the notice.
Section 6. Quorum. A majority of the duly elected board of directors
shall constitute a quorum of the board of directors for the transaction of
business at any meeting of the board of directors.
Section 7. Manner of Acting. The act of the majority of the directors
present at a meeting at which a quorum is present sl~all be the act of the
board of directors.
Section 8. Informal Action by Directors. Action consented to by a
majority of the board of directors without a meeting is nevertheless board
action so long as (a) a written consent to the action is signed by all the
directors of the corporation and (b) a certificate or resolution detailing
the action taken is filed with the minutes of the corporation. Any one or
more directors may participate in any meeting of the board of directors by
means of conference telephone or other similar communications device which
permits all directors to hear the comments made by the others at the meeting.
Section 9. Executive and other Committees. The board of directors may,
from time to time, as the business of the corporation may demand, delegate
its authority to committees of the board of directors under such terms and
conditions as it may deem appropriate. The appointment of any such committee,
the delegation of authority to it or action by it under that authority does
not constitute of itself, compliance by any director not a member of the
committee, with the standard provided by statute for the performance of
duties of directors.
Section 10. Compensation. By resolution of the board of directors, each
director may be paid his expenses, if any, of attendance at each meeting of
the board of directors, and may be paid a stated salary as director or a
fixed per diem for attendance at each such meeting of the board of directors,
or both. No such payments shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor.
Section 11. Presumption of Assent. A director of the corporation who is
present at a meeting of the board of directors at which action on any
corporate action is taken shall be presumed to have assented to the action
taken unless he shall announce his dissent at the meeting and his dissent is
entered in the minutes and he shall forward such dissent by registered mail
to the secretary of the corporation immediately after the adjournment of the
meeting.
Section 12. Certificates of Resolution. At any such time as there shall
be only one duly elected and qualified director, actions of the corporation
may be manifest by the execution by such director of a Certificate of
Resolution specifying the corporate action taken and the effective date of
such action.
ARTICLE IV - OFFICERS
Section 1. Number. Officers of the corporation shall be a president and
a secretary, each of whom shall be elected by the board of directors. Such
other officers and assistant officers as may be deemed necessary may be
elected or appointed by the board of directors. Any two or more offices may
be held by the same person, except that no officer may act in more than one
capacity where action of two or more officers is required by law.
Section 2. Election and Term of Office. The officers of the corporation
shall be elected annually by the board of directors after each annual meeting
of the stockholders. Each officer shall hold office for a period of one year
and until his successor shall have been duly elected and shall have accepted
his election as an officer of the corporation in writing.
Section 3. Removal. Any officer or agent may be removed by the board of
directors whenever in its judgment, the best interests of the corporation
will be served thereby. Election to an office in the corporation shall not
create any contractual right of any type or sort in the person elected.
Section 4. Vacancies. A vacancy in any office may be filled by the
board of directors for the unexpired portion of the term.
Section 5. President. The president shall be a director of the
corporation and shall be the principal executive officer of the corporation,
and subject to the control of the board of directors, shall in general
supervise and control all of the business and affairs of the corporation. The
president shall have authority to institute or defend legal proceedings when
the directors are deadlocked. He shall, when present, pres~de at all meetings
of the stockholders and of the board of directors. He may sign, with the
secretary or any other proper officer of the corporation thereunto authorized
by the board of directors, certificates for shares of the corporation, any
deeds, mortgages, bonds, contracts, or other instruments which the board of
directors has authorized to be executed, except in cases where the signing
and execution thereof shall be expressly delegated by the board of directors
or by these by-laws to some other officer or agent of the corporation, or
shall be required by law to be otherwise signed or executed; and in general
shall perform all duties incident to the office of president and such other
duties as may be prescribed by the board of directors from time to time.
Section 6. Secretary. The secretary shall: (a) keep the minutes of the
proceedings of the stockholders and of the board of directors in one or more
books provided for that purpose; (b) see that all notices are duly given in
accordance with the provisions of these by-laws or as required by law; (c) be
custodian of the corporate records and of the seal of the corporation, if
any; (d) keep a register of the post office address of each stockholder which
shall be furnished to the secretary by such stockholder; (e) sign, with the
president, certificates for shares of the corporation, the issuance of which
shall have been authorized by resolution of the board of directors; (f) have
general charge of the stock registry of the corporation; (g) have charge and
custody of and be responsible for all funds and securities of the
corporation; (h) Receive and give receipts for moneys due and payable to the
corporation and deposit all such moneys in the name of the corporation in
such bank accounts as may be established for that purposed; and (i) in
general, perform all duties incident to the office of secretary, as well as
such duties as generally devolve upon treasurers of corporations.
Section 7. Salaries. The salaries of the officers shall be fixed from
time to time by the board of directors and no officer shall be prevented from
receiving such salary by reason of the fact that he is also a director of the
corporation.
ARTICLE V - INDEMNIFICATION OF DIRECTORS
AND OFFICERS OF THE CORPORATION.
Section 1. The corporation shall indemnify any person who was or is a
party or threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of the corporation)
by reason of the fact that he is or was a director or officer of the
corporation, against expenses (including attorney's fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding, if he acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, and with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent shall not,
without more, create a presumption that the person did not act in good faith
and in a manner which he reasonably believed to be in or not opposed to the
best interest of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
ARTICLE VI - CONTRACTS, LOANS, CHECKS AND DEPOSITS
Section 1. Contracts. The board of directors may authorize any officer
or officers or agents to enter into any contract or execute and deliver any
instrument, including loans, mortgages, checks, drafts, deposits, deeds and
documents evidencing other transactions, in the name of the corporation. Such
authority may be general or confined to specific instances.
ARTICLE VII - CERTIFICATES FOR SHARES AND THEIR TRANSFER
Section 1. Certificates for Shares. Certificates representing shares of
the corporation shall be in the form approved in the organizational
resolutions of the corporation. They shall be signed by the president and
secretary of the corporation. Each certificate shall be consecutively
numbered or otherwise identified. The name and address of the person to whom
the shares represented thereby are issued, with the number of shares and date
of issue, shall be entered on each certificate and on the stock registry of
the corporation. All certificates surrendered to the corporation for transfer
shall be canceled and no new certificate shall be issued until the former
certificate for a like number of shares shall have been surrendered and
canceled, except in the case of a lost, destroyed or mutilated certificate,
a new one may be issued therefor upon such terms of indemnity to the
corporation as the board of directors may prescribe.
Section 2. Transfer of Shares. Transfer of shares of the corporation
shall be made only on the stock registry of the corporation by the holder of
record thereof or by his legal representative, who shall furnish proper
evidence of authority to transfer, or by his attorney "hereunto authorized by
power of attorney duly executed and filed with the secretary of the
corporation, and on surrender for cancellation of the certificate for such
shares. The person in whose name shares stand on the books of the corporation
shall be deemed by the corporation to be the owner thereof for all purposes.
ARTICLE VIII - FISCAL YEAR
Section 1. The fiscal year of the corporation shall begin on the first
day of January of each. year and expire on the thirty-first day of December
of each year.
ARTICLE IX - CORPORATE SEAL
Section 1. Use of the corporate seal adopted by the board of directors
shall be optional with the officer or agent of the corporation signing any
document on behalf of the corporation. No duly executed corporate document
shall be void because it does not bear the imprint of a seal.
ARTICLE X - WAIVER OF NOTICE
Section 1. Whenever any notice is required to be given to any
stockholder or director of the corporation under these By-laws, by provisions
of the Articles of Incorporation, or by the statutes of the State of Nevada,
a waiver thereof in writing, signed by the person or persons entitled to such
notice, whether before or after the time stated therein, shall be deemed
equivalent to the giving of such notice.
ARTICLE XI - AMENDMENTS
Section 1. The board of directors shall have the power to make, alter
and repeal by-laws; but by-laws made by the board may be altered or repealed,
or new by-laws made, by the stockholders.
ADOPTED by order of the directors of the corporation on April 23, 1996.
DIVERSIFIED RESEARCH, INC.
/s/Roger Lund, Director
/s/Toni Carter, Director
FALKEN Vermogensberatungsgesellschaft
fur Internationale Kapitalanlagengesellschaft.mb.H.
HebbelstraBe 16
40237 Dusseldorf
hereinafter called "FALKEN"
March 3rd 1997
DIVERSIFIED RESEARCH, INC.
1900 VINE STREET
SALT LAKE CITY
UTAH 84111
Attention:
Gentlemen:
This will confirm the arrangements, terms and conditions pursuant to
which "Falken" Incorporated (the "Investment Banker"), have been retained to
serve as the Investment Banker and advisor to DIVERSIFIED RESEARCH INC, a
Nevada corporation (the "Company"), on a non-exclusive basis for the term set
forth in Section 2 below. The undersigned hereby agrees to the following
terms and conditions;
1. Duties of FALKEN:
(a) Consulting Services: FALKEN will provide such financial consulting
services and advice pertaining to the Company's business affairs as the
Company may from time to time reasonably request. Without limiting the
generality of the foregoing, FALKEN will assist the Company in developing,
studying and evaluating financing, merger and acquisition proposals, prepare
reports and studies thereon when advisable, and assist in negotiations and
discussions pertaining there to.
(b) Financing: FALKEN will assist and represent the Company in
obtaining both short and long-term financing, when so requested by the
Company. FALKEN will be entitled to additional compensation under such forms
as may be agreed to by the parties of up to 10% of the funds raised outside
the US.
(c) Wall Street Liaison FALKEN will, when appropriate, arrange meetings
between representatives of the Company and individuals and financial
institutions in the investment community, such as security analysts,
portfolio managers and market makers.
The services described in this Section I shall be rendered by FALKEN
under the supervision of the Company, but at such time and place and in such
manner (whether by conference, telephone, letter or otherwise) as Consultant
may determine. FALKEN will keep the Company advised of its activities
hereunder.
Term:
This Agreement shall continue for a period of two years from the date
hereof (the "Term"). However, the company reserves the right to terminate the
agreement at the time and under a 30 days remedy clause when FALKEN serves
unsatisfactory to it's obligations.
Compensation.
As compensation for FALKEN'S services hereunder, the Company shall
deliver to FALKEN an aggregate of 250,000 shares of the Company's common
stock the shares shall be restricted by Rule 144. Any offering documents have
to be filed with the Non US authorities whereas such a filing and such a
published notice is required. (i.e. Bundesautsichtsamt fur den
Wertpapicrhandel, Germany).The first documents offered by the company will be
the REG D 504 offered by the company under the exempt Status. The commission
for such introductions shall be:
10% on the first $900,000.-REG D 504
Warranties:
Consultant shall in any event place a minimum of $50,000.- within a
period of 90 days after the proper offering document has been released by the
company for circulation to. However in case the consultant does not live up
to his agreement within the given time period of 60 days, the company reserves
the right revert the stock as described in paragraph 3 Compensation back to
the company.
Relationship:
Nothing herein shall constitute FALKEN as an employee or agent of the
Company, except to such extent as might hereinafter be agreed upon for a
particular purpose. Except as might hereinafter be expressly agreed, FALKEN
shall not have the authority to obligate or commit the Company in any manner
whatsoever.
Confidentially
Except in the course of the performance of its duties hereunder, FALKEN
agrees that it shall not disclose any trade secrets, know-how, or other
proprietary information not in the public domain learned as a result of this
Agreement unless and until such information becomes generally known.
Assignment and Termination
This Agreement shall not be assignable by any party except to successors
to all or substantially all of the business of either party for any reason
whatsoever without the prior written consent of the other party, which
consent may not be unreasonably withheld.
Very truly yours,
FALKEN
Vernogensberatungsgesellschaft fur
Internationale Kapitalanlagen mbH.
By:/s/G.
AGREED AND ACCEPTED
Diversified Research, Inc.
By:/s/L. L. Blecker
ASSIGNMENT
-of-
Entire world wide rights in Digital Masters together with territorial
licences
and other interests in sound recordings
*************
THIS ASSIGNMENT AND TRANSFER DEED is made the 28th March 1997 BETWEEN BEACON
STUDIOS MANAGEMENT CORPORATION whose registered office is at P O Box 438
Tropic Isle Building Wickhams Cay Road Town Tortola British Virgin Islands
("Beacon") of the one part and IMMEDIATE ENTERTAINMENT GROUP INCORPORATED
whose Registered Agent is Gateway Enterprises Incorporated at 3230 E.
Flamingo Road Suite 156 Las Vegas Nevada 89121 United States of America ("the
Purchaser") of the other part
BACKGROUND TO THE ASSIGNMENT AND TRANSFER
A. Beacon is the absolute owner of a substantial catalogue of master digital
sound recordings protected by the Copyright Design and Patents Act 1988 in
the United Kingdom and by other statutory codified conventional and common
law protection in the rest of the World details of which are set out and
described in the First Schedule hereto containing pages ("the catalogue") and
identified by the signatures on behalf of the parties hereto.
B. Beacon has agreed to assign the catalogue to the Purchaser and has also
agreed to sell and transfer to the Purchaser the further rights specified in
the Second Schedule. The consideration for such assignment and sale and
transfer shall be the issue of 500,000. One Cent Ordinary Stock in the
Purchaser (carrying a present value of US$4. per share)clean and without
charge or equities attaching thereto. Itemized payment Schedule and
Disbursements is attached in the Third Schedule.
C. Beacon and the Purchaser have agreed to enter into and be bound by the
further undertakings terms and provisions of this deed for the better
transfer and vesting in the Purchaser of both the catalogue and further rights
specified in the Second Schedule hereto.
NOW THIS DEED HEREBY WITNESSETH as follows:
l. Definitions and interpretation
1.1 Agreement means this assignment and transfer deed and any and all
schedules annexures and exhibits attached to it or incorporated in it by
reference
1.2 "The Shares" shall mean One Cent Ordinary Stock in the Purchaser free
from all charges liens charges or equities.
1.2 Any reference in this agreement to any statute or statutory provision
shall be construed as including a reference to that statute or statutory
provision as time to time amended modified extended or re-enacted whether
before or after the date of this agreement and to all statutory instruments
orders and regulations for the time being made pursuant to it or deriving
validity from it in any part of the world and not necessarily the United
Kingdom
1.3 Unless the context other wise requires words denoting the singular shall
include the plural and vice versa and words denoting any one gender shall
include all genders and words denoting persons shall include bodies corporate
unincorporated associations and partnerships
1.4 The expression "copyright" means the entire copyright subsisting under
the laws of the United Kingdom and all analogous rights subsisting under the
laws of each and every jurisdiction throughout the world together with all
rights of extension and renewal
1 5 "Digital Masters" means the masters of remastered analogue sound
recordings in the public domain and radio recordings also in the public
domain the copyright and all other rights of which are vested in Beacon
1.6 "Other Product" means any audio or audio visual product including
original sound recordings produced by Beacon and original recordings which
have been acquired by Beacon other than Digital Masters which Beacon may have
acquired by assignment transfer agreement licence or by the operation of law
by any parties in or from any part of the world which Beacon acquired the
right or licence or any associate of Beacon acquired the right or licence to
manufacture or licence at any time prior to the date hereof.
1.7 "Publicity material" means when available such biographical musicological
notes transparencies and audio-visual material in respect of those artistes
composer conductors arrangers as may be in the control under licence or other
proprietorship or licensor right immediately prior to the date hereof.
1.8 "Territory" means the whole of the world
1.9 "Third Party Liabilities" means any and all sums payable to any parties
whose services or performances are contained in any Digital Masters and all
fees and payments required to be made by or under the provisions of
agreements or arrangements with the American Federation of Musicians (
including but not limited to the Phonograph Record Trust Agreement the
Phonograph Manufacturers Special Payment Fund Agreement and the American
Federation of Musicians Pension and Welfare Fund) and all sums payable to the
owners of any element of copyright contained in the Digital Masters and all
other sums of whatever nature payable in respect of the exploitation of the
Digital Masters in the Territory
2. Assignment and transfer
In consideration of :
2.1 The issue by the Purchaser of Five Hundred Thousand Shares to Beacon for
the use of Beacon absolutely (the receipt of which shares Beacon hereby
acknowledges) Beacon as Beneficial Owner HEREBY ASSIGNS AND TRANSFERS to the
Purchaser the copyright and all rights in the nature of copyright throughout
the Territory in the Digital Masters specified and described in the First
Schedule for all the residue of the term of copyright and such rights therein
and all renewals or extensions thereof and together with all accrued causes
of action in respect thereof
AND
2.2 The sum of US$Ten now paid to Beacon by the Purchaser (the receipt of
which sum acknowledges) Beacon as Beneficial Owner HEREBY ASSIGNS AND
LICENCES to the Purchaser the rights and licences contained in and specified
by the Second Schedule
TO HOLD unto the use of the Purchaser absolutely.
3. Further Assurance
3.1 Beacon shall at any time and from time to time hereafter at the request
and expense of the Purchaser execute all such documents and do or procure all
such acts things and matters as the Purchaser may require in order to vest
the rights and property assigned and transferred above in order to vest the
said rights and property in the Purchaser
4. Grant of Further Rights
4.1 The Purchaser and its successors assigns and licensees shall have the
non- exclusive right to use the Publicity Material throughout the Territory
during the Term.
4.2 The Purchaser shall be entitled to use and exploit any and all
audio-visual promotional films and videos made by or licensed to Beacon in
connection with the rights assigned or transferred to the Purchaser above in
any manner the Purchaser may see fit in any and all media by any and all
means throughout the world for the full period of copyright and any costs
incurred in the creation and manufacture of such promotional films and videos
and other material shall be deemed to be included in the consideration above
Beacon confirms that the entire copyright and all other rights in all such
promotional films videos and other material shall vest in the Purchaser
absolutely.
4.4 Beacon confirms and agrees that the Purchaser shall have the
sole and exclusive right to initiate and maintain any and all
actions or proceedings which the Purchaser in its sole discretion
deems necessary in order to establish maintain or preserve any of
Beacon's assigned transferred granted or licensed to the Purchaser
hereunder together with the right to defend any action in the sole
name of the Purchaser without prejudice to the right of the
Purchaser to join Beacon as a plaintiff or defendant in any such
action and Beacon for itself its successors and assigns confirms
that it shall have no right title or interest in respect of any
money recovered by the Purchaser in respect of any such actions or
proceedings.
5. Warranties and obligations of Beacon
As a material inducement to the Purchaser to enter into this
Agreement Beacon warrants and undertakes and agrees with the
Purchaser that:
5.1 all consents required pursuant to the Copyright Designs and
Patents Act 1988 Part II or otherwise for the exploitation by the
Purchaser its assigns and licensees of the Digital Masters in any
and all media by any manner or means now known or invented in the
future throughout the Territory during the Term have been obtained
by Beacon
5.2 Beacon is free to enter into this Agreement and is the sole
absolute unincumbered legal and beneficial owner of all rights and
property granted to the Purchaser and has the authority to grant to
the Purchaser all the rights and consents granted assigned and
transferred by and in this Agreement and is not under any
disability restriction or prohibition which might prevent the
Purchaser from performing or observing any of Beacon's obligations
under this Agreement
5.3 Beacon has not entered and will not enter into any arrangement
which might conflict with this agreement
5.4 The Digital Masters and Publicity Material are and will on
delivery be in first class condition and of first class technical
quality suitable for exploitation in sound recordings in all
configurations
5.5 Beacon shall deliver the Digital Masters and the Publicity
Material to the Purchaser free and clear of all Third Party
liabilities and all recording synchronization mechanical and/or
distribution royalties and any other payments of whatever nature
payable in connection with the Digital Masters all such payments
which may require to be met being solely for the account of Beacon
provided however that the mechanical fees at the Relevant Rate in
respect of Compositions incorporated in the Digital Masters shall
be the responsibility of the Purchaser
5.7 Beacon shall not without the consent in writing of the Purchaser
reveal or make public any financial or other confidential
information in connection with the Digital Masters and the Publicity
Material the terms of this Agreement or the business of the
Purchaser or issue any other publicity relating to any of the
foregoing
5.8 Beacon undertakes to indemnify the Purchaser and keep the
Purchaser at all times fully indemnified from and against all
actions proceedings claims demands costs (including without
prejudice to the generality of this provision the legal costs of the
Purchaser on a solicitor and own client basis) awards and damages
howsoever arising directly or indirectly as a result of any breach
or non-performance by Beacon of any of Beacon's undertakings
warranties or obligations under this Agreement
6. Notices
6.1 Any notice or other document required to be given under this
Agreement or any communication between the parties with respect to
any of the matters or provisions of this Agreement shall be in
writing and deemed to be duly given if signed by or on behalf of a
Director of the party giving notice and if left at or sent by pre-paid
registered or recorded delivery post or by telex facsimile
transmission or other means of telecommunication in permanent
written form to the address of the party receiving such notice as
set out in the head of this Agreement or as notified between the
parties for the purpose of this clause.
6.2 Any such notice or other communication shall be deemed to have
been given to and received by the addressee:
6.3.1 at the time the same is left at the address of or handed to
a representative of the party to be served
6.3.2 by post on the day not being a Sunday or public holiday 7
days following the date of posting
6 3.3 in the case of a telex telegram cable facsimile transmission
or other means of telecommunication on the next following day
7. Severability
If any provision of this Agreement and Assignment shall be
prohibited by or adjudged by a court to be unlawful void or
unenforceable such provision shall to the extent required be
severed from this Agreement and rendered ineffective as far as
possible without modifying the remaining provisions of this
Agreement and shall not in any way affect any other circumstances
or the validity or the enforcement of this Agreement
8. Agreement final and complete
This Agreement contains the full and complete understanding between
the parties and supersedes all prior arrangements and
understandings whether written or oral appertaining to the subject
matter of this Agreement and may not be varied except by an
instrument in writing signed by all the parties to this Agreement
9. Waiver
No failure or delay on the part of any of the parties to this
Agreement relating to the exercise of any right power privilege or
remedy provided under this Agreement shall operate as a waiver of
such right power privilege or remedy or as a waiver of any
preceding or succeeding breach by the other party to this Agreement
not shall any single or partial exercise of any right power
privilege or remedy preclude any other or further exercise of such
or any other right power privilege or remedy provided in this
Agreement all of which are several and cumulative and are not
exclusive of each other or of any other rights or remedies
otherwise available to a party at law or equity.
10. Governing law
This Agreement shall be governed by and construed in accordance with the law
of England and Wales the courts of which shall be courts of competent
jurisdiction
EXECUTED as a Deed by the parties the day and year above written
THE FIRST SCHEDULE
(full lists of titles and artistes to be set out with each page signed by way
of identification and verification by representatives of both parties)
THE SECOND SCHEDULE
(details of all rights and licences vested in Beacon to be set out with
each page signed by way of identification and verification
by representatives of both parties)
SIGNED AS A DEED by
on behalf of Beacon Studios Management Corporation
SIGNED AS A DEED by
on behalf of Immediate Entertainment Group Incorporated
ASSIGNMENT
of
Entire world wide rights in Digital Masters together with
territorial licenses and other interests in sound recordings
This ASSIGNMENT AND TRANSFER DEED
is made on the 17th day of December 1997
Between:
MUSIC AVENUE OF AMERICA Corporation
whose registered office is at:
25 Greystone Manor
Lewes, Delaware 19958
United States of America
hereinafter referred to as MUSIC AVENUE
represented by BRICE DEPASSE, a director,
of the one part,
&
IMMEDIATE ENTERTAINMENT GROUP, INC.
whose registered office is at:
3230 Flamingo Road,
Suite 156
Las Vegas, Nevada 89121
United States of America
residing at:
708 Third Avenue
22nd Floor
New York, NY 10017
United States of America
hereinafter referred to as THE PURCHASER
represented by MICHAEL BERRESHEIM, CEO
of the other part
BACKGROUND TO THE ASSIGNMENT AND TRANSFER
A/ MUSIC AVENUE OF AMERICA Corporation is the absolute owner of a
substantial catalogue of master digital sound recordings protected by the
Copyright Design and Patents Act 1988 in the United Kingdom and by other
statutory codified conventional and common law protection in the rest of the
World, details of which are set out and described in the Schedule hereto
containing pages ("the catalogue") and identified by the signatures on behalf
of the parties hereto.
B/ MUSIC AVENUE OF AMERICA Corporation has agreed to assign the catalogue
to the Purchaser and has also agreed to sell and transfer to the Purchaser all
rights specified in said Schedule.
The consideration for such assignment and sale and transfer shall be the
amount of U.S. $1,640,000.00 (One Million Six Hundred And Forty Thousand U.S.
Dollars), to be paid upon signature of this agreement through the issue of
328,000.00 (Three Hundred And Twenty Eight Thousand) One Cent Ordinary Stock
in the Purchaser (carrying on agreed present value of US $5.00 per share)
clean and without charge or equities attaching thereto.
MUSIC AVENUE OF AMERICA Corporation and the Purchaser have agreed to enter
into and be bound by the further undertakings terms and provision of this deed
for the better transfer and vesting in the Purchaser of both the catalogue and
all rights specified in the Schedule hereto.
Now this DEED HEREBY WITNESSETH as follows:
1. Definition and Interpretation
1.1 Agreement means this assignment and transfer deed and any and all
schedules annexures and exhibits attached to it or incorporated in it by
reference,
1.2 "The Shares" shall mean One Cent Ordinary Stock in the Purchaser free
from all charges liens charges or equities.
1.3 Any reference in this agreement to any statue or statutory provision
shall be construed as including a reference to that statue or statutory
provision as time to time amended modified extended or re-enacted whether
before or after the date of this agreement and to all statutory instruments
orders and regulations for the time being made pursuant to it or deriving
validity from it in any part of the world and not necessarily the United
Kingdom.
1.4 Unless the context otherwise requires words denoting the singular shall
include the plural and vice versa and words denoting any one gender shall
include all genders and words denoting persons shall include bodies corporate
unincorporated associations and partnerships.
1.5 The expression "Copyright" means the entire copyright subsisting under
the laws of the United Kingdom and all analogous rights subsisting under the
laws of each and every jurisdiction throughout the world together with all
rights of extension and renewal.
1.6 "Digital Masters" means the masters of remastered analogue sound
recordings in the public domain and radio recordings also in the public domain
the copyright and all other rights of which are vested in MUSIC AVENUE OF
AMERICA corporation.
1.7 "Other Product" means any audio or audio visual product including
original sound recordings produced by MUSIC AVENUE of Corporation and original
recordings which have been acquired by MUSIC AVENUE of Corporation other than
Digital Masters which MUSIC AVENUE OF AMERICA Corporation may have acquired by
assignment transfer agreement license or by the operation of law by any
parties in or from any part of the world which MUSIC AVENUE OF AMERICA
Corporation acquired the right or license at any time prior to the date
hereof.
1.8 "Publicity Material" means when available such biographical
musicological notes transparencies and audio-visual material in respect to
those artistes composer conductors arrangers as many be in the control under
license or other proprietorship or licensor right immediately prior to the
date hereof.
1.9 "Territory" means the whole of the world.
1.10 "Third Party Liabilities" means any and all sums payable to any parties
whose services or performances are contained in any Digital Masters and all
fees and payments required to be made by or under the provisions of agreements
or arrangements with the American Federation of Musicians (including but not
limited to the Phonograph Record Trust Agreement the Phonograph Manufacturers
Special Payment Fund Agreement and the American Federation of Musicians
Pension and Welfare Fund) and all sums payable to the owners of any element of
copyright contained in the digital Masters and all other sums of whatever
nature payable in respect of the exploitation of the Digital Masters in the
Territory.
2. Assignment and Transfer
In consideration of:
2.1 The issue by the Purchaser of Three Hundred and Twenty Eight Thousand
Shares of MUSIC AVENUE OF AMERICA Corporation for the use of MUSIC AVENUE OF
AMERICA Corporation absolutely (the receipt of which shares MUSIC AVENUE OF
AMERICA Corporation hereby acknowledges).
MUSIC AVENUE OF AMERICA Corporation as Beneficial Owner HEREBY ASSIGNS AND
TRANSFERS to the Purchaser the copyright and all rights in the nature of
copyright throughout the Territory in the Digital Masters specified and
described in the Schedule for all the residue of the term of copyright and
such rights therein and all renewals or extensions thereof and together with
all accrued causes of action in respect thereof, and
2.2 The sum of US $5,000.00 to be paid to MUSIC AVENUE OF AMERICA
Corporation by the purchaser to cover the cost of copying the masters MUSIC
AVENUE OF AMERICA Corporation as Beneficial Owner HEREBY ASSIGNS AND LICENSES
to the Purchaser the rights and licenses contained in and specified in the
Schedule to hold unto the use of the Purchaser absolutely.
3. Further Assurance
3.1 MUSIC AVENUE OF AMERICA Corporation shall at any time and from time to
time hereafter at the request and expense of the Purchaser execute all such
documents and do or procure all such acts things and matters as the Purchaser
may require in order to vest the rights and property assigned and transferred
above in order to vest the said rights and property in the Purchaser.
4. Grant of Further Rights
4.1 The Purchaser and its successors assigns and licensees shall have the
non-exclusive right to use the Publicity Material throughout the Territory
during the Term.
4.2 The Purchaser shall be entitled to use and exploit any and all possibly
existing audio-visual promotional films and videos made by or licensed to
MUSIC AVENUE OF AMERICA Corporation in connection with the rights assigned or
transferred to the Purchaser above in any manner the Purchaser may see fit in
any and all media by any and all means throughout the world for the full
period of copyright and any costs incurred in the creation and manufacture of
such promotional films and videos and other material shall be deemed to be
included in the consideration above MUSIC AVENUE OF AMERICA Corporation
confirms that the entire copyright and all other rights in all such
promotional films videos, in so far as they exist, and other material shall
vest in the Purchaser absolutely.
4.3 MUSIC AVENUE OF AMERICA Corporation confirms and agrees that the
Purchaser shall have the sole and exclusive right to initiate and maintain any
and all actions or proceedings which the Purchaser in its sole discretion
deems necessary in order to establish maintain or preserve any of MUSIC AVENUE
OF AMERICA Corporation's rights assigned transferred, granted, or licensed to
the Purchaser hereunder, together with the right of the Purchaser to join
MUSIC AVENUE OF AMERICA Corporation as a plaintiff or defendant in any such
action and MUSIC AVENUE OF AMERICA Corporation for itself its successors and
assigns confirms that it shall have no right title or interest in respect of
any money recovered by the Purchaser in respect of any such actions or
proceedings.
5. Warranties & Obligations of MUSIC AVENUE OF AMERICA Corporation
As a material inducement to the Purchaser to enter into this Agreement MUSIC
AVENUE OF AMERICA Corporation warrants and undertakes and agrees with the
purchaser that:
5.1 All consents required pursuant to the Copyright Designs and Patents Act
1998 Part II or otherwise for the exploitation by the Purchaser its assigns
and licensees of the Digital Masters in any and all media by any manner or
means now know or invented in the future throughout the Territory during the
Term have been obtained by MUSIC AVENUE OF AMERICA Corporation.
5.2 MUSIC AVENUE OF AMERICA Corporation is free to enter into this Agreement
and is the sole absolute unincumbered legal and beneficial owner of all rights
and property granted to the Purchaser and has the authority to grant to the
Purchaser all the rights and consents granted assigned and transferred by and
in this Agreement and is not under disability restriction or prohibition which
might prevent the Purchaser from performing or observing any of MUSIC AVENUE
OF AMERICA Corporation is obligations under this Agreement.
5.3 MUSIC AVENUE OF AMERICA Corporation has not entered and will not enter
into any arrangement which might conflict with this agreement.
5.4 the digital Masters are and will on delivery, after payment of master
copying costs by Purchaser to MUSIC AVENUE OF AMERICA Corporation, be in first
class condition and of first class technical quality suitable for exploitation
in sound recordings in all configurations.
5.5 MUSIC AVENUE OF AMERICA Corporation shall deliver the Digital Masters
and the Publicity Material to the Purchaser free and clear of all Third Party
liabilities and all recording synchronization mechanical and/or distribution
royalties and any other payments of whatever nature payable in connection with
the Digital Masters all such payments which may require to be met being solely
for the account of MUSIC AVENUE OF AMERICA Corporation provided however that
the mechanical fees at the Relevant Rate in respect of Compositions
incorporated in the Digital Masters shall be the responsibility of the
Purchaser.
5.6 MUSIC AVENUE OF AMERICA Corporation shall not without the consent in
writing of the Purchaser reveal or make public any financial or other
confidential information in connection with the Digital Masters and the
Publicity Material the terms of this Agreement or the business of the
Purchaser or issue any other publicity relating to any of the foregoing.
5.7 MUSIC AVENUE OF AMERICA Corporation undertakes to indemnify the
Purchaser and keep the Purchaser at all time fully indemnified from and
against all actions proceedings claims demands costs (including without
prejudice to the generality of this provision the legal costs of the Purchaser
on a solicitor and own client basis) awards and damages howsoever arising
directly or indirectly as a result of any breach or non-performance my MUSIC
AVENUE OF AMERICA Corporation of any of MUSIC AVENUE OF AMERICA Corporation is
undertakings warranties or obligations under this Agreement.
6. Notices
6.1 Any notices or other document required to be given under this Agreement
or any communication between the parties with respect to any of the matters or
provisions of this Agreement shall be in writing and deemed to be duly give if
signed by aor on behalf of a Director of the party giving notice and if left
at or sent by pre-paid registered or recorded delivery post or by telex
facsimile transmission or other means of telecommunication in permanent
written form to the address of the party receiving such notice as set out in
the head of this Agreement or as notified between the parties for the purpose
of this clause.
6.2 Any such notice or other communication shall be deemed to have been
given to and received by the addressee:
6.3/A At the time the same is left at the address of or handed to a
representative of the party to be served.
6.3/B By post on the day not being Sunday or public holiday 7 days
following the date of posting.
6.3/C In the case of a telex telegram cable facsimile transmission or
other means of telecommunication on the next following day.
7. Severability
If any provision of this Agreement and Assignment shall be prohibited by or
adjudged by a court to be unlawful void or unenforceable such provision shall
to the extent required by severed from this Agreement and rendered ineffective
as far as possible without modifying the remaining provisions of this
Agreement and shall not in any way affect any other circumstances or the
validity or the enforcement of this Agreement.
8. Agreement Final & Complete
This Agreement contains the full and complete understanding between the
parties and supersedes all prior arrangements and understandings whether
written or oral appertaining to the subject matter of this Agreement and may
not be varied except by an instrument in writing signed by all the parties to
this Agreement.
9. Waiver
No failure or delay on the part of any of the part to this Agreement relating
to the exercise of any right power privilege or remedy provided under this
Agreement shall operate as a waiver of such right power privilege or remedy or
as a waiver of any preceding or succeeding breach by the other party to this
Agreement not shall any single or partial exercise of any right power
privilege or remedy preclude any other or further exercise of such or any
other right power privilege or remedy provided in this Agreement all of which
are several and cumulative and are not exclusive of each other or of any other
rights or remedies otherwise available to a party at law or equity.
10. Governing law
This Agreement shall be governed by and construed in accordance with the law
of the Kingdom of Belgium the courts of which shall be courts of competent
jurisdiction.
EXECUTED as Deed by the Parties the day and year above written.
SCHEDULE
A/ 206 Long playing Master Recordings, containing a minimum of 3,296
tracks, details of artists and repertoire, see "B".
B/ Details of all rights and licenses vested in MUSIC AVENUE OF AMERICA
Corporation by way of a copy of the ASSIGNMENT OF RIGHTS & FLAT FEE SALE of
MASTER RECORDINGS (AGREEMENT) between RIVIERA RECORDS (The VENDOR) and MUSIC
AVENUE OF AMERICA Corporation (The PURCHASER), Dated July 23, 1997.
SIGNED AS A DEED by
/s/Brice DePasse
on behalf of
MUSIC AVENUE OF AMERICA Corporation
SIGNED AS A DEED by
/s/Michael Berresheim
on behalf of
IMMEDIATE ENTERTAINMENT GROUP, INC.
FALKEN Vermogensberatungsgesellschaft
fur Internationale Kapitalanlagengesellschaft.mb.H.
HebbelstraBe 16
40237 Dusseldorf
hereinafter called "FALKEN"
August 2rd, 1997
IMMEDIATE ENTERTAINMENT GROUP, INC
10 MOLASSES ROW, PLANTATION WHARF
LONDON SW11 8TW
UNITED KINGDOM
Attention:
Gentlemen:
This will confirm the arrangements, terms and conditions pursuant to
which "FALKEN" Incorporated (the "Investment Banker"), have been retained to
serve as the Investment Banker and advisor to IMMEDIATE ENTERTAINMENT GROUP,
INC, a Nevada corporation (the "Company"), on a non-exclusive basis and on a
best effort basis for the term set forth in Section 2 below. The undersigned
hereby agrees to the following terms and conditions:
1. Duties of FALKEN:
(a) Consulting Services: FALKEN will provide such financial consulting
services and advice pertaining to the Company's business affairs as the
Company may from time to time reasonably request. Without limiting the
generality of the foregoing, FALKEN will assist the Company in developing,
studying and evaluating financing, in merger and acquisition proposals,
prepare reports and studies thereon when advisable, and assist in
negotiations and discussions pertaining there to.
(b) Financing: FALKEN will assist and represent the Company in obtaining
both short and long-term financing, when so requested by the Company. FALKEN
will be entitled to additional compensation under such forms as may be agreed
to by the parties of up to 10 % of the funds and 5 % unaccountable expense on
funds raised outside the US. Falken will provide every Investor introduced
with the relevant disclosure of the provisions and commissions paid to Falken
outside the US. (See draft prospectus attached) The prospectus will be filed
with the German Office for Securities in Frankfurt, Germany.
(Bundesaufsichtamt fur den Wertpapierhandel Falken) shall also be entitled to
a up to 50.000 shares of the Reg S Offering as additional compensation ("The
offering') Such shares shall only be sold by Falken when the offering is
completed and or terminated .Any proportion which is not completed on the
US $ 5.000.000 Offering shall be accounted on a pro rata basis. The shares
which are not earned under the agreement shall be returned to the company.
Term:
This Agreement shall continue for a period of two years from the date
hereof (the "Term"). However, the company reserves the right to terminate the
agreement at the time and under a 30 days remedy clause, when FALKEN serves
unsatisfactory to it's obligations.
Relationship:
Nothing herein shall constitute FALKEN as an employee or agent of the
Company, except to such extent as might hereinafter be agreed upon for a
particular purpose. Except as might hereinafter be expressly agreed, FALKEN
shall not have the authorize to obligate or commit the Company in any manner
whatsoever. This Agreement shall be for funds raised outside the US only-
Confidentially:
Except in the course of the performance of its duties hereunder, FALKEN
agrees that it shall not disclose any trade secrets, know-how, or other
proprietary information not in the public domain learned as a result of this
Agreement unless and until such information becomes generally known.
Assignment and Termination:
This Agreement shall not be assigned by any party except to successors
to all or substantially all of the business of either party for any reason
whatsoever without the prior written consent of the other party, which
consent may not be unreasonably withheld.
Very truly yours,
FALKEN Vermogensberatungsgesellschaft
fur
Internationale Kapitalanlagen mbH.
by:/s/Georgios Stohe,
Managing Director
AGREED AND ACCEPTED:
Immediate Entertainment Group, Inc.
By:/s/ Michael Berresheim
Chairman
By:/s/ Geraldine Blecker
Secretary
THIS AGREEMENT is made the 11th day of October 1996
but is effective as of the first day of September 1996
B E T W E E N
(1) BMG ENTERTAINMENT INTERNATIONAL UK & IRELAND LIMITED of
Bedford House 69-79 Fulham High Street London SW6 3JW
(hereinafter called "BMG" which expression shall include its
successors and assigns) and
(2) The Company whose name address and company number are set out
in paragraph 1 of the Schedule hereto (hereinafter called "Company"
which expression shall include its successors and assigns)
WHEREAS
(1) BMG provides distribution services in relation to audio and
audio-visual products and
(2) The Company wishes to avail itself of such distribution services on
the terms and conditions herein set out
N O W I T I S H E R E B Y A G R E E D as follows:
1. DEFINITIONS
The following terms shall have the meanings set out herein:
1.1 "Affiliate of Company" shall mean Company's successors in title and
any company firm person or record label which is directly or indirectly
owned or controlled in whole or in part by Company and at BMG's
election every company firm or person which is directly or indirectly
owned or controlled in whole or in part by any person who directly or
indirectly owns or controls Company in whole or in part.
1.2 "Applicable Fees" shall mean such fees as are set out in the
Schedule hereto in respect of distribution services rendered hereunder by BMG
to Company.
1.3 "BMG Distribution Centre" shall mean the premises at Lyng Lane
West Bromwich West Midlands England from which BMG operates its distribution
services.
1.4 "Company Records" shall mean each Record derived in whole or in
part from any Master Recording now or hereafter owned or controlled
by Company or by any Affiliate of Company for the Territory during
the Term and/or comprised in the catalogue of any third party in
relation to which Company has any license or agreement relating to
the release or distribution of Records during the Term
1.5 "Company Videograms" shall mean each Videogram derived in whole
or in part from any Master Recording now or hereafter owned or
controlled by Company or by any Affiliate of Company for the
Territory during the Term and/or comprised in the catalogue of any
third party in relation to which Company has any license or agreement
relating to the release or distribution of Videograms during the Term
1.6 "Contract Year" shall mean each period of twelve months
commencing on the first day of the Term hereof and thereafter
commencing on the yearly anniversary of each such day.
1.7 "Customer" and "Customer Accounts" shall mean respectively
(a) each retailer and wholesaler or any other party (including without
limitation Company) to whom Company Records are shipped hereunder and
(b) each account maintained and held by BMG in relation thereto
1.8 "Dealer Price" shall mean the Company's list price as advised by
Company to BMG from time to time during the Term and showing the
price at which each Company Record (or such Records if more than
one such Record is packaged together) is available for sale in the
Territory before deducting any discounts but after deducting any sales
or other taxes levied on sales which form a recognized distinct
element of such price and which are recoverable directly or indirectly
as part of the selling price.
1.9 "Deletions" shall mean Company Records and Company Videograms
deleted from Company's catalogue PROVIDED THAT no Company
Record and/or Company Videogram shall be treated as a Deletion
hereunder unless the retail trade and BMG have been notified in
writing of such deletion at the same time by Company.
1.10 "File Discounts" shall mean discounts which are negotiated by
Company with its major retail and wholesale customers and which are
notified by Company to BMG in writing and maintained by BMG from
time to time on its computer file programme.
1.11 "Gross Invoice Value" shall mean the gross value of sales of
Company Records and, Company Videograms at Dealer Price.
1.12 "LP" and "Company LP" shall mean respectively a Record and a
Company Record (other than a Single) played at 33 1/3 rpm in
double-sided disc form twelve inches in diameter (and the cassette
compact disc or other equivalent thereof).
1.13 "Line" shall mean each Company Record and Company Videogram
referable to a catalogue number designated by. Company.
1.14 "Master Recording" shall mean the original material object in which
sounds with or without visual images comprising the material of any
Record or Company Record or Videogram or Company Videogram are
fixed by any method now known or later developed.
1.15 "Net Invoice Value" shall mean the Gross Invoice Value less the value
of applicable File Discounts.
1.16 Intentionally Deleted
1.17 "Overstocks" shall mean those Company Records and Company
Videograms which exceed the Required Stock Level (as defined in
clause 3.10 hereof) and in relation to which certain charges shall be
made all as more particularly described in clause 3.10 hereof
1.18 "Pledge" shall mean the letter of Pledge as set out in Schedule 2
attached.
1.19 "Privileged Returns" shall mean returns of Company Records and/or
Company Videograms (not being faulty or damaged returns or returns
of Company Records and/or Company Videograms sent in error)
which are permitted by virtue of a Privileged Returns scheme
operated by Company with respect to Customers but only in the case
where details of such scheme shall first have been supplied by
Company to BMG in writing prior to the commencement of the Term
hereof. Notwithstanding the foregoing in the event that Company
does not operate such a scheme or details of such scheme have not
been supplied by Company to BMG in writing prior to the
commencement of the Term then at BMG's election "Privileged
Returns" shall; mean returns of Company Records and/or Company
Videograms (not being faulty or damaged returns or returns of
Company Records and/or Company Videograms sent in error) which
are permitted by virtue of any Privileged Returns scheme operated by
BMG with respect to Customers.
1.20 "Promotional Record Account" shall mean an account which will be
debited with the value of such Company Records and/or Company
Videograms as are supplied to Company for the purpose of promoting
sales of further Company Records and/or Company Videograms and
in relation to which an Applicable Fee will be charged pursuant to
paragraph 5 of the Schedule hereto.
1.21 "Record" shall mean any reproduction of a Master Recording in any
currently available form or any which may later be developed and in
which sounds with or without visual images can be perceived reproduced or
otherwise communicated either directly or with the aid of a machine or other
device including but not limited to vinyl discs (whether in LP or Single
form), audio tapes and compact discs and which shall be technically suitable
for release to the public. For the avoidance of doubt such definition shall
not include Videograms as hereinafter defined.
1.22 "Single" and "Company Single" shall mean respectively a Record and
Company Record (45 or 33 1/3 I pm) in double-sided disc form (including
so-called EPs) which is not an LP and which is seven or twelve inches in
diameter and the cassette and compact disc equivalent thereof.
1.23 "Stock Transfer Charge" shall mean the charge for picking packing and
despatching Overstocks or any other quantities of Company Records or Company
Videograms designated by BMG as stock transfers and subject to a Stock
Transfer Charge prior to returning the same to Company or destroying the same
and set out at paragraph 7 of the Schedule hereto.
1.24 "Term" shall mean the period set out in paragraph 2 of the Schedule
hereto subject to the provisions hereof relating to extension of the Term and
to termination of the agreement.
1.25 "Territory" shall mean the United Kingdom of Great Britain including
Northern Ireland, the Channel Islands, and the Isle of Man.
1.26 "Videogram" shall mean all devices whether now known or hereafter
devised by which audio-visual performances can be perceived reproduced or
otherwise communicated either directly with the aid of a machine or by other
means whether with or without sound and including for the avoidance of doubt
all laser optical formats including without limitation CDV and laser disc.
2. GRANT OF RIGHTS
2.1 Company hereby grants to BMG the sole and exclusive right during
the Term and in the Territory (as Company's sole agent) to distribute Company
Records and Company Videograms hereunder to Customers. To this end and in
connection with such grant of rights Company hereby acknowledges that BMG
shall have the exclusive right (as Company's sole agent) to invoice all
Customers in relation to all supplies of Company Records and Company
Videograms PROVIDED THAT nothing shall compel BMG to distribute Company
Records or Company Videograms to any Customer who is subject to
a credit referral by BMG s credit control department and/or with
whom in any circumstances BMG does not wish to trade.
2.2 For the avoidance of doubt Company shall undertake all selling,
marketing and promotion of Company Records and Company Videograms and Company
shall utilize its own sales representatives for the purposes of soliciting
orders of Company Records and Company Videograms which orders shall then be
submitted by Company to BMG in accordance with the terms hereof. BMG
confirms that BMG's Retail Services operation may be used for the purposes of
receiving orders for Company Records and Company Videograms. No Company
Record or Company Videogram sold by Company's sales force may be sold for
cash.
2.3.1 Subject as provided herein BMG shall provide a distribution service
for Company Records and Company Videograms comparable to that provided by BMG
for Records and Videograms distributed for its own account or any of its
other distributed labels and such service shall include storing, handling,
invoicing, picking, packing, delivery and reasonable commercial endeavors
(not including commencement of legal proceedings) to collect monies when due.
2.4 In consideration of the services of BMG to be rendered to Company as
herein provided Company shall pay to BMG the Applicable Fees namely
(a) the domestic fee set out at paragraph 3 of the Schedule in respect of
distribution of Company Records and Company Videograms to each Customer
(b) Intentionally deleted.
(c) the fee set out at paragraph 6 of the Schedule in respect of Company
Records and Company Videograms distributed and allocated to the Promotional
Record Account and
(d) the Stock Transfer Charge set out at paragraph 7 of the Schedule in
respect of stock transfers of Company Records and Company Videograms
(e) a fee of 14p in respect of music cassettes (MC) and 24p in respect of
CD's for each MC or CD case corresponding to Company Records which BMG changes
in respect of Company Records returned to BMG by reason of standard cases of
the same being cracked but otherwise in saleable condition
The Applicable Fee set out in (a) above shall be calculated on the Gross
Invoice Value of Company Records and Company Videograms shipped during the
month relating to which the Applicable Fees are charged. The Applicable Fees
set out in (c) and (d) above shall be calculated on the Dealer Price of each
Company Record and Company Videogram in respect of which such Applicable Fees
are charged.
2.5 Such Applicable Fees and any other deductions specified herein shall
be deducted from sums paid by or collected from Customers by BMG in respect
of Company Records and Company Videograms distributed to them by BMG on behalf
of Company.
2.6 The rights hereby granted shall not be interpreted in any manner which
may directly or indirectly contravene or conflict with the principles of the
Treaty of Rome 1957, nor with any applicable decisions, rules provisions or
other legislation binding the United Kingdom as a member of the European
Economic Community together with any resulting legislation within the United
Kingdom.
2.7 The coming into effect of this Agreement is conditional upon the
Company executing and delivering to BMG a Pledge in the form attached as
Schedule 2.
3. STOCK
3.1 Company shall supply to BMG during the Term stocks of Company
Records and Company Videograms in their sleeves or other packaging
together with all inserts which shall for the avoidance of doubt
already be inserted in such packaging together with any point-of-sale
or other material intended for distribution to Customers.
3.2 Company shall be solely responsible for monitoring stock levels of
Company Records and Company Videograms and shall ensure that BMG at all times
has adequate supplies thereof to fulfil demand therefor.
3.3.1 The stock risk in Company Records and Company Videograms and
point of sale/marketing materials shall pass to BMG upon delivery of
the same to BMG's storage racks and BMG's liability shall be limited
as hereunder provided and in particular shall be limited to the extent
of the insurance cover afforded BMG as provided under sub-clause 3.5 hereof.
3.3.2 Title to the Property in Company Records and Company Videograms
shall remain vested in Company up to the point at which such Title passes to
Customers by virtue of the exercise by BMG of its rights hereunder as
Company's agent and subject to BMG's rights under this Agreement and in
particular (but without limitation) sub-clause 3.11 hereof and BMG's rights
under the Pledge.
3.3.3 For the avoidance of doubt Company hereby irrevocably appoints
BMG as its sole duly authorized agent for all-purposes connected with
the rights granted to BMG by Company under this Agreement and without
limiting the foregoing Company irrevocably appoints BMG as its sole authorized
agent for the purposes of passing Title to the property in Company Records and
Company Videograms to Customers in accordance with BMG's Terms and Conditions
of Sale (from time to time) and (if applicable) in accordance with the terms
and conditions of the Pledge.
3.4 No payment shall be due from BMG in respect of any Company Record or
Company Videogram which is not invoiced by BMG or is invoiced and returned.
3.5 BMG shall procure that Company Records and Company Videograms stored at
the BMG Distribution Centre are insured under any comprehensive BMG policy
covering Records, Videograms and such other materials including packaging as
aforesaid. In the event that any Company Records and/or Company Videograms
shall be lost or damaged in transit by any carrier for BMG then BMG shall
ensure that Company shall have the same remedies against such carrier as BMG
would have had if Company Records lost or destroyed had been Records
distributed by BMG for its own account.
3.6 BMG shall maintain accurate stock information relating to Company
Records and Company Videograms and shall promptly prepare and supply to
Company free of charge any-sales and inventory or other reports as are
routinely available to any of BMG's distributed labels. Any other data or
reporting systems required by the Company shall be provided at the discretion
of BMG and at Company's cost.
3.7 Company shall be permitted once in each Contract Year of the Term at
reasonable times during normal working days to check the stock held at BMG's
Distribution Centre provided it shall have given BMG reasonable notice of its
intention to do so and provided that no disruption to BMG's distribution
services shall be caused thereby.
3.8 BMG shall once in each Contract Year of the Term undertake a
physical check of stock and a representative of Company shall be entitled to
attend such stock check.
3.9 Finished stock discrepancies (including sleeves and printed labels)
exceeding one percent (1 %) of the total of gross shipments of Company
Records and Company Videograms during each Contract Year (and pro-rata for any
period of less than one year at the end of the Term) shall be credited to
Company. Such credit shall be based on the manufacturing price in effect at
the end of the applicable Contract Year and shall be accounted for to Company
in the Accounting (as hereinafter defined) in respect of the final month of
each such Contract Year (or the last month of the Term as the case may be).
3.10 Stock Review: Overstocks and Deletions
3.10.1 The parties hereto shall undertake a calendar monthly sales
performance review of each Line distributed by BMG hereunder in the
manner set out below and Company shall adjust its stocks of Company Records
and Company Videograms at BMG's Distribution Centre in accordance with the
findings of each such review as follows:
Each calendar month following the expiry of two (2) months after the release
of each Company Record and Company Videogram, BMG and Company shall review
the preceding eight weeks' sales, together with the level of stocks held by
BMG of such Company Records and Company Videograms. Such information shall be
processed by BMG's computer systems which will assess (by applying a weighted
average to previous sales achieved) the necessary level of stocks for the six
(6) months ensuing each such monthly review, such stock level being referred
to as "the Required Stock Level". Stocks of such Company Records and Company
Videograms held or received by or at BMG's Distribution Centre subsequent to
each such review and which exceed the Required Stock Level (ie. Overstocks)
shall be subject to a pick-slot rental fee charged per month on the following
basis. For the purpose of computing such pick-slot rental fee Overstocks in
respect of each Line shall be notionally divided into sections of up to
one thousand five hundred (1,500) units each ("the Overstock Sections")
(a) If the number of Company Records and Company Videograms within each
Overstock Section numbers between one (1) and one hundred and fifty (150)
then such Overstock Section shall be subject to a charge of two pounds and
twenty pence (L2.20) per month.
(b) If the number of Company Records and Company Videograms within each
Overstock Section numbers between one hundred and fifty one (151) and six
hundred (600) then such Overstock Section shall be subject to a charge of
four pounds and forty pence (L4.40) per month.
(c) If the number of Company Records and Company Videograms within each
Overstock Section numbers between six hundred and one (601 ) and one thousand
five hundred (1,500) (in the case of Company Records (and one thousand
(1,000) in the case of Company Videograms)) then such Overstock Section shall
be subject to a charge of six pounds and sixty pence (L6.60) per month.
(d) By way of example of the foregoing, if one thousand seven hundred (1,700)
Company Records within a particular Line are Overstocks then the fee charged
shall be six pounds sixty (L6.60) per month in respect of the first Overstock
Section of one thousand five hundred (1,500) units, and four pounds forty
(L4.40) per month in respect of the second Overstock Section of two hundred
(200) units, making a total pick slot rental fee of eleven pounds (L11.00)
per month in respect of such Line.
(e) If Company shall instruct BMG to remove Overstocks (or Deletions as the
case may be) to a location other than the BMG Distribution Centre, then the
"Stock Transfer Charge" set out at paragraph 7 of the Schedule shall be made
in respect of each unit of Company Records and/or Company Videograms handled
by BMG as an Overstock or Deletion. BMG shall not be obliged to comply with
any instruction in-this regard which shall in BMG's opinion be likely to
result in any breach of the terms of this agreement.
The rates set out in this clause may be increased by BMG once during each
Calendar Year of the Term and upon written notice.
3.10.2 Overstocks and Deletions may be destroyed by BMG either upon Company's
written instruction or at BMG's election following thirty (30) days from
BMG's notification to Company of its intention to destroy the same PROVIDED
THAT Company has not notified BMG in writing of its intention to sell
Overstocks or Deletions at a reduced Dealer Price or to remove such Overstocks
or Deletions elsewhere. Such removal must occur promptly following Company's
notification of its intention to do so and shall be subject to the provisions
of paragraph (e) above.
3.11 Without prejudice to BMG's rights under the Pledge at the end of the
Term (whether by effluxion of time or otherwise) Company shall within thirty
(30) days thereof collect all remaining unsold stocks of Company Records and
Company Videograms together with any promotional material of any description
held by BMG SUBJECT TO any lien which BMG may elect to exercise over such
unsold stocks in respect of any debts due from Company to BMG or to any other
company within the BMG Group of companies. (For the avoidance of doubt, if
BMG exercises its lien aforesaid Company hereby grants BMG the right to sell
such unsold stocks and to apply the proceeds from such sale against sums owed
by Company to BMG or a Company within the BMG Group of Companies aforesaid.)
BMG shall be entitled at the end of such thirty (30) day period to destroy
such remaining unsold and uncollected stocks of Company Records and Company
Videograms without further notice and with no liability to Company.
3.12 Accurate records of any Company Records and Company Videograms destroyed
by BMG pursuant to the terms hereof shall be maintained by BMG and an
affidavit of destruction shall be supplied to Company upon request.
3.13 Company shall keep true and accurate records of all transactions
relating to Overstocks and Deletions and shall permit BMG or any firm
of chartered accountants nominated by BMG to inspect and verify such records
and to take copies thereof at any time during usual business hours during the
Term (but no more than twice during each period of twelve (12) months) and
once within a period of twelve (12) months following the expiration of the
Term
4. CONDITIONS OF SALE OF COMPANY RECORDS AND COMPANY VIDEOGRAMS
4.1 Subject as hereinafter provided Company agrees that all Company Records
and Company Videograms shall be distributed and supplied to Customers by BMG
hereunder pursuant to BMG's Standard Terms and Conditions of Sale a copy of
which is annexed hereto.
4.2 No liability is accepted by BMG in respect of Company Records or Company
Videograms which are sold by any agent of Company (excluding BMG) or other
third party on terms which differ from those set out herein.
4.3 Company shall designate in writing prior to the pre-release distribution
of any Company Record or Company Videogram the Dealer Price of each such
Company Record and Company Videogram. Company shall be responsible for
keeping BMG informed in a timely manner of any alterations in any Dealer
Prices.
4.4 File Discounts shall be deducted from the Gross Invoice Value appearing
on each statement rendered hereunder to Company by BMG as if they were an
Applicable Fee and charged to Company pursuant to clause 2 hereof.
4.5 Notwithstanding the provisions set out above in relation to File
Discounts, Company may request in writing of BMG that BMG shall in relation
to a Company Record offer a level of discount to certain customers which
differs from the usual File Discounts. Such arrangement shall be described as
a "Special Discount". Provided that Company requests any Special Discount at
least thirty (30) days in advance of the release of the Company Record to
which such proposed Special Discount relates, and provided that BMG agrees in
writing to each Special Discount in relation to each Customer proposed by
Company no later than seven (7) days before such release, then the Special
Discount shall be applied to sales of such Company Record and shall be
deducted from Gross Invoice Value in the same manner as File Discounts.
4.6 Returns
4.6.1 Company acknowledges that faulty or damaged Company Records and
Company Videograms shall be returned to BMG in accordance with its Standard
Terms and Conditions and in compliance with statutory requirements. Unless
otherwise agreed in writing, upon receipt by BMG such returns shall be treated
as follows:
(a) in the case of MC or CD versions of Company Records which have been
returned to BMG by reason of standard cases being cracked or damaged (but not
for any other reason) BMG shall replace the cracked or damaged case with a
new "standard" case and return the re-packaged Company Record to inventory. If
BMG undertakes such replacement service BMG shall charge Company the fee(s)
set out at 2.4(e) of this Agreement. For the avoidance of doubt this clause
4.6.1 (a) shall only apply to CD's or MC's in standard cases and which are
returned solely by reason of such casing being damaged or cracked
(b) subject to 4.6.1 (a) above all faulty or damaged Company Records and
Company Videograms shall be scrapped.
In accordance with its Standard Terms and Conditions in the case of units
returned as faulty, damaged or sent in error, BMG shall issue Customers with
replacement Company Records and/or Company Videograms or issue a credit in
respect thereof to the applicable Customer.
4.6.2 With respect to "Sale or Return" schemes, Company may not reach any
agreement with Customers which would allow for any "Sale or Return" scheme to
be employed in relation to any Company Record or Company Videogram unless
Company has notified BMG in writing in advance of such scheme setting out all
the terms thereof and BMG has agreed in writing to accept such a scheme
4.6.3 BMG shall have the right to accept all returns of Company Records
and/or Company Videograms of any nature. With respect to returns of Company
Records and/or Company. Videograms which are not Privileged Returns, sent in
error, faulty or damaged, BMG shall not be obliged to accept such returns
unless they have been pre-authorized in writing by Company and notified to
BMG. With respect to returns made as part of a "Sale or Return Scheme" BMG
shall not be obliged to accept such returns unless Company has complied with
the provisions of Clause 4.6.2 above. With respect to any returns accepted by
BMG and not treated in accordance with 4.6.1 (a) and/or (b) of this Agreement
BMG shall sort such returns by catalogue number and adjust such returns back
into inventory. Notwithstanding the foregoing Company hereby indemnifies BMG
against any loss or damage which may be caused to BMG by BMG's processing in
good faith of unauthorized or otherwise disputed returns of Company Records
and/or Company Videograms.
4.6.4 BMG shall, when rendering an Accounting to Company (as defined in
clause 6 hereof) deduct the value of all actual returns including without
limitation Privileged Returns, and returns of Company Records and/or Company
Videograms which are sent in error or which are faulty or damaged. In addition
BMG shall (whether these are replaced by Company or whether a credit to the
applicable Customer is granted by Company) make a deduction from sums
otherwise due to Company as a reserve against potential returns of Company
Records and Company Videograms distributed hereunder and being sum equivalent
to such percentage of the Gross Invoice Value as is set out in paragraph 8 of
the Schedule hereto and referred to herein as the Returns Reserve. The Returns
Reserve shall be released (subject to the terms hereof) in the Accounting for
the month ending no later than three (3) months after the month in respect of
which such Returns Reserve was taken. Notwithstanding the aforegoing:
(a) BMG shall be entitled to increase the Returns Reserve to twenty five per
cent (25%) of the Gross Invoice Value in the Accounting for the last four
months of the Term and/or in the Accounting for any month when BMG reasonably
anticipates that the Returns Reserve will be insufficient to cover returns of
Company Records and Company Videograms during subsequent months after such
Accounting
(b) BMG shall have no liability to make any payment to Company if on the date
of any Accounting ("the Accounting Date") the value of returns received prior
to such Accounting Date exceeds the aggregate of payments due to Company
after deduction of the Returns Reserve and all other deductions hereunder. In
such event no further payment to Company shall be made until such time as by
reason of the sale of further Company Records and/or Company Videograms the
aggregate of payments due to Company on an Accounting Date (after deduction of
the Returns Reserve and all other deductions hereunder) exceeds the value of
returns received by BMG since the last Accounting Date on which payment was
made to Company. BMG shall be entitled to charge interest on sums outstanding
in Company's account with BMG hereunder at the rate of 3% above Barclays Bank
pie's base lending rate until such time as Company's account is restored to a
credit balance or otherwise repaid to BMG's satisfaction.
4.6.5 Notwithstanding the foregoing it is hereby agreed that if at any
time in any Contract Year the total value of credits thus far issued to
Customers in that Contract Year in respect of non-faulty returns shall exceed
7.5% of the Gross Invoice Value of all Company Records and Company Videograms
thus far shipped in that Contract Year, then a further fee of 6% of Dealer
Price shall be charged to Company by BMG in respect of each non-faulty unit
returned thereafter for the remainder of that Contract Year. This fee (to be
referred to as the "Returns Handling Charge") shall be treated as an
Applicable Fee and charged to Company pursuant to clause 2 hereof.
4.7 Invoices
4.7.1 In accordance with BMG's own policy for its Records, BMG undertakes to
prepare invoices to Customers in respect of all Company Records and Company
Videograms distributed pursuant to this Agreement and to use its reasonable
endeavors to collect amounts due from such Customers pursuant to all such
invoices in accordance with its collection policy for invoices relating to
its own Records and Videograms.
4.7.2 Without prejudice to the above, Company shall be responsible for and
Company's account and statement with and from BMG shall be charged with all
bad debts arising out of non-payment of any invoice or part thereof relating
to Company Records and Company Videograms. Such bad debts shall be charged to
Company when the unpaid invoice in question is referred for legal action
and/or to a bad debt collection agency and/or when BMG has reason to believe
that such unpaid invoice is likely to become a bad debt. In the event that
the invoice is paid (whether in part or in full) then such monies less the
administration costs relating thereto and the legal costs and expenses of
recovering the same shall be credited to Company's account.
5. OTHER SERVICES PROVIDED BY BMG
5.1 Intentionally deleted.
5.2 MARKETING FACILITIES
5.2.1 BMG shall procure for Company upon request the services of any
company engaged by BMG for the mailing and distribution to the
trade and otherwise hereunder of promotional literature (herein
sometimes referred to as "Dealer Mail-Outs") which shall be
delivered by Company at its sole cost and expense to the relevant
company's premises (the minimum number of A4 sheets required for
any particular mail out being 3,000). Company hereby expressly
warrants, represents and undertakes to and with BMG and shall
ensure that the content of any such literature shall comply with the
Trade Descriptions Act and any other applicable regulations laws or
statutes and shall not infringe the copyright of any third party nor
shall be obscene or defamatory.
5.2.2 The delivery of release sheets and other promotional literature to the
BMG Distribution Centre or to such other location designated by BMG not less
than 48 hours prior to the date of such mail out as notified by BMG to
Company shall be Company's responsibility and BMG shall have no liability in
relation thereto.
5.2.3 The charge for the use of BMG's Dealer Mail-Out facility shall be that
set out at paragraph 9 of the Schedule
6. ACCOUNTING
6.1 BMG shall account to Company for Company Records and Company Videograms
distributed and invoiced by BMG to Customer Accounts in each calendar month
ofthe Term hereunder by rendering to Company a statement on the forty fifth
day after the end of each such month ("an Accounting") showing in respect
thereof (inter alia) the Gross Invoice Value during the month to which the
Accounting relates and the Applicable Fees due to BMG in respect of its
services to Company PROVIDED ALWAYS THAT when such forty fifth day shall fall
on a Bank Holiday or Saturday or Sunday then the relevant Accounting shall be
rendered on the next working day thereafter.
6.2 Company shall not permit Customers to take any reserves or retentions
nor otherwise come to any arrangement which shall allow Customers to pay
other than full invoice value by the due date unless by prior written
arrangement with BMG. If, notwithstanding such provision, Customers make such
retentions or delay payment for any reason pursuant to such unauthorized
arrangement or otherwise howsoever, BMG shall be entitled to withhold from
Company the same amount so withheld retained or delayed by such Customers
until payment of such sums is received by BMG, without incurring any liability
to Company.
6.3 Company shall upon execution of this Agreement deliver to BMG a fully
completed and duly executed undertaking in the form a copy of which is
annexed hereto and marked "VAT SELF BILLING SCHEME". Pursuant thereto BMG
shall (without thereby incurring any liability to Company in respect thereof)
submit VAT invoices to HM Customs and Excise in respect of supplies on behalf
of Company of Company Records and Company Videograms to Customers during the
month to which each Accounting relates and PROVIDED THAT such undertaking is
executed, BMG shall remit sums including VAT payments when Accounting to
Company hereunder subject to clause 6.4 hereof.
6.4 When rendering such Accounting BMG shall pay to Company the balance of
the Gross Invoice Value for which BMG itself has received full payment from
Customers after deduction from the Gross Invoice Value of the Applicable Fees
and any other deductions made hereunder including without limitation the
repayment instalments referred to in clause 10, bad debts, File Discounts,
Special Discounts, reserves and retentions and the value of any returns of
any description.
7. AUDIT:
Company shall have the right upon giving BMG not less than 90 days' prior
written notice to appoint an independent firm of chartered accountants to
inspect during the Term (but not more than once during each consecutive
twelve (12) month period thereof) and once thereafter within a period of
twelve (12) consecutive months following the expiration of the Term and during
normal working hours those documents relating solely to Company Records and
Company Videograms distributed by BMG hereunder and the calculation of sums
payable to Company hereunder. No firm or person shall be designated as such
accountant if their remuneration is to be calculated wholly or partially by
reference to the amount of any discrepancy revealed by such inspection. In the
event that an accountant is or is employed by a member of a firm which is
involved in a similar inspection of BMG's documents for any third party as of
the date designated in the notice hereunder then such accountant may not be
used for such inspection. Company shall procure that its accountant will prior
to the start of any inspection hereunder execute an undertaking to BMG to
treat as confidential all information regarding BMG's affairs and business
which he may acquire in the course of such inspection and not to disclose same
to any person except to the extent necessary to discharge his responsibility
to Company in relation to such inspection. Unless within two (2) years of the
date of any statement rendered hereunder Company shall have notified BMG in
writing of any specific objections thereto such statement shall be conclusive
evidence as to the total monies payable by BMG to Company hereunder during
the period covered by such statement and final and binding upon and not open
to dispute by Company
8. CONTINGENCIES:
8.1 Neither party shall be liable to the other for failure to fulfil any of
its obligations hereof or for delay hereunder if such failure or delay shall
be due caused by or resulting from adverse weather conditions, war, fire,
strike, lock-out, riot, act of God, legal act of any public or governmental
authority, shortage of raw materials or labor or outbreak of hostilities
(whether or not war is declared), act of terrorism, insurrection, civil
disturbance, flood, explosion, accident, theft, any act by any trade union or
any circumstances beyond the control of that party
8.2 Notwithstanding any contrary provision contained herein, BMG shall
have the right without liability to Company or any third party to decline the
distribution of any Company Record or Company Videogram which it has
reasonable cause to believe (a) may be in violation of any statute or
regulation or (b) may subject BMG to civil or criminal liability or (c) may
cause industrial unrest or disruption or (d) may put BMG in violation of any
agreements entered into by BMG or (e) may contain obscene or defamatory
material or (f) may in BMG's good faith business (or legal) judgment be in
contravention of public morals, contain libelous matter, violate or infringe
the copyright, moral rights, performance rights the rights of privacy or
any other rights of any person and/or infringe existing common law or
statutory rights or subject BMG to claims or demands from third
parties or (9) may be detrimental to the name or reputation of BMG
8.3 If BMG shall be unable or shall elect to decline to perform its
obligations hereunder as a result of any such contingency or condition
as mentioned in clauses 8.1 or 8.2 hereof Company may as its sole
remedy make other arrangements (at its sole cost and expense) with
respect to the specific Company Records and/or Company
Videograms affected by such contingency or condition and for the
duration thereof PROVIDED THAT Company shall have first given
BMG prior written notice of its intention to make such other
arrangements and such contingency still exists at the time such
arrangements are intended to become effective
9. TERMINATION AND EXPIRATION:
9.1 Either party may terminate this Agreement by prior written notice to
the other if the other of them shall commit any material breach of this
Agreement (otherwise than as a result of any contingency referred to
in clause 8 hereof) and shall not remedy the-same (if same is capable
of being remedied) within thirty days after receipt of notice in writing
from that party specifying the breach and calling for the same to be
remedied or shall not have commenced within such period with due
diligence to remedy the breach complained of in as short a time as is
reasonably practicable or, having so commenced, shall not continue so to
remedy same.
9.2 If Company shall compound or make any arrangement with its creditors or
go into liquidation (other than a voluntary liquidation for the purpose of
amalgamation or reconstruction) or have a receiver appointed of any of its
assets then BMG shall have the right by service of notice in writing to
terminate the Term of this Agreement.
9.3 Either party may terminate this Agreement by prior written
notice to the other if any contingency referred to in clause 8.1 hereof
shall prevent that other party from performing its obligations
hereunder for a continuous period of six months.
9.4 BMG shall have the option (by service of notice in writing) to
terminate the Term of this Agreement forthwith in the event that by the end of
any Contract Year the aggregate gross invoice value of sales of Records and
Videograms distributed by BMG on behalf of Company during the whole of such
Contract Year shall be less than five hundred thousand pounds (L500,000).
9.5 The termination howsoever occasioned of this Agreement shall
be without prejudice to any rights or obligations already accrued
prior to such termination and shall not destroy or diminish the binding
force of any of the provisions of this Agreement which are expressly or
by implication to come into effect or to continue to be effective
on or after such termination
9.6 The provisions of clauses 3.11 and 3.12 hereof (relating to
disposal of stocks) shall apply upon termination or expiration of the
Term.
9.7 Without limiting the provisions of clause 4.6.4 hereof, upon
serving notice pursuant to clauses 9.1, 9.2, 9.3 or 9.4 hereof,
reasonable reserves (if necessary in excess of the Returns Reserve) may
thereafter be retained by BMG until final accounting occurs which shall take
place within 120 days after such termination or expiration and thereupon
(subject to any other remedies available to BMG in respect of any unremedied
breach of this Agreement by Company) all such retentions pursuant to this
Clause (and Clause 4.6.4 hereof) shall be fully liquidated.
Notwithstanding the foregoing
(a) BMG may make a reasonable deduction from sums payable to Company in the
event of any dispute remaining unresolved by such time; and
(b) any SOR retentions shall be maintained until all such SOR sales have been
returned; and
(c) if any retentions made hereunder are insufficient to cover returns
hereunder BMG shall invoice Company in respect of such deficiency and
Company will pay to BMG the amount so invoiced within thirty (30) days
following the date of such invoice
10. WARRANTIES AND REPRESENTATIONS:
Company hereby represents and warrants to BMG:
10.1 that it has and will at all times during the Term have all such rights
in respect of Company Records and Company Videograms and otherwise as are
necessary to enable it to enter into this Agreement and to grant BMG the
rights herein granted and for Company to perform its obligations hereunder
and
such rights are and will remain free from any Pledges, charges, mortgages,
liens or any other encumbrances;
10.2 that the distribution and sale of any Company Records and Company
Videograms and related materials hereunder shall be in accordance
with the BPI Code of Conduct (a copy of which Company acknowledges it has
received from BMG) and will not as the result of any act or omission by
Company contravene any Act of Parliament, statutory instrument, regulation or
by-law and will not infringe any patent, trademark or copyright or any rights
of any third party and BMG shall have no liability in respect thereof
10.3 that all artists' and copyright royalties (including value added or
similar tax thereon) and any other similar charges of whatsoever nature
payable to any third party in respect of any Company Records and Company
Videograms manufactured sold or distributed hereunder shall be the sole
responsibility of Company and BMG shall have no liability in respect thereof
10.4 that it is under no disability, restriction or prohibition in respect of
its rights to enter into this Agreement and to perform its obligations
hereunder and that it has not entered into and will not enter into any
agreement with any third party which in any way conflicts or is
incompatible with any of the terms of this Agreement or derogates
from or otherwise adversely affects any rights granted to BMG hereunder
10.5 neither the Company Records and Company Videograms delivered
hereunder nor any material embodied therein or associated therewith
(including without limitation promotional literature) shall infringe the
rights of any third party or be obscene, defamatory of any person,
firm or company or be in violation of the Trade Descriptions Act or
any and all other applicable statutes and regulations
10.6 except as otherwise provided herein all costs and charges and
expenses incurred or to be incurred in connection with Company
Records and Company Videograms and the making of Master
Recordings embodied in Company Records and Company Videograms
shall be the sole responsibility of Company and shall be promptly paid
in full by Company when due
10.7 that it is the exclusive owner of all trademarks, trade names and
logos used by Company in connection with Company Records and
Company Videograms and that no other person or entity has an
interest therein or any grounds for disputing Company's use thereof.
10.8 that it shall be fully responsible for any and all "VAT" in connection
with Company Records withdrawn from the Promotional Record Account
10.9 that Company shall ensure that the outer sleeve or other outer
packaging of all Company Records and Company Videograms distributed and sold
hereunder shall bear in the appropriate place the legend "Distributed by BMG
Entertainment International UK & Ireland Limited" or any other appropriate
legend which BMG shall notify that Company shall employ in substitution
therefor and so that the name and logo of BMG shall always appear in the
type-face directed by BMG and in accordance with the artwork provided by BMG.
BMG in this connection hereby grants to Company a non-exclusive licence
during the Term to use its logo or mark solely for the purposes set
out herein and not otherwise.
11. INDEMNITIES:
Company undertakes and agrees that it shall upon demand by BMG fully
indemnify BMG and keep it indemnified against all actions, claims, demands,
liabilities, costs, charges and expenses whatsoever (including reasonable
legal fees and expenses) which may be brought against BMG or which BMG may
sustain suffer or incur by reason of any breach or alleged breach or
non-observance of any provisions hereof or any guarantee, warranty or
representation or undertakings given by Company hereunder being untrue,
inaccurate or unfulfilled. In the event of any claim being made to which this
indemnity applies BMG may withhold from any sums payable by BMG to Company
under this Agreement and any other agreements between the parties hereto an
amount reasonably sufficient to meet such claim or potential claim BMG shall
give Company prompt notice in writing of any claim made to which this
indemnity applies and BMG shall advise Company
of any monies withheld hereunder in respect thereof, Company shall have the
right to participate in the defense of such claim at Company's sole
expense. BMG shall not settle any claim without Company's consent which
consent shall not be unreasonably withheld or delayed
12. MISCELLANEOUS:
12.1 Assignment The benefit and/or burden of this Agreement to BMG
and the rights and/or obligations of BMG hereunder may be freely
assigned by BMG. The Company may not assign the benefit or burden of this
agreement
12.2 Partnership Nothing herein contained shall constitute a partnership
or joint venture between the parties or constitute either party the
representative or agent of the other. Neither party shall hold itself
out as carrying on business in circumstances contrary to the provisions of
this Agreement and neither party shall become liable by reason of any
representation, act or omission of the other party contrary to such
provisions
12.3 Notice All notices hereunder and all requests and approvals in
connection herewith shall be in writing and shall be addressed as
follows :
To: The Company at the address specified in the Schedule hereto
To: BMG at Lyng Lane West Bromwich West Midlands B70 7ST Attention: Director,
Distribution and Operations and a copy to BMG Entertainment International UK
&
Ireland Limited Bedford House 69-79 Fulham High Street LONDON SW6 3JW
Attention: Director, Business Affairs or such other address as may be so
notified in writing. Notices shall be sent by recorded delivery or registered
post or personal delivery and shall be deemed to be given on the day on which
they are sent in such manner
12.4 Modification The terms and provisions herein constitute the entire
agreement between the parties and shall supersede all previous
communications either oral or written. No modification amendment
or waiver of this Agreement or any provision hereof shall be binding
upon any party unless confirmed in writing under their hands or the
hands of their duly authorized representatives. No waiver of any
provisions of or default under this Agreement shall affect any party's
right thereafter to enforce such provision or to exercise any right or
remedy hereunder
12.5 Headings. Clause headings used herein are for convenience of
reference only and are not part of the clause and shall not be used in
construing the clause or this Agreement
12.6 Extension of Term. BMG shall have an irrevocable option to extend
the Term by a further two (2) years ("the Extension Period") which
option shall be exercisable by notice in writing given by BMG to
Company no later than three (3) months prior to the date when the
Term would otherwise expire. In the event that BMG exercises its
option to extend the Term in accordance with this clause 12.6 the
Extension Period shall commence on the first day of September
1998 and all of the terms and conditions contained herein shall apply
in respect thereof SAVE THAT the Applicable Fees shall be subject
to renegotiation (both parties acting in good faith) using as a guide
the preceding Contract Year's Applicable Fees.
12.7 Governing Law. This Agreement and any and all extensions and/or
modifications thereof shall be governed by and construed in
accordance with the laws of England and the High Court of England
and Wales shall have exclusive jurisdiction to determine all matters
arising hereunder
AS WITNESS the hands of the duly authorized representatives of the
parties hereto the day and year first above written.
SIGNED/s/John W. Hendson
For and on behalf of:- In the presence of:-/s/S. Smith
BMG ENTERTAINMENT INTERNATIONAL
UK & IRELAND LIMITED
SIGNED/s/
For and on behalf of:- In the presence of:
IMMEDIATE RECORDS LIMITED
DISTRIBUTION AGREEMENT
SCHEDULE
TO THE AGREEMENT DATED 11th October 1996
1. Company Name: IMMEDIATE RECORDS LIMITED
Address: 10 Molasses Row
Plantation Wharf.
LONDON SW11 3TW
(for BMG administrative purposes only:
Contact Name: Tony Calder/Bill Kimber
Telephone No. 0171 978 6778
Fax No. 0171 978 6559/6530)
Company No: 3154022
2. Term: Two (2) years commencing 1st September 1996
3. Domestic Fee (both Audio and Video): twelve percent (12%)
PROVIDED THAT in the event that by the end of any Contract Year the aggregate
gross invoice value of sales of Records and Videograms distributed by BMG on
behalf of Company during the whole of such Contract Year shall exceed one
million pounds (L1,000,000), then the Domestic Fee for the whole of the next
following Contract Year only shall be eleven percent (11%)
AND PROVIDED FURTHER THAT in the event that by the end of any Contract Year
the aggregate gross invoice value of sales of Records and Videograms
distributed by BMG on behalf of Company during the whole of such Contract
Year
shall exceed two million pounds (L2,000,000), then the Domestic Fee for the
whole of the next following Contract Year only shall be ten percent (10%)
4. Intentionally deleted
5. Intentionally deleted
6. Promotional Fee (both Audio and Video): 5% on Dealer Price
7. Stock Transfer Charge: 5% on Dealer Price
8. Returns Reserve: 15%
9. Dealer Mail-Out: 14p per A4 sheet - (A minimum of 3,000 sheets
required for BMG to provide this service)
V.A.T. SELF-BILLING SCHEME
U N D E R T A K I N G
We, the undersigned, in consideration of BMG Record UK Limited's
("BMG's") promise to use its reasonable endeavors to notify HM Customs
& Excise in a timely manner of the details of all supplies of Company
Records and Company Videograms (as defined in the agreement annexed
hereto) occurring in each month of the Term (as defined likewise), such
procedure being referred to as "the Self-Billing System", hereby consent
and undertake as follows:
1. to co-operate fully with and to execute any documents required by
BMG for the Self-Billing System
2. to issue no tax invoice in respect of any transactions covered by
the Self-Billing System
3. to notify BMG immediately in the event that we shall be de
registered for VAT purposes and to indemnify BMG in respect of any
VAT which may incorrectly be paid to us following our failure so to
notify BMG
4. to notify the Distributed Labels Accountant of BMG (whose present
details are, for administrative purposes, given below) of any change in
any details such as the VAT number given below or our address
It is hereby acknowledged by us and by BMG that the Self-Billing System
has been approved by HM Customs & Excise and that we are not thereby
relieved of any of our statutory or other legal duties in respect of our
accounting thereto in respect of VAT or other excise duty payments. BMG
shall be indemnified by us and held harmless from any claims costs or
damages which may at any time be made or ordered against us by HM
Customs & Excise or otherwise in respect of tax invoices raised pursuant
to the Self-Billing System.
NAME UNDER WHICH REGISTERED: IMMEDIATE RECORDS LIMITED
V.A.T. REGISTRATION No:672 0233 62
DATE OF V.A.T. REGISTRATION:......................................
DATE: SIGNED:/s/
duly authorized for and on behalf of
IMMEDIATE RECORDS LIMITED
...... /s/E.A. Wallace
(SECRETARY)
Please return to: Wendy Wright
Distributed Labels Accountant
BMG Entertainment International UK & Ireland Limited
Bedford House
69-79 Fulham High Street
London SW6 3JW
SCHEDULE 2
BMG Entertainment International
UK & Ireland Limited
Bedford House
69-79 Fulham High Street
LONDON SW6 3JW
Dear Sirs,
In consideration of BMG enforcing into the attached Distribution Agreement
(as
hereinafter defined) with us, we the undersigned (the "Pledgor") undertake to
and agree with BMG as follows:
1. Definitions
1.1 In this Pledge unless the context otherwise requires:
"Pledged Goods" means: all goods and warrants delivery orders
warehouse-keepers' certificates or receipts and all documents of title and
the goods to which the same relate which are now or may in the future be
deposited or lodged with or otherwise in the possession of or transferred to
or warehoused or stored in the name of BMG or its agents or nominees or
otherwise held by or to its or their order or under its or their control
whether for safety, custody, security or for any specific purpose or
generally, and including without prejudice to the generality of the foregoing
all those goods transferred into the possession of BMG pursuant to sub-clause
2.1, or otherwise under, the Distribution Agreement ("the Agreement") of even
date herewith between the Pledgor and BMG.
"Secured Liabilities" means all monies, obligations and liabilities whether
principal interest or otherwise which may now or at any time in the future be
due owing or incurred by the Pledgor to BMG on any account whatsoever or
howsoever owing or incurred including without limiting the generality of the
foregoing under or pursuant to the Agreement.
2. Covenant to Pay
2.1 The Pledgor covenants when the same shall be or become due or,
in the absence of any specified due date (contained in the Agreement),
on demand to pay and discharge the Secured Liabilities to BMG.
3. Pledge
3.1 BMG shall have a pledge on the Pledged Goods which shall be
continuing security for the payment or discharge of the Secured Liabilities.
4. Representations Warranties and Covenants by the Pledgor
4.1 The Pledgor represents and warrants to BMG and undertakes that:
(a) it has good title to the Pledged Goods and that the documents
referred to in clause 1.1 are valid and that the Pledged Goods are and
will remain free from any pledge mortgage charge lien or any other
encumbrance.
5. Authority
5.1 Intentionally Deleted
5.2 The Pledgor irrevocably authorizes BMG and its agents and nominees
as the agent of the Pledgor to execute all documents and do all other
acts and things whatsoever which BMG considers necessary or
desirable to perfect its security or to effect any sale of any of the
Pledged Goods or to enforce any rights to which the Pledgor or BMG
is entitled in connection with the Pledged Goods.
6. Enforcement
6.1 If any of the Secured Liabilities are not paid or discharged by the
Pledgor in accordance with clause 2.1 BMG may without further
notice to the Pledgor sell transfer or assign or otherwise dispose of
the Pledged Goods in such manner and generally on such terms and
conditions and for such consideration as BMG may in its absolute
discretion think fit.
6.2 BMG may apply the proceeds of the sale or other disposal of the
Pledged Goods in or towards the payment of the costs incurred and
the Secured Liabilities whether or not then due and payable in such
order as BMG may in its absolute discretion determine.
6.3 Sections 93 and 103 of the Law of Property Act 1925 shall not
apply to this Pledge.
6.4 BMG shall not be liable to account to the Pledgor (whether as
mortgage in possession or on any other basis) for anything except its
actual receipts or be liable to the Pledgor for any loss or damage
arising from the possession or realization of the Pledged Goods or for
any act default or omission in relation to them whether on the part of
BMG or any of its agents or nominees.
7. Further Assurance
7.1 The Pledgor shall whenever requested by BMG immediately execute
and sign all such transfers and documents and do all such things as
BMG may require at the Pledgor's cost for the purpose of perfecting
its title or security to any of the Pledged Goods to BMG its agents or
nominees or facilitating any sale or other disposition of any of the
Pledged Goods or more effectively providing security to BMG for the
payment and discharge of the Secured Liabilities.
8. Costs and Indemnity
8.1 All costs charges and expenses properly incurred by BMG in
relation to this Pledge shall be reimbursed by the Pledgor to BMG on demand
on a full indemnity basis and until so reimbursed shall carry interest as
mentioned in the definition of "Secured Liabilities" from the date of
payment to the date of reimbursement.
8.2 BMG and its agents shall be entitled to be indemnified on a full
indemnity basis against all actions claims liabilities costs charges and
expenses suffered or incurred by them directly or indirectly in connection
with the Pledged Goods or in the exercise or purported exercise of any of the
powers or discretion to which they are entitled under this Pledge and BMG may
retain and pay all sums in respect of the same out of the proceeds of sale of
the Pledged Goods.
9. Miscellaneous
9.1 The security constituted by this Pledge shall be in addition to
and shall not be prejudiced determined or affected or operate so as in any
way to determine prejudice or affect any other security which BMG may now or
at any time in the future hold for or in respect of all or any part of the
Secured Liabilities nor shall any prior security held by BMG over the Pledged
Goods or any part of them merge in the security constituted by this Pledge
which will remain in force and effect notwithstanding any intermediate
settlement of account as a continuing security until discharge by BMG.
9.2 BMG may without discharging or in any way affecting the security
created by this Pledge or any remedy of BMG grant time or other
indulgence or abstain from exercising or enforcing any remedies
securities guarantees or other rights which it may now or in the future
have from or against the Pledgor and may make any other
arrangement variation or release with any person or persons without
prejudice either to this Pledge or liability of the Pledgor for the
Secured Liabilities.
9.3 The provisions of this Pledge shall be severable and if at any
time any one or more such provisions is or become invalid illegal or
unenforceable the validity legality and enforceability of the remaining
provisions shall not in any way be impaired.
9.4 The rights and remedies of BMG provided by this Pledge are
cumulative and are not exclusive of any rights powers or remedies
provided by law and may be exercised from time to time and as often
as BMG may deem expedient.
9.5 Any reference in this Pledge to any statute or any section of any
statute shall be deemed to include reference to any statutory
modification or re-enactment thereof for the time being in force.
10. Notices
10.1 Any demand or notice under this Pledge shall be in writing signed
by a Director of BMG or may be sent by post to the Pledgor's address
specified in this Agreement. If such demand or notice is sent by post
it shall be deemed to have been received on the day following the day
on which it was posted and shall be effective notwithstanding that it
was not in fact delivered or was returned undelivered.
11. Governing Law and Jurisdiction
11.1 This Pledge shall be governed by and construed with the laws of
England and the Pledgor hereby irrevocably submits to the non-exclusive
jurisdiction of the English Courts.
EXECUTED as a deed under )
the Common Seal of )
IMMEDIATE RECORDS LIMITED )
In the presence of )
Director:/s/
Secretary:/s/E. A. Wallace
Ladenburg Thalmann [letterhead]
January 1, 1998
Immediate Entertainment Group, Inc.
Paul Ehrlich Strasse 17
63322 Rodermark
GERMANY
Re: Restatement of Retention Agreement Dated October 31, 1997
Attention: Michael Berresheim
Chairman
Gentlemen:
We are writing this letter to restate and confirm our agreement
("Agreement") that Porter Bibb is authorized to represent Immediate
Entertainment Group, Inc. and its affiliates and related entitles
(collectively, the "Company") and to assist the Company as its financial
advisor in connection with the possible acquisition of acquisition targets
introduced by Mr. Bibb. Also covered by this Agreement is any transaction
involving the Company by means of any merger, consolidation,
recapitalization, joint venture, business combination, exchange offer or
purchase or sale of securities or assets or transaction introduced by Mr. Bibb
which results in a change of control of any acquired entity, to its assets,
securities or business. For the purpose of this Agreement, any of the
foregoing shall constitute a "Transaction."
This Agreement shall become effective at November 4, 1997, and the
initial term of this Agreement and the appointment provided for herein shall
end on the earlier of (i) February 28, 1998, and (ii) the date on which the
proposed Transaction introduced by Mr. Bibb, relating to a German television
network, closes. The Company will have the option to extend this Agreement
at the end of the initial or any renewal term for successive three month
renewal terms. The period during which this Agreement remains in effect is
referred to as the "Term." At such time after the initial term as the Company
and Mr. Bibb agree to advantageous, Mr. Bibb will introduce the Company to
Ladenburg Thalmann & Co., with a view toward formalizing an investment banking
relationship between the Company and that firm. The Company agrees to use
reasonable efforts to effect one or more Transactions acceptable to it during
the Term.
I. Performance of Services
Under this Agreement, Mr. Bibb will work with the Company and use
reasonable efforts to attempt to consummate one or more satisfactory
Transactions, including the following services as reasonably requested by the
Company.
1. Provide corporate finance advise and consultation, as reasonably
required to assist in this engagement.
2. Discuss and evaluate with the Company various strategies and
advise the Company with respect to the implementation of these
strategies in order to conclude one or more Transactions
designed to achieve the Company's aforestated acquisition
objectives.
3. Advise and assist the Company in the negotiation and consummation
of one or more transactions.
II. Compensation of Services
A. As compensation, for all services rendered hereunder, the Company
shall pay Mr. Bibb a monthly retainer on the first day of each calendar month
during the Term, commencing with January 1998, in the amount of $25,000. In
addition, the Company shall grant Mr. Bibb warrants to purchase 250,000
shares of the Company's common stock, $0.001 par value, at $2.00 per share for
each Transaction introduced by Mr. Bibb that is consummated by the Company
during the Term or within six months after the end of the Term and which
involves Aggregate Consideration in the amount of $5,000,000.00 or more.
Aggregate Consideration is defined and computed as follows:
1. The total purchase price and other consideration paid by the
Company upon the consummation of any Transaction (including payments made in
installments, paid into escrow and/or deferred), inclusive of cash, debt and
equity securities, notes, property, shareholder payables and indebtedness
assumed or retired.
2. If a portion of such consideration includes contingent payments,
Aggregate Consideration shall also include the value of such payments when
and if paid. If the Aggregate Consideration for the Transaction consists in
whole or in part of securities or other property, for the purposes of
calculating the amount of Aggregate Compensation, the value of such securities
or other property will be the value thereof on the day preceding the
consummation of the Transaction as the Company and Mr. Bibb agree: provided
however that in this case of securities for which there is a public trading
market, value will be determined by the average last sales prices for such
securities for the last twenty trading days prior to such consummation. In
the case of debt securities for which there is no public trading market, the
value thereof shall be the principal amount thereof. If there is no public
trading market for securities or other property other than debt securities
receivable as part of Aggregate Consideration and the parties are unable to
agree on their value, then each of Mr. Bibb and the Company will select an
investment banking firm respected in the merger and acquisition field to
determine a value and the midpoint between the two values established by the
two independent experts will be the fair market value for the purposes hereof.
B. The Company agrees to reimburse Mr. Bibb for reasonable
out-of-pocket expenses up to a maximum of $10,000 incurred in carrying out
the terms of this Agreement, including telephone, travel, facsimile, and
courier fees. Any reimbursements of expenses over that amount must be
approved by the Company. These out-of-pocket expenses will be payable from
time to time promptly upon invoicing by Mr. Bibb after commencement of this
Agreement.
C. If the Company requires financing in order to consummate a
Transaction, Mr. Bibb will seek to arrange such financing on condition that
the Company and Mr. Bibb enter into a separate agreement on mutually
acceptable terms providing additional compensation to Mr. Bibb for such
services.
The provisions of this section II shall survive the termination and
expiration of this Agreement.
III. Indemnification
The Company and Mr. Bibb hereby agree to the terms and conditions of
the Indemnification Agreement attached hereto as Appendix A with the same
force and effect as if such terms and conditions were set forth at length
herein.
IV. Disclosure
Any financial or other advise, descriptive memoranda or other
documentation rendered by Mr. Bibb pursuant to this Agreement may not be
disclosed publicly. All non-public information provided by the Company to
Mr. Bibb will be considered as confidential information and shall be
maintained as such by Mr. Bibb, except as required by law or as required to
enable Mr. Bibb to perform services pursuant to this Agreement, until the same
becomes known to third parties or the public without release thereof by Mr.
Bibb.
The Company agrees to provide to Mr. Bibb, among other tings, all
reasonable information requested or required by Mr. Bibb, including, but not
limited to, information concerning historical and projected financial results
and possible and known litigious, environmental and other contingent
liabilities of the Company. The Company also agrees to make available to Mr.
Bibb such representatives of the Company, including, among others, directors,
officers, employees, outside counsel and independent certified public
accountants, as Mr. Bibb may reasonably request. The company will promptly
advise Mr. Bibb of any material changes in its business or finances. The
Company represents that all information made available to Mr. Bibb by
the Company will be complete and correct in all material respects and will
not contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein not misleading
in light of the circumstances under which such statements are made. In
rendering his services hereunder, Mr. Bibb will be using and relying primarily
on such information without independent verification thereof or independent
appraisal of any of the Company's assets. Mr. Bibb does not assume
responsibility for the accuracy or completeness of the information to which
reference is made above.
V. Obligation of Porter Bibb
The services herein provided are to be rendered solely to the Board of
Directors of the Company. They are not being rendered by Mr. Bibb as an
agent or as a fiduciary of the shareholders of the Company and Mr. Bibb shall
not have any liability or obligation with respect to his services hereunder to
such shareholders or any other person, firm or corporation.
VI. Entire Agreement, Government Laws and Jurisdiction, Etc.
This Agreement sets for the entire understanding of the parties
relating to the subject matter hereof and supersedes and cancels any prior
communications, understandings and agreements between the parties. This
Agreement cannot be terminated or changed, not can any of its provisions be
waived, except by written agreement signed by all parties hereto. This
Agreement shall be binding upon and insure to the benefit of any successors,
assigns, heirs and personal representatives of the Company and Mr. Bibb.
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York applicable to contracts made and to be
performed solely in such state by citizens thereof. Any dispute arising out
of this Agreement shall be adjudicated in the courts of the State of New York
or in the federal courts sitting the Southern District of New York, and the
Company hereby agrees that service of process upon it by registered or
certified mail at its address set forth above shall be deemed adequate and
lawful. The parties hereto shall deliver notices to each other by personal
delivery or by registered or certified mail (return receipt requested) at the
addresses set forth above. Courtesy copies of all notices will also be sent
to Michael B. Kent, Esq. c/o Kent, Beatty & Gordon, LLP at 598 Madison
Avenue, New York, NY 10022.
VII. Acceptance
Please confirm that the foregoing restatement is in accordance with
your understanding by signing upon behalf of the Company and returning an
executed copy of this Agreement, whereupon after execution by Mr. Bibb it
shall become a binding agreement between the company and Mr. Bibb. A telecopy
of a signed original of this Agreement shall be sufficient to bind the parties
whose signatures appear hereon.
Very truly yours,
/s/Porter Bibb
ACCEPTED AND AGREED TO:
IMMEDIATE ENTERTAINMENT GROUP, INC. AND ITS AFFILIATES AND RELATED ENTITIES
By:/s/Michael Berresheim, Chairman
Date as of: January 1, 1998
EXHIBIT 21
SUBSIDIARIES OF IMMEDIATE ENTERTAINMENT GROUP, INC. (THE "COMPANY")
(1) Dolphin Studios Musikproduktions GmbH, a German corporation (wholly-owned
subsidiary).
Dolphin Studios operates a recording studio complex located in
Morfelden-Walldorf, near Frankfurt, Germany. The complex consists of four
studios and two control rooms using state-of-the-art digital and analog
recording and outboard equipment and peripherals. Dolphin Studios also
offers master restoration and enhancing services and pre-mastering facilities
for compact disk ("CD") manufacturing. Artists who have recorded or mastered
at Dolphin Studios include 10cc, America, Canned Heat and Nina Hagen, among
others.
(2) Chartware (Swiss), Inc., a Delaware corporation formerly known as
Immediate (Swiss), Inc.(wholly-owned subsidiary).
Chartware (Swiss), Inc. is engaged in the business of acquiring new
recording talent and catalogs in Switzerland. It operates from offices
located in Niederurnen, Switzerland.
(3) Chartware Media Corporation, a Delaware corporation formerly known as
Immediate Music Corporation(wholly-owned subsidiary).
Chartware Media Corporation ("CMC") owns record labels including
"Mausoleum" for heavy metal and rock recordings; "SilenZ" for
singer-songwriter recordings; "Actual" for oldies, contemporary and classical
music; "4th Dimension" for dance/pop and contemporary music; "Frankfurt Beat"
for techno; and "Allemania", a German language label for pop and folk music.
(4) Chartware Record Service GmbH, a German corporation (wholly-owned
subsidiary of CMC).
Chartware is engaged in the production of CD's, including graphics and
printing, at its CD manufacturing facility and warehouse in Rodermark,
Germany. Chartware also produces CD-ROM for a limited number of third party
clients, including Buhl Data, Nintendo, Porsche, ZDF and Sony, and masters
sound recordings at its facility.
(5) Music Action Limited, an English corporation (wholly-owned subsidiary of
CMC).
Music Action Limited ("MAC") operates a European direct sales mail order
catalog containing a broad range of musical CD's from the Company's own
catalog, as well as the catalogs of such major manufacturers as Sony,
Polygram, EMI and WEA. The MAC catalog contains recordings in a wide variety
of musical genres, including musicals and soundtracks, rock and pop, disco,
reggae, swing, classical, country, folk, soul, international and children's
music. MAC also offers direct sales of CD-ROM's through its catalog. In
addition, MAC offers a hard rock mail order catalog known as "MAC Loud." MAC
Loud currently has approximately 2500 subscribers. Purchases through the
catalogs are made by completing and mailing an order postcard to MAC's
offices in Rodermark, Germany, or by fax. Orders are then shipped to the
address given by the purchaser.
MAC is also preparing to offer to German investors only an
investment fund which is intended to raise capital for its music publishing,
manufacturing, catalog acquisition, talent development and music and film
production operations. The MAC fund is to be offered to German investors
only, through a professional sales force, which is to receive a commission of
15% of all sales made.
(6) Chartware Records Ltd., an English corporation formerly known as
"Immediate Records Limited(wholly-owned subsidiary of CMC).
Chartware Records Ltd. ("CRL") is responsible for the development of new
talent and the acquisition of catalogs, product clearances and licensing of
product for compilation releases and series. CRL, through its U.K. office,
is also responsible for marketing, promotion and distribution of artists and
repertoire. In 1997, CRL released its first album, "Classic Moody Blues
Hits," by the Frankfurt Rock Orchestra, featuring the voice of Moody Blues
singer Justin Hayward. CRL has A & R scouts searching for talent in Los
Angeles, Lexington, Memphis, Austin, New York, Amsterdam, Frankfurt and
London. CRL also plans to release two new record labels: "Immediate Energy"
for dance music; and "Immediate Classics" for re-releases of great recordings
from the past and full albums by influential artists.
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<NAME> IMMEDIATE ENTERTAINMENT GROUP, INC.
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