<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 6, 1998
FILE NO. 333-________
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM SB-2
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
----------------
PTN MEDIA, INC.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 7371 38-3399098
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
313 NORTH FIRST ST., SUITE 8B, ANN ARBOR, MICHIGAN 48104 (734) 327-0579
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES)
313 NORTH FIRST ST., SUITE 8B, ANN ARBOR,
MICHIGAN 48104 (ADDRESS OF PRINCIPAL PLACE OF BUSINESS
OR INTENDED PRINCIPAL PLACE OF BUSINESS)
PETER KLAMKA, PRESIDENT
PTN MEDIA, INC.
313 NORTH FIRST ST., SUITE 8B, ANN ARBOR, MICHIGAN 48104 (734) 327-0579
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
----------------
COPIES TO:
DAVID N. FELDMAN, ESQ.
LAW OFFICES OF DAVID N. FELDMAN
36 WEST 44TH STREET, SUITE 1201
NEW YORK, NEW YORK 10036
(212) 869-7000
FAX: (212) 997-4242
----------------
APPROXIMATE DATE OF PROPOSED SALE TO
THE PUBLIC: As soon as practicable after the effective
date of this registration statement.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] __________
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ] ____
If this Form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ] ____
If delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following box. [ ]
----------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE PER AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED UNIT OFFERING PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
COMMON STOCK,
PAR VALUE $. 001 PER SHARE.................. 400,000 SHARES $5.00 $2,000,000 $ 590
</TABLE>
(1) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
<PAGE>
Preliminary Prospectus dated _____________, 1998. Subject to Completion.
PROSPECTUS
PTN MEDIA, INC.
400,000 SHARES OF COMMON STOCK
PTN MEDIA, INC., a Delaware corporation (the "Company") is offering hereby
400,000 shares (the "Shares") of Common Stock, $.001 par value per share (the
"Common Stock") of the Company. This offering (the "Offering") will terminate at
5:00 p.m. on the date which is 30 days after the date of this Prospectus, unless
extended at the Company's discretion for up to an additional 30 day period (the
"Expiration Date"). Pending the closing of the sale of the Shares, all proceeds
will be deposited in a non-interest bearing escrow account at University Bank,
Ann Arbor, Michigan. All subscriptions for Shares are irrevocable. No minimum
number of Shares is required to be sold by the Company in this Offering. If at
the Expiration Date less than all of the Shares have been subscribed for,
subscriptions that have been received by the Company shall remain effective and
this Offering shall terminate with respect to the unsubscribed Shares. See "Plan
of Distribution."
The Company will offer and sell the Shares on a "best efforts" basis to
investors directly through its officers and directors, and may also engage
registered broker-dealers ("Selling Agents") to provide financial advice and to
assist, on a "best efforts" basis, as selling agents, in the solicitation of a
portion of the subscriptions to purchase Shares in this Offering. No Selling
Agent will have any obligation to purchase or accept any Shares. See "Plan of
Distribution."
Prior to the Offering, there has been no public market for the Common
Stock. There is no assurance that an active trading market in the Common Stock
will develop or that, if developed, any such market will be sustained. The
offering price of the Shares has been determined by the Company and bears no
relationship to the Company's asset value, net worth or other established
criteria of value. See "Risk Factors" and "Plan of Distribution"
THESE SECURITIES ARE HIGHLY SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK AND
SHOULD BE CONSIDERED ONLY BY PERSONS WHO CAN AFFORD THE LOSS OF THEIR ENTIRE
INVESTMENT. IN ADDITION, PURCHASERS OF THE SECURITIES WILL SUFFER IMMEDIATE
SUBSTANTIAL DILUTION IN THAT THE BOOK VALUE PER SHARE OF THE COMMON STOCK AFTER
THIS OFFERING WILL BE SUBSTANTIALLY LESS THAN THE PUBLIC OFFERING PRICE OF THE
COMMON STOCK. SEE "RISK FACTORS" AND "DILUTION" AT PAGES ______ AND_____ .
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Selling Agent
Discounts and Proceeds to
Price to Public Commissions(1) Company(2)
Per Share............. $5.00 $.50 $4.50
Total ................ $2,000,000 $200,000 $1,800,000
(1) Reflects selling commissions of up to 10% of the offering price which may
be payable with respect to those Shares offered and sold through Selling
Agents, on the Company's behalf. It is assumed for the purposes of this
table that all 400,000 Shares are sold in this Offering and that all such
Shares are sold through Selling Agents. The Company will agree to indemnify
any participating Selling Agents against certain liabilities, including
liabilities under the Securities Act of 1933, as amended. See "Plan of
Distribution."
(2) Before deducting expenses of the Offering payable by the Company estimated
at $200,000. See "Use of Proceeds" and "Plan of Distribution."
The Shares are offered subject to prior sale, allotment, withdrawal,
cancellation or modification of this Offering without notice, delivery and
acceptance by the Company and/or any Selling Agents, approval of counsel and
certain further conditions. The Company reserves the right, in its discretion,
to reject orders, in whole or in part, for the purchase of any of the Shares
offered hereby.
The date of this Prospectus is ___________________, 1998
<PAGE>
PICTURES
At the date of this Prospectus (the "Effective Date"), the Company will
become subject to the informational requirements of the Securities Exchange Act
of 1934, as amended (the "Exchange Act") and, in accordance therewith, will be
required to file reports, proxy information statements and other information
with the Securities and Exchange Commission (the "Commission"). Accordingly,
such reports, proxy statements and other information can be inspected and copied
at the Commission's principal office, Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549; the Northeast Regional Office of the
Commission at 7 World Trade Center, Suite 1300, New York, New York 10048; and
the Midwest Regional Office of the Commission, Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661, where copies may be obtained upon
payment of the fees prescribed by the Commission. Such documents may also be
obtained through the web site maintained by the Commission at
http://www.sec.gov.
The Company intends to furnish to its stockholders annual reports
containing financial statements audited and reported on by its independent
public accounting firm and such other periodic reports as the Company may
determine to be appropriate or as may be required by law.
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, appearing
elsewhere in this Prospectus. Each prospective investor is urged to read this
Prospectus in its entirety and should carefully consider the matters set forth
in "Risk Factors." Unless otherwise indicated, the information in this
Prospectus does not give effect to the exercise of 45,000 warrants to purchase
Common Stock issued in July and August 1997 (the "Bridge Warrants") or the
exercise of options granted or to be granted under or pursuant to the Company's
1998 Stock Option Plan (the "Option Plan").
Unless the context otherwise requires, as used in this Prospectus, "PTN"
and "the Company" refer to PTN Media, Inc. and its predecessor, Interactive
Entertainment Studio, Inc., which was incorporated in the State of Nevada in May
1997, and which was merged with and into PTN Media, Inc. on March 9, 1998, for
the sole purpose of changing the domicile of the company to Delaware.
THE COMPANY
PTN is an interactive media content provider focusing on providing leading
branded content for well-defined target audiences using a combination of new and
traditional media. The Company's strategy is to create content that is of great
appeal to its targeted audience and attract advertisers desiring to reach this
audience. The Company currently provides this content on its interactive web
site known as "Fashion House with Niki Taylor, which utilizes the name and
likeness of well-known model Niki Taylor. The Company also plans to provide
similar content on additional web sites hosted by other well-known models and
celebrities, including a web site to be hosted by well-known model Tyra Banks,
as well as through radio, television, print and other forms of traditional
media. The Company's initial web sites will focus primarily on fashion, beauty,
style, fitness and related subjects. In addition, the Company plans to create,
market and sell calendars and electronic planners featuring photographs of
models and other celebrities, the first of which will be a 1999 calendar and
electronic planner including a collection of photographs of Tyra Banks (the
"Tyra Banks Calendars").
The Company, through its predecessor, commenced operations in May 1997. At
that time it entered into a License Agreement with Niki Taylor. That agreement
provides for, among other things, the right to use her name and likeness in
connection with the Company's "Fashion House with Niki Taylor" web site. Since
commencement of operations, the Company has entered into an agreement with a web
site designer and direct marketing agreements to sell flowers, videos and music
compact disks on the Niki Taylor web site. The Company also recently entered
into a License Agreement with Tyra Banks, similar to its license with Niki
Taylor, and is currently negotiating with other well-known models to develop web
sites which they will host. The Company also has entered into agreements with
certain advertisers whose banner advertisements appear on its initial web site,
and is negotiating with additional advertisers to place banner advertisements on
its current and/or future web sites. There can be no assurance that any of these
negotiations will be successful.
Use of the Internet has grown steadily in recent years. According to
International Data Corporation, an industry source, the number of users of the
World Wide Web has increased from an estimated 16.1 million individuals at the
end of 1995 to approximately 34.6 million users at the end of 1996, and this
number is expected to increase to approximately 200 million users by the end of
the year 2000. The Company's initial strategy is to capitalize on the
opportunities created by the growth of this rapidly developing market,
particularly by creating web sites targeting young women, which the Company
believes is the fastest growing segment of the population using the Internet.
The Company's plan is to develop web sites featuring popular fashion models,
many of whom, such as Niki Taylor and Tyra Banks, are commonly referred to as
"supermodels" in publications and other media. The Company, in the future, also
may create web sites featuring other celebrities. These web sites are developed
to appeal to women between the ages of 18 and 30, although the Company believes
that some of the content it provides also appeals to men of similar ages. The
Company's current web site focuses primarily on fashion, beauty, style, fitness
and related subjects, and offers several features, such as monthly letters from
Niki Taylor, daily updated fashion editorials, photo scrapbooks featuring Niki
Taylor, interactive chat sessions with Niki Taylor, downloadable electronic
calendars featuring Niki Taylor, entertainment coverage (e.g. movie, television
and book reviews) and cooking and diet tips. The Company plans to operate
additional web sites in the future, which will offer similar features and
services.
The Company, similar to other web site operators, has recognized the
growing commercial opportunities presented by the Internet and the World Wide
Web, which the Company believes is emerging as a global marketplace for the
transaction of business. The Company's strategy is to take advantage of many of
these commercial outlets, including the sale of banner
3
<PAGE>
advertisements and sponsorships on its web sites to advertisers targeting
consumers with similar demographic characteristics as visitors to the Company's
web sites, direct response marketing of related products and services through
arrangements with third parties, sales of downloadable electronic and paper
calendars featuring host models, licensing of proprietary content and
intellectual property rights to third parties, and subscription and membership
online chat services.
The Company plans to advertise and promote its web sites through various
forms of media. It also plans to purchase banner advertisements on search
engines on the World Wide Web, on a limited basis, as well as enter into
advertising barter arrangements with other web sites. The Company further
intends to promote its web sites through (i) advertising and promotional spots
contained within Company-sponsored radio programs and (ii) by advertising in
selected publications. The Company also will arrange for the promotion of its
web sites by host models, to the extent that they are not prohibited from
participating in any such promotion as a result of other commitments, or such
promotion is limited by the terms of the Company's license with any model.
Finally, promotional advertising in connection with products offered by the
Company, including calendars and electronic planners, is another means by which
the Company intends to promote its web sites.
Although there are currently several web sites that focus on fashion and/or
models, including sites that are operated by well-known publications and
modeling agencies, the Company believes, although there can be no assurance,
that its web sites will have a competitive advantage over these other sites,
based on the popularity of its host models, among the audience that these sites
target. The Company also believes, although there can be no assurance, that it
will be able to enter into exclusive engagements with additional models and
celebrities having significant appeal to the same targeted users of the World
Wide Web. In addition, the Company has engaged the services of an editor of a
nationally published fashion magazine, as its Editorial Director, to assist the
Company in the development of timely editorial materials, some of which may be
updated as often as daily. Furthermore, the Company plans to offer an online
avenue for interactive communication covering topics such as fashion and health,
with the primary focus on its web sites' models and celebrity hosts. The
Company's goal is to operate the exclusive online access to select models such
as Niki Taylor and Tyra Banks, and to provide visitors and members with
information, photos and other content unavailable elsewhere. In the event the
Company's strategy is successful, of which there can be no assurance, it
believes that it will be one of few web site operators that offers features
relating to fashion and beauty with the quality of content and celebrity appeal
it intends to provide.
The Company was incorporated under the laws of Delaware in January 1998,
and is the surviving corporation of a merger with its predecessor Interactive
Entertainment Studio, Inc., a Nevada corporation. The Company's executive
offices are located at 313 North First Street, Ann Arbor, Michigan 48104 and its
telephone number is (734) 327-0579.
4
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered
by the Company.................................. 400,000 shares
Common Stock to be outstanding'
after the Offering ............................. 3,564,848 shares(1)
Estimated Net Proceeds............................ $1,600,000
Use of Proceeds...................................
For marketing, sales and
consulting services, payment
of licensing fees to models,
design and development of
additional web sites,
printing of Tyra Banks
1998-99 calendar, equipment,
professional fees,
photography sessions,
repayment of indebtedness to
an executive officer and
others, and working capital
and general corporate
purposes. See "Use of
Proceeds."
Risk Factors...................................... The Shares offered hereby
are speculative and involve
a high degree or risk and
immediate substantial
dilution and should not be
purchased by investors who
cannot afford the loss of
their entire investment.
See "Risk Factors" and
"Dilution."
<FN>
- -----------
(1) Assumes the sale of all 400,000 Shares in this Offering. All share and
per share data and information contained in this Prospectus relating to
or based upon the number of shares of Common Stock outstanding does not
include (i) 45,000 shares of Common Stock issuable upon the exercise of
the Bridge Warrants, (ii) 106,000 shares of Common Stock subject to
options previously granted by the Company pursuant to the Option Plan
or (iii) up to an additional 394,000 shares of Common Stock reserved
for issuance upon the exercise of options which may, in the future, be
granted under the Option Plan. See "Management - 1998 Stock Option
Plan."
</FN>
</TABLE>
5
<PAGE>
SUMMARY FINANCIAL DATA
The summary financial information set forth below is derived from the
more detailed financial statements appearing elsewhere in this Prospectus. This
information should be read in conjunction with such financial statements,
including the notes thereto.
May 27, 1997
(Inception)
to
December 31, 1997
STATEMENT OF OPERATIONS:
Net sales................................. $ -
Cost of revenues.......................... 43,750
Product development costs................. 29,630
General and administrative costs.......... 79,387
Loss from operations...................... (152,767)
Interest expense.......................... 2,250
Net loss.................................. (155,017)
Basic loss per share...................... $ (0.05)
Weighted average number of shares......... 2,967,348
<TABLE>
<CAPTION>
BALANCE SHEET DATA:
December 31, 1997
Actual Pro forma (1) As Adjusted(2)
<S> <C> <C> <C>
Working capital (deficit) $(153,044) $ 44,456 $1,644,456
Total assets 81,325 313,825 1,657,575
Short-term debt 232,385 267,385 11,135
Shareholders equity (151,060) 46,440 1,646,440
(deficit)
<FN>
- ----------------------
(1) Gives effect to (i) loans received through March 1998, aggregating
$232,500, (ii) the issuance of 50,000 shares of Common Stock, in March
1998, to Peter Klamka, the Company's Chairman, President and Chief
Executive Officer, as compensation for services provided in 1997 and
(iii) the conversion of $147,500 of loans payable into 147,500 shares
of Common Stock.
(2) Gives effect to the sale of all 400,000 shares of Common Stock offered
hereby and the application of the estimated net proceeds therefrom.
See "Use of Proceeds."
</FN>
</TABLE>
6
<PAGE>
DISCLOSURE REGARDING FORWARD LOOKING-STATEMENTS
This Prospectus includes statements that are "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended (the "Securities Act") and Section 21E of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), including statements regarding the
Company's expectations, hopes, beliefs, intentions or strategies regarding the
future. All statements other than statements of historical facts included in
this Prospectus, including, without limitation, statements under "Prospectus
Summary," "Risk Factors," "Management's Plan of Operations" and "Business"
regarding the Company's financial position, business strategy and other plans
and objectives for future operations, and future product demand, supply,
manufacturing, costs, marketing, transportation and pricing factors, are
forward-looking statements. All forward-looking statements included in this
Prospectus are based on information available to the Company on the date hereof,
and the Company assumes no obligation to update such forward-looking statements.
Although the Company believes that the assumptions and expectations reflected in
such forward-looking statements are reasonable, it can give no assurance that
such expectations will prove to have been correct or that the Company will take
any actions that may presently be planned. Certain important factors that could
cause actual results to differ materially from the Company's expectations are
disclosed under "Risk Factors" and elsewhere in this Prospectus. All written or
oral forward-looking statements attributable to the Company or persons acting on
its behalf are expressly qualified in their entirety by such factors.
7
<PAGE>
RISK FACTORS
An investment in the securities offered hereby is highly speculative
and involves a high degree of risk, including, but not limited to, the risks
described below. An investment should be made only by investors who can afford
the loss of their entire investment. Each prospective investor, prior to making
an investment decision, should carefully consider the following risk factors in
addition to all of the other information provided in this Prospectus.
EXTREMELY LIMITED OPERATING HISTORY; ACCUMULATED DEFICIT; ANTICIPATED
LOSSES. The Company commenced operations through a predecessor company in May
1997 and was incorporated on January 14, 1998. The Company has generated no
revenues to date, and has an extremely limited operating history upon which an
evaluation of the Company, its business and its prospects can be made. The
likelihood of the success of the Company must be considered in light of the
problems, expenses, difficulties, complications and delays frequently
encountered by companies in their early stage of development, particularly
companies in the new and rapidly evolving market for Internet products and
services. Specifically, such risks include the failure of the Company to
anticipate and adapt to a developing market, the rejection of the Company's
services and products by Internet users, development of equal or superior
services or products by competitors and the failure of the market to adopt the
Internet as a transaction medium.
The Company has had limited financial resources to date and has
incurred operating losses since its inception. As of December 31, 1997, the
Company had an accumulated deficit of approximately $150,000. The Company
expects to continue to incur operating losses for the foreseeable future, due to
the significant expenses which the Company expects to incur in the development
and marketing of its initial two web sites hosted by models Niki Taylor and Tyra
Banks, respectively, as well as any additional sites developed by the Company.
These expenses include substantial advance royalty payments that the Company has
agreed to make to Ms. Taylor and Ms. Banks. Additionally, to the extent that the
Company engages additional models and/or celebrities for its web sites, it will
most likely be required to pay advance royalties to those persons. The Company
has generated no revenues to date, but expects initial revenues from the
introduction of its "Fashion House with Niki Taylor" web site by June 1998,
although there can be no assurance that the Company will generate any revenues
by such date or at any time thereafter. These initial revenues are expected
primarily from advertising placed on the site. The Company also expects to
significantly increase its operating expenses to expand its sales and marketing
operations, to fund greater levels of product development, and to develop other
forms of revenue-generating business, such as direct response sales, licensing
of the Company's proprietary materials to others, and celebrity chat clubs.
While the Company believes, although there can be no assurance, that such other
related businesses will, in the future, generate revenues in excess of the
revenues generated by advertising, the Company does not expect significant
revenues from such other businesses prior to June 1998. As a result of the
foregoing factors, there can be no assurance that the Company's services and
products will ever generate sufficient revenues or that the Company's operations
will ever be profitable. See "Management's Plan of Operations" and Financial
Statements.
POTENTIAL FLUCTUATIONS IN OPERATING RESULTS. Because of the Company's
extremely limited operating history and the emerging nature of the markets in
which it competes, management is unable to accurately forecast future revenues.
The Company, to date, has not generated any revenues. The Company's contracts
with advertisers typically guarantee the advertiser a minimum number of
impressions or times that an advertisement appears in page views downloaded by
visitors to the Company's web sites. To the extent that minimum impression
levels are not achieved for any reason, the Company may be required to provide
additional impressions after the contract term, which may adversely affect the
availability of advertising inventory. To the extent minimum guaranteed
impressions are not met, the Company will be required to defer the recognition
of corresponding revenues until guaranteed impression levels are achieved. The
Company's expense levels will be based in part on its expectations concerning
future revenues and to a large extent will be fixed. Accordingly, the
cancellation or deferral of a small number of advertising contracts could have a
material adverse effect on the Company's business, results of operations or
financial condition. The Company may be unable to adjust spending in a timely
manner to compensate for any unexpected revenue shortfall, and any significant
shortfall in revenue would have an immediate adverse effect on the Company's
business, results of operations and financial condition.
The Company's operating results may fluctuate significantly in the
future as a result of a variety of factors, many of which are not in the
Company's control. Such factors include the level of usage of the Internet,
demand for Internet
8
<PAGE>
advertising, seasonal trends in both Internet usage and advertising placements,
the advertising budgeting cycles of advertisers, the amount and timing of
capital expenditures and other costs relating to the expansion of the Company's
operations, the introduction of new services or products by the Company or its
competitors, pricing changes in the industry, technical difficulties with
respect to the Company's web sites, general economic conditions and economic
conditions specific to the Internet and online media. As a result of any of the
foregoing conditions, the Company may be required to make certain decisions in
connection with the operation of its business which could have a material
adverse effect on the Company's business, results of operations and financial
condition. See "Management's Plan of Operations" and Financial Statements.
DEVELOPING MARKET; DEPENDENCE ON CONTINUED GROWTH IN USE OF INTERNET;
ACCEPTANCE OF INTERNET AS AN ADVERTISING MEDIUM. The market for the Company's
services and products is relatively new and has only recently begun to develop.
This market also is rapidly evolving and is characterized by an increasing
number of market entrants who have introduced or developed services and products
for use on the Internet. The Company's business is highly dependent upon the
continued growth in use of the Internet, particularly by women of all ages, for
information, interaction, distribution and commerce. Although the Company
intends to create web sites that appeal to men and women of various ages, the
Company believes that women will constitute the primary audience for many of the
services and products to be offered on the Company's web sites. The Company's
ability to generate sufficient revenues will therefore be highly dependent on a
significant and continued increase in the use of the Internet, particularly by
women. Furthermore, the Internet is still an unproven medium for paid services
such as those which the Company currently provides and intends to provide in the
future, including the placement of effective advertising by site sponsors.
Accordingly, the Company's future operating results will depend substantially
upon such continued growth in use, as well as the emergence of the Internet as
an effective commerce medium. Additionally, critical issues concerning the
commercial use of the Internet (such as security, reliability, cost, ease of
use, access, quality of service and acceptance of advertising), remains a
barrier to entry for many individuals and businesses and therefore may impact
the rate of growth of Internet use. If widespread commercial use of the Internet
does not develop, or if the Internet does not develop as an effective commerce
medium, the Company's business, results of operations and financial condition
will be materially adversely affected.
DEPENDENCE ON ADVERTISING REVENUES. The Company expects to derive
substantially all of its initial revenues from the sale of advertisements on its
initial web site, and expects this to continue until at least December 1998. The
Company, to date, has obtained commitments from certain advertisers for
advertising on its "Fashion House with Niki Taylor" web site, and is currently
negotiating with additional advertisers for the sale of advertisements. There
can be no assurance that any of such negotiations will result in a commitment to
advertise on any of the Company's web sites. Existing advertising placement
contracts are for relatively short terms, generally three months or less, and
are terminable by advertisers at any time on very short notice. Consequently,
the Company's advertising clients will be able to eliminate or move their
advertising to competing Internet sites or from the Internet to traditional
media, quickly and at low cost. The Company's ability to generate advertising
revenues will depend upon, among other factors, the acceptance of the Company's
web sites as attractive and sustainable media, the development of a large
audience of users of the Company's web sites and the effective development of
media properties that provide user demographic characteristics that will be
attractive to advertisers.
There is currently intense competition in the sale of advertising on
the Internet. This competition has resulted in a wide range of advertising rates
for a variety of advertising services, making it difficult to project future
levels of Internet advertising revenues which may be realized by the Company or
any of its competitors. Competition among current and future web sites, as well
as competition from traditional media for advertising placements, could result
in significant price competition and reductions in the Company's projected
advertising prices and revenues. In the event that the Company fails to attract
advertising customers, loses customers after they have been retained, or is
forced to reduce advertising rates in order to retain or attract advertisers,
the Company's business, results of operations and financial condition could be
materially and adversely affected. See "Business - Sources of Revenue --
Advertising."
DEPENDENCE ON REVENUES FROM OTHER SOURCES. After the Company's web
sites have been established and have started to gain recognition (of which no
assurance can be given thereof), the Company's ability to expand its business
will become dependent upon its success in generating significant revenues from
sources other than advertising placements on its web sites. The Company intends
to enter into direct marketing arrangements with a variety of businesses in
connection with the sale of their products and services on the Company's web
sites. The Company, to date, has entered into a direct marketing agreement with
a company to promote the sale of flowers on the "Fashion House with Niki Taylor"
web site. This agreement provides for the payment of commissions to the Company
based on a percentage of net sales for flowers sold through the web site. The
Company also has entered into an agreement with another company to provide for
the exclusive sale by that
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company of videos and music compact disks on the "Fashion House with Niki
Taylor" web site for which the Company would similarly receive commissions based
on net sales. In addition, the Company has contracted the services of third
parties to create fashion and swimsuit electronic planners and paper calendars
based on models appearing on the Company's web sites, the first of which will
feature photographs of Tyra Banks. The electronic planners, to the extent
offered by the Company, will be created so that they can be downloaded to a
user's computer for a fee. The Company also plans to sell paper calendars
through its web sites and in retail stores. The Company also intends to create a
daily syndicated radio show, of approximately 90 seconds in length, covering
fashion and other subjects. The Company plans to use the syndicated show to
promote its web sites and other services and products, and also plans to sell
advertising time for up to 30 seconds per show, as an additional source of
revenues. There are several other businesses which provide similar services and
products as those contemplated by the Company and there can be no assurance that
the Company will ever be able to create and maintain other sources of revenue
sufficient for the Company to be profitable. In the event that the Company is
unable to generate significant revenues from any sources other than advertising
placements, the Company's business, results of operations and financial
condition could be materially and adversely affected. See "Business - Sources of
Revenue."
TECHNOLOGICAL CHANGE. The primary market in which the Company competes
is characterized by rapidly changing technology, evolving industry standards,
frequent new service and product announcements, introductions and enhancements
and changing customer demands. Accordingly, the Company's success will depend in
significant part on its ability to adapt to rapidly changing technologies, the
ability to adapt its services and products to evolving industry standards, and
to continually improve the performance, features and reliability of its services
and products in response to evolving demands in the marketplace and competitive
service and product offerings. In addition, the widespread adoption of new web
functionality through developments such as "JAVA", Virtual Reality Modeling
Language and other multimedia technologies could require substantial
expenditures by the Company and could fundamentally affect the nature, viability
and measurability of web-based advertising. The failure of the Company to adapt
to such changes and evolution would have a materially adverse effect on the
Company's business, results of operations and financial condition.
UNPROVEN ACCEPTANCE OF THE COMPANY'S WEB SITES AND CONTENT. The
Company's success is dependent upon its ability to deliver original and
compelling content in order to attract users. Since the Company is currently in
the process of launching its initial web site it is too early to determine the
level of its acceptance by consumers, and there can be no assurance that the
Company's current web site and/or future web sites, to the extent developed and
launched, will contain content which will be attractive to a sufficient number
of users to generate advertising revenues or that the Company will be able to
anticipate, monitor and successfully respond to rapidly changing consumer tastes
and preferences so as to attract a sufficient number of new and repeat users to
its sites. As is typical in a new and rapidly evolving industry, demand and
market acceptance for recently introduced products and services, such as the
Company's web sites are subject to a high level of uncertainty and risk. Because
this market is new and evolving, it is difficult to predict future growth. There
can be no assurance that the Company will be able to successfully develop a
market for its web sites or that demand will emerge or become sustainable. If
the Company's web sites and the content contained thereon are not accepted, or
develop more slowly than expected, or the market becomes saturated with
competitors, the Company's business, results of operations and financial
condition will be materially and adversely affected. See "Business - Web Sites."
DEPENDENCE ON LICENSES WITH MODELS AND OTHER CELEBRITY HOSTS. To date,
the Company has retained the services of two models to host web sites. The first
license, with Niki Taylor, permits the use of Ms. Taylor's name and likeness in
connection with the "Fashion House with Niki Taylor" web site, as well as
certain services to be provided by Ms. Taylor, including her appearance for one
eight-hour photo shoot (which has already taken place) and two four-hour
publicity appearances. Ms. Taylor, at her sole option, may also participate by
telephone or in-person, in exclusive interviews and/or on-line chat sessions.
The Company's other license, with Tyra Banks, contains similar provisions. The
Company also expects to enter into licenses with other models, in the near
future, although there can be no assurance that the Company will be able to
successfully retain the services of any other models on terms that are mutually
agreeable to the Company and those models. The Company's license with Ms. Taylor
expires on September 30, 1998, but will be automatically extended for two
consecutive one year periods, unless either the Company or Ms. Taylor terminates
the license as of the end of the then current term. There can be no assurance
that Ms. Taylor will not terminate this license as of September 30, 1998. Ms.
Banks' license expires on March 31, 1999, if not renewed. The expiration or
termination of either or both of these licenses would have a material adverse
effect on the Company's business, results of operations and financial condition.
Although the Company anticipates that the content of its web sites will
consist of articles and photographs pertaining to fashion, beauty, style and
entertainment, and that its web sites will provide an avenue for users to share
general tips and
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advice relating to these subjects, the Company believes that the celebrity
models whose services it obtains to host the Company's web sites will be the
principal attraction. In the event the Company is unable to retain the services
of a sufficient number of celebrities to host its web sites, or maintain the
services of such celebrities for an extended period of time, it is highly
unlikely that the Company's web sites would attract the number of users which
would be required to obtain significant advertising and merchandisers. These
circumstances would most likely result in the termination of the Company's
business and the loss of an investor's entire investment. In addition, the
success of the Company's web sites will be highly dependent on the continued
popularity of the celebrity models who host the sites. In the event that the
popularity of any such celebrity model fades in the public eye, including, for
among other reasons, disclosure of allegedly illegal or immoral acts by such
celebrity model, the Company will in all likelihood find it necessary to
terminate its relationship with that celebrity model. A suitable replacement may
not be available on a timely basis and on terms and conditions mutually
agreeable to the Company and any such potential replacement. In the event that
the Company is not able to timely replace a celebrity model, this failure could
have a material adverse effect on the Company's business, results of operations
and financial condition.
See "Business - Web Sites."
DEPENDENCE ON THIRD-PARTY DEVELOPERS AND CONTENT PROVIDERS. The Company
is in an early development stage and currently has only two employees. A key
element of the Company's business is the development and design of its web
sites. In connection therewith, the Company has and will continue to rely on the
development efforts of third-party developers. The Company's initial web site
was designed and developed by an independent third party, which has also agreed
to design and develop additional web sites for the Company. The Company believes
that this firm has the personnel and equipment to develop and design additional
web sites, upon the Company's request, to the specifications provided by the
Company. In the event that this developer is unable to successfully design and
develop any additional web sites, in a timely manner, or at all, the Company
would be required to engage the services of an alternate developer. While the
Company believes that there are several developers who could design and develop
the Company's web sites, the delays caused by the Company's need to engage the
services of another developer could have a material adverse effect on the
Company's business, results of operations and financial condition. In addition,
the Company also will be relying on third parties to provide the content for the
Company's web sites. The Company also has engaged the services of an editor of a
nationally published fashion magazine, as Editorial Director. It is anticipated
that the Company's Editorial Director will prepare and acquire editorial content
for the Company's web sites relating to fashion, beauty, style, health, fitness
and travel, among other subjects. If this Editorial Director no longer agrees to
provide services to the Company, and the Company is unable to replace her with
an editor of comparable ability, upon terms and conditions mutually agreeable to
the Company and any potential replacement, this could have a material adverse
effect on the business, results of operations and financial condition of the
Company. The Company also will require the services of additional third-party
developers and content providers to create the news, reviews and other
entertainment features which the Company intends to include on its web sites, as
well as personnel to handle the ongoing administration of the Company's web
sites, to the extent that the administration of the sites is not performed by
employees of the Company. There can be no assurance that the Company's current
or future affiliations with developers, content providers or administrative
personnel will result in effective content development and administration of the
Company's web sites, or that their efforts will result in significant revenues
for the Company. Any failure of such persons to develop and maintain high
quality and successful technology and content for the Company's web sites would
have a material adverse effect on the Company's business, results of operations
and financial condition. See "Business - Design and Development of Web Sites."
DEPENDENCE ON OTHER WEB SITES AND PROVIDERS. The Company's ability to
advertise on other web sites and the willingness of the owners of such sites to
direct users to the Company web sites through hypertext links will be critical
to the Company's operations. Search engines, directories and other navigational
tools managed by Internet service providers and web browser companies also will
significantly affect traffic to the Company's web sites. The Company also will
depend on its relationships with third party vendors of Internet development
tools and technologies in order to develop the content required to attract users
to its web sites. Developing and maintaining satisfactory relationships with
such persons could become more difficult and expensive as competition increases
among content providers. If the Company is unable to develop and maintain
satisfactory relationships with such third parties, or if the Company's
competitors are better able to maintain such relationships, the Company's
business, results of operations and financial condition could be materially and
adversely affected.
RISK OF CAPACITY CONSTRAINTS. A key element of the Company's business
will be to generate a high volume of traffic to its web sites. Any system
failure that causes interruptions in the availability or increases response time
of the Company's services would reduce traffic to the Company's web sites and,
if sustained or repeated, would reduce the attractiveness of the
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Company's services to advertisers and other future potential customers or
visitors to the Company's web sites. An increase in the volume of traffic to the
Company's web sites could adversely effect the capacity of the software or
hardware deployed by the Company, which could lead to slower response time or
even system failures. The Company is also dependent upon web browsers and
Internet and online services providers for access to its services and consumers
may experience difficulties due to system failures unrelated to the Company's
systems. To the extent that the above-described capacity constraints are not
effectively addressed by the Company, such constraints would have a material
adverse effect on the Company's business, results of operations and financial
condition. See "Business - Operations, Security and Technology."
SECURITY RISKS. Although the Company has engaged a third party, Digex,
Inc. ("Digex") to host its initial web site, and intends to engage third parties
to host all its web sites, which third parties typically will provide such
security as they are able, the Internet infrastructure is vulnerable to computer
viruses, break-ins and similar disruptive problems by its customers and other
Internet users. These factors could lead to interruption, delays or cessation in
service. In addition, unauthorized use of the Internet could also jeopardize the
security of confidential information stored in computer systems of the Company's
customers and other parties using the Internet, which could deter potential
customers from accessing the Company's web sites and give rise to liability to
users whose security or privacy has been infringed. A security breach could
result in loss of customers, damage to the Company's reputation, damage to the
Company's web sites, costs of repair and detection, and other expenses. The
occurrence of any of these events could have a material adverse effect on the
Company's business, results of operations and financial condition. See "Business
- - Operations, Security and Technology."
COMPETITION. The market for Internet services and products is highly
competitive and competition is expected to continue to increase significantly in
the future. In addition, the Company expects the market for web-based
advertising, to the extent it develops, to be intensely competitive. There are
no significant barriers to developing web sites, and the Company expects
competition to continue to grow. The Company competes with a significant number
of web content providers, several of which offer competitive services and/or
products, and address certain of the Company's target markets, including, among
others, Women's Wire, Elle Magazine, Ford Models, Inc. and Pataxi Entertainment
Network, Inc. (operator of supermodel.com). Many of these competitors have
significantly greater financial, technical and marketing resources than the
Company, and include companies that are larger and better capitalized than the
Company. These competitors may also have expertise and established brand
recognition in the Internet market. There can be no assurance that the Company's
competitors will not develop Internet services and products that are superior to
those currently offered or contemplated by the Company or that they will not
achieve greater market acceptance than the Company's contemplated services and
products. In addition, the Company competes with these competitors, online
services and other web site operators, for the same sources of advertising and
direct marketing revenue.
The Company's web site competes with (and any future developed web
sites will compete with) other forms of media, such as television, radio and
print media, many of which provide services and products that are similar to
those which the Company currently provides and also intends to provide through
its web sites. Although traditional media outlets do not offer many of the
interactive features available through the Internet (such as online chat rooms
and E-mail), there are numerous publications, as well as television and radio
programs, which provide editorial content similar to that which the Company
provides on its web site, as well as articles and features on fashion, beauty,
health and celebrities. The Company also will compete with these traditional
media outlets for advertising revenue and direct marketing revenue.
Although the Company believes that there exists a large share of
advertising dollars available to the Company and other web site operators, as
well as several other commercial opportunities for the generation of revenues
through the Company's contemplated web sites, competition among current and
future web sites, as well as competition with other forms of media for
advertising placements, could result in significant price competition and
reductions in advertising revenues. There can be no assurance that the Company
will ever be able to compete successfully with potential competitors or that the
competitive pressures faced by the Company will not have a material adverse
effect on the Company's business, results of operations and financial condition.
See "Business - Competition."
PROPRIETARY TECHNOLOGY AND INTELLECTUAL PROPERTY. The Company regards
its technology and content created for its web sites as proprietary and will
attempt to protect such proprietary rights through, among other means, trademark
and copyright registration, trade secret protection and confidentiality and
non-disclosure agreements with its employees and independent contractors. The
Company intends to pursue registration of certain trademarks and copyrights in
the United States and in any foreign countries in which such trademarks and
copyrights are used. Effective trademark, copyright and trade secret protection
may afford the Company only limited protection in the United States and may not
be available in every
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country in which the Company's web sites, and services and products included
thereon, are distributed or made available. Despite the Company's efforts to
protect such proprietary rights, the rapid pace of technological innovation on
the Internet makes it possible for third parties to copy or otherwise obtain and
use the Company's products or technology without authorization, or to develop
similar technology independently. Policing unauthorized use of the Company's
technology and intellectual property will be difficult. There can be no
assurance that the precautions taken by the Company will prevent
misappropriation or infringement of its technology or intellectual property. In
addition, notwithstanding the Company's best efforts to obtain confidentiality
agreements from all employees and independent contractors providing services in
connection with the development and design of the Company's web sites, no
assurance can be given that others will not gain access to the Company's trade
secrets, that such agreements will be honored by employees and independent
contractors, or enforced by the courts, or that the Company will be able to
effectively protect its rights to its proprietary technology and intellectual
property.
The Company believes that its trademarks, copyrights and other
intellectual property rights will not infringe the trademarks of others. There
can be no assurance that the Company will succeed in obtaining registrations of
its trademarks, or that others, who may have significantly greater resources
than the Company, will not challenge the Company's use of its trademarks and
other intellectual property, or seek to market their own services or products
using similar trademarks or other intellectual property. In the event that the
Company seeks to enforce its rights with respect to any intellectual property
rights, or a third party seeks to enforce its rights against the Company with
respect to any intellectual property right, litigation may be required, which
would result in substantial costs and diversion of the Company's resources and
could have a material adverse effect on the Company's business, results of
operations and financial condition. See "Business - Trademarks and Proprietary
Rights."
GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES. The Company's proposed
business is not currently subject to direct regulation by any government agency,
other than regulations applicable to businesses generally, and there are
currently few laws or regulations directly applicable to access to or commerce
on the Internet. However, due to the increasing popularity and use of the
Internet, it is possible that a number of laws and regulations may be adopted
with respect to the Internet, covering issues such as user privacy, pricing,
characteristics and quality of products and services. The Telecommunications
Reform Act of 1996 imposes criminal penalties on anyone who distributes obscene,
indecent or patently offensive communications on the Internet (although certain
provisions of that law have recently been held to be unconstitutional). The
manner in which this law, or any similar law which may be adopted in the future,
will be interpreted and enforced and its effects on the Company's proposed
operations cannot yet be fully determined. The adoption of any additional laws
or regulations may decrease the growth of the Internet, which could in turn
decrease the demand for the Company's services and products and increase the
Company's cost of doing business. Furthermore, the applicability to the Internet
of existing laws in various jurisdictions governing issues such as property
ownership, libel and personal privacy is uncertain. Any such new legislation or
regulation could have an adverse effect on the Company's business, results of
operations and financial condition. See "Business - Government Regulations."
LIABILITY FOR INFORMATION DOWNLOADED FROM INTERNET; INSURANCE. Because
materials may be downloaded from the Company's web sites and subsequently
distributed to others, there is the possibility that claims will be made against
the Company for defamation, negligence, copyright or trademark infringement or
other theories based on the nature and content of the material on the Company's
web sites. These types of claims have been brought and sometimes successfully
argued, against online services. In addition, the Company could be exposed to
liability with respect to products that may be accessible through the Company's
web sites. For example, product liability claims could be made with respect to
products, purchased through the Company's web sites, which cause injury, or
claims could be made if material alleged to be inappropriate for viewing by
children may be accessed through the Company's web sites. Although the Company
carries general liability insurance which it believes to be sufficient for its
proposed business and consistent with standard industry practices, the insurance
may not cover potential claims of these types and may not be adequate to
indemnify the Company from all liability that may be imposed. Additionally, the
Company is expected to be named as an additional insured on the liability
policies carried by Digex, the web host of the "Fashion House with Niki Taylor"
web site, and will request to be included as an additional insured on the
liability policies of any additional web hosts that it engages to host the
Company's web sites. No assurance can be given that any of these web hosts will
agree to name the Company as an additional insured or that if so named that any
such policies will adequately protect the Company against potential claims. Any
imposition of liability that is not covered by insurance or is in excess of
insurance coverage could have a material adverse effect on the Company's
business, results of operations and financial condition.
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RELIANCE ON KEY PERSONNEL. The success of the Company will be largely
dependent on the efforts of Peter Klamka, its Chairman, President and Chief
Executive Officer, and his ability to forge new relationships with celebrity
models and to maintain such relationships, as well as to oversee the development
and maintenance of the Company's web sites and other services and products. The
Company's success will also be highly dependent on Mr. Klamka's ability, as well
as the ability of others employed by the Company, to obtain advertising
placements consistent with the demographic characteristics of the users of the
Company's web sites. The Company has not entered into an employment agreement
with Mr. Klamka and Mr. Klamka has not entered into any agreement restricting
his involvement in a business which competes with the Company. As a result, Mr.
Klamka is an employee-at-will and has the right to leave the Company at any
time. Mr. Klamka has informed the Company that he intends to devote a
substantial portion of his working time to the business of the Company, and that
he also intends to devote a portion of his time to other business interests that
do not compete with the Company's business. In addition, Mr. Klamka is not
restricted from entering into a competing business, after the term of his
employment with the Company; provided, however, that he would not be permitted
to use proprietary information and trade secrets belonging to the Company. The
loss of his services would have a material adverse effect on the Company's
business and prospects. The success of the Company will also be dependent upon
its ability to hire and retain qualified writers, editors and technical
personnel, as well as qualified marketing, financial and other personnel.
Competition for qualified personnel is intense and there can be no assurance
that the Company will be able to hire or retain additional qualified personnel.
See "Management."
LACK OF COMMERCIAL INTERNET EXPERIENCE; UNCERTAIN ABILITY TO MANAGE
GROWTH. The Company's current management has only limited experience in managing
the commercial operation of web sites on the Internet. Since the industry is
relatively new, the availability of qualified personnel also may be limited. In
order to manage the possible rapid growth of its operations, the Company will be
required to implement and improve its operational and financial systems,
procedures and controls and to train, manage and control its growing employee
base. This growth could place a significant strain on the Company's financial,
management and other resources. The Company's future performance will depend in
part on its ability to manage expansion, including, without limitation, the
development, planning, timing and execution of the introduction of new services
and products, the design and development of new and entertaining web sites, and
the development and implementation of advertising and marketing strategies. In
addition, the Company's ability to manage any growth effectively will require it
to continue to improve its operational and financial control systems and
infrastructure, and to attract, train, motivate, manage and retain key
employees. If the Company's management were to become unable to manage growth
effectively, the Company's business, financial condition and results of
operations could be materially adversely affected.
CONTROL BY MANAGEMENT. Upon the consummation of this Offering, Peter
Klamka, Chairman, President and Chief Executive Officer of the Company, will
beneficially own greater than 50% of the Company's outstanding capital stock.
Accordingly, Mr. Klamka will be in a position to control the Company, elect all
of the Company's directors, increase the authorized capital, dissolve, merge, or
sell the assets of the Company and generally direct the affairs of the Company.
See "Management" and "Principal Stockholders."
DEPENDENCE ON OFFERING PROCEEDS; NEED TO RAISE ADDITIONAL FUNDS. The
Company is dependent on and intends to use a substantial portion of the net
proceeds of this Offering to commence operations. The Company anticipates, based
on currently proposed plans and assumptions relating to its operations
(including the substantial start-up costs associated with its initial two web
sites), that the net proceeds of this Offering, assuming the sale of all 400,000
Shares offered hereby, together with projected cash flow from operations and
available cash resources, will be sufficient to satisfy anticipated cash
requirements for at least 18 months following the consummation of this Offering.
In the event that the Company raises less than the estimated maximum amount of
net proceeds available pursuant to this Offering, or the Company's plans change,
its assumptions change or prove to be inaccurate or the net proceeds of this
Offering or cash flow prove to be insufficient to fund operations (due to
unanticipated expenses, delays, problems, difficulties or otherwise), the
Company would be required to seek additional financing sooner than anticipated
or curtail certain of its planned activities. The Company, in any such event,
may determine, depending on the opportunities available to it, to seek
additional equity or debt financing to fund the cost of its operations. To the
extent that the Company chooses to raise additional funds by issuing equity
securities, this issuance could result in the further substantial dilution of
the interests of the Company's stockholders. Additionally, to the extent that
the Company issues debt securities to raise funds or otherwise incurs
indebtedness, the Company will be subject to risks associated with incurring
substantial indebtedness, including the risks that interest rates may fluctuate
and cash flow may be insufficient to pay principal and interest on any such
indebtedness. The Company has no current arrangements with respect to, or
sources of, additional financing, and it is not anticipated that the existing
stockholders will provide any portion
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of the Company's future financing requirements. There can be no assurance
that additional financing will be available to the Company on commercially
reasonable terms, or at all. See "Use of Proceeds" and "Management's Plan of
Operations."
GOING CONCERN ISSUES IN INDEPENDENT AUDITORS' REPORT. As a result of
the Company's having been in the development stage since its inception, its
lack of revenues to date and its incurrence of net losses during such period,
the Company's independent certified public accountants have included an
explanatory paragraph in their report on the Company's financial statements
for the period ended December 31, 1997, regarding having substantial doubt
about the Company's ability to continue as a going concern without additional
financing. See Note 1 to the Financial Statements included elsewhere in this
Prospectus.
NO MINIMUM SALE REQUIREMENT OR PURCHASE COMMITMENT OFFERING. The
Company will use its best efforts to sell all of the Shares offered hereby.
These sales may be made either directly by the Company, through its officers and
directors, or with the assistance of one or more Selling Agents. None of the
Company, the Selling Agents, if any, or any other person, has made any
commitment to purchase any of the Shares offered hereby. Consequently, there can
be no assurance that any of the Shares will be sold. Additionally, there is no
minimum purchase required to effect the consummation of this Offering. Since
subscriptions by investors to purchase Shares in this Offering are irrevocable
upon receipt by the Company, there is a risk that this Offering will be
consummated with the Company receiving aggregate gross proceeds significantly
less than the maximum amount of $2,000,000, in the event that all 400,000 shares
are purchased in this Offering. To the extent that the net proceeds raised by
the Company are substantially less than the maximum amount, the Company's
opportunities would be severely diminished. In the event that an alternate
source of financing is not obtained in a timely manner, those investors who
participate in this Offering risk the loss of their entire investments. See "Use
of Proceeds," "Management's Plan of Operations" and "Plan of Distribution."
IMMEDIATE AND SUBSTANTIAL DILUTION. Purchasers of Common Stock in the
Offering will experience immediate dilution in net tangible book value per share
of Common Stock of $4.54 from the public offering price per share (assuming sale
of all the Shares offered hereby) and may experience further dilution in that
value from issuances of Common Stock in connection with future acquisitions. See
"Dilution."
BULLETIN BOARD; NO ASSURANCE OF PUBLIC MARKET . Prior to this Offering,
there has been no public trading market for the Common Stock. The Company's
shares of Common Stock will be traded in the over-the-counter market. It is
anticipated that they will be quoted on the "Electronic Bulletin Board", an
NASD-sponsored and operated inter-dealer automated quotation system for equity
securities not included in the Nasdaq SmallCap Market or National Market, or, in
the event that the Company is unable to include its shares of Common Stock for
quotation on the Bulletin Board then in the NQB "Pink Sheets" published by the
National Quotation Bureau Incorporated. Although the Bulletin Board has recently
begun to receive greater recognition from the brokerage community, the trading
volume of securities quoted on the Bulletin Board is normally significantly less
than that of securities traded in the Nasdaq SmallCap and National Markets.
Trading volume in the Pink Sheets also is significantly less than on the
Bulletin Board. As a result, purchasers of the Company's shares of Common Stock
may have more difficulty selling or obtaining quotations of the price of the
Company's securities than they would have if they were listed on Nasdaq or a
national securities exchange, particularly if the shares are traded in the Pink
Sheets. Unless and until the Company's Common Stock is listed on the Nasdaq or a
national securities exchange (of which no assurance can be given), the liquidity
of the Company's Common Stock may be impaired, not only in the number of shares
which could be bought and sold, but also through delays in the timing of
transactions, reduction in securities analysts and the news media's coverage of
the Company, if any, and lower prices for the Company's shares of Common Stock
than might otherwise be obtained. Additionally, since the Company is not
utilizing the services of an underwriter in connection with its sale of the
Shares in this Offering, there can be no assurance that any broker-dealer will
make a market in the Common Stock. Making a market in securities involves
maintaining bid and ask quotations and being able, as principal to effect
transactions in reasonable quantities at those quoted prices, subject to various
securities laws and other regulatory requirements. The development of a public
trading market depends upon the existence of willing buyers and sellers, the
presence of which is not within the control of the Company. There can be no
assurance that a regular trading market for the Common Stock will develop after
this Offering or that, if developed, it will be sustained. Therefore, purchasers
of the Shares should have a long-term investment intent and should recognize
that it may be difficult to sell their Shares, notwithstanding the fact that
they are not restricted securities.
DETERMINATION OF OFFERING PRICE; POSSIBLE VOLATILITY OF MARKET PRICE OF
COMMON STOCK. The offering price of the Shares was determined by the Company and
does not bear any direct relationship to the value of the physical assets of the
Company, the book value of the Company, or any other generally accepted criteria
of valuation. The price and other terms were based on a number of factors
including, without limitation, the estimates of the business potential and
earnings prospects of the Company and the consideration of such potential
earnings in relation to market valuations of comparable companies. The offering
price is not necessarily an indication of the actual value of such securities at
the time of this Offering. Additionally, the market price for the Company's
securities following this Offering may be highly volatile as has been the case
with the securities of other companies in emerging businesses. Factors such as
the Company's financial results and introduction of new products and services by
the Company or its competitors, and various factors affecting the Internet
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industry generally, may have a significant impact on the market price of the
Company's securities. Additionally, in recent years, the stock market has
experienced a high level of price and volume volatility and market prices for
the securities of many companies, particularly of small and emerging growth
companies, the common stock of which trade in the over-the-counter market, have
experienced wide price fluctuations which have not necessarily been related to
the operating performance of these companies. See "Plan of Distribution."
DIVIDEND POLICY. The Company has not paid any dividends to its
stockholders to date. The Company intends to retain earnings, if any, to finance
the operation and expansion of its business and, therefore, does not expect to
pay cash dividends in the foreseeable future. See "Description of Securities -
Dividend Policy."
SHARES ELIGIBLE FOR FUTURE SALE. Upon completion of this Offering
(assuming the sale of all 400,000 Shares), the Company will have 3,564,848
shares of Common Stock outstanding. Of these shares of Common Stock, all of the
Shares sold in this Offering will be freely transferrable without restriction or
limitation under the Securities Act, except for any Shares purchased or owned by
affiliates of the Company, as such term is defined in Rule 144 promulgated under
the Securities Act. The remaining 3,164,848 shares constitute "restricted
securities" within the meaning of Rule 144 and may be sold without registration
pursuant to such rule, at various times commencing on June 1, 1998. No
prediction can be made as to the effect, if any, that sales of shares of Common
Stock or even, the availability of such shares for sale will have on the market
prices prevailing from time to time. The possibility that substantial amounts of
Common Stock may be sold in the public market may adversely affect the
prevailing market price for the Common Stock and could impair the Company's
ability to raise capital through the sale of its equity securities. See
"Description of Securities" and "Shares Eligible for Future Sale."
AUTHORIZATION OF PREFERRED STOCK. The Company's Certificate of
Incorporation authorizes the issuance of up to 1,000,000 shares of preferred
stock with designations, rights and preferences determined from time to time by
its Board of Directors. Accordingly, the Company's Board of Directors is
empowered, without stockholder approval, to issue preferred stock with dividend,
liquidation, conversion, voting, or other rights which could adversely affect
the voting power or other rights of the holders of the Common Stock. In the
event of issuance, the preferred stock could be utilized, under certain
circumstances, as a method of discouraging, delaying or preventing a change in
control of the Company. Although the Company has no present intention to issue
any shares of its authorized preferred stock, there can be no assurance that the
Company will not do so in the future. See "Description of Securities - Preferred
Stock."
RISK OF LOW-PRICED STOCK. Since the Shares will initially be traded in
the over-the-counter market on the Bulletin Board or in the Pink Sheets, if the
market price of the Company's Common Stock decreases to less than $5.00 per
share, trading would become subject to the requirements of certain rules
promulgated under the Exchange Act, which require additional disclosure by
broker-dealers in connection with any trades involving a stock defined as a
penny stock (generally, any non-Nasdaq equity security that has a market price
of less than $5.00 per share, subject to certain exceptions). These rules
require the delivery, prior to any penny stock transaction, of a disclosure
schedule explaining the penny stock market and the risks associated therewith,
and impose various sales practice requirements on broker-dealers who sell penny
stocks to persons other than established customers and accredited investors
(generally institutions). For these types of transactions, the broker-dealer
must make a special suitability determination for the purchaser and have
received the purchaser's written consent to the transaction prior to sale. The
additional burdens imposed on broker-dealers by these requirements may
discourage them from effecting transactions in the Common Stock, which could
severely limit the liquidity of the Common Stock and the ability of purchasers
in this Offering to sell their Shares in the secondary market. These
requirements also may reduce the likelihood that a bank or financial institution
will accept the Company's Common Stock as collateral.
16
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of all 400,000 Shares
offered by the Company hereby at an offering price of $5.00 per share are
estimated to be approximately $1,600,000, after deducting discounts and
commissions payable to Selling Agents (assuming the payment of commissions in a
maximum amount of $200,000) and estimated offering expenses of $200,000 payable
by the Company. The Company expects to use the net proceeds of this Offering as
follows:
The following table sets forth the Company's estimated use of the net
proceeds of this Offering assuming aggregate proceeds from the sale of Shares of
$2,000,000, $1,500,000 and $1,000,000, respectively. In each case discounts and
commissions paid to Selling Agents is assumed to be 10% of the aggregate
proceeds raised and other offering expenses aggregate $200,000.
<TABLE>
<CAPTION>
$2 Million $1.5 Million $1 Million
---------- ------------ ----------
<S> <C> <C> <C>
Licensing Fees Payable to $500,000 $300,000 $300,000
Models(1)
Photographs and $370,000 $275,000 $200,000
Printing(2)
Repayment of $206,250 $206,250 $56,250
Indebtedness(3)
Web Site Design (4) $165,000 $100,000 $55,000
Public Relations and $150,000 $100,000 $50,000
Advertising (5)
Computer Equipment $ 50,000 --- ---
Working Capital (6) $158,750 $168,750 $38,750
<FN>
- -------------------
(1) The Niki Taylor License, the Tyra Banks License and the agreement in
connection with the Tyra Banks Calendars provide for advance payments
against future royalties, of which an aggregate of $300,000 remains
outstanding and payable by the Company. If the Company raises gross
proceeds in excess of $1,500,000, it may enter into licenses with
additional models or celebrities which would require the payment of
additional licensing fees. See "Business - Web Sites."
(2) These amounts include payment for photo sessions to take exclusive
shots of models for use in connection with the Company's web sites,
calendars and electronic planners, as well as for the printing of
calendars, including the Tyra Banks Calendars. See "Business - Web
Sites," " - The Tyra Banks Calendars" and " - Sources of Revenue --
Electronic Planners."
(3) Includes the Company's repayment of a $150,000 outstanding loan to
Peter Klamka, the Company's Chairman, President and Chief Executive
Officer, upon the consummation of this Offering. This indebtedness is
not due until the earlier of (i) the date that the Company has raised
an aggregate of not less than $1,500,000 in one or more public
offerings of any of its securities or (ii) May 2001. Also includes the
Company's repayment of $56,250, plus interest at the rate of 8% per
annum, to four individuals pursuant to promissory notes which are due
and payable on the earlier of (i) the date that the Company closes an
equity financing raising gross proceeds of not less than $500,000 or
(ii) July 1998. See "Certain Transactions."
(4) Reflects payments to a third party web designer. See "Business -
Design and Development of Web Sites."
(5) Includes amounts payable to a public relations firm, which the Company
has retained, and expenses relating to print and/or electronic
advertising. See "Business - Sources of Revenue -- Advertising" and
" - Marketing and Promotion -- Public Relations."
(6) The Company may use a portion of the proceeds allocated to working
capital to pay salaries of non-executive employees.
</FN>
</TABLE>
17
<PAGE>
The foregoing represents the Company's current estimate of its allocation of the
net proceeds of the Offering. This estimate is based on certain assumptions,
including without limitation the development of the Tyra Banks web site,
creation, marketing and sale of the Tyra Banks Calendars and the growth in
revenues derived from the "Fashion House with Niki Taylor" web site, as to which
there can be no assurance.
The amounts actually expended for each purpose set forth in "Use of Proceeds"
may vary significantly in the event any of these assumptions prove inaccurate.
The Company reserves the right to change its use of proceeds as unanticipated
events may cause the Company to redirect its priorities and reallocate the
proceeds accordingly. A portion of the proceeds may also be used to acquire or
invest in complementary businesses or products. Although the Company evaluates
potential acquisitions or businesses and products from time to time, there are
no present understandings, commitments or agreements with respect to any such
acquisitions.
Pending utilization, the net proceeds of the Offering will be invested in
short-term, interest-bearing investments.
Any additional proceeds received upon exercise of the Bridge Warrants or options
granted pursuant to the Option Plan will be added to working capital. There can
be no assurance that the Bridge Warrants or such options granted pursuant to the
Option Plan will be exercised.
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<PAGE>
CAPITALIZATION
The following table sets forth the short-term debt and capitalization
of the Company: (i) as of December 31, 1997 and (ii) pro forma to give effect to
the receipt of $232,500 of loans, the issuance of 50,000 shares of Common Stock
in March 1998 to Peter Klamka, the Company's Chairman, President and Chief
Executive Officer, as compensation for services provided in 1997, and the
conversion, in March 1998, of indebtedness of the Company, in an aggregate
principal amount of $147,500, into a total of 147,500 shares of Common Stock and
(iii) the sale of 400,000 shares of Common Stock offered by the Company hereby
and the application of the estimated net proceeds therefrom. This table should
be read in conjunction with the Financial Statements of the Company and the
Notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
December 31, 1997
----------------------------------------------
Actual Pro Forma As Adjusted
---------- ---------- -----------
<S> <C> <C> <C>
Short-term debt $ 232,385 $ 267,385 $ 11,135
---------- ---------- ----------
Shareholders' equity:
Preferred stock, $.0l par value; 1,000,000
shares authorized, none issued or outstanding --- --- ---
Common stock, $.001 par value; 10,000,000 shares authorized; 2,967,348 issued
and outstanding, actual, 3,164,848 issued and outstanding (pro forma), and
3,564,848 shares issued and outstanding (as adjusted). 2,967 3,164 3,564
Additional paid-in capital 990 198,293 1,797,893
Accumulated deficit (155,017) (155,017) (155,017)
--------- --------- ---------
Total shareholders' equity (151,060) 46,440 1,646,440
--------- ---------- ----------
Total capitalization $ 81,325 $ 313,825 $1,657,575
========= ========== ==========
</TABLE>
19
<PAGE>
DILUTION
The difference between the public offering price per share of the
Common Stock and the pro forma net tangible book value per share of the Common
Stock of the Company after this Offering constitutes the dilution to investors
in this Offering. The pro forma net tangible book value of the Company as of
December 31, 1997 was $46,440 or $.01 per share of Common Stock with a total of
3,164,848 shares outstanding. As a result of the sale of the maximum of 400,000
Shares offered by the Company hereby and the receipt of the net proceeds
therefrom, the pro forma net tangible book value of the Company as of December
31, 1997, would have been $1,646,440 and $.46 per share of Common Stock,
calculated on a total of 3,564,848 shares of Common Stock outstanding. This
represents an immediate increase in pro forma net tangible book value to
existing stockholders of $.45 per share and an immediate dilution to purchasers
in this Offering of 4.54 per share.
The following table illustrates the foregoing dilution to the investors
on a per share basis (1):
Common Stock Share Purchase Price $5.00
Pro forma net tangible book value per share of $.01
Common Stock before Offering
Increase in pro forma net tangible book value per .45
share of Common Stock attributable to new ----
investors
Pro forma net tangible book value per share of .46
Common Stock after Offering ----
Dilution of pro forma net tangible book value per $4.54
share of Common Stock to new investors =====
- --------------------------
(1) The above table assumes gross proceeds raised in this Offering of
$2,000,000. In the event that the Company raises gross proceeds of less
than $2,000,000 dilution to purchasers in this Offering will be less.
The following table sets forth, with respect to the initial
stockholders and the new stockholders, a comparison of the number and percentage
of their shares of Common Stock, the amount and percentage of consideration paid
and the average price per share paid to the Company for those shares.
<TABLE>
<CAPTION>
AVERAGE
AMOUNT PRICE
SHARES PERCENTAGE PAID PERCENTAGE PER SHARE
--------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Initial Stockholders 3,164,848 88.8% $ 201,457 9.2% $.06
New Stockholders 400,000 11.2% 2,000,000 90.8% 5.00
---------- ------ ---------- -----
3,564,848 100% $2,201,457 100%
========= ====== ========== =====
</TABLE>
20
<PAGE>
MANAGEMENT'S PLAN OF OPERATIONS
OPERATIONS FOR THE NEXT TWELVE MONTHS
For the next twelve months the Company will expand its content
offerings on the "Fashion House with Niki Taylor" web site, as well as continue
to add more advertising and other sources of revenue to its site. The Company
also plans to launch an additional web site to be hosted by popular model Tyra
Banks. This site will focus on subjects similar to the Company's existing site,
but will be targeted towards men and women with particular interest in Ms.
Banks. Additionally, the Company is creating the Tyra Banks Calendars for 1999.
The Company intends to commence shipment of the Tyra Banks Calendars, both in
paper format and electronic planners, in August 1998. The Company also may
launch a third web site, during the period, which will focus on another popular
fashion model. There can be no assurance that the Company will be able to launch
any additional web sites.
In order to assist the Company in the launch of its operations, the
Company has also engaged the services of a public relations firm to arrange for
creative and on-target promotions for the Company's web sites, services and
products in both traditional and electronic media.
CASH REQUIREMENTS
The Company anticipates, based on currently proposed plans and
assumptions relating to its operations (including the substantial start-up costs
associated with its initial two web sites), that the net proceeds of this
Offering, assuming the sale of all 400,000 Shares offered hereby, together with
projected cash flow from operations and available cash resources, will be
sufficient to satisfy anticipated cash requirements for at least 18 months
following the consummation of this Offering. In the event that the Company
raises less than the estimated maximum amount of net proceeds available pursuant
to this Offering, or the Company's plans change, its assumptions change or prove
to be inaccurate or the net proceeds of this Offering or cash flow prove to be
insufficient to fund operations (due to unanticipated expenses, delays,
problems, difficulties or otherwise), the Company would be required to seek
additional financing sooner than anticipated or curtail certain of its planned
activities. See "Risk Factors."
EMPLOYEES
The Company presently employs two individuals, Peter Klamka, its
Chairman, President and Chief Executive Officer and one additional person. Upon
consummation of this Offering, the Company intends to hire several additional
employees. These employees will most likely be assisting the Company technically
or creatively.
21
<PAGE>
BUSINESS
COMPANY OVERVIEW
PTN is an interactive media content provider focusing on providing
leading branded content for well-defined target audiences using a combination of
new and traditional media. The Company's strategy is to create content that is
of great appeal to its targeted audience and attract advertisers desiring to
reach this audience. The Company currently provides this content on its
interactive web site known as "Fashion House with Niki Taylor," which utilizes
the name and likeness of well-known model Niki Taylor. The Company also plans to
provide similar content on additional web sites hosted by other well-known
models and celebrities, including a web site to be hosted by well-known model
Tyra Banks, as well as through radio, television, print and other forms of
traditional media. The Company's initial web sites will focus primarily on
fashion, beauty, style, fitness and related subjects. In addition, the Company
plans to create, market and sell calendars and electronic planners featuring
photographs of models and other celebrities, the first of which will be a 1999
calendar and electronic planner including a collection of photographs of Tyra
Banks (the "Tyra Banks Calendars").
The Company, through its predecessor, commenced operations in May 1997.
At that time it entered into a License Agreement with Niki Taylor. That
agreement provides for, among other things, the right to use her name and
likeness in connection with the Company's "Fashion House with Niki Taylor" web
site. Since commencement of operations, the Company has entered into an
agreement with a web site designer and direct marketing agreements to sell
flowers, videos and music compact disks on the Niki Taylor web site. The Company
also recently entered into a License Agreement with Tyra Banks, similar to its
license with Niki Taylor, and is currently negotiating with other well-known
models to develop web sites which they will host. The Company also has entered
into agreements with certain advertisers whose banner advertisements appear on
its initial web site, and is negotiating with additional advertisers to place
banner advertisements on its current and/or future web sites. There can be no
assurance that any of these negotiations will be successful.
The Company's initial strategy is to capitalize on the opportunities
created by the growth of the rapidly developing Internet market, particularly by
creating web sites targeting young women, which the Company believes is the
fastest growing segment of the population using the Internet. The Company's plan
is to develop web sites featuring popular fashion models, many of whom, such as
Niki Taylor and Tyra Banks, are commonly referred to as "supermodels" in
publications and other media. The Company, in the future, also may create web
sites featuring other celebrities. These web sites are developed to appeal to
women between the ages of 18 and 30, although the Company believes that some of
the content it provides also appeals to men of similar ages. The Company's
current web site focuses primarily on fashion, beauty, style, fitness and
related subjects, and offers several features, such as monthly letters from Niki
Taylor, daily updated fashion editorials, photo scrapbooks featuring Niki
Taylor, interactive chat sessions with Niki Taylor, downloadable electronic
calendars featuring Niki Taylor, entertainment coverage (e.g. movie, television
and book reviews) and cooking and diet tips. The Company plans to operate
additional web sites in the future, which will offer similar features and
services.
The Company, similar to other web site operators, has recognized the
growing commercial opportunities presented by the Internet and the World Wide
Web, which the Company believes is emerging as a global marketplace for the
transaction of business. The Company's strategy is to take advantage of many of
these commercial outlets, including the sale of banner advertisements and
sponsorships on its web sites to advertisers targeting consumers with similar
demographic characteristics as visitors to the Company's web sites, direct
response marketing of related products and services through arrangements with
third parties, sales of downloadable electronic and paper calendars featuring
host models, licensing of proprietary content and intellectual property rights
to third parties, and subscription and membership online chat services.
The Company plans to advertise and promote its web sites through
various forms of media. It also plans to purchase banner advertisements on
search engines on the World Wide Web, on a limited basis, as well as enter into
advertising barter arrangements with other web sites. The Company further
intends to promote its web sites through (i) advertising and
22
<PAGE>
promotional spots contained within Company-sponsored radio programs and (ii) by
advertising in selected publications. The Company also will arrange for the
promotion of its web sites by host models, to the extent that they are not
prohibited from participating in any such promotion as a result of other
commitments, or such promotion is limited by the terms of the Company's license
with any model. Finally, promotional advertising in connection with products
offered by the Company, including calendars and electronic planners, is another
means by which the Company intends to promote its web sites.
Although there are currently several web sites that focus on fashion
and/or models, including sites that are operated by well-known publications and
modeling agencies, the Company believes, although there can be no assurance,
that its web sites will have a competitive advantage over these other sites,
based on the popularity of its host models, among the audience that these sites
target. The Company also believes, although there can be no assurance, that it
will be able to enter into exclusive engagements with additional models and
celebrities having significant appeal to the same targeted users of the World
Wide Web. In addition, the Company has engaged the services of an editor of a
nationally published fashion magazine, as its Editorial Director, to assist the
Company in the development of timely editorial materials, some of which may be
updated as often as daily. Furthermore, the Company plans to offer an online
avenue for interactive communication covering topics such as fashion and health,
with the primary focus on its web sites' models and celebrity hosts. The
Company's goal is to operate the exclusive online access to select models such
as Niki Taylor and Tyra Banks, and to provide visitors and members with
information, photos and other content unavailable elsewhere. In the event the
Company's strategy is successful, of which there can be no assurance, it
believes that it will be one of few web site operators that offers features
relating to fashion and beauty with the quality of content and celebrity appeal
it intends to provide.
INDUSTRY BACKGROUND
The Internet and the Web
The Internet is a global network of computers that enable businesses,
educational institutions, government agencies and individuals to communicate,
share information and conduct business electronically. Historically, the
Internet was used primarily by educational institutions and government agencies
to exchange information. Recently, growth in the use of the Internet by
individuals has increased significantly, as a result of technological advances,
including increased microprocessing speed and transmission bandwidth and the
development of easy-to-use graphical user interfaces, combined with cultural and
business changes. These factors, combined with widespread access to the Internet
at a rapidly declining cost, have resulted in the emergence of the World Wide
Web, a system of hyperlinked multimedia databases. The World Wide Web enables
non-technical users to exploit the resources of the Internet. This has created
great opportunities for businesses to advertise and promote their services and
products in a targeted, interactive and multimedia environment. According to
International Data Corporation, an industry source, the number of users of the
World Wide Web has increased from an estimated 16.1 million individuals at the
end of 1995 to approximately 34.6 million users at the end of 1996, and this
number is expected to increase to approximately 200 million users by the end of
the year 2000.
Advertising and Commerce
The Company believes that advertising on the World Wide Web has been
growing rapidly among the sellers of a variety of products and services.
Additionally, the Company believes that the costs of advertising on web sites
currently is within the range of $20 to $50 for each 1,000 times that a consumer
views an advertisement. Web advertisers are comprised of two groups: content
providers that seek to increase traffic to their web sites, and traditional
companies that see the World Wide Web as a new medium to reach consumers. The
Company believes that the Internet is a desirable vehicle for advertising
because the World Wide Web offers advertisers the ability to target messages to
specific, self-selected audiences and enables users to interact with respect to
the advertising information presented. These features allow advertisers to
target clearly defined markets and to measure the effectiveness of their
advertising more accurately. Currently, advertising is presented primarily in
the form of banner advertisements which provide consumers with access to more
detailed information upon the click of a computer mouse. The Company expects the
form and overall volume of advertising on the World Wide
23
<PAGE>
Web to increase significantly as the technology of the Internet continues to
improve, although no assurance thereof can be given.
Web Sites; Content Providers
By accessing the World Wide Web through the Internet, users can reach a
multitude of web sites simply by typing domain names, normally beginning with
the letters "www" and ending with the letters "com," "gov," "org" or other
suffix depending on the type of entity. Recent improvements in web browsers and
search engines, which help users navigate the information and services offered
on the World Wide Web, have made locating these web sites much simpler. The
Company believes that as the number of providers of infrastructure, access and
browser services increases and access to and the usefulness of the Internet
improve, the quality of the content provided by web site operators also will
improve. This in turn will attract greater levels of commerce over the Internet.
Additionally, as a result of increased usage of the Internet, content
historically provided by means of traditional media, such as television, radio
or print, is now being offered on the Internet. Furthermore, because of the
advantages the Internet has over traditional forms of media, particularly its
interactive features, content can be provided by means unavailable through
traditional media. For example, content can be delivered to specifically
identified audiences who share strong similar interests. Advertisers seek out
only those web sites that attract audiences with the same demographic
characteristics as the desired purchasers of their goods or services.
STRATEGY
The Company seeks to capitalize on the opportunities created by the
popularity of fashion and style, particularly the so-called "supermodels"
associated therewith, along with the rapid growth of the Internet as a
commercial medium, by developing and operating fashion web sites hosted by
models and other celebrities. The Company seeks to offer comprehensive and
exclusive content, updated regularly, by utilizing the World Wide Web's
interactive and graphical capabilities. The Company's current web site, and
proposed future web sites, are targeted at users between the ages of 18 and 30
years old, particularly women. The Company's goal is to create a variety of web
sites each tied to a well-known model or celebrity, and each providing
compelling content which is of interest to the target audience. The Company's
current web site is, and all future web sites will be, designed to provide a
sense of access and intimacy with the fashion world, since contact with leading
models and other celebrities will be available. Although the Company believes
that its web sites will attract men, as well as women, the sites will not be
male oriented exploitation web sites, but sites offering compelling content
covering fashion, beauty, style, fitness and related subjects. The Company also
believes that as the Internet continues to grow, the importance of brand
recognition will increase due to the growing number of web sites and the
relatively low barriers to entry. The Company intends to establish and maintain
brand recognition with respect to its "Fashion House with Niki Taylor" web site
and to similarly establish brand recognition in connection with its proposed
Tyra Banks web site, as well as any additional web sites which it develops.
Establishing and maintaining this brand recognition will be highly dependent on
the Company's ability to engage and retain well-known models, such as Niki
Taylor and Tyra Banks, its ability to develop original and compelling content,
and its success in creating an awareness for its brand names in other media
besides the Internet. There can be no assurance that the Company will ever
successfully achieve brand recognition for any of its web sites, or that if it
does, that this brand recognition will ever result in the Company's being
profitable.
WEB SITES
General
The Company currently has one web site that provides content over the
Internet and is developing another site. Although there are currently several
fashion-related web sites on the Internet, and the Company expects there to be
several additions in the future, the Company believes that the editorial content
of its web sites will distinguish the Company from other providers. The
Company's web sites will offer a variety of articles covering fashion, beauty,
style and entertainment. Most of these articles will be provided by freelance
journalists who are experienced writers in these fields. The Company
24
<PAGE>
also engages the services of an editor of a nationally published fashion
magazine, as its Editorial Director, on a freelance basis, to supervise all
matters relating to editorial content, including, without limitation, the
assignment of articles to writers and the editing of these articles. The
Company's Editorial Director has been a journalist covering fashion and beauty
for over ten years.
"Fashion House with Niki Taylor"
The Company is currently launching "Fashion House with Niki Taylor",
its first web site, located on the World Wide Web at www.fashionhouse.net, and
also will appear at www.nikitaylor.net. Pursuant to a Web Site License Agreement
dated as of June 1, 1997 with a company controlled by popular model Niki Taylor
(the "Niki Taylor License"), the Company has engaged the services of Ms. Taylor
to host its current web site. The Niki Taylor License provides for the Company's
non-transferable right to use Ms. Taylor's name and likeness in connection with
the web site, subject to her prior written approval for all "for profit" uses,
including all uses in print and electronic media. This use is subject to any
prior commitments made by Ms. Taylor with which the Company's use may conflict.
In addition, the Niki Taylor License provides the Company with exclusive use of
photographs taken at a photo shoot directed by the Company, as well as the right
to have Ms. Taylor make two publicity appearances to promote the web site. Ms.
Taylor has also agreed, at her sole option, to participate in exclusive
interviews and on-line chat sessions on the web site, at mutually agreed upon
times. All services to be provided by Ms.
Taylor are subject to her availability.
For her services, Ms. Taylor is entitled to a $150,000 advance against
future royalties, one-third of which was paid upon execution of the Niki Taylor
License, and the remainder of which is currently owed but will be paid upon
consummation of this Offering. Ms. Taylor has not requested the payment of any
amounts currently owed to her and has not taken any action to compel the Company
to pay any such amounts prior to the consummation of this Offering. Although the
Company believes that Ms. Taylor will not demand payment of any amounts owed,
prior to the consummation of this Offering, there can be no assurance that she
will not demand payment of the entire balance, or a portion thereof, prior to
such date, and/or declare the Company in breach of the Niki Taylor License.
Royalties to be paid to Ms. Taylor are based on a percentage of the gross
revenues generated by the Company from the "Fashion House with Niki Taylor" web
site, provided that Ms. Taylor is entitled to receive a substantially higher
percentage of gross revenues with respect to revenues generated from corporate
sponsors, strategic partners and licensees introduced to the Company by Ms.
Taylor. Ms. Taylor also is entitled to a percentage of the net revenues received
by the Company from the sale of merchandise on the web site.
During the term of the Niki Taylor License, Ms. Taylor has agreed not
to (i) license her name and likeness to any other web site or home page devoted
to her or (ii) be employed by, provide consulting services to or otherwise
render services to other fashion-related on-line services. Notwithstanding these
limitations, Ms. Taylor is permitted to advertise on other sites, provide
services to sites operated by persons with whom she has corporate sponsorship
commitments and participate in online interviews and articles. The Niki Taylor
License expires on September 30, 1998, but will be automatically extended for up
to two additional twelve month periods, unless terminated by the Company or Ms.
Taylor prior to any such extension.
The Company's "Fashion House with Niki Taylor" web site offers the
following content areas:
From Niki - This regular newsletter is an avenue for Ms. Taylor to
provide fashion tips or other information to her fans on a monthly basis.
Style - This area covers the latest in styles and trends. Fashion
editorial and images are updated daily. Content includes three to five feature
articles per month which are exclusive to Style. The Company's Editorial
Director, assists the Company in the development of timely editorial materials,
some of which are updated as often as daily. Style also includes interviews with
well-known designers and highlights beauty products and techniques.
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<PAGE>
Portfolio - Images of Ms. Taylor, many of which have never been seen
before, and for which the Company has the exclusive rights. Included in this
album are many of the photos that have put Ms. Taylor on the cover of over 250
magazines, including some of her famous swimsuit exposes.
NTV - This is the entertainment and interactive area. Visitors to this
area can submit questions for interviews with Ms. Taylor and can view interviews
with Ms. Taylor or her interviews of other well-known models and celebrities.
This area also includes chat rooms and a bulletin board for makeup and style.
NTV is also the host area for periodic conference calls with Ms. Taylor and
special guests. Visitors also can get tips on places to go; movies, shows and
other events to see; and music and book reviews, in addition to a variety of
other entertainment information. This area also features sound clips from Niki's
CD Player.
Travel - This area provides visitors with travel information and
includes Ms. Taylor on location around the world, as well as suggestions for
travel and vacations.
Tyra Banks Web Site
The Company recently entered into a Web Site License Agreement with a
company controlled by popular model, Tyra Banks (the "Tyra Banks License"),
pursuant to which the Company has engaged the services of Ms. Banks to host its
next web site which is currently under development with the working title "Tyra
Tyra Tyra." The Tyra Banks License provides for the Company's non-transferable
right to use Ms. Banks's name and likeness in connection with the web site,
subject to her prior written approval for all "for profit" uses, including all
uses in print and electronic media. This use is subject to any prior commitments
made by Ms. Banks with which the Company's use may conflict. In addition, the
Tyra Banks License provides the Company with exclusive use of photographs taken
at a photo shoot directed by the Company, as well as the right to use certain
photographs taken for Ms. Banks 1998-99 calendar on the web site. Ms. Banks has
also agreed, at her sole option, to participate in exclusive interviews and
on-line chat sessions on the web site, at mutually agreed upon times. All
services to be provided by Ms. Banks are subject to her availability.
For her services, Ms. Banks is entitled to a $100,000 advance against
future royalties, which amount is currently due, but will be paid, in its
entirety, upon consummation of this Offering. Ms. Banks has not requested the
payment of this advance and has not taken any action to compel the Company to
pay any amounts prior to the consummation of this Offering. Although the Company
believes that Ms. Banks will not demand payment of any advances owed, prior to
the consummation of this Offering, there can be no assurance that she will not
demand payment of the entire amount, or a portion thereof, prior to such date,
and/or declare the Company in breach of the Tyra Banks License. Royalties to be
paid to Ms. Banks are based on a percentage of the gross revenues generated by
the Company from the "Tyra Tyra Tyra" web site, provided that Ms. Banks is
entitled to receive a substantially higher percentage of gross revenues with
respect to revenues generated from corporate sponsors, strategic partners and
licensees introduced to the Company by Ms. Banks. Ms. Banks also is entitled to
a percentage of the net revenues received by the Company from the sale of
merchandise on the web site.
During the term of the Tyra Banks License, Ms. Banks has agreed not to
(i) license her name and likeness to any other web site or home page devoted to
her or (ii) be employed by, provide consulting services to or otherwise render
services to other fashion-related on-line services. Notwithstanding these
limitations, Ms. Banks is permitted to advertise on other sites, provide
services to sites operated by persons with whom she has corporate sponsorship
commitments and participate in online interviews and articles. The Tyra Banks
License expires on March 31, 1999, but will be automatically extended for up to
two additional twelve month periods, unless terminated by the Company or Ms.
Banks prior to any such extension. A guaranteed minimum royalty of $150,000 is
payable upon commencement of the initial renewal period, and a guaranteed
minimum royalty of $250,000 is payable upon commencement of the second renewal
period. The Tyra Banks License will be automatically extended for the first
renewal period if the Company's agreement with Ms. Banks concerning the Tyra
Banks Calendars is renewed for the year 2000. See "Business - Tyra Banks
Calendars."
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The "Tyra Tyra Tyra" web site is expected to include content areas
which are similar to those on the Company's "Fashion House with Niki Taylor" web
site. Notwithstanding the foregoing, the "Tyra Tyra Tyra" web site is still
under development, and its final content cannot be determined at this time, nor
can any assurance thereof be given.
Additional Web Sites and Content
The Company is currently negotiating licenses with other popular models
in connection with its development of additional fashion-related web sites to be
hosted by these models. These web sites will offer content areas similar to
those provided on the Company's current site with Niki Taylor, provided that the
content of each web site will be specifically tailored to the look and style of
its model host, as well as the interests of the targeted audience. The Company
also plans to provide daily television listings and astrological forecasts on
its web sites, which are expected to be obtained on a barter basis.
The Company believes that user fantasies will be the main draw of the
Company's web sites. The Company plans to continuously add to and change the
content on its web sites to enhance user interest. This content may include
national and regional "behind the scenes" news from fashion shows, models,
clothing designers and other celebrities. In addition, the Company may enter
into arrangements for live broadcasts of fashion shows featuring models from the
Company's web sites.
TYRA BANKS CALENDARS
Effective January 1, 1998, the Company entered into an agreement with
Ms. Banks' company, pursuant to which the Company has obtained the right to use
Ms. Banks' name, likeness and endorsement in connection with the Tyra Banks
Calendars. These rights are applicable to the Company's advertisement, promotion
and sale of any number of versions of calendars in paper or electronic format,
for the 16-month period terminating December 31, 1999.
In consideration for such rights, the Company has agreed to pay Ms.
Banks a $100,000 advance against future royalties, none of which has been paid
to date, but will be paid, in its entirety, upon consummation of this Offering.
Ms. Banks has not requested the payment of any advances currently owed to her
and has not taken any action to compel the Company to pay any such amounts prior
to the consummation of this Offering. Although the Company believes that Ms.
Banks will not demand payment of any advances owed, prior to the consummation of
this Offering, there can be no assurance that she will not demand the payment of
any such amounts and/or declare the Company in breach of the agreement for the
Tyra Banks Calendars. Royalties to be paid to Ms. Banks are based on a
percentage of the net sales generated by the Company from the sale of the Tyra
Banks Calendars. The Company has also agreed to pay Ms. Banks' company's
production expenses in connection with the creation of the photographs of Ms.
Banks, which amount has been limited to $87,000.
Ms. Banks has prior approval rights with respect to all versions of the
Tyra Banks Calendars that the Company plans to sell, as well as all advertising
and promotional materials. The Company also has a right of "first negotiation"
for year 2000 Tyra Banks Calendars on terms which are mutually agreeable.
The Company is currently developing Tyra Banks Calendars in paper
format and electronic planners and expects to commence shipment of both in
August 1998.
DESIGN AND DEVELOPMENT OF WEB SITES
The Company's current web site was designed and developed by a third
party web designer. Pursuant to the Company's agreement with this design firm,
it agreed to design and develop the Company's "Fashion House with Niki
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Taylor" web site, as well as any additional web sites requested by the Company.
This engagement includes designs for aesthetic and functional characteristics of
the web sites, as well as computer files and code that implement the web sites.
The Company is the owner of all rights to the web sites when completed
except for properties licensed to the design firm by third parties and certain
materials created by the design firm. The Company paid the design firm a total
of $45,000 for the design and development of its "Fashion House with Niki
Taylor" web site and estimates the payment of an additional $45-50,000 for the
design and development of The Tyra Banks Home Page. The agreement with the
designer is terminable by either party upon 15 days' prior written notice and
the designer has limited its liability to the Company to an amount equal to any
fees paid by them to the Company during the 12-month period immediately
preceding the date that any cause of action arises.
SOURCES OF REVENUE
Advertising
The Company believes that its current web site offers (and any future
additional web sites will offer) a desirable vehicle for advertisers seeking to
reach fashion-oriented consumers. The Company further believes that the subject
matter of its web sites will attract an audience that is well educated,
sophisticated and affluent, although there can be no assurance thereof. To be
successful, the Company must attract advertising placements from businesses that
provide the types of products and services that appeal to the target audience of
the Company's web sites.
Banner Advertising
The Company expects to derive substantially all of its initial revenues
from the sale of advertising banners on its initial web site. These banners
appear on a user's computer screen when accessing different areas of the
Company's web sites. The interactive nature of the Internet also allows users to
obtain extensive additional information about an advertiser's products or
services instantly, by clicking on a hypertext link to the advertiser's web
site. In some cases the advertiser's products can be purchased in a transaction
completed on the Internet. The Company has entered into agreements with certain
advertisers whose banner advertisements appear on its "Fashion House with Niki
Taylor" web site, and is negotiating with additional advertisers to place banner
advertisements on its current and/or future web sites. There can be no assurance
that any of these negotiations will be successful.
These agreements are generally for periods of three months or less and
guarantee advertisers a minimum of 250,000 impressions (times that an
advertisement appears in page views downloaded by visitors to the Company's web
sites) per month. In the event that any advertisement does not achieve a minimum
of 250,000 impressions, during any month, for any reason, the Company may be
required to provide additional impressions after the contract term at no
additional cost. Advertisers pay between $2,500 and $15,000 per month depending
on where the banners are placed, and whether it is an exclusive or non-exclusive
advertiser of such products or services. The Company also offers a limited
number of twelve-month placements at a price of $30,000, which also includes one
product placement. To assist advertisers in monitoring the effectiveness of
their advertisements, the Company provides them with weekly reports showing
advertising impressions and the number of times users hyperlink to the
advertisers' web sites. The Company also assists its advertisers in developing
customized promotions for the target audience.
Content Area Sponsorships
The Company also will sell sponsorships for its content areas. Each
sponsor will have a special association with the content area chosen. For
example, a movie rental chain and/or sporting goods store may sponsor the NTV
area of the
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"Fashion House with Niki Taylor" web site. The sponsorships might be one-time,
annual or semi-annual depending on the arrangement. There can be no assurance
that the Company will be able to sell sponsorships.
Product Placements
The Company also may sell product placements as an additional source of
revenue. This would consist of the placement of brand products in different
environments on the Company's web sites. Some of these products could also be
placed in situations with Niki Taylor or other models or celebrities whom the
Company may engage, to the extent that he or she is able to endorse such
products. Although the Company has not yet entered into any arrangements for
product placements, it has had preliminary discussions with manufacturers of
audio equipment who have expressed their interest in having their products
pictured in "Niki's CD Player." There can be no assurance that the Company will
be able to obtain any of these product placements. In the event that the Company
is able to obtain any product placements, it believes that the terms and
conditions of each such placement, including the amount payable for such
placement, will be determined on a case-by-case basis.
Local Advertising
The Company also plans to provide opportunities for regional
advertising on its web sites. One method of providing this advertising will be
through the development of regional bulletin boards. Advertisers and sponsors
will be able to more easily target local consumers for their products and
services. This will be of particular interest to local businesses that have no
reason to pay higher prices to advertise their products and services nationally
into markets where such products and services are not available. In addition,
regional advertising will provide all businesses with the option to reduce their
advertising expenses by focusing on specific targeted markets.
Direct Response Marketing
The Company has entered into two agreements pursuant to which it
provides hyperlinks to other sites from its "Fashion House with Niki Taylor" web
site for the purchase of flowers (PC Flowers and Gifts, Inc. ("PC Flowers")) and
the purchase of music compact disks, videos and apparel products (CDnow, Inc.
("CDnow")). Pursuant to its agreement with PC Flowers, the Company is providing
an advertising banner and hyperlink to PC Flowers on the Company's web site. In
exchange, the Company will receive a percentage of revenues derived from sales
to those accessing the PC Flowers web site through the Company's web site.
Customers interested in purchasing flowers from the Company's site will be
hyperlinked to PC Flowers' web site to place their orders. Visitors to the
Company's site who visit "Fashion House Flowers and Gifts" also will be provided
with a toll-free number to call in orders. This number will be exclusive to the
Company's site. PC Flowers has agreed to pay the Company a sales commission
ranging from 8% to 10% of net sales with respect to all flowers, balloons,
gourmet foods, gift baskets and greeting cards sold through the Company's web
site. This agreement may be terminated by either party upon 90 days prior
written notice.
Pursuant to the Company's agreement with CDnow, the Company also is
developing a hyperlink to CDnow's site for the purchase of music compact disks,
videos and apparel. The Company will receive commissions for products ordered
through hyperlinks from its site , ranging from 3% to 5% of net sales of music
compact disks, 4% to 6% of net sales of videos and 8% to 10% of net sales of
apparel products. The initial term of this agreement expires in September 1998,
but renews automatically for subsequent one year terms unless either party
terminates within 30 days of the end of the then current term. The Company
believes that there are a number of other direct response relationships which
can be developed including, without limitation, sales of cosmetics and
fragrances, tickets to concerts and movies, travel services and housewares. The
Company presently has not established any relationships with respect to the
direct response marketing of any of those products or services, and there can be
no assurance that it will ever enter into any such relationship. The Company
also believes that annual revenue generated from direct response marketing could
ultimately surpass annual revenue generated from banner advertising, although
there can be no assurance thereof.
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Subscription Revenues
Persons that visit specific web sites on the Internet often have
similar interests in a particular subject area. Many of them have a more intense
interest in the subject matter and desire more than the standard content offered
on the site. To satisfy these consumers, the Company may offer exclusive chat
sessions on its web sites with access provided on a subscription basis. The
Company could charge subscription fees ranging from $1.00 to $5.00 per session.
If successful, the Company also may create club memberships, whereby members
would pay an annual membership fee entitling them to access to special areas on
the Company's web sites, as well as discounts and/or free offers from selected
advertisers. The Company has not developed any subscription or club membership
arrangements to date.
Licensing and Product Sales
In connection with the operation of its web sites, the Company prepares
exclusive editorial content for its target audiences. The Company believes that
other companies which serve, or wish to serve, these audiences will wish to
license the Company's editorial content, trademarks and images for their use.
Potential customers for these services include telephone companies offering high
capacity Internet service, online services and other web site operators. In
addition, the Company also may enter into joint ventures in which editorial
content is jointly created by the Company with other web site operators. In
these cases, revenue likely would be shared by the Company and the other joint
venturers. The Company also intends to develop a variety of merchandise relating
to its web sites, such as limited edition collectibles, license apparel and
other fashion merchandise. These items can be sold on the Company's web sites or
in retail stores. The Company has not yet entered into any licensing
arrangements or sold any products.
Electronic Planners
The Company has engaged the services of a third party designer to
design and develop electronic planners featuring Niki Taylor, Tyra Banks and
possibly one other model. The 1999 Tyra Banks electronic planner is currently
being developed and the Company expects this product to be available in August
1998. Planners for each model will be offered in two versions, one of which will
be a fashion edition targeted at women, and the other of which will be a
swimsuit edition targeted at men. These planners, which will be downloadable
from the Company's web sites to most personal computers and laptops, will
provide purchasers with personal information management software that allows
them control over scheduling, business and personal contacts, financial and
travel planning and personal record keeping. The planners will also provide
links to the Internet. The Company plans to sell the planners for $19.95 each.
If successful, the Company plans to create and sell electronic planners
featuring additional models appearing on the Company's web sites.
Syndicated Radio Show
The Company has had preliminary discussions with a national syndicator
of radio programming, in connection with the development and airing of a daily
90-second radio show devoted to the same subject matter as the Company's web
sites. The show, which is tentatively called "The Fashion House Minute" could be
a source of additional revenue for the Company through the sale of up to 30
seconds of advertising time on each show. There can be no assurance that the
Company will be able to enter into an agreement with the syndicator or develop
or make profitable the radio show.
Additional Sources of Revenue
The Company's success will be highly dependent on its ability to
generate revenues from a variety of sources. To the extent that any of the
Company's proposed sources of revenue prove to be unprofitable, the Company
likely will find it necessary to abandon the activities associated therewith and
replace them with services or products that have the potential to generate
profits. Therefore, the list of sources of revenue set forth in this Prospectus
should not be considered exhaustive, since the Company must and will continue to
try to identify new sources of revenue in order to achieve its goals. There can
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be no assurance that the Company will be able to identify any new sources of
revenue or that even if the Company does identify additional sources, that the
services or products relating thereto will generate revenues sufficient enough
to cause the Company's operations to be profitable.
MARKETING AND PROMOTION
The Company continually evaluates numerous ways to promote its brand
names such as "Fashion House with Niki Taylor," believing that brand recognition
will assume increasing importance as the volume of activity on the Internet
increases. The Company intends to promote its web sites, products and other
services through several of the following methods.
Public Relations
The Company has engaged the services of The Angellotti Company, a
public relations firm, to assist in the launch of its web sites. The Company
has agreed to pay $3,500 per month for these services for a period of eight
months commencing in May 1998. The agreement is automatically renewable at the
end of the term, unless the Company gives 30 days' prior written notice of its
desire to terminate such services. It will be the public relations firm's
responsibility to arrange for creative and on-target promotions in both
traditional and electronic media.
Barter Arrangements
The Company has had preliminary discussions with representatives of
approximately 20 other web sites whereby the Company would be provided with
advertising space on other web sites in exchange for providing those other web
sites with advertising space of equal value on the Company's web sites. Similar
arrangements also may be considered with advertisers who use the same models in
print ads. For example, a cosmetic company could include the domain name of the
"Fashion House with Niki Taylor" web site in a magazine advertisement in which
Ms. Taylor appears, in exchange for an advertisement for the cosmetic company's
products on the Company's web sites.
Syndicated Radio Show; Advertising on Search Engines; Product Promotions; Print
Advertising
In addition to the Company's use of the "Fashion Minute" syndicated
radio show to generate advertising revenue, the Company also plans to utilize
the radio show to promote its web sites. The Company, on a limited basis, also
plans to purchase banner advertisements on search engines. Many of the products
sold by the Company, such as the electronic planners and calendars, will also be
used to promote the Company's web sites. These products will most likely contain
advertising which may include, among other things, the domain addresses of the
Company's web sites. The Company also plans to purchase advertising in selected
publications, on a limited basis and/or in conjunction with additional
promotions.
WEB HOST; OPERATIONS, SECURITY AND TECHNOLOGY
The Company's web sites are made available to users through its web
host, Digex. The Company provides pages of code, graphics and video to Digex,
which uploads this information to its dedicated servers. Digex is responsible
for all traffic, security and management of the technological aspects of the
Company's web sites. The Company is responsible to update the content on the web
sites and to apprise Digex of the Company's changing technological needs and
offering Digex the opportunity to provide for these needs. The Company
compensates Digex with a combination of cash and promotional consideration. The
Company believes it would have no difficulty replacing Digex with another web
host if its relationship with Digex were to be terminated for any reason,
although there can be no assurance of this.
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A key element of the Company's success is to generate a high volume of use of
its sites. Accordingly, high levels of performance are critical. Any system
failure that causes interruption or an increase in response time could result in
less traffic to the Company's web sites and, if sustained or repeated, could
reduce the attractiveness of the Company's web sites to advertisers. Further,
any substantial increase in the number of visits to the Company's web sites
could strain the capacity of the software or hardware deployed by the Company or
its web hosts and would require the Company to expand and adapt its network
infrastructure. The Company's inability to add software or hardware to
accommodate substantial increases in traffic could lead to slower response time
or system failures. There can be no assurance that the Company would be able to
expand its network infrastructure on a timely basis to meet any increased
demand.
The Company's operations also are dependent, in part, upon the ability
of its web hosts to protect their operating systems against physical damage form
fire, floods, earthquakes, power loss, telecommunications failures, break-ins
and similar events. The Company does not currently have redundant, multiple site
capacity in the event of any such occurrence. Notwithstanding the implementation
of security measures by the Company, such as limiting physical and network
access to its routers, the Company's infrastructure is vulnerable to computer
viruses, break-ins and similar disruptive acts by Internet users. These factors
could lead to interruption, delays or cessation in service of the Company's web
sites. Furthermore, the inappropriate use of the Internet could jeopardize the
security of confidential information stored in the computer systems of the
Company's customers and other users of the Internet, which could deter potential
customers from accessing the Company's web sites and give rise to uncertain
liability to users whose security and privacy has been infringed. A security
breach could result in loss of customers, damage to the Company's reputation,
damage to the Company's web sites, costs of repair and detection and other
expenses. The security and privacy concerns of existing and potential customers
may inhibit the growth of the Internet, in general, and the Company's revenues
in particular.
COMPETITION
Competition among content providers on the Internet is intense and is
expected to increase significantly. The Internet is currently characterized by
minimal barriers to entry, since new web sites can be developed and launched at
relatively low cost. The Company faces competition from a number of sources that
provide content through one or more media, such as print, broadcast, cable
television and the Internet. In order to compete successfully, the Company must
establish and maintain awareness, among the public, of the Company and its brand
names, effectively market its services and products, and successfully
differentiate its web sites. This will be highly dependent on the Company's
ability to provide compelling and popular content to attract Internet users and
support advertising and sales of products and services that are intended to
reach such users.
The Company competes with a significant number of web content
providers, several of which offer competitive services and/or products, and
address certain of the Company's target markets, including, among others,
Women's Wire, Elle Magazine, Ford Models, Inc. and Pataxi Entertainment Network,
Inc. (operator of supermodel.com). In addition, the Company competes against
large service providers, including web directories, search engines, commercial
online services and sites maintained by Internet service providers, many of
which offer content similar to that provided on the Company's web sites and
attract advertisers targeting the same audience as the Company. Some of these
companies include Microsoft Corporation, America Online, Inc., Netscape
Communications, Yahoo! Inc. and Prodigy Services Co. Many of these competitors
have significantly greater financial, technical and marketing resources than the
Company, and include companies that are larger and better capitalized than the
Company. These competitors also may have expertise and established brand
recognition in the Internet market.
In addition, the Company competes for the time and attention of
Internet users with thousands of non-profit Internet sites operated by
educational institutions, governments and individuals. Existing and potential
competitors also include other forms of media, such as television, radio and
print media, many of which provide services and products that are similar to
those which the Company currently provides and also intends to provide through
its web sites. Although traditional media outlets do not offer many of the
interactive features available through the Internet (such as online chat rooms,
E-mail, etc.),
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there are numerous publications, as well as television and radio programs, which
provide editorial content similar to that which the Company provides on its web
site, as well as articles and features on fashion, beauty, health and
celebrities. There can be no assurance that the Company's competitors will not
develop services and products that are superior to those of the Company or that
achieve greater market acceptance.
The Company believes that the principal competitive factors in the
Internet market are brand recognition, ease of use, content depth, content
quality, content presentation, speed and quality of service execution,
competitive pricing, successful marketing and the availability of targeted
content and focused value added services and products. To be competitive, the
Company believes that it must distinguish its editorial content from its
competitors and customize this content to appeal to its target audiences. There
can be no assurance that the Company will be able to achieve either of these
goals.
Since many of the Company's competitors have greater resources than the
Company, these competitors may be able to undertake more extensive marketing
campaigns, adopt more aggressive pricing policies and devote substantially more
resources to developing their content and services. In addition, as a strategic
response to changes in the competitive environment, the Company may make certain
pricing, service or marketing decisions or enter into acquisitions of new
entities that could have a material adverse effect on the Company's business,
results of operations and financial condition. Although the Company believes
that its web sites will compete favorably with those of its competitors, there
can be no assurance that the Company will be able to compete successfully
against current and future sources of competition.
TECHNOLOGY; TRADEMARKS AND PROPRIETARY RIGHTS
The Company's success is highly dependent on its trademarks and other
intellectual property rights. The Company relies upon trademark and copyright
law, trade secret protection and, where appropriate, confidentiality and /or
license agreements with its employees, independent contractors and consultants
to protect its proprietary rights. To date, none of the Company's trademarks has
been registered, nor does the Company currently contemplate registering any of
its trademarks. The Company also relies on copyright laws to protect the
original content included on its web sites. A substantial amount of uncertainty
exists concerning the application of copyright laws to the Internet, and there
can be no assurance that existing laws will provide the Company with adequate
protection.
Effective trademark, copyright and trade secret protection may not be
available in every country in which the Company's services and products are
distributed or appear via the Internet. As part of its business strategy, the
Company may license its content, trademarks and images to third parties. Without
adequate protection in foreign markets, there can be no assurance that these
licensees will not take actions that might materially or adversely affect the
value of the Company's proprietary rights. In addition, despite the Company's
efforts to protect its proprietary rights, the rapid pace of technological
innovation on the Internet makes it possible for third parties to copy or
otherwise obtain and use the Company's products or technology without
authorization, or to develop similar technology independently. Policing
unauthorized use of the Company's technology and intellectual property will be
difficult. There can be no assurance that the precautions taken by the Company
will prevent misappropriation or infringement of its technology or intellectual
property. Furthermore, notwithstanding the Company's best efforts to obtain
confidentiality agreements from all employees and independent contractors
providing services in connection with the development and design of the
Company's web sites, no assurance can be given that others will not gain access
to the Company's trade secrets, that such agreements will be honored by
employees and independent contractors, or enforced by the courts, or that the
Company will be able to effectively protect its rights to its proprietary
technology and intellectual property.
GOVERNMENT REGULATIONS
The Company's proposed business is not currently subject to direct
regulation by any government agency, other than regulations applicable to
businesses generally, and there are currently few laws or regulations directly
applicable to access to or commerce on the Internet. However, due to the
increasing popularity and use of the Internet, it is possible that a number
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of laws and regulations may be adopted with respect to the Internet, covering
issues such as user privacy, pricing, characteristics and quality of products
and services. The Telecommunications Reform Act of 1996 imposes criminal
penalties on anyone who distributes obscene, indecent or patently offensive
communications on the Internet (although certain provisions of that law have
recently been held to be unconstitutional). The manner in which this law, or any
similar law which may be adopted in the future, will be interpreted and enforced
and its effects on the Company's proposed operations cannot yet be fully
determined. The adoption of any additional laws or regulations may decrease the
growth of the Internet, which could in turn decrease the demand for the
Company's services and products and increase the Company's cost of doing
business. Furthermore, the applicability to the Internet of existing laws in
various jurisdictions governing issues such as property ownership, libel and
personal privacy is uncertain.
LEGAL PROCEEDINGS
The Company is not a party to any legal proceedings.
EMPLOYEES
The Company presently employs two individuals, Peter Klamka, its
Chairman, President and Chief Executive Officer and one additional person. Upon
consummation of this Offering, the Company intends to hire several additional
employees. These employees will most likely be assisting the Company technically
or creatively. None of the Company's employees are represented by a labor union.
FACILITIES
The Company currently maintains its executive offices, consisting of
700 square feet of space, at 313 North First St., Suite 8B, Ann Arbor, Michigan,
pursuant to a month-to-month lease at a monthly rental of $670.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The Company's directors and executive officers are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
---- --- -------------------------
<S> <C> <C>
Peter Klamka 29 Chairman, President, Chief Executive Officer and
Secretary
Deborah M. Schneider 37 Director
Lila Lazarus 34 Director
</TABLE>
Peter Klamka has been Chairman, President, Chief Executive Officer and
Secretary of the Company since the inception of the Company's predecessor in May
1997. From 1990 to 1991, Mr. Klamka was employed as an analyst with Credit
Lyonnais. From 1991 to 1993, he was employed by a private investment concern.
His duties included the evaluation of acquisition candidates. In 1993, Mr.
Klamka became the sole stockholder of a manufacturing concern which he sold in
1994. From 1993 through 1997, Mr. Klamka developed a number of consumer products
featuring entertainment licenses. In 1995, he developed one of the first
authorized celebrity web sites. Mr. Klamka received his Bachelor of Arts degree
from the University of Michigan. Mr. Klamka is deemed to be a founder of the
Company.
Deborah M. Schneider has been a director of the Company since February
1998. Ms. Schneider is a practicing attorney with and a shareholder of
Adkison, Need, Green, Allen & Schneider, P.L.L.C. ("Adkison Need") in
Bloomfield Hills, Michigan. She received an A.B. degree in Human Biology and
Economics from Stanford University and received her J.D. degree from Wayne
State University Law School. She is a member of the Oakland County Bar
Association, the State Bar of Michigan and the American Bar Association. She
serves on the membership services committees of the Oakland County Bar
Association and the State Bar of Michigan. She also is a member of the Section
on Intellectual Property and Forum on Entertainment and Sports Industries of
the American Bar Association. Ms. Schneider is past president of the Oakland
Bar - Adams Pratt Foundation. She also is a member of Promotion Marketing
Association of America and serves on its Legal Services Committee. Ms.
Schneider practices in the areas of intellectual property, promotion,
entertainment and computer law. Adkison Need has provided legal services to
the Company. Prior to her present affiliation Ms. Schneider was a partner with
the law firm of Howard & Howard.
Lila Lazarus has been a director of the Company since February 1998.
Ms. Lazarus has been a health reporter and a weekend anchor on television
station WDIV in Detroit, Michigan, since September 1996. Prior to that, Ms.
Lazarus was an anchor at television station NECN in Boston, Massachusetts, from
August 1994 to August 1996, and a reporter at television station WBAL in
Baltimore, Maryland, from December 1992 to August 1994. She received a Masters
in Journalism from the University of Michigan and a Masters in Political Science
from the University of Massachusetts. Ms. Lazarus is a Fulbright Scholar and has
been honored by the Detroit News Club, the Detroit Press Club and the Associated
Press. Ms. Lazarus also is a past recipient of the Hanns-Seidel fellowship for
study in West Germany.
All directors hold office until the next annual meeting of stockholders
and the election and qualification of their successors. Directors currently
receive no cash compensation for serving on the Board other than reimbursement
of reasonable expenses incurred in attending meetings. Directors who are not
employees of the Company are entitled to receive options to purchase shares of
Common Stock upon their election as a director and annually while they serve as
directors.
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See "1998 Stock Option Plan." Officers are expected to be elected annually by
the Board and serve at the discretion of the Board.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company has no standing Audit Committee, Compensation Committee,
Nominating Committee or other committee. The Board performs the functions of all
such committees itself.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Delaware law permits a corporation, through its Certificate of
Incorporation, to exonerate its directors from certain personal liability to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, other than (a) for any breach of the director's duty of
loyalty to the Company or its stockholders; (b) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law; (c) in connection with payment of any illegal dividend or an illegal stock
repurchase or redemption; or (d) for any transaction from which the director
derived an improper personal benefit. This provision does not apply to equitable
remedies such as injunctive relief. The Company's Certificate of Incorporation
includes a provision exonerating its directors to the fullest extent permitted
by Delaware law.
Prior to, or immediately after the consummation of this Offering, the
Company will obtain directors' and officers' liability insurance covering
certain liabilities that may be incurred by any director or officer in
connection with the performance of his or her duties and certain liabilities
that may be incurred by the Company, including the indemnification paid to any
director or officer. The Company plans to obtain a policy that provides for a
maximum aggregate coverage of not less than $2,000,000, including defense costs.
The entire premium for this insurance will be paid by the Company.
The Company's Certificate of Incorporation authorizes the Company to
indemnify its directors for certain breaches of fiduciary duty to the Company
and its stockholders, and other liabilities, subject to certain limitations.
This indemnification does not apply to acts or omissions which are knowingly
fraudulent, deliberately dishonest or arise out of willful misconduct.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company has been
advised that in the opinion of the Commission such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable.
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EXECUTIVE COMPENSATION
The following table sets forth the compensation paid by the Company for
the Company's initial fiscal year from inception of its predecessor (May 1997)
through December 31, 1997 to its Chief Executive Officer. The Company had no
other officers during this period.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation
---------------------------------------
Name and Principal Position Salary Bonus Other
- --------------------------- ------ ----- -----
<S> <C> <C> <C>
Peter Klamka, Chairman, President and
Chief Executive Officer(1) $50,000 $0 $0
<FN>
- ---------------
(1) Mr. Klamka is entitled to receive an annual base salary of $100,000
from the Company. Mr. Klamka was employed by the Company, during 1997,
from its inception on May 27, 1997 to December 31, 1997. In March 1998,
the Company issued to Mr. Klamka 50,000 shares of Common Stock at a
value of $1.00 per share in respect of the payment of his annual salary
for 1997. Mr. Klamka has waived any additional salary payable to him
for services provided during the year ended December 31, 1997, and has
stated to the Company that he expects to waive any further salary
payable to him for the foreseeable future, although no assurance
thereof can be given.
</FN>
</TABLE>
EMPLOYMENT AGREEMENTS
The Company has no employment or other written agreement with Peter
Klamka, its Chairman, President and Chief Executive Officer. Mr. Klamka has an
oral agreement with the Company to receive a base salary of $100,000 per year
and such other compensation as the Board of Directors shall designate. Except
for the issuance of 50,000 shares of Common Stock to Mr. Klamka as compensation
for services provided in 1997, Mr. Klamka has waived this base salary through
the date hereof, and the Company believes he will waive the base salary for the
foreseeable future, although no assurance thereof can be given.
Mr. Klamka is involved in other business ventures, including the
ownership of over 500,000 shares of a Nasdaq Bulletin Board company, but he
intends to devote substantially all his business time and effort on behalf of
the Company for the foreseeable future. Mr. Klamka has committed that, for so
long as the Company shall be in existence, he shall conduct no business relating
to models or fashion personalities other than through the Company.
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<PAGE>
1998 STOCK OPTION PLAN
The Option Plan was adopted and approved by the stockholders and
directors in March 1998. The Option Plan provides for the grant of options to
purchase up to 500,000 shares of the Company's Common Stock. These options are
intended to qualify either as incentive stock options ("Incentive Stock
Options") within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended, or as options that are not intended to meet the requirements
of such section ("Nonstatutory Stock Options"). Under the Option Plan, Incentive
Stock Options may be granted to employees (including officers) of the Company,
and Nonstatutory Stock Options may be granted to employees (including officers),
non-employee directors, consultants or advisors of the Company.
The Option Plan is administered by the full Board of Directors. The
Board has discretionary authority to select the persons to whom, the number of
shares for which, the times at which and the exercise price for which options
will be granted.
Stock options granted to an employee expire immediately upon the
termination of employment voluntarily by such employee or for cause by the
Company. Employee stock options may be exercised up to one year after the
termination of employment due to death or disability. Employee stock options may
be exercised up to three months after termination for any other reason. Stock
options granted to a non-employee director expire upon the termination of the
director's services for cause. Non-employee director stock options may be
exercised up to one year after such person is no longer serving as a director
for any other reason.
Incentive Stock Options must have an exercise price greater than or
equal to the fair market value of the shares underlying the option on the date
of grant. Incentive Stock Options granted to the holder of 10% or more of the
Company's Common Stock must have an exercise price of 110% of the underlying
shares' fair market value on the date of grant. The maximum exercise period of
Incentive Stock Options is ten years from the date of grant (five years in the
case of an individual owning more than 10% of the Company's Common Stock). The
aggregate fair market value (determined at the date the option is granted) of
shares with respect to which Incentive Stock Options are exercisable for the
first time by the holder of the option during any calendar year may not exceed
$100,000. If such amount exceeds $100,000, the Board may designate those shares
that will be treated as Nonstatutory Stock Options.
The Option Plan provides for certain grants to non-employee directors.
Non-employee directors serving on the Board when the Option Plan was adopted
each received options to purchase an aggregate of 3,000 shares of Common Stock
at the fair market value of the Common Stock on such date. One of the Company's
non-employee directors was also granted an option to purchase an additional
47,000 shares of Common Stock on such date, as an incentive to serve on the
Company's Board of Directors.
As of the date of this Prospectus, the Company has granted options to
purchase an aggregate of 106,000 shares of Common Stock under the Option Plan to
its employees and non-employee directors. All of these options were granted in
March 1998 at an exercise price of $1.00 per share, and expire in March 2008.
Options to purchase 3,000 shares of Common Stock are currently exercisable and
the remaining options vest over a period of three years, in equal amounts,
commencing in January through March 1999. The Company intends to file a
registration statement covering shares issuable upon exercise of stock options
granted under the Option Plan.
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information as of April 30, 1998, with
respect to the beneficial ownership of the Company's Common Stock by (i) each
current director of the Company, (ii) each executive officer of the Company
named in the Summary Compensation Table set forth under the caption "Executive
Compensation" below, (iii) all directors and executive officers of the Company
as a group and (iv) each person known by the Company to own beneficially more
than five percent (5%) of the outstanding shares of Common Stock of the Company.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF NUMBER OF SHARES PERCENT OF CLASS PERCENT OF CLASS
BENEFICIAL OWNER BENEFICIALLY OWNED PRIOR TO OFFERING (1) AFTER OFFERING(1)(2)(3)
- ---------------- ------------------ --------------------- -----------------------
<S> <C> <C> <C>
Peter Klamka(4) 2,107,008 66.58% 59.39%
Deborah M. Schneider(5) --- --- ---
Lila Lazarus(6) --- --- ---
Chris H. Giordano(7) 540,340 17.11% 15.19%
Michael Giordano(8) 300,000 9.50% 8.43%
All executive officers and directors 2,107,008 66.58% 59.11%
as a group (three persons)
<FN>
- -----------------------
(1) Includes the conversion of certain outstanding indebtedness of the
Company, in March 1998, into 147,500 shares of the Company's Common Stock.
Excludes the shares underlying certain warrants issued by the Company.
(2) Assumes the sale of all 400,000 Shares in this Offering.
(3) In the event that the Company is unable to sell all of the Shares in this
Offering, each holder's beneficial ownership after this Offering will be
higher.
(4) Mr. Klamka's address is the same as that of the Company.
(5) Ms. Schneider's address is 1533 North Woodward, Bloomfield Hills, Michigan
48304. Does not include an option granted to Ms. Schneider pursuant to the
Option Plan, in March 1998, to purchase up to 50,000 shares of Common
Stock, which option becomes first exercisable in March 1999. See
"Management - 1998 Stock Option Plan."
(6) Ms. Lazarus' address is 1533 North Woodward, Bloomfield Hills, Michigan
48304. Does not include an option granted to Ms. Lazarus pursuant to the
Option Plan, in March 1998, to purchase up to 3,000 shares of Common
Stock, which option becomes first exercisable in March 1999. See
"Management - 1998 Stock Option Plan."
(7) Chris Giordano's address is 4 Dogwood Court, West Patterson, NJ 07424.
Chris Giordano is Michael Giordano's brother, but disclaims any beneficial
ownership of shares owned by Michael Giordano.
(8) Michael Giordano's address is 7591 N.W. 29th Street, Margate, Florida
33063. Michael Giordano is Chris Giordano's brother, but disclaims any
beneficial ownership of shares owned by Chris Giordano.
</FN>
</TABLE>
39
<PAGE>
CERTAIN TRANSACTIONS
In June 1997, Peter Klamka purchased 2,117,008 shares of Common Stock of
the Company's predecessor for an aggregate purchase price, paid by delivery of a
promissory note, of $2,117.01. In June 1997 Chris Giordano purchased 540,340
shares of Common Stock of the Company's predecessor for an aggregate purchase
price, paid by delivery of a promissory note, of $540.34. In June 1997 Michael
Giordano purchased 300,000 shares of Common Stock of the Company's predecessor
for an aggregate purchase price, paid by delivery of a promissory note, of
$300.00. Messrs. Klamka, Chris Giordano and Michael Giordano are each deemed to
be founders of the Company.
Jean Renard, manager for Ms. Taylor owns 10,000 shares of Common Stock.
Mr. Klamka recently made a loan to the Company in the principal amount of
$150,000. This loan is evidenced by a promissory note (the "Note") bearing
interest at a rate of 9% per annum. The Note is payable, in full, inclusive of
accrued interest, on the earlier of (i) the date that the Company has raised an
aggregate of not less than $1,500,000 in one or more public offerings of any of
its securities or (ii) May 2001.
DESCRIPTION OF SECURITIES
GENERAL
The Company is authorized to issue 10,000,000 shares of Common Stock, par
value $0.001 per share, and 1,000,000 shares of preferred stock, par value $0.01
per share (the "Preferred Stock"). As of the date of this Prospectus, 3,164,848
shares of Common Stock are outstanding which the Company believes are
beneficially owned by approximately 23 persons, and no shares of Preferred
Stock are outstanding. After an additional 400,000 shares of Common Stock are
issued by the Company in this Offering, assuming all 400,000 shares of Common
Stock offered hereby are sold, 3,564,848 shares will be outstanding.
COMMON STOCK
Holders of Common Stock are entitled to one vote for each share on all
matters voted on by stockholders, including the election of directors.
Accordingly, holders of a majority of the shares of Common Stock entitled to
vote in any election of directors may elect all of the directors standing for
election if they choose to do so. The Certificate of Incorporation does not
provide for cumulative voting of directors. Holders of Common Stock will be
entitled to receive dividends ratably, if any, as may be declared from time to
time by the Board out of funds legally available therefor. Holders of Common
Stock will be entitled to receive, pro rata, all assets of the Company available
for distribution to them upon liquidation. In addition, holders of Common Stock
have no preemptive, subscription or redemption rights. All outstanding shares of
Common Stock are, and the Common Stock offered hereby, upon issuance and sale,
will be, fully paid and nonassessable.
PREFERRED STOCK
The Company's Certificate of Incorporation provides that the Company is
authorized to issue up to 1,000,000 shares of "blank check" Preferred Stock,
which may be issued from time to time in one or more series upon authorization
by the Board. The Board, without further approval of the stockholders, is
authorized to fix any dividend rights, conversion rights, voting rights,
redemption rights and terms, liquidation preferences and any other rights,
preferences, privileges and restrictions applicable to each series of Preferred
Stock. The issuance of Preferred Stock, while providing flexibility in
connection with possible acquisitions and other corporate purposes, could, among
other things, adversely affect the voting power of the holders of the Common
Stock. Under certain circumstances, the issuance of Preferred Stock could also
make it more difficult
40
<PAGE>
for a third party to gain control of the Company, discourage bids for the
Company's Common Stock at a premium or otherwise adversely affect the market
price of the Common Stock.
BRIDGE WARRANTS
In connection with the Company's issuance of certain promissory notes to the
lenders of an aggregate of $56,250 to the Company in July 1997, the Company
issued to such lenders warrants (the "Bridge Warrants") to purchase a total of
45,000 shares of Common Stock. The Bridge Warrants are exercisable for the first
time, upon the offering of the shares of Common Stock hereunder, at a price of
$3.00 per share, and expire in July 2001. The Company has the right to
repurchase the Bridge Warrants from the Bridge Warrant holders for $.05 per
share of Common Stock purchasable thereby at any time after July 1998, provided
that the shares of Common Stock have been trading in the public market at $6.00
per share or more on each of the most recent 20 consecutive trading days prior
to the Company's notice to repurchase the Bridge Warrants, and provided further,
that no underwriter has placed any restrictions on such repurchase by the
Company.
DIVIDEND POLICY
The Company has never declared or paid any cash dividends on its capital
stock and does not anticipate paying cash dividends in the foreseeable future,
but intends to retain future earnings for reinvestment in its business. Future
cash dividends, if any, will be at the discretion of the Company's Board of
Directors and will be dependent upon, among other things, the Company's
financial condition, capital requirements and such other factors as the Board of
Directors deems relevant.
LIMITATION OF LIABILITY OF DIRECTORS
The Company's Certificate of Incorporation provides that a director of the
Company will not be personally liable for monetary damages to the Company or its
stockholders for breach of fiduciary duty as a director, except for liability
(i) for any breach of the director's duty of loyalty to the Company or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) for unlawful
payments of dividends or unlawful stock repurchases or redemptions as provided
in Section 174 of the Delaware General Corporation Law or (iv) for any
transaction from which the director derived an improper personal benefit.
This provision is intended to afford directors additional protection and
limit their potential liability from suits alleging a breach of duty of care by
a director. As a result of the inclusion of this provision, stockholders may be
unable to recover monetary damages against directors for actions taken by them
that constitute negligence or gross negligence or that are otherwise in
violation of their fiduciary duty of care, although it may be possible to obtain
injunctive relief or other equitable relief with respect to such actions. If
equitable remedies are found not to be available to stockholders in any
particular situation, stockholders may not have an effective remedy against a
director in connection with this conduct.
STATUTORY PROVISIONS AFFECTING STOCKHOLDERS
In the event that any of the Company's Common Stock becomes listed on a
national securities exchange or the Nasdaq Stock Market or is held of record by
more than 2,000 stockholders, the Company would become subject to Section 203 of
the Delaware General Corporation Law ("Section 203") which contains certain
provisions that may make more difficult the acquisition of control of the
Company by means of a tender offer, open market purchases, proxy fight or
otherwise. These provisions are designed to encourage persons seeking to acquire
control of the Company to negotiate with the Board of Directors. However, these
provisions could have the effect of discouraging a prospective acquiror from
making a tender offer or otherwise attempting to obtain control of the Company.
To the extent that these provisions discourage takeover attempts,
41
<PAGE>
they could deprive stockholders of opportunities to realize takeover premiums
for their shares or could depress the market price of the Common Stock.
Section 203 prohibits certain "business combination" transactions between a
publicly held Delaware corporation and any "interested stockholder" for a period
of three years after the date on which such stockholder became an interested
stockholder, unless (i) the Board of Directors approves, prior to such date,
either the proposed business combination or the proposed acquisition of stock
which resulted in the stockholder becoming an interested stockholder, (ii) upon
consummation of the transaction in which the stockholder becoming an interested
stockholder, the interested stockholder acquires at least 85% of those shares of
voting stock of the corporation which are not held by the directors, officers or
certain employee stock plans or (iii) on or subsequent to the consummation date,
the business combination with the interested stockholder is approved by the
Board of Directors and also approved at a stockholders' meeting by the
affirmative vote of the holders of at least two-thirds of the outstanding shares
of the corporation's voting stock other than shares held by the interested
stockholder. For purposes of Section 203, a "business combination" includes a
merger, asset sale or other transaction resulting in a financial benefit to the
interested stockholder, and an "interested stockholder" is a person who,
together with affiliates and associates, owns (or within three years, did own)
15% or more of the corporation's voting stock. A corporation may, at its option,
exclude itself from the coverage of Section 203 by amending its charter or
by-laws by action of its stockholders to exempt itself from coverage, provided
that this by-law or charter amendment would not become effective until 12 months
after the date it is adopted. The Company has not elected to opt out of Section
203 pursuant to its terms.
TRANSFER AGENT
The transfer agent for the Common Stock is Corporate Stock Transfer, Denver,
Colorado.
SHARES ELIGIBLE FOR FUTURE SALE
Upon the consummation of this Offering (assuming sale of all 400,000 Shares
hereby), the Company will have 3,564,848 shares of Common Stock outstanding. Of
such shares of Common Stock, 400,000 shares (the Shares sold in this Offering)
will be freely tradeable without restriction or further registration under the
Securities Act. The remaining 3,164,848 shares of Common Stock are "restricted
securities," as the term is defined under Rule 144 of the Act. These shares may
only be sold pursuant to a registration statement under the Securities Act, in
compliance with the exemption provisions of Rule 144, or pursuant to another
exemption under the Securities Act.
In general, under Rule 144 under the Securities Act as currently in effect,
a person (or persons whose shares are aggregated) who has beneficially owned
restricted shares (as that term is defined in Rule 144) for at least one year is
entitled to sell, within any three-month period, a number of shares that does
not exceed the greater of 1% of the then outstanding shares of the issuer's
common stock (approximately 35,650 shares immediately after this Offering) or
the average weekly trading volume during the four calendar weeks preceding the
sale. Sales pursuant to Rule 144 also are subject to certain other requirements
relating to the manner and notice of sale and availability of current public
information about the Company. Affiliates may publicly sell shares not
constituting restricted securities under Rule 144 in accordance with the
foregoing volume limitations and other restrictions, but without regard to the
one-year holding period. Under Rule 144(k), a person who is not deemed to have
been an affiliate of the Company at any time during the 90 days immediately
preceding a sale by such person, and who has beneficially owned restricted
shares for at least two years, is entitled to sell such shares under Rule 144
without regard to the volume limitations and other conditions described above.
An additional 151,000 shares of Common Stock are issuable upon exercise of
outstanding warrants and options, all of which will be eligible, under Rule 144,
for sale into the public securities markets one year after the warrant or option
is exercised, or sooner if registered by the Company.
42
<PAGE>
The Company makes no prediction as to the effect, if any, that future sales
of shares or the availability of shares for future sale will have on the
prevailing market price of the Common Stock. Sales of substantial amounts of the
Common Stock in the public market or the perception that such sales could occur
could have an adverse effect on the prevailing market price of the Common Stock.
PLAN OF DISTRIBUTION
The Shares will be offered by the Company through its officers and directors
on a best efforts basis up to a maximum of 400,000 Shares. The Company may also
enter into an agency agreement (the "Agency Agreement") with one or more
registered broker-dealers ("Selling Agents"), pursuant to which these Selling
Agents will assist the Company, on a best efforts basis, in selling the Shares.
The Agency Agreement will provide that the obligations of the Selling Agents are
subject to approval of certain legal matters by counsel and to various other
conditions. The Selling Agents will not make any commitment to, nor will they
have any obligation to purchase or pay for any of the Shares, but will act
solely as selling agents on behalf of the Company. Each Selling Agent, if any,
will be a broker-dealer registered with the National Association of Securities
Dealers, Inc. ("NASD") and also will be duly registered in each state, where
required, unless an applicable exemption from registration applies.
The Company and the Selling Agents, if any, will use their best efforts to
find purchasers for the Shares within a period of 30 days from the date of this
Prospectus, subject to extension for an additional period of 30 days thereafter
(the "Expiration Date") at the Company's sole discretion. All proceeds from the
sale of the Shares will be deposited promptly into a non-interest bearing escrow
account at University Bank, Ann Arbor, Michigan (the "Bank") pursuant to an
escrow agreement between the Company and the Bank. The Company is not required
to sell any minimum number of Shares to consummate this Offering and may
therefore hold any number of closings of this Offering from the date the first
subscription is received until the Expiration Date. The minimum subscription is
200 Shares ($1,000), but the Company, in its discretion, may accept
subscriptions for less than $1,000. All subscriptions are irrevocable upon
receipt by the Company.
Each Selling Agent participating in this Offering, if any, will be paid a
commission of not greater than 10% of the gross proceeds received by the Company
from the sale of Shares by the Company through that Selling Agent. Neither the
Company nor any of its directors or officers will receive any commissions in
connection with their offer and sale of the Shares. Shares sold by the Company
directly, or with the assistance of a Selling Agent, will be offered to the
public at the offering price set forth on the cover page of this Prospectus and
to certain dealers at that price less a concession not in excess of $.50 per
share.
The Company will indemnify the Selling Agents, if any, against certain
liabilities, including liabilities under the Securities Act. The Company also
has agreed to pay all expenses in connection with qualifying the Shares for sale
under the laws of such states, as may be required, and the costs and
disbursements with respect to the registration of this Offering with the NASD,
if required.
Purchases of Shares will be accepted only upon an investor's delivery to the
Bank of a properly executed and completed Stock Subscription Agreement prior to
the Expiration Date together with full payment of the purchase price for all
Shares for which subscription is being made. Stock Subscription Agreements (i)
incomplete or defective or (ii) not accompanied by full payment for the Shares
subscribed for, will be returned by the Company for correction and resubmission,
unless the Company, in its sole discretion, agrees to accept such subscriptions
as submitted. Stock Subscription Agreements received after the Expiration Date
will be returned. The Company reserves the right, in its sole discretion, to
reject any subscription, in whole or in part, for any reason, in which case the
portion of the subscriber's funds not accepted will be returned, without
interest and without deduction. The purchase price shall be payable either (i)
by check made payable to "University Bank, as escrow agent for PTN Media, Inc"
or (ii) wire transfer pursuant to the following wire instructions:
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<PAGE>
Bank: University Bank
Address:
Account Name: __________, as escrow agent for PTN Media, Inc.
Account No.:
ABA No.:
Certificates representing Common Stock issued in this Offering will be
mailed to the persons entitled thereto at the addresses provided in the Stock
Subscription Agreements, as soon as practicable following each closing of this
Offering, with respect to the Shares sold at each such closing. Until
certificates for the Common Stock are available and delivered to subscribers,
subscribers may not be able to sell the Shares they purchased.
The Company expressly reserves the right to amend the terms and conditions
of this Offering, whether the terms and conditions are more or less favorable to
potential subscribers. In the event of a material change to the terms of this
Offering, the Company will file a pre-effective or post-effective amendment to
its Registration Statement, of which this Prospectus is a part, and recirculate
the amended Prospectus, to the extent required by the Commission. The Company
expressly reserves the right, at any time, prior to an initial closing of this
Offering, to terminate this Offering, if prohibited by law or regulation, or the
Board of Directors concludes, in its judgment, that it is not in the best
interests of the Company to continue the Offering. Upon any such termination,
all funds received will be returned to subscribers, without interest and without
deduction.
Prior to this Offering there has been no public market for any of the
Company's securities. Accordingly, the offering price of the Shares has been
arbitrarily determined by the Company and does not bear any direct relationship
to the value of the physical assets of the Company, the book value of the
Company, or any other generally accepted criteria of valuation. The price and
other terms were based on a number of factors including, without limitation, the
estimates of the business potential and earnings prospects of the Company and
the consideration of such potential earnings in relation to market valuations of
comparable companies. The offering price is not necessarily an indication of the
actual value of such securities at the time of this Offering.
LEGAL MATTERS
The legality of the Common Stock offered hereby has been passed upon for the
Company by The Law Offices of David N. Feldman ("LODNF"). David Feldman, sole
proprietor of LODNF, beneficially owns 10,000 shares of Common Stock.
EXPERTS
The financial statements of the Company as of December 31, 1997 and for the
period from inception, May 27, 1997 through December 31, 1997 included in this
Prospectus have been audited by Lazar, Levine & Felix, LLP, independent
certified public accountants, as set forth in their report thereon appearing
elsewhere herein and are included in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
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ADDITIONAL INFORMATION
At the date of this Prospectus (the "Effective Date"), the Company will
become subject to the informational requirements of the Securities Exchange Act
of 1934, as amended (the "Exchange Act") and, in accordance therewith, will be
required to file reports, proxy information statements and other information
with the Securities and Exchange Commission (the "Commission"). Accordingly,
such reports, proxy statements and other information can be inspected and copied
at the Commission's principal office, Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549; the Northeast Regional Office of the
Commission at 7 World Trade Center, Suite 1300, New York, New York 10048; and
the Midwest Regional Office of the Commission, Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661, where copies may be obtained upon
payment of the fees prescribed by the Commission. Such documents may also be
obtained through the web site maintained by the Commission at
http://www.sec.gov.
The Company will provide without charge to each person who
receives this Prospectus, upon written or oral request of such person, a copy of
any of the information that is incorporated by reference in this Prospectus (not
including exhibits to the information that is incorporated by reference unless
the exhibits are themselves specifically incorporated by reference). Such
requests should be directed by mail to Peter Klamka, President, PTN Media, Inc.,
313 North First St., Suite 8B, Ann Arbor, Michigan 48104 or by telephone at
(734) 327-0579.
The Company has filed with the Commission a Registration
Statement on Form SB-2, including all schedules and exhibits thereto, under the
Securities Act with respect to the Common Stock offered by this Prospectus. This
Prospectus does not contain all of the information set forth in the Registration
Statement, certain parts of which are omitted in accordance with the rules and
regulations of the Commission. For further information with respect to the
Company and this Offering, reference is made to such Registration Statement,
including the exhibits filed therewith, which may be inspected without charge at
the Commission's principal office at 450 Fifth Street, N.W., Washington, D.C.
20549. Copies of the Registration Statement may be obtained from the Commission
at its principal office upon payment of prescribed fees. Statements contained in
this Prospectus as to the contents of any contract or other document are not
necessarily complete and, where the contract or other document has been filed as
an exhibit to the Registration Statement, each such statement is qualified in
all respects by reference to the contract or other document so filed with the
Commission.
45
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE(S)
--------
<S> <C>
Independent Auditors' Report................................... F-2
Financial Statements:
Balance Sheet as of December 31, 1997..................... F-3
Statement of Operations for the Cumulative
Period During the Development Stage from May 27, 1997
(Inception) to December 31, 1997........................ F-4
Statement of Changes in Shareholders'
Deficit for the Cumulative Period During the
Development Stage from May 27, 1997 (Inception) to
December 31, 1997....................................... F-5
Statement of Cash Flows for the Cumulative
Period During the Development Stage from May 27, 1997
(Inception) to December 31, 1997........................ F-6
Notes to Financial Statements.................................. F-7
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
PTN Media, Inc.
We have audited the accompanying balance sheet of PTN Media, Inc. (a
development stage company) as of December 31, 1997, and the related statements
of operations, shareholders' equity (deficit), and cash flows for the period
from May 27, 1997 (inception) to December 31, 1997. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit 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 financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of PTN Media, Inc. as of December
31, 1997, and the results of its operations and its cash flows for the period
from May 27, 1997 (inception), to December 31, 1997, in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1, the Company is
in the development stage, has incurred net losses since its inception and has
experienced severe liquidity problems. These conditions raise substantial doubt
about the Company's ability to continue as a going concern. Management's plans
in regard to these matters are also described in Note 1. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
LAZAR LEVINE & FELIX LLP
New York, New York
March 26, 1998
F-2
<PAGE>
PTN MEDIA, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
AS OF DECEMBER 31, 1997
ASSETS
<TABLE>
<S> <C> <C>
CURRENT ASSETS:
Cash............................................ $ 20,134
Due from shareholders (Note 5).................. 2,957
Prepaid license fees--net (Note 3).............. 56,250
---------
TOTAL CURRENT ASSETS............................ 79,341
FIXED ASSETS--NET (Note 2b)..................... 1,984
---------
$ 81,325
---------
---------
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accrued expenses................................ $61,135
License fees payable (Note 3)................... 50,000
Short-term loans payable (Note 4)............... 121,250
---------
TOTAL CURRENT LIABILITIES............................ 232,385
COMMITMENTS AND CONTINGENCIES (Notes 8, 9 and 10)
SHAREHOLDERS' EQUITY (DEFICIT) (Note 5 and 6):
Preferred stock, par value $.01; 1,000,000
shares authorized, none issued or outstanding. $ --
Common stock, par value $.001; 10,000,000 shares
authorized, 2,967,348 shares issued and
outstanding................................... 2,967
Additional paid-in capital...................... 990
Deficit accumulated during the development
stage......................................... (155,017) (151,060)
--------- ---------
$ 81,325
---------
---------
</TABLE>
See accompanying notes.
F-3
<PAGE>
PTN MEDIA, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
FOR THE CUMULATIVE PERIOD DURING THE
DEVELOPMENT STAGE FROM MAY 27, 1997 (INCEPTION)
TO DECEMBER 31, 1997
<TABLE>
<S> <C>
REVENUES (Note 2c).......................................... $ --
---------
EXPENSES:
Cost of revenue (Note 2g).............................. 43,750
Product development.................................... 29,630
General and administrative............................. 79,387
---------
152,767
---------
LOSS FROM OPERATIONS........................................ (152,767)
Interest expense....................................... 2,250
---------
NET LOSS (Note 7)........................................... $(155,017)
---------
---------
BASIC LOSS PER COMMON SHARE (Note 2e)....................... $ (.05)
---------
---------
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING (Note 2e).................................. 2,967,348
---------
---------
</TABLE>
See accompanying notes.
F-4
<PAGE>
PTN MEDIA, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN SHAREHOLDERS' DEFICIT
FOR THE CUMULATIVE PERIOD DURING THE
DEVELOPMENT STAGE FROM MAY 27, 1997 (INCEPTION)
TO DECEMBER 31, 1997
<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED
COMMON STOCK ADDITIONAL DURING THE TOTAL
--------------------- PAID-IN DEVELOPMENT SHAREHOLDERS'
SHARES AMOUNT CAPITAL STAGE DEFICIT
---------- ------ ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Shares issued at inception for
promissory notes (Note 5) 2,957,348 $2,957 $ -- $ -- $2,957
Compensatory shares (Note 5)..... 10,000 10 990 -- 1,000
Net loss for the period from
inception May 27, 1997 to
December 31, 1997........ -- -- -- (155,017) (155,017)
---------- ------ ---------- ----------- ----------
BALANCE AT DECEMBER 31, 1997..... 2,967,348 $2,967 $990 $(155,017) $(151,060)
---------- ------ ---------- ----------- ----------
---------- ------ ---------- ----------- ----------
</TABLE>
See accompanying notes.
F-5
<PAGE>
PTN MEDIA, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
FOR THE CUMULATIVE PERIOD DURING THE
DEVELOPMENT STAGE FROM MAY 27, 1997 (INCEPTION)
TO DECEMBER 31, 1997
<TABLE>
<S> <C> <C>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS:
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................. $(155,017)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization......... 43,960
Compensatory shares................... 1,000
Changes in operating assets and liabilities:
Prepaid license fees.................. (100,000)
Accrued expenses...................... 61,135
License fees payable.................. 50,000
---------
Net cash (used) in operating
activities........................ (98,922)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets.................. $ (2,194)
---------
Net cash (used) by financing
activities............................ (2,194)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term loans............ 121,250
---------
Net cash provided by
financing activities.................. 121,250
---------
INCREASE IN CASH AND CASH EQUIVALENTS.......... 20,134
Cash and cash equivalents, at inception... --
---------
CASH AND CASH EQUIVALENTS, AT END OF PERIOD.... $ 20,134
---------
---------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
(a) Interest paid...................... $ --
Taxes paid......................... --
(b) In May 1997, the Company issued (i)
2,957,348 shares of common stock in
exchange for notes receivable of $2,957
and (ii) 10,000 shares of common stock
in lieu of payment for legal fees
aggregating $1,000.
</TABLE>
See accompanying notes.
F-6
<PAGE>
PTN MEDIA, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
NOTE 1--DESCRIPTION OF COMPANY AND GOING CONCERN UNCERTAINTY:
PTN Media, Inc., the Company, was incorporated in Delaware on January 13,
1998 and is the successor to Interactive Entertainment Studio, Inc. (IES). IES
was incorporated in the State of Nevada on May 27, 1997 and was merged into the
Company in March 1998, for the sole purpose of changing the domicile of the
Company to Delaware. This merger has been retroactively reflected in the
December 31, 1997 financial statements. The Company has been in the development
stage in accordance with Statement of Financial Accounting Standards No. 7,
since its inception.
The Company is an interactive content provider focusing on providing leading
branded content for well-defined target audiences using a combination of new and
traditional media. The Company provides this content on its interactive web
sites in the form of articles and photographs pertaining to fashion, beauty,
style and entertainment. These web sites, utilizing celebrity models as hosts,
will provide an avenue for users to share general tips and advice relating to
the subjects covered.
The Company, since its inception, has incurred net losses of $155,017 and at
December 31, 1997 current liabilities exceeded current assets by $153,044. The
Company has relied on certain bridge financing (see Note 4) to fund its
activities. The Company is currently attempting to sell common stock through an
initial public offering (see Note 9) to provide working capital for its
continuing development stage activities and eventual commencement of its
operations. Unless the Company successfully completes its proposed public
offering or arranges additional financing, the Company may be unable to continue
in existence. The financial statements do not include any adjustments relating
to the recoverability of assets that might be necessary in the event the Company
cannot continue in existence.
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The Company's accounting policies are in accordance with generally accepted
accounting principles. Outlined below are those policies which are considered
particularly significant.
(A) USE OF ESTIMATES:
In preparing financial statements in accordance with generally accepted
accounting principles, management makes certain estimates and assumptions, where
applicable, that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements, as well as the reported amounts of revenues and expenses during the
reporting period. While actual results could differ from those estimates,
management does not expect such variances, if any, to have a material effect on
the financial statements.
(B) FIXED ASSETS:
Fixed assets are recorded at cost and as of December 31, 1997, consisted
solely of computer equipment with a cost of $2,194. Depreciation of fixed assets
is provided on a straight-line basis as follows:
Computer equipment 3 years
Maintenance and repairs are expensed as incurred. Depreciation expense for
the period ended December 31, 1997 aggregated $210.
F-7
<PAGE>
PTN MEDIA, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
(C) REVENUE RECOGNITION:
The Company anticipates generating revenues from the sale of advertising
banners on its web sites which appear on a user's computer screen when accessing
different areas of the Company's web sites. Advertising revenue will be
recognized in the period the advertisement is displayed, provided that no
significant Company obligations remain. Company obligations typically include
guarantees of a minimum number of "impressions" or times that an advertisement
is viewed by users of the Company's web sites.
(D) INCOME TAXES:
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to temporary differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases, and to net operating loss and tax credit carry forwards,
measured by enacted tax rates for years in which taxes are expected to be paid
or recovered.
Deferred taxes are provided for temporary differences between financial and
tax accounting, principally for differences in the basis of fixed assets and
other nondeductible expenses, as well as for net operating loss carry forwards.
(E) EARNINGS (LOSS) PER SHARE:
Earnings (loss) per share has been computed on the basis of the weighted
average number of common shares outstanding during each period presented
according to the standards of SFAS No. 128 "Earnings Per Share" ("SFAS 128"). In
accordance with the rules of the Securities and Exchange Commission for initial
public offerings, all shares issued within one year of filing are being treated
as outstanding for all periods presented.
(F) STATEMENTS OF CASH FLOWS:
For purposes of the statements of cash flows, the Company considers all
highly liquid investments purchased with a remaining maturity of three months or
less to be cash equivalents.
(G) ROYALTIES/LICENSE FEES:
Royalties/license fees paid under the terms of license agreements entered
into are charged to expense in accordance with the terms of the agreements. Any
guaranteed minimum payments are being amortized over the period of the license
agreement.
Amortization expense for the period ended December 31, 1997 aggregated
$43,750.
NOTE 3--PREPAID LICENSE FEES:
On June 1, 1997, the Company entered into a License Agreement (the
"Agreement") with Niki, Inc. ("Niki"). This agreement provides for, among other
things, the right to use Ms. Niki Taylor's name and likeness in connection with
the Company's "Fashion House with Niki Taylor" web site. In consideration for
such rights, the Company will pay royalties of 15% of any gross revenues
received in connection with this web site (except for sponsors introduced by
Niki whereby the royalties will be calculated at 50%) and 35% of net revenues
from product sales. This agreement expires on the earlier of the first
anniversary of the launch of this web site or September 30, 1998, and may be
automatically extended for two separate 12-month periods. This agreement can be
terminated by either party at the end of the then current term.
F-8
<PAGE>
PTN MEDIA, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
The Company has guaranteed the payment of minimum royalties in the amount of
$150,000. $50,000 of this amount was paid at the time of execution of this
agreement and the balance is payable upon the earlier of (i) final approval of
or (ii) the use of the "Niki Taylor Home Page".
NOTE 4--SHORT-TERM LOANS PAYABLE:
In July and August 1997, the Company received $56,250 through the issuance of
8% promissory notes and common stock purchase warrants to acquire Company stock.
The 45,000 warrants issued, which expire in July 2001, entitle the holders to
purchase 45,000 shares of common stock at an exercise price of $3.00 per share,
the deemed fair value of the warrants at the time of issuance. The notes and
accrued interest are payable one year from the date of issuance or the closing
of an equity funding of the Company of a minimum of $500,000, whichever is
sooner.
In December 1997, the Company issued unsecured 8% promissory notes
aggregating $65,000 originally due six months from date of issuance. In March
1998, subsequent to the balance sheet date, the note holders agreed to convert
these notes into 65,000 shares of the Company's common stock.
NOTE 5--SHAREHOLDERS' EQUITY:
The Company's authorized share capital consists of 1,000,000 shares of
preferred stock, $.01 par value and 10,000,000 shares of common stock, $.001 par
value. None of the preferred shares have been issued as of the date of this
report.
In June 1997, the Company issued 2,957,348 shares of common stock in
exchange for promissory notes aggregating $2,957, bearing interest at an annual
rate of 6% and becoming due in June 1998.
In addition, the Company also issued 10,000 shares of common stock in
exchange for legal services rendered aggregating $1,000.
NOTE 6--STOCK OPTIONS:
In March 1998, subsequent to the balance sheet date, the Company adopted the
1998 Stock Option Plan (the Plan), which provides for the grant of options to
purchase up to 500,000 shares of the Company's common stock. Under this Plan
incentive stock options may be granted to employees and nonstatutory stock
options may be granted to employees and non-employees.
In March 1998, the Company granted options to purchase 106,000 shares of
common stock under this Plan. These options are exercisable at $1.00 per share
and expire ten years from the date of grant. Options to purchase 3,000 shares of
common stock are currently exercisable and the remaining options vest equally
over three years.
NOTE 7--INCOME TAXES:
No provision for Federal and state income taxes has been recorded since the
Company has incurred losses for the period from inception through December 31,
1997. Deferred tax assets at December 31, 1997 consist primarily of the tax
effect of a net operating loss carry forward which amounts to approximately
$50,000. The Company has provided a full 100% valuation allowance on the
deferred tax assets at December 31, 1997 to reduce such asset to zero, as it is
management's belief that realization of such amounts do not meet the criteria
required by generally accepted accounting principles. Management will review
this valuation allowance requirement periodically and make adjustments as
warranted.
F-9
<PAGE>
PTN MEDIA, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
NOTE 8--COMMITMENTS:
OPERATING LEASES:
During 1997, the Company utilized office space provided by its majority
shareholder pursuant to a month-to-month lease at a monthly rental of $400. In
1998, the Company began renting new space under a month-to-month lease at a
monthly rental of $670.
NOTE 9--PROPOSED INITIAL PUBLIC OFFERING:
The Company is preparing to undertake, on a "best efforts" basis, an initial
public offering ("IPO") of 400,000 shares of its common stock at a price of
$5.00 per share, which will yield approximately $1,600,000 of net proceeds.
The net proceeds from this offering will be used for repayment of indebtedness,
marketing, sales and consulting services, payment of license fees, design and
development of additional web sites, etc.
NOTE 10--SUBSEQUENT EVENTS:
(A) In January 1998, the Company entered into a License Agreement (the
"Agreement") with an entity controlled by model Tyra Banks pursuant to which Ms.
Banks will host the Company's next web site under terms similar to that
negotiated with Ms. Taylor (see Note 3). This agreement expires on the earlier
of the first anniversary of the launch of this web site or March 31, 1999, and
will be automatically extended for up to two additional 12-month periods, unless
terminated by either party prior to such extension. The Company has guaranteed
the payment of minimum royalties in the amount of $100,000. $50,000 of this
amount was payable at the time of execution of this agreement (which amount has
not yet been paid) and the balance is payable upon the consummation of the
Company's proposed IPO.
Also in January 1998, the Company entered into a separate agreement with this
entity for the rights to utilize the name and likeness of Ms. Banks in
connection with the "Tyra Banks Calendar." These rights are applicable for the
calendar for the 16-month period ending December 31, 1999. The Company has
agreed to pay this entity up to $87,000 for production expenses incurred in
connection with the creation of this calendar and has guaranteed minimum
royalties in the amount of $100,000. This amount, which was payable upon
execution of this agreement has not yet been paid.
(B) During 1998, the President and Chief Executive Officer of the Company
entered into an uncollateralized loan agreement with the Company whereby this
officer agreed to advance $150,000 to the Company. This loan bears interest at
an annual rate of 9% and is repayable on the earlier of (i) the date the Company
has raised an aggregate of not less than $1,500,000 in one or more public
offerings of its securities or (ii) May 2001.
(C) In January and February 1998, the Company issued additional 8%
unsecured promissory notes (see Note 4) aggregating $82,500. In March 1998, the
note holders agreed to convert these notes into 82,500 shares of the Company's
common stock.
(D) In March 1998, the Company issued 50,000 shares of common stock to
the President as payment of compensation aggregating $50,000 which was accrued
as of December 31, 1997.
(E) In March 1998, the Company entered into a consulting agreement with
its editorial director which expires on June 30, 1999 and is subject to
automatic annual renewals. The Company has (i) agreed to pay this individual a
monthly fee of $4,166 and (ii) granted options to purchase up to 50,000 shares
of the Company's common stock at an exercise price of $1.00 per share (see
Note 6).
(F) The Company has agreed to pay a monthly fee of $3,000 to a public
relations firm to assist in the launch of its web sites. This firm will be
responsible for arranging creative and on-target promotions in both the
traditional and electronic media.
F-10
<PAGE>
No dealer, salesperson or any other person has been authorized to give
any information or to make any representations other than those contained in
this Prospectus, and, if given or made, such information or representations must
not be relied upon as having been authorized by the Company or the Underwriters.
This Prospectus does not constitute an offer to sell or a solicitation of an
offer to buy any security other than the Common Stock offered by this
Prospectus, or an offer to sell or a solicitation of an offer to buy any
security, by any person in any jurisdiction which such an offer or
solicitation would be unlawful. Neither the delivery of this Prospectus nor any
sale made hereunder shall, under any circumstances, imply that the information
in this Prospectus is correct as of any time subsequent to the date of this
Prospectus.
-----------------
TABLE OF CONTENTS
PAGE
Prospectus Summary........................................
Disclosure Regarding Forward-Looking
Statements........................
Risk Factors..............................................
Use of Proceeds...........................................
Capitalization............................................
Dilution..................................................
Management's Plan of Operations...........................
Business..................................................
Management................................................
Principal Stockholders....................................
Certain Transactions......................................
Description of Securities.................................
Shares Eligible for Future Sale...........................
Plan of Distribution......................................
Legal Matters.............................................
Additional Information....................................
Index to Financial Statements............................. F-1
400,000 Shares
PTN MEDIA, INC.
Common Stock
------------
PROSPECTUS
------------
________, 1998
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Pursuant to Section 145 of the General Corporation Law of Delaware (the
"Delaware Corporation Law"), Article 9 of the Registrant's Certificate of
Incorporation, a copy of which is filed as Exhibit 3.1 to this Registration
Statement, provides that the Registrant shall indemnify, to the fullest extent
permitted by Section 145 of the Delaware Corporation Law, as amended from time
to time, each person that such section grants the Corporation the power to
indemnify. Section 145 of the Delaware Corporation Law permits the registrant to
indemnify any person in connection with the defense or settlement of any
threatened, pending or completed legal proceeding (other than a legal proceeding
by or in the right of the Registrant) by reason of the fact that he is or was a
director or officer of the Registrant or is or was a director or officer of the
Registrant serving at the request of the Registrant as a director, officer,
employee or agent of another corporation, partnership or other enterprise
against expenses (including attorney's fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred in connection with the defense or
settlement of such legal proceeding if he acted in good faith and in a manner
that he reasonably believes to be in or not opposed to the best interests of the
Registrant, and, with respect to any criminal action or proceeding, if he had no
reasonable cause to believe that his conduct was unlawful. If the legal
proceeding, however, is by or in the right of the Registrant, the director or
officer may be indemnified by the Registrant against expense (including
attorneys' fees) actually and reasonably incurred in connection with the defense
or settlement of such legal 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
Registrant and except that he may not be indemnified in respect of any claim,
issue or matter as to which he shall have been adjudged to be liable to the
Registrant unless a court determines otherwise.
Pursuant to Section 102(b)(7) of the Delaware Corporation Law, Article
8 of the Certificate of Incorporation of the Registrant, a copy of which is
filed as Exhibit 3.1 to this Registration Statement, provides that no director
of the Registrant shall be personally liable to the Registrant or its
stockholders for monetary damages for any breach of his fiduciary duty as a
director; provided, however, that such clause shall not apply to any liability
of a director (i) for breach of his duty of loyalty to the Registrant or its
stockholders, (ii) for acts or omissions that are not in good faith or involve
intentional misconduct or a knowing violation of the law, (iii) under Section
174 of the Delaware Corporation Law, or (iv) for any transaction from which the
director derived an improper personal benefit. The aforesaid provision also
eliminates the liability of any stockholder for managerial acts or omissions,
pursuant to Section 350 of the Delaware Corporation Law or any other provision
of Delaware law, to the same extent that such liability is limited for a
director.
II-1
<PAGE>
The Company intends to enter into Indemnification Agreements with its
officers and directors prior to or shortly after the completion of the Offering.
Each such Indemnification Agreement will provide that the Company will indemnify
the indemnitee against expenses, including reasonable attorney's fees,
judgments, penalties, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with any civil or criminal action or
administrative proceeding arising out of the performance of his duties as an
officer, director, employee or agent of the Company. Indemnification is
available if the acts of the indemnitee were in good faith, if the indemnitee
acted in a manner he reasonably believed to be in or not opposed to the best
interests of the Company and, with respect to any criminal proceeding, the
indemnitee had no reasonable cause to believe his conduct was unlawful.
The Company intends to acquire directors and officers liability
insurance prior to the completion of the Offering. The amount and scope of
coverage will depend upon the Company's analysis of the cost and appropriateness
thereof.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all estimated costs and expenses in
connection with the issuance and distribution of the securities being
registered, other than underwriting discounts. All such expenses will be paid by
the Company; none will be paid by the Company's stockholders. As underwriting
compensation in connection with the issuance and distribution of the securities
being registered, the Company will pay the Underwriters' legal fees and
expenses.
SEC Registration fee............................................... $ 590
NASD filing fee.................................................... $ *
*Blue sky fee and expenses (including legal fees)................... $ 12,000
*Printing and engraving expenses.................................... $125,000
*Legal fees and expenses............................................ $ 40,000
*Accounting fees and expenses....................................... $ 10,000
*Transfer Agent Fees ............................................... $ 6,000
*Miscellaneous...................................................... $ 5,000
*TOTAL.................................................... $200,000
* Estimated
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
(a) In June 1997, the Company sold an aggregate of 2,957,348 shares of
Common Stock at a price of $.001 per share. These shares were issued in exchange
for promissory notes at $.001 per share. These transactions were exempt from
registration pursuant to Section 4(2) of the Securities Act since the shares
were offered and sold only to the three founders of the Company.
II-2
<PAGE>
(b) In June 1997, the Company issued to an individual, in consideration
for legal services provided to the Company, 10,000 shares of Common Stock. This
transaction was exempt from registration pursuant to Section 4(2) of the
Securities Act since the shares were issued in a private transaction to one
individual in consideration for services provided to the Company.
(c) In July 1997, the Company issued promissory notes in an aggregate
principal amount of $56,250, with interest thereon at a rate of 8% per annum. In
connection with the issuance of such promissory notes, the Company also issued
warrants (the "Bridge Warrants") to purchase an aggregate of 45,000 shares of
Common Stock at a purchase price of $3.00 per share. The Bridge Warrants first
become exercisable on the date that the Company offers Common Stock in an
initial public offering intended to raise gross proceeds of not less than
$500,000 and expire in July 2001. The Company has the right to repurchase the
Bridge Warrants for $.05 per share of Common Stock purchasable thereby at any
time after July 1998, provided that the shares of Common Stock have been trading
in the public market at $6.00 per share or more on each of the most recent 20
consecutive trading days prior to the Company's notice to repurchase the Bridge
Warrants, and provided further, that no underwriter has placed any restrictions
on such repurchase by the Company. This transaction was exempt from registration
pursuant to Section 4(2) of the Securities Act since it was offered only to four
individuals who were personally known to the founders of the Company.
(d) In December 1997 and January 1998, a limited number of individuals
provided loans to the Company in an aggregate amount of $147,500. These loans
were evidenced by a series of promissory notes issued to these lenders. This
transaction was exempt pursuant to Section 4(2) of the Securities Act. In March
1998, the Company converted the entire indebtedness of $147,500 into a total of
147,500 shares of Common Stock. This transaction was exempt pursuant to Section
3(a)(9) of the Securities Act since the shares were issued to existing
securityholders in exchange for the promissory notes.
(e) In March 1998, the Company issued to Mr. Klamka 50,000 shares of
Common Stock as and for payment for services provided by Mr. Klamka to the
Company in 1997. The market value of the shares of Common Stock on the date
issued was $1.00 per share. This transaction was exempt pursuant to Section 4(2)
of the Securities Act since the shares were issued only to the President of the
Company.
II-3
<PAGE>
Item 27. Exhibits
<TABLE>
<CAPTION>
Exhibit
Number DESCRIPTION
<S> <C>
2.1 Plan of Merger between PTN Media, Inc. and Interactive Entertainment Studio, Inc.,
dated as of February 25, 1998.
3.1 Certificate of Incorporation of PTN Media, Inc. dated as of January 13, 1998.
3.2 By-Laws of PTN Media, Inc.
4.1* Specimen Common Stock Certificate
4.2 Specimen Bridge Warrant Certificate
5.1* Opinion of the Law Offices of David Feldman
10.1 Web Site License Agreement between Niki, Inc. and Interactive Entertainment Studio,
Inc. dated as of June 1, 1997
10.2 Website License Agreement between Ty Girl, Inc. and Interactive Entertainment Studio,
Inc. dated as of January 1, 1998
10.3 License Agreement between Ty Girl, Inc. and Interactive Entertainment Studio, Inc.
dated as of January 1, 1998
10.4 Lease Agreement dated as of February 27, 1998, between First Miller Limited
Partnership and PTN Media, Inc.
10.5 Website Design Services Agreement between zoecom, Inc. and Interactive
Entertainment Studio, Inc. dated as of December 20, 1996
10.6 Letter of Intent between Cdnow, Inc. and Interactive Entertainment Studio, Inc. dated as
of September 8, 1997
10.7 Agreement for Fashion House Flowers & Gifts Service between PC Flowers and Gifts,
Inc. and Interactive Entertainment Studio, Inc. dated as of September 9, 1997
10.8 Standard Publicists Guild Agency - Client Agreement between The Angellotti Company
and PTN Media, Inc. dated as of April 15, 1998.
10.9* PTN Media, Inc. 1998 Stock Option Plan
10.10* Form of Subscription Agreement for the Purchase of Shares in this Offering
11.1 Computation of per share earnings
23.1 Consent of Lazar Levine & Felix LLP
23.2 Consent of the Law Offices of David Feldman (included in Exhibit 5.1)
24.1 Power of Attorney (included in Part II of Registration Statement)
27.1 Financial Data Schedule
<FN>
- -------------------
* To be filed by amendment
</FN>
</TABLE>
II-4
<PAGE>
ITEM 28. UNDERTAKINGS
1. The Registrant hereby undertakes:
a) The Registrant will:
i. for determining any liability under the Securities Act of
1933, as amended (the "Securities Act"), treat the information
omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the Registrant
pursuant to Rule 424(b)(1) or (4) or 497(h) under the
Securities Act as part of this registration statement as of
the time the Commission declared it effective;
ii. for determining any liability under the Securities Act, treat
each post-effective amendment that contains a form of
prospectus as a new registration statement for the securities
offered in the registration statement, and that offering of
the securities at that time as the initial bona fide offering
of those securities.
2. Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
ITEM 29. FINANCIAL STATEMENTS. NOT APPLICABLE.
II-5
<PAGE>
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Peter
Klamka his or her true and lawful attorney-in-fact and agent with full powers of
substitution and resubstitution, for him or her and in his or her name, place
and stead in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement or any related
registration statement filed pursuant to Rule 462(b) under the Securities Act,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission granting unto
said attorney-in-fact and agent, full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his substitute or substitutes may lawfully do or cause to be done by
virtue hereof.
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of Ann
Arbor, State of Michigan on May 1, 1998.
PTN MEDIA, INC.
By: /s/ Peter Klamka
________________________________________
Peter Klamka
Chairman, President and Chief
Executive Officer
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates stated.
<TABLE>
<CAPTION>
NAME TITLE DATE
- ---- ----- ----
<S> <C> <C>
/s/ Peter Klamka Chairman, President, Chief May 1, 1998
- ------------------------------
Peter Klamka Executive Officer and Secretary
(Principal Executive Officer
and Principal Financial and
Accounting Officer)
/s/ Deborah M. Schneider Director May 1, 1998
- ------------------------
Deborah M. Schneider
/s/ Lila Lazarus Director May 1, 1998
- --------------------------------
Lila Lazarus
II-6
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
Exhibit
Number DESCRIPTION
- ------- ---------------------------------------------------------------------------
<S> <C>
2.1 Plan of Merger between PTN Media, Inc. and Interactive Entertainment Studio,
Inc., dated as of February 25, 1998.
3.1 Certificate of Incorporation of PTN Media, Inc. dated as of January 13, 1998.
3.2 By-Laws of PTN Media, Inc.
4.1* Specimen Common Stock Certificate
4.2 Specimen Bridge Warrant Certificate
5.1* Opinion of the Law Offices of David Feldman
10.1 Web Site License Agreement between Niki, Inc. and Interactive Entertainment
Studio, Inc. dated as of June 1, 1997
10.2 Website License Agreement between Ty Girl, Inc. and Interactive Entertainment
Studio, Inc. dated as of January 1, 1998
10.3 License Agreement between Ty Girl, Inc. and Interactive Entertainment Studio, Inc.
dated as of January 1, 1998
10.4 Lease Agreement dated as of February 27, 1998, between First Miller Limited
Partnership and PTN Media, Inc.
10.5 Website Design Services Agreement between zoecom, Inc. and Interactive
Entertainment Studio, Inc. dated as of December 20, 1996
10.6 Letter of Intent between Cdnow, Inc. and Interactive Entertainment Studio, Inc.
dated as of September 8, 1997
10.7 Agreement for Fashion House Flowers & Gifts Service between PC Flowers and
Gifts, Inc. and Interactive Entertainment Studio, Inc. dated as of September 9, 1997
10.8 Standard Publicists Guild Agency - Client Agreement between The Angellotti
Company and PTN Media, Inc. dated as of April 15, 1998.
10.9* PTN Media, Inc. 1998 Stock Option Plan
10.10* Form of Subscription Agreement for the Purchase of Shares in this Offering.
11.1 Computation of per share earnings
23.1 Consent of Lazar Levine & Felix LLP
23.2 Consent of the Law Offices of David Feldman (included in Exhibit 5.1)
24.1 Power of Attorney (included in Part II of Registration Statement)
27.1 Financial Data Schedule
<FN>
- --------------------
* To be filed by amendment
</FN>
</TABLE>
II-7
<PAGE>
EXHIBIT 2.1
ARTICLES OF MERGER
OF
INTERACTIVE ENTERTAINMENT STUDIO, INC.
AND
PTN MEDIA, INC.
To the Secretary of State
State of Nevada
Pursuant to the provisions of Chapter 92A, Nevada Revised Statutes, the
foreign corporation and the domestic corporation herein named do hereby adopt
the following Articles of Merger.
1. Annexed hereto and made a part hereof is the Plan of Merger for
merging Interactive Entertainment Studio, Inc., a business corporation
organized and existing under the laws of the State of Nevada, with and into PTN
Media, Inc., a business corporation organized and existing under the laws of
the State of Delaware. The said Plan of Merger has been adopted by the Board of
Directors of Interactive Entertainment Studio, Inc. and by the Board of
Directors of PTN Media, Inc.
2. The said Plan of Merger was submitted to the stockholders of
Interactive Entertainment Studio, Inc. by its Board of Directors pursuant to
the provisions of Chapter 92A, Nevada Revised Statutes, and the manner of
approval thereof by said stockholders was as follows:
(i) The designation, the number of outstanding shares, and the
number of votes entitled to be cast by each class entitled to vote on the said
Plan of Merger are as follows:
(a) Designation of class: Common Stock, par value $.001 per
share
(b) Number of outstanding shares of class: 2,967,348
(c) Number of votes of class entitled to be cast: 2,967,348
(ii) The total number of votes cast for and against the merger
herein provided for by each class entitled to vote on the said Plan of Merger
is as follows:
(a) Designation of class: Common Stock, par value $.001 per
share
(b) Number of votes of class cast for Plan of Merger:
2,967,348
<PAGE>
(c) Number of votes of class cast against Plan of Merger: -0-
(iii) The said number of votes cast for the said Plan of Merger
was sufficient for the approval thereof by said class.
3. The merger of Interactive Entertainment Studio, Inc. with and into
PTN Media, Inc. is permitted by the laws of the jurisdiction of organization of
PTN MEdia, Inc. and has been authorized in compliance with said laws, by which
PTN Media, Inc. is governed.
4. The said Plan of Merger was submitted to the stockholders of PTN
Media, Inc. pursuant to the provisions of the laws of its jurisdiction of
organization, and the manner of approval thereof by said stockholders was as
follows:
(i) The designation, the number of outstanding shares, and the
number of votes entitled to be cast by each class entitled to vote on the said
Plan of Merger are as follows:
(a) Designation of class: Common Stock par value $.001 per
share
(b) Number of outstanding shares of class: 1
(c) Number of votes of class entitled to be cast: 1
(ii) The total number of votes cast for and against the merger
herein provided for by each class entitled to vote on the said Plan of Merger
is as follows.
(a) Designation of class: Common Stock par value $.001 per
share
(b) Number of undisputed votes of class cast for Plan of
Merger: 1
(c) Number of votes of class cast against Plan of Merger: 1
(iii) The said number of votes cast for the said Plan of Merger
was sufficient for the approval thereof by said class.
5. No amendments to the Certificate of Incorporation are effected by
the merger provided for.
6. The specified address of PTN Media, Inc. where copies of process may
be sent by the Secretary of State of the State of Nevada, served pursuant to
the provisions of Section 78.461, Nevada Revised Statutes, in a proceeding to
enforce any obligation or the rights of dissenting shareholders of Interactive
Entertainment Studio, Inc., unless PTN Media has designated in writing to the
Secretary of State of the State of Nevada a different address for that purpose,
is:
1905 Anderson Ave.
Ann Arbor, MI 48104
<PAGE>
7. The merger herein provided for shall become effective in the State
of Nevada on March 4, 1998.
Signed on February 25, 1998.
INTERACTIVE ENTERTAINMENT STUDIO, INC.
By: /s/ Peter Klamka
-------------------------------------
Peter Klamka, President and Secretary
PTN MEDIA, INC.
By: /s/ Peter Klamka
-------------------------------------
Peter Klamka, President and Secretary
STATE OF MICHIGAN )
COUNTY OF WASHTENAW ) SS,:
On February 25, 1998, Peter Klamka personally appeared before me, a notary
public in and for the State and County aforesaid, Washtenaw Cnty, MI, and Peter
Klamka, President and Secretary of Interactive Entertainment Studio, Inc. and
PTN Media, Inc., personally known to me to be the persons whose names are
subscribed to the above instrument in the said capacities, who acknowledged
that they executed the said instrument.
Commission Expires: 9-18-99
Lenawee County Acting in
Washtenaw County /s/ Marcy L. Brown
-------------------
Notary Public
Marcy L. Brown
<PAGE>
PLAN OF MERGER adopted for Interactive Entertainment Studio, Inc., a business
corporation organized under the State of Nevada, by resolution of its Board of
Directors on February 25th, 1998, and adopted for PTN Media, Inc., a business
corporation organized under the laws of the State of Delaware, by resolution of
its Board of Directors on February 25th, 1998. The names of the corporations
planning to merge are Interactive Entertainment Studio, Inc., a business
corporation organized under the laws of the State of Nevada, and PTN Media,
Inc., a business corporation organized under the laws of the State of Delaware.
The name of the surviving corporation into which Interactive Entertainment
Studio, Inc. plans to merge is PTN Media, Inc.
1. The address of Interactive Entertainment Studio, Inc. is 1905
Anderson Ave, Ann Arbor, MI 48104, its place of organization is the State of
Nevada, and its governing law is the Nevada Revised Statutes. The address of
PTN Media, Inc. is 1905 Anderson Ave. Ann Arbor, MI 48104, its place of
organization is the State of Delaware, and its governing law is Delaware
General Corporation Law.
2. Interactive Entertainment Studio, Inc. and PTN Media, Inc. shall,
pursuant to the provisions of the Nevada revised Statutes and the provisions of
laws of the jurisdiction of organization of PTN Media, Inc., be merged with and
into a single corporation to wit, PTN Media, Inc., which shall be the surviving
corporation when the merger becomes effective and which is sometimes
hereinafter referred to as the "surviving corporation", and which shall
continue to exist as said surviving corporation under its present name pursuant
to the provisions of the laws of its jurisdiction of organization. The separate
existence of Interactive Entertainment Studio, Inc., which is sometimes
hereinafter referred to as the "non-surviving corporation", shall cease when
the merger becomes effective in accordance with the laws of the jurisdiction of
its organization.
3. The Certificate of Incorporation of the surviving corporation when
the merger becomes effective shall be the Certificate of Incorporation of said
surviving corporation and said Certificate of Incorporation shall continue in
full force and effect until amended and changed in the manner prescribed by the
provisions of the laws of its jurisdiction of organization.
4. The present bylaws of the surviving corporation will be the bylaws of
said surviving corporation and will continue in full force and effect until
changed, altered, or amended as therein provided and in the manner prescribed
by the provisions of the laws of its jurisdiction of organization.
5. The directors and officers in office of the surviving corporation
when the merger becomes effective shall be members of the first Board of
Directors and the first officers of the surviving corporation, all of whom
shall hold office until their respective successors are elected or appointed
and qualified or until their tenure is otherwise terminated in accordance with
the bylaws of the surviving corporation.
6. Each issued share of stock of the non-surviving corporation when the
merger becomes effective shall be converted into one share of stock of the
surviving corporation. The issued shares of stock of the surviving corporation
shall not be converted or exchanged in any manner,
<PAGE>
shares of stock of the surviving corporation shall not be converted or
exchanged in any manner, but each said share which is issued when the merger
becomes effective shall continue to represent an issued share of stock of the
surviving corporation.
7. The merger of the non-surviving corporation with and into the
surviving corporation shall be authorized in the manner prescribed by the
Nevada Revised Statutes and by the laws of the jurisdiction of organization of
the surviving corporation, and the Plan of Merger herein made and approved
shall be submitted to the stockholders of the non-surviving corporation for
their approval or rejection in the manner prescribed by the provisions of the
Nevada Revised Statutes.
8. In the event that the merger of the non-surviving corporation with
and into the surviving corporation shall have been duly authorized in
compliance with the Nevada Revised Statutes, and in the event that the Plan of
Merger shall have been approved by the stockholders entitled to vote of the
surviving corporation in the manner prescribed by the laws of the jurisdiction
of its organization, the non-surviving corporation and the surviving
corporation hereby stipulate that they will cause to be executed and filed
and/or recorded any document or documents prescribed by the laws of the State
of Nevada and of the State of Delaware, and that they will cause to be
performed all necessary acts therein and elsewhere to effectuate the merger.
9. The Board of Directors and the proper officers of the non-surviving
corporation and of the surviving corporation, respectively, are hereby
authorized, empowered, and directed to do any and all acts and things, and to
make, execute, deliver, file and/or record any and all instruments, papers, and
documents which shall be or become necessary, proper, or convenient to carry
out or put into effect any other provisions of this Plan of Merger or of the
merger herein provided for.
<PAGE>
EXHIBIT 3.1
State of Delaware
Office of the Secretary of State
I, EDWARD J. FREEL, SECRETARY OF THE STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
INCORPORATION OF "PTN MEDIA, INC.", FILED IN THIS OFFICE ON THE THIRTEENTH DAY
OF JANUARY, A.D. 1998, AT 9 O'CLOCK A.M.
/s/ Edward J. Freel
-----------------------------------
Edward J. Freel, Secretary of State
<PAGE>
CERTIFICATE OF INCORPORATION
OF
PTN Media, Inc.
(Pursuant to Section 103 of the Delaware General Corporation Law)
--------------
1. The name of the corporation is PTN Media, Inc. (the "Corporation").
2. The address of its registered office in the State of Delaware is
1013 Centre Road Wilmington, Delaware 19805, County of New Castle. The name of
its registered agent at such address is Corporation Service Company.
3. The nature of the business or purposes to be conducted or promoted
is to engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of Delaware (the "DGCL").
4. The Corporation is to have perpetual existence.
5. The total number of shares of capital stock which the Corporation
shall have authority to issue is: Ten million (10,000,000) shares of common
stock (the "Common Stock") with the par value of $.001 and one million
(1,000,000) shares of preferred stock (the "Preferred Stock") with the par value
of $.01.
Holders of shares of Common Stock shall be entitled to cast one vote
for each share held at all stockholders' meetings for all purposes, including
the election of directors. The Common Stock does not have cumulative voting
rights.
The Preferred Stock of the Corporation shall be issued by the Board of
Directors of the Corporation in one or more classes or one or more series within
any class and such classes or series shall have such voting powers, full or
limited, or no voting powers, and such designations, preferences, limitations or
restrictions as the Board of Directors of the Corporation may determine from
time to time.
No holder of shares of stock of any class shall be entitled as a matter
of right to subscribe for or purchase or receive any part of any new or
additional issue of shares of stock of any class or of securities convertible
into shares of stock of any class, whether now hereafter authorized or whether
issued for money, for consideration other than money, or by way of dividend.
<PAGE>
6. The Board of Directors shall have the power to adopt, amend or
repeal the by-laws of the Corporation.
7. The Board of Directors of the Corporation shall have the power to
authorize an issuance from time to time of shares of its stock of any class,
whether now or hereafter authorized, or securities convertible into shares of
its stock of any class or classes, whether now or hereafter authorized.
8. No director shall be personally liable to the Corporation or its
stockholders for monetary damages for any breach of fiduciary duty by such
director as a director. Notwithstanding the foregoing sentence, a director shall
be liable to the extent provided by applicable law, (i) for breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) pursuant to Section 174 of the DGCL or (iv) for
any transaction from which the director derived an improper personal benefit. If
the DGCL hereafter is amended to authorize the further elimination or limitation
of the liability of directors, then the liability of a director of the
Corporation, in addition to the limitation on personal liability provided
herein, shall be limited to the fullest extent permitted by the amended DGCL. No
amendment to or repeal of this Article 8 shall apply to or have any effect on
the liability or alleged liability of any director of the Corporation for or
with respect to any acts or omissions of such director occurring prior to such
amendment.
9. The Corporation shall indemnify, to the fullest extent permitted by
Section 145 of the DGCL, as amended from time to time, each person that such
section grants the Corporation the power to indemnify.
10. The name and mailing address of the incorporator is Alexandra M.
Migoya, 36 West 44th Street, New York, New York 10036.
IN WITNESS WHEREOF, the undersigned, being the incorporator
hereinbefore named, has executed, signed and acknowledged this certificate of
incorporation this 13 day of January, 1998.
/s/ Alexandra M. Migoya
------------------------
ALEXANDRA M. MIGOYA
Incorporator
2
<PAGE>
EXHIBIT 3.2
BY-LAWS
OF
PTN MEDIA, INC.
(a Delaware corporation)
ARTICLE I
STOCKHOLDERS
Section 1. Certificates Representing Stock. (a) Certificates
representing stock in the corporation shall be signed by, or in the name of, the
corporation by the Chairman or Vice-Chairman of the Board of Directors, if any,
or by the President or a Vice-President and by the Treasurer or an Assistant
Treasurer or the Secretary or an Assistant Secretary of the corporation. Any or
all the signatures on any such certificate may be a facsimile. In case any
officer, transfer agent, or registrar who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to be such
officer, transfer agent, or registrar before such certificate is issued, it may
be issued by the corporation with the same effect as if her were such officer,
transfer agent, or registrar at the date of issue.
(b) Whenever the corporation shall be authorized to issue more
than one class of stock or more than one series of any class of stock, and
whenever the corporation shall issue any shares of its stock as partly paid
stock, the certificates representing shares of any such class or series or of
any such partly paid stock shall set forth thereon the statements prescribed by
the General Corporation Law. Any restrictions on the transfer or registration of
transfer of any shares of stock of any class or series shall be noted
conspicuously on the certificate representing such shares.
(c) The corporation may issue a new certificate of stock or
uncertificated shares in place of any certificate theretofore issued by it,
alleged to have been lost, stolen or destroyed, and the Board of Directors may
require the owner of the lost, stolen or destroyed certificate, or his legal
representative, to give the Corporation a bond sufficient to indemnify the
corporation against any claim that may be made against it on account of the
alleged loss, theft or destruction of any such certificate or the issuance of
any such new certificate or uncertificated shares.
Section 2. Uncertificated Shares. Subject to any conditions imposed by the
General Corporation Law, the Board of Directors of the corporation may provide
by resolution or resolutions that some or all of any or all classes or series of
the stock of the corporation shall be uncertificated shares. Within a reasonable
time after the issuance or transfer of any uncertificated shares, the
<PAGE>
corporation shall send to the registered owner thereof any written notice
prescribed by the General Corporation Law.
Section 3. Fractional Share Interests. The corporation may, but shall
not be required to, issue fractions of a share. If the Corporation does not
issue fractions of a share, it shall (1) arrange for the disposition of
fractional interests by those entitled thereto, (2) pay in cash the fair value
of fractions of a share as of the time when those entitled to receive such
fractions are determined, or (3) issue scrip or warrants in registered form
(either represented by a certificate or uncertificated) or bearer form
(represented by a certificate) which shall entitle the holder to receive a full
share upon the surrender of such scrip or warrants aggregating a full share. A
certificate for a fractional share or an uncertificated fractional share shall,
but scrip or warrants shall not unless otherwise provided therein, entitle the
holder to exercise voting rights, to receive dividends thereon, and to
participate in any of the assets of the Corporation in the event of liquidation.
The Board of Directors may cause scrip or warrants to be issued subject to the
conditions that they shall become void if not exchanged for certificates
representing the full shares or uncertificated full shares before a specified
date, or subject to the conditions that the shares for which scrip or warrants
are exchangeable may be sold by the corporation and the proceeds thereof
distributed to the holders of scrip or warrants, or subject to any other
conditions which the Board of Directors may impose.
Section 4. Stock Transfers. Upon compliance with provisions restricting
the transfer or registration of transfer of shares of stock, if any, transfers
or registration of transfers of shares of stock of the corporation shall be made
only on the stock ledger of the corporation by the registered holder thereof, or
by his attorney thereunto authorized by power of attorney duly executed and
filed with the Secretary of the corporation or with a transfer agent or a
registrar, if any, and, in the case of shares represented by certificates, on
surrender of the certificate or certificates for such shares of stock properly
endorsed and the payment of all taxes due thereon.
Section 5. Record Date For Stockholders. In order that the corporation
may determine the stockholders entitled to notice of or to vote at any meeting
of stockholders or any adjournment thereof, the Board of Directors may fix a
record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board of Directors, and
which record date shall not be more than sixty nor less than ten days before the
date of such meeting. If no record date is fixed by the Board of Directors, the
record date for determining stockholders entitled to notice of or to vote at a
meeting of stockholders shall be at the close of business on the day next
preceding the day on which notice is given, or, if notice is waived, at the
close of business on the day next preceding the day on which the meeting is
held. A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting. In order that the corporation may determine the stockholders
entitled to consent to corporate action in writing without a meeting, the Board
of Directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the Board of
Directors, and which date shall not be more than ten days after the date upon
which the resolution fixing the record date is adopted by the Board of
Directors. If no record date has been
2
<PAGE>
fixed by the Board of Directors, the record date for determining the
stockholders entitled to consent to corporate action in writing without a
meeting, when no prior action by the Board of Directors is required by the
General Corporation Law, shall be the first date on which a signed written
consent setting forth the action taken or proposed to be taken is delivered to
the corporation by delivery to its registered office in the State of Delaware,
its principal place of business, or an officer or agent of the corporation
having custody of the book in which proceedings of meeting of stockholders are
recorded. Delivery made to the corporation's registered office shall be by hand
or by certified or registered mail, return receipt requested. If no record date
has been fixed by the Board of Directors and prior action by the Board of
Directors is required by the General Corporation Law, the record date for
determining stockholders entitled to consent to corporate action in writing
without a meeting shall be at the close of business on the day on which the
Board of Directors adopts the resolution taking such prior action. In order that
the corporation may determine the stockholders entitled to receive payment of
any dividend or other distribution or allotment of any rights or the
stockholders entitled to exercise any rights in respect of any change,
conversion, or exchange of stock, or for the purpose of any other lawful action,
the Board of Directors may fix a record date, which record date shall not
precede the date upon which the resolution fixing the record date is adopted,
and which record date shall be not more than sixty days prior to such action. If
no record date is fixed, the record date for determining stockholders for any
such purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto.
Section 6. Meaning of Certain Terms. As used herein in respect of the
right to notice of a meeting of stockholders or a waiver thereof or to
participate or vote thereat or to consent or dissent in writing in lieu of
meeting, as the case may be, the term "share" or "shares" or "share of stock" or
"shares of stock" or "stockholder" or "stockholders" refers to an outstanding
share or shares of stock and to a holder or holders of record of outstanding
shares of stock when the corporation is authorized to issue only one class of
shares of stock, and said reference is also intended to include any outstanding
share or shares of stock and any holder or holders of record of outstanding
shares of stock of any class upon which or upon whom the certificate of
incorporation confers such rights where there are two or more classes or series
of shares of stock or upon which or upon whom the General Corporation Law
confers such rights notwithstanding that the certificate of incorporation may
provide for more than one class or series of shares of stock, one or more of
which are limited or denied such rights thereunder; provided, however, that no
such right shall vest in the event of an increase or a decrease in the
authorized number of shares of stock of any class or series which is otherwise
denied voting rights under the provisions of the certificate of incorporation,
except as any provision of law may otherwise require.
Section 7. Stockholder Meetings.
- Time. The annual meeting shall be held on the date and at the time
fixed, from time to time, by the directors, provided that the first annual
meeting shall be held on a date within thirteen months after the organization of
the corporation, and each successive annual meeting shall be held on a date
within thirteen months after the date of the preceding annual meeting. A special
meeting shall be held on the date and at the time fixed by the directors.
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- Place. Annual meetings and special meetings shall be held at such
place, within or without the State of Delaware, as the directors may, from time
to time, fix. Whenever the directors shall fail to fix such place, the meeting
shall be held at the registered office of the corporation in the State of
Delaware.
- Call. Annual meetings and special meetings may be called by the
directors or by any officer instructed by the directors to call the meeting.
- Notice or Waiver of Notice. Written notice of all meetings shall be
given, stating the place, date, hour of the meeting and stating the place within
the city or other municipality or community at which the list of stockholders of
the corporation may be examined. The notice of an annual meeting shall state
that the meeting is called for the election of directors and for the transaction
of other business which may properly come before the meeting, and shall (if any
other action which could be taken at a special meeting is to be taken at such
annual meeting) state the purpose or purposes. The notice of a special meeting
shall in all instances state the purpose or purposes for which the meeting is
called. The notice of any meeting shall also include, or be accompanied by, any
additional statements, information, or documents prescribed by the General
Corporation Law. Except as otherwise provided by the General Corporation Law, a
copy of the notice of any meeting shall be given, personally or by mail, not
less than ten days nor more than sixty days before the date of the meeting,
unless the lapse of the prescribed period of time shall have been waived, and
directed to each stockholder at his record address or at such other address
which he may have furnished by request in writing to the Secretary of the
corporation. Notice by mail shall be deemed to be given when deposited, with
postage thereon prepaid, in the United States Mail. If a meeting is adjourned to
another time, not more than thirty days hence, and/or place is made at the
meeting, it shall not be necessary to give notice of the adjourned meeting
unless the directors, after adjournment, fix a new record date for the adjourned
meeting. Notice need not be given to any stockholder who submits a written
waiver of notice signed by him before or after the time stated therein.
Attendance of a stockholder at a meeting of stockholders shall constitute a
waiver of notice of such meeting, except when the stockholder attends the
meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, not the purpose of, any
regular or special meeting of the stockholders need be specified in any written
waiver of notice.
- Stockholder List. The officer who has charge of the stock ledger of
the corporation shall prepare and make, at least ten days before every meeting
of stockholders, a complete list of the stockholders, arranged in alphabetical
order, and showing the address of each stockholder and the number of shares
registered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten days prior to the meeting,
either at a place within the city or other municipality or community where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present. The stock ledger shall be the only evidence as
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to who are the stockholders entitled to examine the stock ledger, the list
required by this section or the books of the corporation, or to vote at any
meeting of stockholders.
- Conduct of Meeting. Meetings of the stockholders shall be presided
over by one of the following officers in the order of seniority and if present
and acting-the Chairman of the Board, if any, the Vice-Chairman of the Board, if
any, the President, a Vice-President, or, if none of the foregoing is in office
and present and acting, by a chairman to be chosen by the stockholders. The
Secretary of the corporation, or in his absence, an Assistant Secretary, shall
act as secretary of every meeting, but if neither the Secretary nor an Assistant
Secretary is present the Chairman of the meeting shall appoint a secretary of
the meeting.
- Proxy Representation. Every stockholder may authorize another person
or persons to act for him by proxy in all matters in which a stockholder is
entitled to participate, whether by waiving notice of any meeting, voting or
participating at a meeting, or expressing consent or dissent without a meeting.
Every proxy must be signed by the stockholder or by his attorney-in-fact. No
proxy shall be voted or acted upon after three years from its date unless such
proxy provides for a longer period. A duly executed proxy shall be irrevocable
if it states that is irrevocable and, if, and only as long as it is coupled with
an interest sufficient in law to support an irrevocable power. A proxy may be
made irrevocable regardless of whether the interest with which it is coupled is
an interest in the stock itself or an interest in the corporation generally.
- Inspectors. The directors, in advance of any meeting, may, but need
not, appoint one or more inspectors of election to act at the meeting or any
adjournment thereof. If any inspector or inspectors are not appointed, the
person presiding at the meeting may, but need not appoint one or more
inspectors. In case any person who may be appointed as an inspector fails to
appear or act, the vacancy may be filled by appointment made by the directors in
advance of the meeting or at the meeting by the person presiding thereat. Each
inspector, if any, before entering upon the discharge of his duties, shall take
and sign an oath faithfully to execute the duties of inspectors at such meeting
with strict impartiality and according to the best of his ability. The
inspectors, if any, shall determine the number of shares of stock outstanding
and the voting power of each, the shares of stock represented at the meeting,
the existence of a quorum, the validity and effect of proxies, and shall receive
votes, ballots, or consents, hear and determine all challenges and questions
arising in connection with the right to vote, count and tabulate all votes,
ballots, or consents, determine the result, and do such acts as are proper to
conduct the election or vote with fairness to all stockholders. On request of
the person presiding at the meeting, the inspector or inspectors, if any, shall
make a report in writing of any challenge, question, or matter determined by him
or them and execute a certificate of any fact found by him or them. Except as
otherwise required by subsection (e) of Section 231 of the General Corporation
Law, the provisions of that Section shall not apply to the corporation.
- Quorum. The holders of a majority of the outstanding shares of stock
shall constitute a quorum at a meeting of stockholders for the transaction of
any business. The stockholders presents
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may adjourn the meeting despite the absence of a quorum.
- Voting. Each share of stock shall entitle the holder thereof to one
vote. Directors shall be elected by a plurality of the votes of the shares
present in person or represented by proxy at the meeting and entitled to vote on
the election of directors. Any other action shall be authorized by a majority of
the votes cast except where the General Corporation Law prescribes a different
percentage of votes and/or a different exercise of voting power, and except as
may be otherwise prescribed by the provisions of the certificate of
incorporation and these Bylaws. In the election of directors, and for any other
action, voting need not be by ballot.
Section 8. Stockholder Action Without Meetings. Any action required by
the General Corporation Law to be taken at any annual or special meeting of
stockholders, or any action which may be taken at any annual or special meeting
of stockholders, may be taken without a meeting, without prior notice and
without a vote, if a consent in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and
voted. Prompt notice of the taking of the corporate action without a meeting by
less than unanimous written consent shall be given to those stockholders who
have not consented in writing. Action taken pursuant to this paragraph shall be
subject to the provisions of Section 228 of the General Corporation Law.
ARTICLE II
DIRECTORS
Section 1. Functions and Definition. The business and affairs of the
corporation shall be managed by or under the direction of the Board of Directors
of the corporation. The Board of Directors shall have the authority to fix the
compensation of the members thereof. The use of the phrase "whole board" herein
refers to the total number of directors which the corporation would have if
there were no vacancies.
Section 2. Qualifications and Number. A director need not be a
stockholder, a citizen of the United States, or a resident of the State of
Delaware. The initial Board of Directors shall consist of one (1) person.
Thereafter, the number of directors may be fixed from time to time by action of
the stockholders or of the directors, or, if the number is not fixed, the number
shall be one (1). The number of directors may be increased or decreased by
action of the stockholders or of the directors.
Section 3. Election and Term. The first Board of Directors, unless the
members thereof shall have been named in the certificate of incorporation, shall
be elected by the incorporator or incorporators and shall hold office until
first annual meeting of stockholders and until their successors are elected and
qualified or until their earlier resignation or removal. Any director may resign
at any time upon written notice to the corporation. Thereafter, directors who
are elected at an annual
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meeting of stockholders, and directors who are elected in the interim to fill
vacancies and newly created directorships, shall hold office until the next
annual meeting resignation or removal. Except as the General Corporation Law may
otherwise require, in the interim between annual meetings of stockholders or of
special meetings of stockholders called for the election of directors and/or for
the removal of one or more directors and for the filling of any vacancy in that
connection, newly created directorships and any vacancies in the Board of
Directors, including unfilled vacancies resulting from the removal of directors
for cause or without cause, may be filled by the vote of a majority of the
remaining directors then in office, although less than a quorum, or by the sole
remaining director.
4. MEETINGS.
- TIME. Meetings shall be held at such time as the Board shall
fix, except that the first meeting of a newly elected Board shall be held as
soon after its election as the directors may conveniently assemble.
- PLACE. Meetings shall be held at such place within or
without the State of Delaware as shall be fixed by the Board.
- CALL. No call shall be required for regular meetings for
which the time and place have been fixed. Special meetings may be called by or
at the direction of the Chairman of the Board, if any, the Vice-Chairman of the
Board, if any, of the President, or of a majority of the directors in office.
- NOTICE OR ACTUAL OR CONSTRUCTIVE WAIVER. No notice shall be
required for regular meetings for which the time and place have been fixed.
Written, oral, or any other mode of notice of the time and place shall be given
for special meetings in sufficient time for the convenient assembly of the
directors thereat. Notice need not be given to any director or to any member of
a committee of directors who submits a written waiver of notice signed by him
before or after the time stated therein. Attendance of any such person at a
meeting shall constitute a waiver of notice of such meeting, except when he
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened. Neither the business to be transacted at, nor the purpose
of, any regular or special meeting of the directors need be specified in any
written waiver of notice.
- QUORUM AND ACTION. A majority of the whole Board shall
constitute a quorum except when a vacancy or vacancies prevents such majority,
whereupon a majority of the directors in office shall constitute a quorum,
provided, that such majority shall constitute at least one-third of the whole
Board. A majority of the directors present, whether or not a quorum is present,
may adjourn a meeting to another time and place. Except as herein otherwise
provided, and except as otherwise provided by the General Corporation Law, the
vote of the majority of the directors present at a meeting at which a quorum is
present shall be the act of the Board. The quorum and voting provisions herein
stated shall not be construed as conflicting with any provisions of the General
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Corporation Law and these Bylaws which govern a meeting of the directors held to
fill vacancies and newly created directorships in the Board or action of
disinterested directors.
Any member or members of the Board of Directors or of any
committee designated by the Board, may participate in a meeting of the Board, or
any such committee, as the case may be, by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other.
- CHAIRMAN OF THE MEETING. The Chairman of the Board, if any
and if present and acting, shall preside at all meetings. Otherwise, the
Vice-Chairman of the Board, if any and if present and acting, or the President,
if present and acting, or any other director chosen by the Board, shall preside.
Section 5. REMOVAL OF DIRECTORS. Except as may otherwise be
provided by the General Corporation Law, any director or the entire Board of
Directors may be removed, with or without cause, by the holders of a majority of
the shares then entitled to vote at an election of directors.
Section 6. COMMITTEES. The Board of Directors may, by
resolution passed by a majority of the whole Board, designate one or more
committees, each committee to consist of one or more of the directors of the
corporation. The Board may designate one or more directors as alternate members
of any committee, who may replace any absent or disqualified member at any
meeting of the committee. In the absence or disqualification of any member of
any such committee or committees, the member or members thereof present at any
meeting and not disqualified from voting, whether or not he or they constitute a
quorum, may unanimously appoint another member of the Board of Directors to act
at the meeting in the place of any such absent or disqualified member. Any such
committee, to the extent provided in the resolution of the Board, shall have and
may exercise the powers and authority of the Board of Directors in the
management of the business and affairs of the corporation with the exception of
any authority the delegation of which is prohibited by Section 141 of the
General Corporation Law, and may authorize the seal of the corporation to be
affixed to all papers which may require it.
Section 7. WRITTEN ACTION. Any action required or permitted to
be taken at any meeting of the Board of Directors or any committee thereof may
be taken without a meeting if all members of the Board or committee, as the case
may be, consent thereto in writing, and the writing or writings are filed with
the minutes of proceedings of the Board or committee.
ARTICLE III
OFFICERS
The officers of the corporation shall consist of a President,
a Secretary, a Treasurer, and, if deemed necessary, expedient, or desirable by
the Board of Directors, a Chairman of the Board,
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a Vice-Chairman of the Board, an Executive Vice-President, one or more other
Vice-Presidents, one or more Assistant Secretaries, one or more Assistant
Treasurers, and such other officers with such title as the resolution of the
Board of Directors choosing them shall designate. Except as may otherwise be
provided in the resolution of the Board of Directors choosing him, no officer
other than the Chairman or Vice-Chairman of the Board, if any, need be a
director. Any number of offices may be held by the same person, as the directors
may determine.
Unless otherwise provided in the resolution choosing him, each
officer shall be chosen for a term which shall continue until the meeting of the
Board of Directors following the next annual meeting of stockholders and until
his successor shall have been chosen and qualified.
All officers of the corporation shall have such authority and
perform such duties in the management and operation of the corporation as shall
be prescribed in the resolutions of the Board of Directors designating and
choosing such officers and prescribing their authority and duties, and shall
have such additional authority and duties as are incident to their office except
to the extent that such resolutions may be inconsistent therewith. The Secretary
or an Assistant Secretary of the corporation shall record all of the proceedings
of all meetings and actions in writing of stockholders, directors, and
committees of directors, and shall exercise such additional authority and
perform such additional duties as the Board shall assign to him. Any officer may
be removed, with or without cause, by the Board of Directors. Any vacancy in any
office may be filled by the Board of Directors.
ARTICLE IV
CORPORATE SEAL
The corporate seal shall be in such form as the Board of
Directors shall prescribe.
ARTICLE V
FISCAL YEAR
The fiscal year of the corporation shall be fixed, and shall
be subject to change, by the Board of Directors.
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EXHIBIT 4.2
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND NEITHER THE SECURITIES
NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE
DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH
ACT OR SUCH LAWS OR AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT AND SUCH LAWS
WHICH, IN THE OPINION OF COUNSEL FOR THE HOLDER, WHICH COUNSEL AND OPINION ARE
REASONABLY SATISFACTORY TO COUNSEL FOR THIS CORPORATION, IS AVAILABLE.
July , 1997
REDEEMABLE WARRANT TO PURCHASE SHARES OF COMMON
STOCK OF INTERACTIVE ENTERTAINMENT STUDIO, INC.
This certifies that (the "INITIAL HOLDER" or the "HOLDER") or any
subsequent holder of this Warrant (the "HOLDER"), for value received, is
entitled, subject to the adjustment and to the other terms set forth below, to
purchase from Interactive Entertainment Studio, Inc., a Nevada corporation (the
"COMPANY"), fully paid and nonassessable shares of the Company's common stock,
par value $.001 per share (the "COMMON STOCK") at a price of $3.00 per share
(the "STOCK PURCHASE PRICE"). This Warrant shall be exercisable at any time on
or after the date on which the Company offers its shares of Common Stock in a
public offering at a price of not less than $5.00 per share. The date that this
Warrant first becomes exercisable is hereafter referred to as the "FIRST
EXERCISE DATE." This Warrant shall not be exercisable later than 5:00 p.m. (New
York Time) on the Expiration Date (as defined below). This Warrant shall be
exercisable by the Holder's surrendering to the Company at its principal office
at 1905 Anderson Avenue, Ann Arbor, Michigan 48104, Attention: President (or at
such other location as the Company may advise Holder in writing) this Warrant
properly endorsed with the form of Warrant Exercise attached hereto duly filled
in and signed, and payment in cash, certified check, or cashier's check of the
aggregate Stock Purchase Price for the number of shares for which this Warrant
is being exercised determined in accordance with the provisions hereof. The
Stock Purchase Price and, in some cases, the number of shares purchasable
hereunder are subject to adjustment as provided in Section 4 of this Warrant.
This Warrant and all rights hereunder, to the extent not exercised in the manner
set forth herein shall terminate and become null and void on the Expiration
Date. "EXPIRATION DATE" means 5:00 pm (New York time) on the fourth anniversary
of the issue date of this Warrant, as first noted above. In the event that the
Holder does not exercise this Warrant pursuant to the terms of this Warrant,
then this Warrant shall expire, be canceled, and be null and void.
<PAGE>
This Warrant is subject to the following terms and conditions:
1. Exercise; Issuance of Certificates; Payment for Shares.
This Warrant is exercisable at the option of the Holder at any time or
from time to time but not earlier than on the First Exercise Date or later than
5:00 p.m. (New York Time) on the Expiration Date for all or a portion of the
shares of Common Stock which may be purchased hereunder. The Company agrees that
the shares of Common Stock purchased under this Warrant shall be and are deemed
to be issued to the Holder as the record owner of such shares as of the close of
business on the date on which this Warrant shall have been surrendered and
payment made for such shares. Subject to the provisions of Section 2,
certificates for the shares of Common Stock so purchased, together with any
other securities or property to which the Holder is entitled upon such exercise,
shall be delivered to the Holder by the Company or its transfer agent at the
Company's expense within a reasonable time after the rights represented by this
Warrant have been exercised. Each stock certificate so delivered shall be in
such denominations of Common Stock as may be requested by the Holder and shall
be registered in the name of the Holder or such other name as shall be
designated by the Holder. If, upon exercise of this Warrant, fewer than all of
the shares of Common Stock evidenced by this Warrant are purchased prior to the
Expiration Date of this Warrant, one or more new warrants substantially in the
form of, and on the same terms as in, this Warrant will be issued for the
remaining number of shares of Common Stock not purchased upon exercise of this
Warrant.
2. Shares to be Fully Paid; Reservation of Shares.
The Company covenants and agrees that all shares of Common Stock which
may be issued upon the exercise of this Warrant (the "WARRANT SHARES") shall,
upon issuance, be duly authorized, validly issued, fully paid and nonassessable
and free from all preemptive rights of any stockholder and free of all taxes,
liens and charges with respect to the issue thereof. The Company covenants that
it will reserve and keep available a sufficient number of shares of its
authorized but unissued Common Stock for such exercise. The Company will take
all such reasonable action as may be necessary to assure that the Warrant Shares
may be issued as provided herein without violation of any applicable law or
regulation, or of any requirements of any domestic securities exchange or
automated quotation system upon which the Common Stock may be listed.
3. Redemption.
3.1 Conditions for Redemption. By resolution of the Company's board of
directors, the Company may redeem this Warrant at a price of $.05 per share of
Common Stock exercisable hereunder (the "REDEMPTION PRICE"), at any time after
one year from the date of this Warrant, provided that the shares of Common Stock
have been trading in the public market at $6.00 per share or more on each of the
most recent twenty (20) consecutive trading days prior to the Company's notice
to redeem this Warrant, and provided further that no underwriter has placed any
restrictions on such redemption by the Company.
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3.2 Redemption Notice. The Company shall give notice of its election to
redeem this Warrant by sending notice to the Holder at his or her address
appearing on the books of the Company, pursuant to the requirements provided for
notices in Section 9 hereafter, not less than thirty (30) days prior to the date
designated as the date for such redemption (the "REDEMPTION DATE"). In order for
any redemption to be effective hereunder, the Company shall be required to
transmit the notice required herein within fifteen (15) days after any twenty
(20) day period during which the conditions contained in subsection 3.1 hereof
have been satisfied. The Company's failure to send such notice within fifteen
(15) days after any such twenty (20) day period shall result in the loss of the
Company's right of redemption with respect to that twenty (20) day period only.
3.3 Warrant Exercise. The Holder may elect to exercise this
Warrant for any number of shares exercisable hereunder, at any time prior to
the Redemption Date pursuant to the terms and conditions contained in this
Warrant.
3.4 Surrender and Cancellation of Warrant. On and after the Redemption
Date, the Holder shall be entitled to receive the Redemption Price, with respect
to all shares which remain unexercised hereunder, upon presentation and
surrender of this Warrant at the Company's offices, together with the transfer
form attached thereto. From and after the Redemption Date (unless the Company
defaults in providing payment of the Redemption Price), all rights of the Holder
with respect to this Warrant shall cease, except for the right to receive the
full Redemption Price, without interest, and this Warrant shall no longer be
deemed to be outstanding.
4. Adjustment of Stock Purchase Price and Number of Shares.
The Stock Purchase Price and, in some cases, the number of shares
purchasable upon the exercise of this Warrant shall be subject to adjustment
from time to time upon the occurrence of certain events described in this
Section 4.
4.1 Split or Combination of Stock and Stock Dividend. In case the
Company shall at any time subdivide its outstanding shares of Common Stock into
a greater number of shares or declare a dividend upon its Common Stock payable
solely in shares of Common Stock, the Stock Purchase Price in effect immediately
prior to such subdivision or declaration shall be proportionately reduced, and
the number of shares issuable upon exercise of this Warrant shall be
proportionately increased. Conversely, in case the outstanding shares of Common
Stock of the Company shall be combined into a smaller number of shares, the
Stock Purchase Price in effect immediately prior to such combination shall be
proportionately increased, and the number of shares issuable upon exercise of
this Warrant shall be proportionately reduced.
4.2 Notice of Adjustment. Promptly after adjustment of the Stock
Purchase Price or any increase or decrease in the number of shares purchasable
upon the exercise of this Warrant, the Company shall give written notice
thereof, by first class mail, postage prepaid, addressed to the registered
Holder of this Warrant at the address of such Holder as shown on the books of
the Company. The notice shall be signed by the Company's President and shall
state the effective date of the adjustment and the Stock Purchase Price
resulting from such adjustment and the increase or decrease, if any, in the
number of shares purchasable at such price upon the exercise of this Warrant,
setting forth in reasonable detail the method of calculation and the facts upon
which such calculation is based.
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4.3 Notices. If at any time:
(A) the Company shall declare any cash dividend upon its
Common Stock;
(B) the Company shall declare any dividend upon its Common
Stock payable in capital stock (other than a dividend payable solely in
shares of Common Stock) or make any special dividend or other
distribution to the holders of its Common Stock;
(C) there shall be any consolidation or merger of the Company
with another corporation, or a sale of all or substantially all of the
Company's assets to another corporation; or
(D) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up
of the Company;
then, in any one or more of said cases, the Company shall give, by certified or
registered mail, return receipt requested, postage prepaid, addressed to the
registered Holder of this Warrant at the address of such Holder as shown on the
books of the Company, (i) at least thirty (30) days' prior written notice of the
date on which the books of the Company shall close or a record shall be taken
for such dividend, distribution or subscription rights or for determining rights
to vote in respect of any such dissolution, liquidation or winding-up; (ii) at
least ten (10) days' prior written notice of the date on which the books of the
Company shall close or a record shall be taken for determining rights to vote in
respect of any such reorganization, reclassification, consolidation, merger or
sale, and (iii) in the case of any such reorganization, reclassification,
consolidation; merger, sale, dissolution, liquidation or winding-up, at least
thirty (30) days' written notice of the date when the same shall take place. Any
notice given in accordance with clause (i) above shall also specify, in the case
of any such dividend, distribution or option rights, the date on which the
holders of Common Stock shall be entitled thereto. Any notice given in
accordance with clause (iii) above shall also specify the date on which the
holders of Common Stock shall be entitled to exchange their Common Stock for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up, as the case may be. If the registered Holder of this Warrant does
not exercise this Warrant prior to the occurrence of an event described above,
except as provided in Sections 4.1 and 4.4, the Holder shall not be entitled to
receive the benefits accruing to existing holders of the Common Stock in such
event.
4.4 Changes in Stock. In case at any time following the date of
issuance of this Warrant, the Company shall be a party to any transaction
(including, without limitation, a merger, consolidation, sale of all or
substantially all of the Company's assets or recapitalization of the Common
Stock) in which the previously outstanding Common Stock shall be changed into or
exchanged for different securities of the Company or common stock or other
securities of another corporation or interests in a noncorporate entity or other
property (including cash) or any combination of any of the foregoing (each such
transaction being herein called the "TRANSACTION" and the date of consummation
of the Transaction being herein called the "CONSUMMATION DATE"), then, as a
condition of the consummation of the Transaction, lawful and adequate provisions
shall be made so that each Holder, upon the exercise hereof at any time on or
after the Consummation
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Date, shall be entitled to receive, and this Warrant shall thereafter represent
the right to receive, in lieu of the Common Stock issuable upon such exercise
prior to the Consummation Date, the highest amount of securities or other
property to which such Holder would actually have been entitled as a stockholder
upon the consummation of the Transaction if such Holder had exercised this
Warrant immediately prior thereto. The provisions of this Section 4.4 shall
similarly apply to successive Transactions.
5. Issue Tax.
The issuance of certificates for shares of Common Stock upon the
exercise of this Warrant shall be made without charge to the Holder of this
Warrant for any issue tax in respect thereof; provided, however, that the
Company shall not be required to pay any tax which may be payable in respect of
any transfer involved in the issuance and delivery of any certificate in a name
other than that of the then Holder of the Warrant being exercised.
6. No Voting or Dividend Rights; Limitation of Liability.
Nothing contained in this Warrant shall be construed as conferring upon
the Holder hereof the right to vote or to consent or to receive notice as a
stockholder in respect of meetings of stockholders for the election of directors
of the Company or any other matters or any rights whatsoever as a stockholder of
the Company. Except for the adjustment to the Stock Purchase Price pursuant to
Section 4.1 in the event of a dividend on the Common Stock payable in shares of
Common Stock, no dividends or interest shall be payable or accrued in respect of
this Warrant or the interest represented hereby or the shares purchasable
hereunder until, and only to the extent that, this Warrant shall have been
exercised. No provisions hereof, in the absence of affirmative action by the
Holder to purchase shares of Common Stock, and no mere enumeration herein of the
rights or privileges of the Holder hereof, shall give rise to any liability of
such Holder for the Stock Purchase Price or as a stockholder of the Company
whether such liability is asserted by the Company or by its creditors.
7. Restrictions on Transferability of Securities; Compliance With
Securities Act.
7.1 Restrictions on Transferability. This Warrant and the Warrant
Shares shall not be transferable in the absence of registration under the
Securities Act of 1933, as amended (the "ACT") or an exemption therefrom under
said Act.
7.2 Restrictive Legend. Each certificate representing the Warrant
Shares or any other securities issued in respect of the Warrant Shares upon any
stock split, stock dividend, recapitalization, merger, consolidation or similar
event, shall be stamped or otherwise imprinted with a legend substantially in
the following form (in addition to any legend required under applicable state
securities laws):
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND NEITHER THE
SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, TRANSFERRED, PLEDGED
OR OTHERWISE DISPOSED OF
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EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR SUCH
LAWS OR AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT AND SUCH LAWS WHICH, IN
THE OPINION OF COUNSEL FOR THE HOLDER, WHICH COUNSEL AND OPINION ARE REASONABLY
SATISFACTORY TO COUNSEL FOR THIS CORPORATION, IS AVAILABLE."
8. Modification and Waiver.
This Warrant and any provision hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of the same is sought.
9. Notices.
All notices, requests, demands and other communications hereunder shall
be in writing and shall be deemed to be effective only if delivered by hand, or
overnight courier, or mailed by prepaid registered or certified mail, return
receipt requested, to the parties at their addresses set forth herein, or to
such other address as each party may specify by written notice to the other from
time to time in accordance with the terms of this Section 9. Such notices,
requests, demands and other communications hereunder shall be deemed to have
been duly given upon such personal delivery, on the next business day after
being sent by overnight courier, or on the date three (3) business days after
the date postmarked by the United States Post Office, as the case may be.
10. Descriptive Headings and Governing Law.
The descriptive headings of the several sections and paragraphs of this
Warrant are inserted for convenience only and do not constitute a part of this
Warrant. This Warrant shall be construed and enforced in accordance with, and
the rights of the parties shall be governed by, the laws of the State of New
York without giving effect to conflict of laws. The parties hereby submit to the
exclusive jurisdiction of the courts of the State of New York located in New
York County and the federal courts located in the Southern District of New York,
with respect to any action or legal proceeding commenced by either party with
respect to this Agreement. Each party irrevocably waives any objection it now
has or hereafter may have respecting the venue of any such action or proceeding
or the inconvenience of such forum, and each party consents to the service of
process in any such action or proceeding in the manner set forth for the
delivery of notices herein.
11. Lost Warrants or Stock Certificate.
The Company represents and warrants to Holder that upon receipt of
evidence reasonably satisfactory to the Company of the loss, theft, destruction
or mutilation of any Warrant or stock certificate and, in the case of any such
loss, theft or destruction, and if requested, upon receipt of an indemnity bond
reasonably satisfactory to the Company, or in the case of any such mutilation,
upon surrender and cancellation of such Warrant or stock certificate, the
Company at its expense will make and deliver a new Warrant or stock certificate,
of like tenor, in lieu of the lost, stolen, destroyed or mutilated Warrant or
stock certificate.
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12. Fractional Shares.
No fractional shares shall be issued upon exercise of this Warrant. The
Company shall, in lieu of issuing any fractional share pay the Holder entitled
to such fraction a sum in cash equal to the fair market value of any such
fractional interest as it shall appear on the public market, or if there is no
public market for such shares, then as shall be reasonably determined by the
Company.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its officer, thereunto duly authorized as of this day of July, 1997.
INTERACTIVE ENTERTAINMENT STUDIO, INC.
By:______________________________
Peter Klamka
President
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FORM OF WARRANT EXERCISE
(To be signed and delivered
upon exercise of Warrant)
[DATE]
Interactive Entertainment Studio, Inc.
1905 Anderson Avenue
Ann Arbor, Michigan 48104
Attention: President
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and to
purchase thereunder,
____________ shares of Common Stock, par value $.001 per share (the "COMMON
STOCK") of Interactive Entertainment Studio, Inc. and subject to the
following paragraph, herewith makes payment of __________ Dollars ($______)
therefor and requests that the certificates for such shares be issued in the
name of, and delivered to _____________, whose address is ____________________.
If the exercise of this Warrant is not covered by a registration
statement effective under the Securities Act of 1933, as amended (the
"SECURITIES ACT"), the undersigned represents that:
(A) the undersigned is acquiring such Common Stock for
investment for his or her own account, not as nominee or agent, and not
with a view to the distribution thereof and the undersigned has not
signed or otherwise arranged for the selling, granting any
participation in, or otherwise distributing the same;
(B) the undersigned has such knowledge and experience in
financial and business matters as to be capable of evaluating the
merits and risks of the undersigned's investment in the Common Stock;
(C) the undersigned has received all of the information the
undersigned has requested from the Company and considers necessary or
appropriate for deciding whether to purchase the shares of Common
Stock;
(D) the undersigned has the ability to bear the economic
risks of his or her prospective investment;
(E) the undersigned is able, without materially impairing his
or her financial condition, to hold the shares of Common Stock for an
indefinite period of time and to suffer complete loss on his
investment,
(F) the undersigned understands and agrees that (i) he or she
may be unable to readily liquidate his investment in the shares of
Common Stock and that the shares must be held indefinitely unless a
subsequent disposition thereof is registered or qualified under
<PAGE>
the Securities Act and applicable state securities or Blue Sky laws or
is exempt from such registration or qualification, and that the Company
is not required to register the same or to take any action or make such
an exemption available except to the extent provided in the within
Warrant and (ii) the exemption from registration under the Securities
Act afforded by Rule 144 promulgated by the Securities and Exchange
Commission ("Rule 144") depends upon the satisfaction of various
conditions by the undersigned and the Company and that, if applicable,
Rule 144 affords the basis for sales under certain circumstances in
limited amounts, and that if such exemption is utilized by the
undersigned, such conditions must be fully complied with by the
undersigned and the Company, as required by Rule 144;
(G) the undersigned either (i) is familiar with the definition
of and the undersigned is an "accredited investor" within the meaning
of such term under Rule 501 of Regulation D promulgated under the
Securities Act, or (ii) is providing representations and warranties
reasonably satisfactory to the Company and its counsel, to the effect
that the sale and issuance of Stock upon exercise of such Warrant may
be made without registration under the Securities Act or any applicable
state securities and Blue Sky laws; and
(H) the address set forth below is the true and correct
address of the undersigned's residence.
DATED: ____________________________
Signature
(Signature must conform in all respects to name of holder as specified on the
face of the Warrant)
____________________________________
Print Name
____________________________________
Address
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EXHIBIT 10.1
WEB SITE LICENSE AGREEMENT
This Web Site License Agreement, dated as of June 1, 1997, between NIKI,
INC., c/o IMG Models, Inc., 170 Fifth Avenue, 10th Floor, New York, New York
10010 ("Company") and INTERACTIVE ENTERTAINMENT STUDIO, INC., 1905 Anderson
Avenue, Suite 200, Ann Arbor, Michigan 48104 ("IES").
IES desires to contract with Company for a license related to its
fashion-oriented on-line service (the "Service"), and Company is willing to
grant such license and to render services (including the services of Niki
Taylor ["Taylor"]) as hereinafter provided. In consideration of the mutual
agreements and covenants set forth in this Agreement, the parties agree as
follows:
1. Establishment of Taylor Home Page. IES will in consultation with and
subject to the approval of Company, design, produce and maintain a designated
area of the Service that will feature content regarding Taylor and Company and
is accessible to users of the Internet through a "free" area of the Service
without the necessity of being a subscriber to the Service (hereinafter, the
"Taylor Home Page"). IES and Company will also develop "premium" features
including, but not limited to, a "boutique" that will permit visitors to the
Taylor Home Page to purchase merchandise licensed, endorsed or selected by
Taylor ("Boutique Merchandise"); any such Boutique Merchandise would contain
such content, and be offered at prices and on terms, as may be mutually agreed
by IES and Company. In connection with the Taylor Home Page, IES will, at its
sole cost and expense:
(a) Design and Maintenance. Maintain full responsibility for the design,
technical development, production, maintenance (including customer phone
support), and fulfillment related to the Taylor Home Page which design shall,
in all events, be subject to the prior approval of Company;
(b) Marketing and Content. Coordinate all on-line marketing efforts and
work closely with Taylor and other Company representatives regarding new
content areas, Boutique Merchandise and other initiatives to ensure that
Company maximizes its association with IES;
(c) Account Executive Availability. At Company's request, make Taylor's
Account Executive at IES responsible to ensure that Company is fully apprised
of the marketing, merchandising and communications goals and objectives related
to the Taylor Home Page;
(d) Laptop Computer. Provide Company with use of a laptop computer during
the Contract Period (as defined below) to ensure that Taylor can take full
advantage of the opportunity to monitor the Taylor Home Page and to interact
with fans throughout the world;
(e) Training and Assistance. Make Taylor's Account Executive at IES
available to educate and train Taylor or other Company representatives with
respect to the functionality of the IES Service and be available to assist
Taylor, at her request, should Taylor require any assistance regarding the use
of her laptop computer in connection with this Agreement;
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(f) Internet Access. Develop and provide Internet access with reputable
organizations to the Taylor Home Page within one hundred twenty (120) days
after the execution of this Agreement;
(g) Customer Service and Billing. Be responsible for all customer service,
technical support, billing, credit card authorization and processing associated
with the Taylor Home Page and the sale of Boutique Merchandise; and
(h) Reports to Company. At Company's request, provide Company with a
summary report, in a mutually agreed format, of user activity on the Taylor
Home Page and other information reasonably requested by Company; such reports
shall be provided no more frequently than quarterly.
2. Use of Taylor's Name and Likeness. (a) Company grants to IES the
non-transferable right to use the Taylor name and likeness ("Taylor
Identification") as reasonably necessary in creating, distributing and
promoting the Taylor Home Page and to repackage and reformat information
contained in, or related to, the Taylor Home Page for promotional, advertising
and subject to Company's prior written approval of each "for profit" uses,
distribution-for-profit uses, in all media, including but not limited to, print
and electronic media, CD-ROM, video and other media. IES acknowledges that
Company will not accept uses which are in conflict with Company's existing or
prospective licensees. IES shall notify Company of its intended use of such
materials before they are used and any such use shall be subject to Company
consent, which consent shall not be unreasonably withheld.
(b) For this purpose, Company shall, upon request by IES, cause Taylor to
provide IES with the use of then unpublished photographs of herself, with
respect to which Company or Taylor has full ownership rights. IES and Company
have agreed upon a Thirty Thousand Dollar ($30,000) budget for the creation of
such photos, such photo shoot to be orchestrated by, and paid by, IES. The
Company shall make Taylor available for this photo shoot for up to eight (8)
hours at a mutually agreed upon time. No payment is owed by IES to Company or
Taylor for this photo shoot or resulting from the photo shoot, except as set
forth herein. During the Contract Period, IES shall have the right to use
photographs obtained through this photo shoot for any purposes related to the
promotion and advertising of the site as set forth above. Company will own the
photographs from the photo shoot.
(c) All rights of IES to use, in any manner, the Taylor Identification or
to refer to Taylor, shall cease immediately upon termination of this Agreement.
(d) It is understood that the recommendations and other material prepared
or delivered by Company hereunder shall not be deemed guarantees,
representations or warranties of Company.
(e) At the request of IES and on adequate notice to Company, Company will
cause Taylor to provide her services for two (2) publicity appearances, not to
exceed four (4) hours each, to be arranged by IES at mutually agreed upon times
and places.
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(f) If the parties agree that Taylor will participate in IES's Advisory
Board, Company grants to IES the non-transferable right to include on its
letterhead Taylor's name as a member of the Advisory Board. Taylor's name shall
be listed with other members of IES's Advisory Board, such list to appear in a
commercially reasonable and customary manner.
3. Services of Company. (a) Company shall render, or elect to have Taylor
render, all of the following services (the "Services") during the Contract
Period (as hereinafter defined):
(i) Advisory Board. Designate Taylor to serve on IES's advisory board (it
is understood and agreed that Taylor will not be required to attend or appear
at any scheduled advisory board meetings unless she chooses to do so, will not
be a member of IES's Board of Directors, will not have any vote, will not have
any legal liability, will have none of the duties or obligations applicable to
an actual Board member, including but not limited to fiduciary duty, duty of
loyalty, etc., and will not be required to perform any services that would be
subject to federal or state securities laws);
(ii) Consultation. Consult with and advise IES from time to time at IES's
request and Company's convenience with respect to corporate, business and
marketing strategy with respect to the Taylor Home Page;
(iii) Introduction to Corporate Sponsors and Strategic Partners. Introduce
IES, upon IES's request and at Company's convenience, to potential corporate
sponsors and strategic partners and assist IES in the sale of advertising and
sponsorships. All fees, charges or other amounts payable for any such
sponsorships and advertising shall be payable to and retained by IES; provided,
that IES will be obligated to compensate Company with respect to such
sponsorship or advertising revenues which are generated by Company in
accordance with Section 5 hereof;
(iv) Introduction to Licensees. Introduce IES to Company's licensees
(companies which have the right to sell Taylor endorsed or licensed merchandise
or services) for purposes of possible sale of such merchandise or services
through the boutique area of the Taylor Home Page. All fees, charges or other
amounts payable with respect to such sales shall be payable to and retained by
the merchandise vendor, subject to IES's commission (and Company's share under
Section 5 hereof) on such sales negotiated with such vendor and Company's
royalties on such sales negotiated with such vendor. IES shall be solely
responsible for entering into and administering any such arrangement with
Company. It is further agreed that at the end of the Contract Period, both IES
and Company will have the right to receive all names and related information
for each purchaser of Boutique Merchandise;
(v) Monthly Column. Review the content of a monthly column (approximately
150 words) written by IES to be published under Taylor's name and approved by
Taylor on a variety of appropriate topics relating to fashion, health or beauty
and whatever other content Company desires to include in the Taylor Home Page;
and
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(vi) Interviews and/or Chat Sessions. Upon request and at Company's
option, to make Taylor available (by telephone or in-person, at Taylor's
option) at mutually agreed upon times (with no more than one hour of actual
time on-line per occasion), to conduct exclusive interviews and/or chat
sessions.
4. Taylor's Availability. Except as required by Paragraph 2(e) above,
Company agrees to cause Taylor to devote such time as Company elects to provide
toward the performances of its duties hereunder. Whenever Company elects to
make Taylor available, IES understands and agrees that any such occasion is
subject to Taylor's personal and professional schedule. IES understands that
IES's failure to utilize services of Taylor hereunder when she offers to
provide them shall not result in any reduction in payments to Company
hereunder. Company will not elect to provide any services of Taylor hereunder
unless payments to Company are current and up to date and IES is not otherwise
in breach of any provisions of the Agreement. If Company confirms Taylor's
availability for any service and Taylor is unable to appear due to illness,
injury or other emergency, such non-appearance is not a breach of this
Agreement and neither Company nor Taylor shall be responsible for any expenses
incurred due to such non-appearance.
5. Payments by IES.
(a) In consideration for the rights herein granted, IES shall pay Company
a "Guaranteed Minimum Royalty" in the amount of One Hundred Fifty Thousand
United States Dollars (US$150,000) payable in two (2) installments -- the first
being Fifty Thousand Dollars ($50,000) payable contemporaneously with the
execution and delivery of this Agreement and the second being One Hundred
Thousand Dollars ($100,000) payable upon the earlier of (i) final approval of,
or (ii) use of, the "Niki Taylor Home Page." The Guaranteed Minimum Royalty
shall be credited against earned royalties payable to Company as follows:
(i) Site Revenues. Fifteen percent (15%) of any gross revenues received by
IES generated by, or in connection with, the Taylor Home Page except for
revenues received from corporate sponsors, strategic partners, or licensees
introduced by Company, and fifty percent (50%) of any gross revenues received
by IES generated in connection with the Taylor Home Page from corporate
sponsors, strategic partners, or licensees introduced by Company; and
(ii) Net Premium Revenues. Thirty-five percent (35%) of any Net Premium
Revenues. The term "Net Premium Revenues" means IES's gross revenues from the
sale of Boutique Merchandise and other "for profit" distribution of materials
contained in or related to the Taylor Home Page minus reasonable documented
out-of-pocket expenses including, but not limited to, the cost of inventory,
shipping and handling but excluding normal overhead expenses, which expenses
are incurred by IES and are directly associated with the generation of such
revenues.
(b) IES will make payments due to Company under this Agreement on a
quarterly basis, within fifteen (15) days following the end of the applicable
calendar quarter. Each such payment shall be accompanied by a statement showing
in reasonable detail how such payment was computed.
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(c) IES shall keep true and complete books and records in which all
information necessary to determine and verify all fees and payments
contemplated hereunder shall be reflected along with the amounts payable to
Company under the terms of this Agreement. IES shall maintain such books and
records for a period of at least two (2) years after the termination of this
Agreement. During the term of this Agreement and for a period of two (2) years
after such termination, Company shall have the right, at its expense and upon
reasonable notice to IES, to examine, or have examined by its authorized
representative, IES's books and records, at IES's principal place of business,
in order to determine or verify all amounts due, and the accuracy of any
reports furnished by IES under this Agreement. In the event that an error is
discovered in the calculation of the amounts payable to Company, the party that
received the benefit of the error shall promptly thereafter pay to the other
the amount of overpayment or underpayment, as the case may be. If any
underpayment by IES for a period examined by Company is five percent (5%) or
more, IES shall pay Company's reasonable out-of-pocket costs with respect to
such examination and the next subsequent reexamination. Company's receipt of
any statement, or any payment, does not prelude it from challenging the
correctness of that statement or payment.
(d) IES shall reimburse Company promptly upon receipt of an invoice
therefore all reasonable out-of-pocket expenses incurred by Company (and/or
Taylor) under this Agreement and approved by IES in advance.
6. Provisions of Content, Additional Responsibilities of IES and Company.
(a) Laptop Computer and Support Software. In addition to all other
obligations of IES hereunder, IES will provide to Company during the term of
this Agreement the use of a laptop computer and related equipment and such
software as is necessary for Taylor's or Company's representatives to transmit
information to IES in accordance with the terms of this Agreement. All such
hardware and software shall be the property of Company. Any software that IES
provides to Company to further the purpose of this Agreement ("Support
Software") shall be provided subject to the following: IES grants to Company a
royalty-free, non-exclusive license to use the Support Software (and any
accompanying user documentation). If the Support Software becomes unavailable
due to a claim that it infringes a third party's rights, IES shall provide
substitute software or a procedure for accomplishing the same objectives.
(b) Company Information. For purposes of this Agreement, the term "Company
Information" means all information created and/or delivered by Company to IES
for inclusion in the Service, including any trademark, service mark, trade name
or logo, whether or not registered, included in such information. Company shall
be solely responsible for the content of all Company Information, and
represents and warrants to IES that to the best of Company's knowledge (i) all
Company Information: (A) will be accurate and Company's own and original
creation, except for information validly licensed for use by Company or in the
public domain; (B) will consist only of information that Company is authorized
to use and to authorize IES to use as contemplated in this Agreement; (C) will
not constitute a libel or defamation or conflict with any copyright, right of
privacy or other rights of any third party; and (D) will conform to all
applicable federal, state and local laws and regulations, and (ii) Company has
the full right and authority to grant the rights and
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consents set forth herein. IES shall be entitled at any time to bring any
concerns it has regarding Company Information to the attention of Company,
whereupon the parties will cooperate in good faith to address IES's concerns.
Subject only to the next sentence, IES shall distribute Company Information
only as transmitted by Company, and shall not, and shall not authorize any
third party to, modify or edit such information without Company's prior written
request. If IES, in its reasonable judgment, believes that immediate action is
required with regard to any Company Information, IES may delete, modify or
revise such information, provided that IES shall notify Company of such action
prior thereto, if reasonably possible (or, if not, as soon thereafter as
practicable) and all representations, warranties, indemnifications and other
obligations of Company wherever with respect to such Company Information shall
immediately terminate and be of no force and effect.
(c) Transmission of Company Information. Company shall transmit to IES all
Company Information and updates thereof necessary for inclusion in the Taylor
Home Page (including any Boutique Merchandise). Information and updates shall
be transmitted by telephone or electronically in a format to be agreed upon by
IES and Company, on a prescheduled basis and/or as such information and updates
become available, as the case may be. IES shall provide Company with a Service
Identification number or numbers that will allow Company to gain access to the
Service at no cost or charge for purposes of electronically delivering Company
Information and content updates. All content supplied by Company shall be
consistent with the editorial standards used by IES for content displayed on
the Service (which standards IES reserves the right to amend from time to time)
provided IES timely and accurately conveys such standards to Company.
(d) Right, Title and Interest to Company Information. All right, title and
interest in Company Information, Taylor Identification, trade name(s),
trademarks and service mark(s) are and shall remain Company's, subject to the
right and license grated to IES herein. IES shall have the right, at no cost,
to use, display (privately or publicly) and distribute Company Information, or
any portion thereof, on the Service or in connection with any demonstration,
promotion or advertisement of the Service in any medium; to enter Company
Information into IES's computer database; and to store, process, retrieve and
transmit the same on the Service. Any use of the Taylor name and likeness, or
use of Company trade name(s), trademark(s) and service mark(s), other than as
included in Company Information, or as materials previously approved for use by
Company for whatever purpose, shall be subject to Company's prior consent
(which consent shall not be unreasonably withheld). IES's rights hereunder
shall include the right to offer subscribers the option of printing and
downloading Company Information or any portion thereof as a function of the
Service generally.
(e) Operation of Service: Non-Company Information, Charges for Service.
Other than with respect to the Taylor Home Page, IES will have sole discretion
to determine all aspects of the operation of the Service and all matters
relating to the content, structure and sequence of material appearing on the
Service; provided, however, that Company shall have approval over any links to
the Taylor Home Page. IES represents and warrants to Company that, to the best
of IES's knowledge, all content on the Service other than Company Information
(to the extent not revised, modified or deleted by IES) ("Non-Company
Information"), (A) will be accurate and
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IES's own and original creation, except for information validly licensed for
use by IES or in the public domain; (B) will consist only of information that
IES is authorized to use; (C) will not constitute a libel or defamation or
conflict with any copyright, right of privacy or other rights of, any third
party; and (D) will conform to all applicable federal, state and local laws and
regulations and (ii) IES has the full right and authority to grant the rights
and consents set forth herein. Company shall be entitled at any time to bring
any concerns it has regarding Non-Company Information to the attention of IES,
whereupon the parties will cooperate in good faith to address Company's
concerns. Nothing in this Agreement shall limit IES's rights regarding charges
for any aspect of the Service (including any product or service offered by IES,
whether alone or in conjunction with others, through means of the Service)
other than the Taylor Home Page. All right, title and interest to IES's name,
trade name(s), trademark(s) or service Mark(s) ("IES Identification") are and
shall remain IES's. Nothing herein shall be deemed to grant Company any
proprietary rights to use of IES's trade name(s), trademark(s) or service
mark(s). Company shall have the right to use IES Identification in connection
with advertising and promoting the Taylor Home Page, subject to IES's prior
written consent, not to be unreasonably withheld. Company's approval over links
to the "Taylor Home Page" shall not be unreasonably withheld, and shall not
extend to the content of any of the links, but only to the approval over
whether or not the link may be accessed through the "Taylor Home Page" only.
(f) Compliance with Applicable Law. IES will be solely responsible to
ensure that all aspects of the Service (other than the Company Information, to
the extent not modified or revised by IES), including the promotion thereof,
comply with applicable law,
(g) Subscriber Agreement. IES will distribute a subscriber agreement
prohibiting republication, redistribution, public broadcast, public display,
resale, offering for resale or other commercial exploitation of copyrighted or
trademarked materials published in the Service without the copyright or
trademark owner's consent.
(h) Compliance with Industry Standards. IES represents and agrees that the
Service will at all times during the Agreement be a first-class service, in
content and technical quality, that is devoted to fashion, health and beauty
information, activities and events, and that the Service will comply with all
on-line broadcasting industry standards.
(i) Database from Taylor's Home Page. IES shall own all information
received through the service, including all names, addresses, mail, and other
information relating to users of the Service obtained by IES through the
Service, including the "Taylor Home Page." IES shall supply to Company, at
Company's reasonable request and in such format as reasonably requested by
Company, a database of names and addresses of users of the "Taylor Home Page"
for Company's or Taylor's use. IES agrees not to use any information obtained
through the Service in any way to imply an endorsement by Company or Taylor of
any company, product or service following the termination of this Agreement.
7. Exclusivity. (a) During the Term hereof and subject to the remainder of
this Section, Company shall not: (i) license the use of Taylor Identification
for any web site or home page devoted to Taylor or (ii) be employed by, act as
a consultant to or otherwise render services
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similar in the aggregate to those provided hereunder with respect to
fashion-related programming to or for any on-line service (regardless of
whether such service is accessed through the Internet, a commercial on-line
service or otherwise). The "Official Niki Taylor Home Page" is exclusive to IES
during the Contact Period. The foregoing is not intended to prohibit Company or
Taylor from advertising on other sites, providing services for other sites or
on-line services, having Taylor Identification on the web sites of Company's
licensees or others, or participating in on-line interviews or articles.
(b) Neither Company nor Taylor is responsible for initiating action
against, enjoining or otherwise attempting to dissuade any person or entity not
licensed by Company, which in contravention of this Agreement use Taylor
Identification in promoting or advertising any products or services which are
the same as or similar to or directly competitive with the Service. Neither
Company nor Taylor shall incur any liability to IES or any third party arising
out of any such activity by any such person or entity. Company agrees that at
IES's sole cost and expense, Company shall give such reasonable assistance to
IES as may be required to cause any such person or entity to cease and desist
from such activities, or in connection with any lawsuit or other proceeding by
IES against such person or entity.
8. Contract Period. (a) The Contract Period will commence on the date
hereof and will continue until the earlier of the first anniversary of the date
the Taylor Home Page was launched or September 30, 1998, (the "Termination
Date"), and thereafter will be extended pursuant to Section 8(b) hereof.
(b) Extension of Contract Period. The Contract Period will be extended for
two (2) separate twelve (12) consecutive month periods after the Termination
Date unless either party gives written notice to terminate to the other party
on or before the Termination Date with respect to the first twelve (12) month
extension period, or on or before the first anniversary of the Termination Date
with respect to the second twelve (12) month extension period.
(c) Good Faith Renewal Discussions, Termination of Agreement. Prior to the
end of the Contract Period, the parties shall discuss in good faith the
possible renewal of this Agreement. If the parties are unable to agree on
mutually satisfactory terms, then this Agreement shall terminate at the end of
the Contract Period, without further obligation of either party to the other
(except for any amounts that are owed to such party per the terms of this
Agreement).
(d) Morals. If at any time during the term of this Agreement the
commercial association of IES with Taylor is substantially impaired by reason
of Taylor's conviction of a felony or of Taylor's commission of an act which
offends a demonstrable majority of the people in the U.S., IES shall have the
right to terminate this Agreement on written notice to Company.
9. Confidentiality. All information disclosed by either party to the other
party, including but not limited to the terms and conditions of this Agreement
or any other agreement between the parties, trade secrets of the party, any
nonpublic information relating to any party's product plans, designs, ideas,
concepts, costs, prices, finances, marketing plans, business opportunities,
personnel, research, development or know-how and any other nonpublic technical
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or business information of a party, that is marked "Confidential" or identified
by the disclosing party in writing as confidential before or within thirty days
after disclosure to the receiving party, will be treated as confidential by the
receiving party and not disclosed to any third party without the disclosing
party's prior written consent. "Confidential Information" as referred to in
this Section does not include (a) information that is generally available to
the public other than as a result of disclosure in violation of this Agreement,
(b) information already known or which becomes known to the receiving party
from a third party source which is not, to the receiving party's knowledge,
under an obligation of confidentiality, (c) information independently developed
by the receiving party (as shown by competent documentation), and (d) otherwise
confidential information that is required to be disclosed by law, including
administrative or judicial action. Any breach of these confidentiality
provisions will entitle the injured party to see injunctive relief and damages
without the necessity of giving notice or posting bond or other security.
10. Indemnification. (a) IES Indemnification. IES hereby indemnifies and
agrees to defend and hold Company and Taylor free and harmless from and against
all claims, costs, liabilities, judgments, expenses or damages (including
reasonable attorneys' fees) (collectively, "Damages") arising out of or in
connection with: (A) Taylor's activities and position as a member of IES's
Advisory Board, (B) any information, other than Company Information (to the
extent not deleted, modified or revised by IES), displayed on the Service, (C)
any breach of any representation, warranty or covenant of IES hereunder or (D)
any use of or reference to Company's name or logo or Taylor name or likeness
not expressly permitted hereunder or based upon IES's use of any intellectual
property other than Company's name or logo or Taylor name or likeness; except
to the extent any such Damages arise from the gross negligence or willful
misconduct of Company or its employees or Taylor.
(b) Company Indemnification. Company hereby indemnifies and agrees to
defend and hold IES free and harmless from and against all Damages arising out
of or in connection with (A) relating to any Company Information displayed on
the Service (to the extent not deleted, modified or revised by IES), (B) any
breach of any representation or warranty of Company hereunder, or (C) any use
of or references to IES's name or logos not expressly permitted hereunder,
except to the extent such Damages arise from the gross negligence or willful
misconduct of IES or its employees.
(c) No Liability for Punitive or Consequential Damages. Notwithstanding
anything stated or implied to the contrary herein, in no event shall either
party be liable to the other for exemplary, punitive or consequential damages,
even if advised of the possibility of such damages, in any manner arising out
to this Agreement or the breach of any term, covenant, representation, warranty
or obligation contained herein.
(d) Notification. Each party shall notify the other as soon as reasonably
possible of any claim of which it becomes aware.
11. Remedies. (a) Injunctive Relief. In the event either party materially
breaches this Agreement, IES and Company agree that, in addition to any and all
other remedies available at law or in equity, the non-breaching party shall be
entitled to injunctive relief to the extent
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permitted by law from further violation of this Agreement, during any
proceeding as well as on final determination thereof, without prejudice to any
other right of either part and without the necessity of giving notice or
posting bond or other security.
(b) Company's Liability not to Exceed Remuneration Paid to IES by
Company. Notwithstanding anything to the contrary herein, in the event IES
incurs any expenses, damages or other liabilities (including, without
limitation, reasonable attorneys' fees) in connection with this Agreement or
Company's services, Company's liability to IES hereunder shall not exceed the
remuneration, excluding reimbursement of expenses, actually paid to IES by
Company hereunder.
12. Insurance. IES shall provide and maintain, at its own expense,
commercial general liability insurance, including product liability and
advertising injury coverage, with limits of not less than One Million Dollars
($1,000,000.00), shall cause such policy to be endorsed to state that Taylor
and Company are additional named insureds thereunder. A certificate of
insurance evidencing such coverage shall be furnished to IES within thirty (30)
days of the full execution of this Agreement. Such insurance policy shall
provide that the insurer shall not terminate or materially modify such policy
or remove Company or Taylor as additional named insureds without prior written
notice to Company at least twenty (20) days in advance thereof.
13. Relationship of the Parties. The parties to this Agreement are
independent contractors, and this Agreement shall not be construed to create a
partnership, joint venture, employment or principal agent relationship between
the parties. It is understood that Taylor is not a party to this Agreement and
has no liability whatsoever under this Agreement. Each party shall be solely
responsible to compensate any employees, agents or representatives employed or
engaged by it to perform duties under this Agreement and for all taxes,
imposts, duties and all charges of any governmental authority arising from its
activities under this Agreement. Neither IES nor Company, nor any other person
or entity employed by either IES or Company, are authorized to make any
warranty concerning the other party or incur or assume any obligation or
liability for the other party and nothing in this Agreement gives or is
intended to give any rights of any kind to any third party, except as expressly
set forth herein.
14. Amendment Waiver. No amendment to this Agreement shall be valid
unless such amendment is in writing and is signed by both of the parties to
this Agreement. Any of the terms and conditions of this Agreement may be waived
at any time in writing by the party entitled to the benefit thereof, but a
waiver in one instance shall not be deemed to constitute a waiver in any other
instance. A failure to enforce any provision of this Agreement shall not
operate as a waiver of the provision or of any other provision hereof.
15. Severability. In the event that any provision of this Agreement
shall be held to be invalid, illegal or unenforceable in any circumstances, the
remaining provisions shall nevertheless remain in full force and effect and
shall be construed as if the unenforceable portion or portions were deleted.
16. Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New York.
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17. Arbitration. The parties agree to submit to arbitration any dispute
related to this Agreement and agree that the arbitration process shall be the
exclusive means for resolving disputes which the parties cannot resolve. Any
arbitration hereunder shall be conducted under the Dispute Resolution Rules of
the American Arbitration Association ("AAA") as modified herein. Arbitration
proceedings shall take place in New York, New York, before a single arbitrator
who shall be a lawyer. All arbitration proceedings shall be confidential.
Neither party shall disclose any information about the evidence produced by the
other party in the arbitration proceedings, except in the course of judicial,
regulatory, or arbitration proceeding, or as may be demanded by government
authority. Before making any disclosure permitted by the preceding sentence, a
party shall give the other party reasonable advance written notice of the
intended disclosure and an opportunity to prevent disclosure. Each party shall
have the right to take the deposition of one individual and any expert witness
retained by the other party. Additional discovery may be had only where the
arbitrator so orders, upon a showing of substantial need. Only evidence that is
directly relevant to the issues may be obtained in discovery. Each party bears
the burden of persuasion of any claim or counterclaim raised by that party. The
arbitration provisions of this Agreement shall not prevent any party from
obtaining injunctive relief from a court of competent jurisdiction to enforce
the obligations for which such party may obtain provisional relief pending a
decision on the merits by the arbitrator. Each of the parties hereby consents
to the jurisdiction of New York courts for such purpose. The arbitrator shall
have authority to award any remedy or relief that a court of the State of New
York could grant in conformity to applicable law, except that the arbitrator
shall have no authority to award attorneys' fees or punitive damages. Any
arbitration award shall be accompanied by a written statement containing a
summary of the issues in controversy, a description of the award, and an
explanation of the reasons for the award. The arbitrator's award shall be final
and judgment may be entered upon such award by any court.
18. Notices. All notices or other communications hereunder shall be in
writing and shall be deemed to be given or made: on the same business day when
sent by confirmed facsimile, on the next business day after mailing when
delivered by overnight courier or on the fifth business day after mailing if
sent by first-class, registered or certified mail to the following address or
addresses or such other address or addresses as the parties may designate in
writing in accordance with this Section:
If to IES Interactive Entertainment Studio, Inc.
1905 Anderson Avenue, Suite 200
Ann Arbor, Michigan 48104
with a copy to: Adkison Need PLLC
1533 N. Woodward, Suite 210
Bloomfield Hills, Michigan 48304
Attn: Deborah Schneider
Facsimile No. (248) 540-7401
If to Company: Niki, Inc.
c/o IMG Models, Inc.
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If to Company: Niki, Inc.
c/o IMG Models, Inc.
170 Fifth Avenue, 10th Floor
New York, New York 10010
Attn: Mia Lolardo
Facsimile No.: (212) 627-4992
with a copy to: TR Management
142 Berkeley Street
Boston, Massachusetts 02116
Attn: Jean Renard
Facsimile No.: (617) 266-0808
19. Assignment. This Agreement shall be binding upon and inure to the
benefit of the parties and their respective successors and permitted assigns.
Neither party may assign its rights or obligations hereunder without the prior
written consent of the other party; provided, however, that Company may assign
this Agreement to Taylor without consent.
20. Execution in Counterparts. This Agreement may be executed by the
parties in counterparts, each of which when so executed and delivered shall be
deemed to be an original and all of which when taken together shall constitute
one and the same agreement.
IN WITNESS WHEREOF, each of the parties has executed this Advisory
Agreement as of the date first written above.
NIKI, INC. INTERACTIVE ENTERTAINMENT
STUDIO, INC.
By /s/ Niki Taylor By /s/ Niki Taylor
--------------- ---------------
Name: Name:
Title: Title: President
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June 1, 1997
Interactive Entertainment Studio, Inc.
1905 Anderson Avenue, Suite 200
Ann Arbor, Michigan 48104
To Whom It May Concern:
I have been advised of an agreement by and between Interactive Entertainment
Studio, Inc. ("IES") and Niki, Inc. ("Company") pursuant to which Company
grants IES certain rights to use my name and likeness, and certain materials
created by me.
This letter is to advise you that I am an employee of Company, that Company has
all of the authority necessary to make the commitments made by it and to grant
the rights granted by it in that agreement and that I, for my part, in
consideration of IES having entered into that agreement with Company, agree to
fully and completely perform all of the services which Company is required
thereby to cause me to perform.
Sincerely yours,
/s/ Niki Taylor
- ---------------
Niki Taylor
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EXHIBIT 10.2
WEB SITE LICENSE AGREEMENT
This Web Site License Agreement, dated as of January 1, 1998, between TY
GIRL, INC., c/o IMG Models, Inc., 304 Park Avenue South, Penthouse North, New
York, New York 10010 ("Company") and INTERACTIVE ENTERTAINMENT STUDIO, INC.,
1905 Anderson Avenue, Suite 200, Ann Arbor, Michigan 48104 ("IES").
IES desires to contract with Company for a license related to its
fashion-oriented on-line service (the "Service"), and Company is willing to
grant such license and to render services (including the services of Tyra Banks
["Banks"]) as hereinafter provided. In consideration of the mutual agreements
and covenants set forth in this Agreement, the parties agree as follows:
1. Establishment of Banks Home Page. IES will in consultation with and
subject to the approval of Company, design, produce and maintain a designated
area of the Service that will feature content regarding Banks and Company and
is accessible to users of the Internet through a "free" area of the Service
without the necessity of being a subscriber to the Service (hereinafter, the
"Banks Home Page"). IES and Company will also develop "premium" features
including, but not limited to, a "boutique" that will permit visitors to the
Banks Home Page to purchase merchandise licensed, endorsed or selected by Banks
("Boutique Merchandise"); any such Boutique Merchandise would contain such
content, and be offered at prices and on terms, as may be mutually agreed by
IES and Company. In connection with the Banks Home Page, IES will, at its sole
cost and expense:
(a) Design and Maintenance. Maintain full responsibility for the design,
technical development, production, maintenance (including customer phone
support), and fulfillment related to the Banks Home Page which design shall, in
all events, be subject to the prior approval of Company;
(b) Marketing and Content. Coordinate all on-line marketing efforts and
work closely with Banks and other Company representatives regarding new content
areas, Boutique Merchandise and other initiatives to ensure that Company
maximizes its association with IES;
(c) Account Executive Availability. At Company's request, make Banks'
Account Executive at IES responsible to ensure that Company is fully apprised
of the marketing, merchandising and communications goals and objectives related
to the Banks Home Page;
(d) Laptop Computer. Provide Company with use of a laptop computer during
the Contract Period (as defined below) to ensure that Banks can take full
advantage of the opportunity to monitor the Banks Home Page and to interact
with fans throughout the world;
(e) Training and Assistance. Make Banks' Account Executive at IES
available to educate and train Banks or other Company representatives with
respect to the functionality of the IES Service and be available to assist
Banks, at her request, should Banks acquire any assistance regarding the use of
her laptop computer in connection with this Agreement;
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(f) Internet Access. Develop and provide Internet access with reputable
organizations to the Banks Home Page within one hundred twenty (120) days after
the execution of this Agreement;
(g) Customer Service and Billing. Be responsible for all customer service,
technical support, billing, credit card authorization and processing associated
with the Banks Home Page and the sale of Boutique Merchandise; and
(h) Reports to Company. At Company's request, provide Company with a
summary report, in a mutually agreed format, of user activity on the Banks Home
Page and other information reasonably requested by Company; such reports shall
be provided no more frequently than quarterly.
2. Use of Banks' Name and Likeness. (a) Company grants to IES the
non-transferable right to use the Banks name and likeness ("Banks
Identification") as reasonably necessary in creating, distributing and
promoting the Banks Home Page and to repackage and reformat information
contained in, or related to, the Banks Home Page for promotional, advertising
and, subject to Company's prior written approval of each "for profit" use,
other distribution-for-profit uses, in all media, including but not limited to,
print and electronic media, CD-ROM, video and other media. IES acknowledges
that Company will not accept uses which are in conflict with Company's existing
or prospective licensees. IES shall notify Company of its intended use of such
materials before they are used and any such use shall be subject to Company
consent, which consent shall not be unreasonably withheld.
(b) For this purpose, Company shall, upon request by IES, cause Banks to
provide IES with the use of then unpublished photographs of herself, with
respect to which Company or Banks has full ownership rights. The Company shall
make Banks available for a photo shoot for up to eight (8) hours at a mutually
agreed upon time. No payment is owed by IES to Company or Banks for this photo
shoot or resulting from the photo shoot, except as set forth herein. During the
Contract Period, IES shall have the right to use photographs obtained through
this photo shoot for any purposes related to the promotion and advertising of
the site as set forth above. Company will own the photographs from the photo
shoot.
(c) Company grants IES the right to use photos of Banks taken from the
photo shoot on January 28 through February 1, 1998 ("Photos") pursuant to that
certain calendar license agreement between IES and Company dated January 1,
1998 ("Calendar Agreement"). IES will include the Calendar Photos on the Banks
Home Page, provided that Banks approves of each Photo selected for the Banks
Home Page prior to its use.
(d) All rights of IES to use, in any manner, the Banks Identification or
to refer to Banks, shall cease immediately upon termination of this Agreement.
(e) It is understood that the recommendations and other material prepared
or delivered by Company hereunder shall not be deemed guarantees,
representations or warranties of Company.
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(f) If the parties agree that Banks will participate in IES's Advisory
Board, Company grants to IES the non-transferable right to include on its
letterhead Banks' name as a member of the Advisory Board. Banks' name shall be
listed with other members of IES's Advisory Board, such list to appear in a
commercially reasonable and customary manner.
3. Services of Company. (a) Company shall render, or elect to have Banks
render, all of the following services (the "Services") during the Contract
Period (as hereinafter defined):
(i) Consultation. Consult with and advise IES from time to time at IES's
request and Company's convenience with respect to corporate, business and
marketing strategy with respect to the Banks Home Page.
(ii) Introduction to Corporate Sponsors and Strategic Partners. Introduce
IES, upon IES's request and at Company's convenience, to potential corporate
sponsors and strategic partners and assist IES in the sale of advertising and
sponsorships. All fees, charges or other amounts payable for any such
sponsorships and advertising shall be payable to and retained by IES; provided,
that IES will be obligated to compensate Company with respect to such
sponsorship or advertising revenues which are generated by Company in
accordance with Section 5 hereof;
(iii) Introduction to Licensees. Introduce IES to Company's licensees
(companies which have the right to sell Banks endorsed or licensed merchandise
or services) for purposes of possible sale of such merchandise or services
through the boutique area of the Banks Home Page. All fees, charges or other
amounts payable with respect to such sales shall be payable to and retained by
the merchandise vendor, subject to IES's commission (and Company's share under
Section 5 hereof) on such sales negotiated with such vendor and Company's
royalties on such sales negotiated with such vendor. IES shall be solely
responsible for entering into and administering any such arrangement with
Company. It is further agreed that at the end of the Contract Period, both IES
and Company will have the right to receive all names and related information
for each purchaser of Boutique Merchandise;
(iv) Monthly Column. Review the content of a monthly column (approximately
150 words) written by IFS to be published under Banks' name and approved by
Banks on a variety of appropriate topics relating to fashion, health or beauty
and whatever other content Company desires to include in the Banks Home Page;
and
(v) Interviews and/or Chat Sessions. Upon request and at Company's option,
to make Banks available (by telephone or in-person, at Banks' option) at
mutually agreed upon times (with no more than one hour of actual time on-line
per occasion), to conduct exclusive interviews and/or chat sessions.
4. Banks' Availability. Company agrees to cause Banks to devote
such time as Company elects to provide toward the performances of its duties
hereunder. Whenever Company elects to make Banks available, IES understands
and agrees that any such occasion is subject to Banks' personal and
professional schedule. IES agrees to pay or reimburse Company for the
reasonable travel expenses incurred by Banks' and one companion in providing
Banks'
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services to IES herein. "Reasonable travel expenses" shall mean first-class
airfare and deluxe hotel accommodations, if applicable, ground transportation
and meals. IEF agrees to provide, at its own expense, hair and make-up
personnel for Banks when such services are required. IES understands that
IES's failure to utilize services of Banks hereunder when she offers to provide
them shall not result in any reduction in payments to Company hereunder.
Company will not elect to provide any services of Banks hereunder unless
payments to Company are current and up to date and IES is not otherwise in
breach of any provisions of the Agreement. If Company confirms Banks'
availability for any service and Banks is unable to appear due to illness,
injury or other emergency, such non-appearance is not a breach of this
Agreement and neither Company nor Banks shall be responsible for any expenses
incurred due to such non-appearance.
5. Payments by IES.
(a) In consideration for the rights herein granted, IES shall pay Company
a "Guaranteed Minimum Royalty" in the amount of One Hundred Thousand United
States Dollars (US$100,000) payable in two (2) installments -- the first being
Fifty Thousand Dollars ($50,000) payable contemporaneously with the execution
and delivery of this Agreement and the secord being Fifty Thousand Dollars
($50,000) payable upon the earlier of (i): final approval of, or use of, the
"Tyra Banks Home Page"; or (ii) March 31, 1998. The Guaranteed Minimum Royalty
shall be credited against earned royalties payable to Company as follows:
(i) Site Revenues. Fifteen percent (15%) of any gross revenues received by
IES generated by, or in connection with, the Banks Home Page except for
revenues received from corporate sponsors, strategic partners, or licenses
introduced by Company, and fifty percent (50%) of any gross revenues received
by IES generated in connection with the Banks Home Page from corporate
sponsors, strategic partners, or licensees introduced by Company; and
(ii) Net Premium Revenues. Thirty-five percent (35%) of any Net Premium
Revenues. The term "Net Premium Revenues" means IES's gross revenues from the
sale of Boutique Merchandise and other "for profit" distribution of materials
contained in or related to the Banks Home Page minus reasonable documented
out-of-pocket expenses including, but not limited to, the cost of inventory,
shipping and handling but excluding normal overhead expenses, which expenses
are incurred by IES and are directly associated with the generation of such
revenues.
(b) IES will make payments due to Company under this Agreement on a
quarterly basis, within fifteen (15) days following the end of the applicable
calendar quarter. Each such payment shall be accompanied by a statement showing
in reasonable detail how such payment was computed.
(c) IES shall keep true and complete books and records in which all
information necessary to determine and verify all fees and payments
contemplated hereunder shall be reflected along with the amounts payable to
Company under the terms of this Agreement. IES shall maintain such books and
records for a period of at least two (2) years after the termination of this
Agreement. During the term of this Agreement and for a period of two (2) years
after such termination, Company shall have the right, at its expense and upon
reasonable notice to
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IES, to examine, or have examined by its authorized representative, IES's books
and records, at IES's principal place of business, in order to determine or
verify all amounts due, and the accuracy of any reports furnished by IES under
this Agreement. In the event that an error is discovered in the calculation of
the amounts payable to Company, the party that received the benefit of the
error shall promptly thereafter pay to the other the amount of overpayment or
underpayment, as the case may be. If any underpayment by IES for a period
examined by Company is five percent (5%) or more, IES shall pay Company's
reasonable out-of-pocket costs with respect to such examination and the next
subsequent reexamination. Company's receipt of any statement, or any payment,
does not preclude it from challenging the correctness of that statement or
payment.
(d) IES shall reimburse Company promptly upon receipt of an invoice
therefore all reasonable out-of-pocket expenses incurred by Company (and/or
Banks) under this Agreement and approved by IES in advance.
6. Provisions of Content, Additional Responsibilities of IES and Company.
(a) Laptop Computer and Support Software. In addition to all other
obligations of IES hereunder, IES will provide to Company during the term of
this Agreement the use of a laptop computer and related equipment and such
software as is necessary for Banks' or Company's representatives to transmit
information to IES in accordance with the terms of this Agreement. All such
hardware and software shall be the property of Company. Any software that IES
provides to Company to further the purpose of this Agreement ("Support
Software") shall be provided subject to the following: IES grants to Company a
royalty-free, non-exclusive licence to use the Support Software (and any
accompanying user documentation). If the Support Software becomes unavailable
due to a claim it infringes a third party's rights, IES shall provide substitute
software or a procedure for accomplishing the same objectives.
(b) Company Information. For purposes of this Agreement, the term "Company
Information" means all information created and/or delivered by Company to IES
for inclusion in the Service, including any trademark, service mark, trade name
or logo, whether or not registered, included in such information. Company shall
be solely responsible for the content of all Company Information, and
represents and warrants to IES that to the best of Company's knowledge (i) all
Company Information: (A) will be accurate and Company's own and original
creation, except for information validly licensed for use by Company or in the
public domain; (B) will consist only of information that Company is authorized
to use and to authorize IES to use as contemplated in this Agreement; (C) will
not constitute a libel or defamation or conflict with any copyright, right of
privacy or other rights of any third party; and (D) will conform to all
applicable federal, state and local laws and regulations; and (ii) Company has
the full right and authority to grant the rights and consents set forth herein.
IES shall be entitled at any time to bring any concerns it has regarding
Company Information to the attention of Company, whereupon the parties will
cooperate in good faith to address IES's concerns. Subject only to the next
sentence. IES shall distribute Company Information only as transmitted by
Company, and shall not, and shall not authorize any third party to, modify or
edit such information without Company's prior written consent. If IES, in its
reasonable judgment, believes that immediate action is required with regard to
any Company Information, IES may delete, modify or revise
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such information, provided that IES shall notify Company of such action prior
thereto, if reasonably possible (or, if not, as soon thereafter as
practicable) and all representations, warranties, indemnifications and other
obligations of Company wherever with respect to such Company Information shall
immediately terminate and be of no force and effect.
(c) Transmission of Company Information. Company shall transmit to IES all
Company Information and updates thereof necessary for inclusion in the Banks
Home Page (including any Boutique Merchandise). Information and updates shall
be transmitted by telephone or electronically in a format to be agreed upon by
IES and Company, on a pre-scheduled basis and/or as such information and
updates become available, as the case may be. IES shall provide Company with a
Service Identification number or numbers that will allow Company to gain access
to the Service at no cost or charge for purposes of electronically delivering
Company Information and content updates. All content supplied by Company shall
be consistent with the editorial standards used by IES for content displayed on
the Service (which standards IES reserves the right to amend from time to time)
provided IES timely and accurately conveys such standards to Company.
(d) Right, Title and Interest to Company Information. All right, title and
interest in Company Information, Banks Identification, trade name(s),
trademarks and service mark(s) are and shall remain Company's, subject to the
right and license granted to IES herein. IES shall have the right, at no cost,
to use, display (privately or publicly) and distribute Company Information, or
any portion thereof, on the Service or in connection with any demonstration,
promotion or advertisement of the Service in any medium; to enter Company
Information into IES's computer database; and to store, process, retrieve and
transmit the same on the Service. Any use of the Banks name and likeness, or
use of Company trade name(s), trademark(s) and service mark(s), other than as
included in Company Information, or as materials previously approved for use by
Company for whatever purpose, shall be subject to Company's prior consent
(which consent shall not be unreasonably withheld). IES's rights hereunder
shall include the right to offer subscribers the option of printing and
downloading Company Information or any portion thereof as a function of the
Service generally.
(e) Operation of Service; Non-Company Information, Charges for Service.
Other than with respect to the Banks Home Page, IES will have sole discretion
to determine all aspects of the operation of the Service and all matters
relating to the content, structure and sequence of material appearing on the
Service; provided, however, the Company shall have approval over any links to
the Banks Home Page. IES represents and warrants to Company that, to the best
of IES's knowledge, all content on the Service other than Company Information
(to the extent not revised, modified or deleted by IES) ("Non-Company
Information"), (A) will be accurate and IES's own and original creation, except
for information validly licensed for use by IES or in the public domain; (B)
will consist only of information that IES is authorized to use; (C) will not
constitute a libel or defamation or conflict with any copyright, right of
privacy or other rights of, any third party; and (D) will conform to all
applicable federal, state and local laws and regulations and (ii) IES has the
full right and authority to grant the rights and consents set forth herein.
Company shall be entitled at any time to bring any concerns it has regarding
Non-Company Information to the attention of IES, whereupon the parties will
cooperate in good faith to address Company's concerns. Nothing in this
Agreement shall limit IES's rights regarding
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charges for any aspect of the Service (including any product or service offered
by IES, whether alone or in conjunction with others, through means of the
Service) other than the Banks Home Page. All right, title and interest to IES's
name, trade name(s), trademark(s) and service mark(s) ("IES Identification")
are and shall remain IES's. Nothing herein shall be deemed to grant Company any
proprietary rights to any of IES's trade name(s), trademark(s) or service
mark(s). Company shall have the right to use IES Identification in connection
with advertising and promoting the Banks Home Page, subject to IES's prior
written consent, not to be unreasonably withheld. Company's approval over links
to the "Banks Home Page" shall not be unreasonably withheld, and shall not
extend to the content of any of the links, but only to the approval over
whether or not the link may be accessed through the "Banks Home Page" only.
(f) Compliance with Applicable Law. IES will be solely responsible to
ensure that all aspects of the Service (other than the Company Information, to
the extent not modified or revised by IES), including the promotion thereof,
comply with applicable law.
(g) Subscriber Agreement. IES will distribute a subscriber agreement
prohibiting republication, redistribution, public broadcast, public display,
resale, offering for resale or other commercial exploitation of copyrighted or
trademarked materials published in the Service without the copyright or
trademark owner's consent.
(h) Compliance with Industry Standards. IES represents and agrees that the
Service will at all times during the Agreement be a first-class service, in
content and technical quality, that is devoted to fashion, health and beauty
information, activities and events, and that the Service will comply with all
on-line broadcasting industry standards.
(i) Database from Bank's Home Page. IES shall own all information received
through the service, including all names, addresses, mail, and other
information relating to users of the Service obtained by IES through the
Service, including the "Banks Home Page." IES shall supply to Company, at
Company's reasonable request and in such format as reasonably requested by
Company, a database of names and addresses of users of the "Banks Home Page"
for Company's or Banks' use. IES agrees not to use any information obtained
through the Service in any way to imply an endorsement by Company or Banks of
any company, product or service following the termination of this Agreement.
7. Exclusivity. (a) During the Term hereof and subject to the remainder of
this Section, Company shall not: (i) license the use of Banks Identification
for any web site or home page devoted to Banks or (ii) be employed by, act as a
consultant to or otherwise render services similar in the aggregate to those
provided hereunder with respect to fashion-related programming to or for any
on-line service (regardless of whether such service is accessed through the
Internet, a commercial on-line service or otherwise). The "Official Tyra Banks
Home Page" is exclusive to IES during the Contract Period. The foregoing is not
intended to prohibit Company or Banks from advertising on other sites,
providing services for other sites or on-line services, having Banks
Identification on the web sites of Company's licensees or others, or
participating in on-line interviews or articles.
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(b) Neither Company nor Banks is responsible for initiating action
against, enjoining or otherwise attempting to dissuade any person or entity not
licensed by Company, which in contravention of this Agreement use Banks
Identification in promoting or advertising any products or services which are
the same as or similar to or directly competitive with the Service. Neither
Company nor Banks shall incur any liability to IES or any third party arising
out of any such activity by any such person or entity. Company agrees that at
IES's sole cost and expense, Company shall give such reasonable assistance to
IES as may be required to cause any such person or entity to cease and desist
from such activities, or in connection with any lawsuit or other proceeding by
IES against such person or entity.
8. Control Period. (a) The Contract Period will commence on the date
hereof and will continue until the earlier of the first anniversary of the date
the Banks Home Page is launched or March 31, 1999 (the "Termination Date") and
thereafter will be extended pursuant to Section 8(b) hereof.
(b) Extension of Contract Period. Subject to the receipt by Company of the
Guaranteed Minimum Royalty (as set forth below), the Contract Period will be
extended for two (2) separate twelve (12) consecutive month periods after the
Termination Date unless either party gives written notice to terminate to the
other party on or before the Termination Date with respect to the first twelve
(12) month extension period (the "First Revival Period"), or on or before the
first anniversary of the Termination Date with respect to the second twelve
(12) month extension period ("Second Renewal Period"). The Guaranteed Minimum
Royalty of One Hundred Fifty Thousand Dollars ($150,000) for the First Renewal
period is due simultaneously with the commencement of the First Renewal Period.
The Guaranteed Minimum Royalty of Two Hundred Fifty Thousand Dollars ($250,000)
for the Second Renewal Period is due simultaneously with the commencement of
the Second Renewal Period.
If the Calendar Agreement between Company and IES is renewed with respect to a
2000 calendar, the Contract Period of this Agreement will be automatically
extended for the First Renewal Period (as defined above) upon the terms set
forth herein and for the Guaranteed Minimum Royalty set forth above.
(c) Good Faith Renewal Discussions, Termination of Agreement. Prior to the
end of the Contract Period and extensions (if any), the parties shall discuss
in good faith the possible renewal of this Agreement. If the parties are unable
to agree on mutually satisfactory terms, then this Agreement shall terminate at
the end of the Contract Period, without further obligation of either party to
the other (except for any amounts that are owed to such party per the terms of
this Agreement).
(d) Morals. If at any time during the term of this Agreement the
commercial association of IES with Banks is substantially impaired by reason of
Banks' conviction of a felony or of Banks' commission of an act which offends a
demonstrable majority of the people in the U.S., IES shall have the right to
terminate this Agreement on written notice to Company.
9. Confidentiality. All information disclosed by either party to the other
party, including but not limited to the terms and conditions of this Agreement
or any other agreement
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between the parties, trade secrets of the party, any nonpublic information
relating to any party's product plans, designs, ideas, concepts, costs, prices,
finances, marketing plans, business opportunities, personnel, research,
development or know-how and any other nonpublic technical or business
information of a party, that is marked "Confidential" or identified by the
disclosing party in writing as confidential before or within thirty days after
disclosure to the receiving party, will be treated as confidential by the
receiving party and not disclosed to any third party without the disclosing
party's prior written consent. "Confidential Information" as referred to in
this Section does not include (a) information that is generally available to
the public other than as a result of disclosure in violation of this Agreement,
(b) information already known or which becomes known to the receiving party
from a third party source which is not, to the receiving party's knowledge,
under an obligation of confidentiality, (c) information independently developed
by the receiving party (as shown by competent documentation), and (d) otherwise
confidential information that is required to be disclosed by law, including
administrative or judicial action. Any breach of these confidentiality
provisions will entitle the injured party to see injunctive relief and damages
without the necessity of giving notice or posting bond or other security.
10. Indemnification. (a) IES Indemnification. IES hereby indemnifies and
agrees to defend and hold Company and Banks free and harmless from and against
all claims, costs, liabilities, judgments, expenses or damages (including
reasonable attorney's fees) (collectively, "Damages") arising out of or in
connection with: (A) Banks' activities and position as a member of IES's
Advisory Board, (B) any information, other than Company Information (to the
extent not deleted, modified or revised by IES), displayed on the Service, (C)
any breach of any representation, warranty or covenant of IES hereunder or (D)
any use of reference to Company's name or logo or Banks name or likeness not
expressly permitted hereunder or based upon IES's use of any intellectual
property other than Company's name or logo or Banks name or likeness; except to
the extent any such Damages arise from the gross negligence or willful
misconduct of Company or its employees or Banks.
(b) Company Indemnification. Company hereby indemnifies and agrees to
defend and hold IES free and harmless from and against all Damages arising out
of or in connection with (A) relating to any Company Information displayed on
the Service (to the extent not deleted, modified or revised by IES), (B) any
breach of any representation or warranty of Company hereunder, or (C) any use
of or references to IES's name or logos not expressly permitted hereunder,
except to the extent such Damages arise from the gross negligence or willful
misconduct of IES or its employees.
(c) No Liability for Punitive or Consequential Damages. Notwithstanding
anything stated or implied to the contrary herein, in no event shall either
party be liable to the other for exemplary, punitive or consequential damages,
even if advised of the possibility of such damages, in any manner arising out
to this Agreement or the breach of any term, covenant, representation, warranty
or obligation contained herein.
(d) Notification. Each party shall notify the other as soon as reasonably
possible of any claim of which it becomes aware.
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11. Remedies. (a) Injunctive Relief. In the event either party materially
breaches this Agreement, IES and Company agree that, in addition to any and all
other remedies available at law or in equity, the non-breaching party shall be
entitled to injunctive relief to the extent permitted by law from further
violation of this Agreement, during any proceeding as well as on final
determination thereof, without prejudice to any other right of either party and
without the necessity of giving notice or posting bond or other security.
(b) Company's Liability not to Exceed Remuneration Paid to Company by
IES. Notwithstanding anything to the contrary herein, in the event IES incurs
any expenses, damages or other liabilities (including, without limitation,
reasonable attorneys' fees) in connection with this Agreement or Company's
services, Company's liability to IES hereunder shall not exceed the
remuneration, excluding reimbursement of expenses, actually paid to Company by
IES hereunder.
12. Insurance. IES shall provide and maintain, at its own expense,
commercial general liability insurance, including product liability and
advertising injury coverage, with limits of not less that One Million Dollars
($1,000,000.00), shall cause such policy to be endorsed to state that Banks and
Company are additional named insureds thereunder. A certificate of insurance
evidencing such coverage shall be furnished to IES within thirty (30) days of
the full execution of this Agreement. Such insurance policy shall provide that
the insurer shall not terminate or materially modify such policy or remove
Company or Banks as additional named insureds without prior written notice to
Company at least twenty (20) days in advance thereof.
13. Relationship of the Parties. The parties to this Agreement are
independent contractors, and this Agreement shall not be construed to create a
partnership, joint venture, employment or principal agent relationship between
the parties. It is understood that Banks is not a party to this Agreement and
has no liability whatsoever under this Agreement. Each party shall be solely
responsible to compensate any employees, agents or representatives employed or
engaged by it to perform duties under this Agreement and for all taxes,
imposts, duties and all charges of any governmental authority arising from its
activities under this Agreement. Neither IES nor Company, nor any other person
or entity employed by either IES or Company, are authorized to make any
warranty concerning the other party or incur or assume any obligation or
liability for the other party and nothing in this Agreement gives or is
intended to give any rights of any kind to any third party, except as expressly
set forth herein.
14. Amendment, Waiver. No amendment to this Agreement shall be valid unless
such amendment is in writing and is signed by both of the parties to this
Agreement. Any of the terms and conditions of this Agreement may be waived at
any time in writing by the party entitled to the benefit thereof, but a waiver
in one instance shall not be deemed to constitute a waiver in any other
instance. A failure to enforce any provision of this Agreement shall not
operate as a waiver of the provision or of any other provision hereof.
15. Severability. In the event that any provision of this Agreement shall
be held to be invalid, illegal or unenforceable in any circumstances, the
remaining provisions shall nevertheless remain in full force and effect and
shall be construed as if the unenforceable portion or portions were deleted.
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16. Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New York.
17. Arbitration. The parties agree to submit to arbitration any dispute
related to this Agreement and agree that the arbitration process shall be the
exclusive means for resolving disputes which the parties cannot resolve. Any
arbitration hereunder shall be conducted under the Dispute Resolution Rules of
the American Arbitration Association ("AAA") as modified herein. Arbitration
proceedings shall take place in New York, New York, before a single arbitrator
who shall be a lawyer. All arbitration proceedings shall be confidential.
Neither party shall disclose any information about the evidence produced by the
other party in the arbitration proceedings, except in the course of judicial,
regulatory, or arbitration proceeding, or as may be demanded by government
authority. Before making any disclosure permitted by the preceding sentence, a
party shall give the other party reasonable advance written notice of the
intended disclosure and an opportunity to prevent disclosure. Each party shall
have the right to take the deposition of one individual and any expert witness
retained by the other party. Additional discovery may be had only where the
arbitrator so orders, upon a showing of substantial need. Only evidence that is
directly relevant to the issues may be obtained in discovery. Each party bears
the burden of persuasion of any claim or counterclaim raised by that party. The
arbitration provisions of this Agreement shall not prevent any party from
obtaining injunctive relief from a court of competent jurisdiction to enforce
the obligations for which such party may obtain provisional relief pending a
decision on the merits by the arbitrator. Each of the parties hereby consents
to the jurisdiction of New York courts for such purpose. The arbitrator shall
have authority to award any remedy or relief that a court of the State of
New York could grant in conformity to applicable law, except that the
arbitrator shall have no authority to award attorneys' fees or punitive
damages. Any arbitration award shall be accompanied by a written statement
containing a summary of the issues in controversy, a description of the award,
and an explanation of the reasons for the award. The arbitrator's award shall
be final and judgment may be entered upon such award by any court.
18. Notices. All notices or other communications hereunder shall be in
writing and shall be deemed to be given or made: on the same business day when
sent by confirmed facsimile, on the next business day after mailing when
delivered by overnight courier or on the fifth business day after mailing if
sent by first-class, registered or certified mail to the following address or
addresses or such other address or addresses as the parties may designate in
writing in accordance with this Section:
If to IES: Interactive Entertainment Studio, Inc.
1905 Anderson Avenue, Suite 200
Ann Arbor, Michigan 48104
with a copy to: Adkison Need PLLC
1533 N. Woodward, Suite 210
Bloomfield Hills, Michigan 48304
Attn: Deborah Schneider
Facsimile No. (248) 540-7401
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If to Company: Ty Girl, Inc.
c/o IMG Models, Inc.
304 Park Avenue South
Penthouse North
New York, New York 10010
Attn: Mia Lolordo
Facsimile No.: (212) 253-8883
with a copy to: Andrew Fox, Esq.
1626 Broadway
New York, New York 10019
19. Assignment. This Agreement shall be binding upon and inure to the
benefit of the parties and their respective successors and permitted assigns.
Neither party may assign its rights or obligations hereunder without the prior
written consent of the other party; provided, however, that Company may assign
this Agreement to Banks without consent.
20. Execution in Counterparts. This Agreement may be executed by the
parties in counterparts, each of which when so executed and delivered shall be
deemed to be an original and all of which when taken together shall constitute
one and the same agreement.
IN WITNESS WHEREOF, each of the parties has executed this Advisory
Agreement as of the date first written above.
TY GIRL, INC. INTERACTIVE ENTERTAINMENT
STUDIO, INC.
By /s/ Tyra L. Banks By
----------------- -----------------
Name: Tyra L. Banks Name:
Title: President Title: President
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January 1, 1998
Interactive Entertainment Studio, Inc.
1905 Anderson Avenue, Suite 200
Ann Arbor, Michigan 48104
To Whom It May Concern:
I have been advised of an agreement by and between Interactive Entertainment
Studio, Inc. ("IES") and Ty Girl, Inc. ("Company") pursuant to which Company
grants IES certain rights to use my name and likeness, and certain materials
created by me.
This letter is to advise you that I am an employee of Company, that Company has
all of the authority necessary to make the commitments made by it and to grant
the rights granted by it in that agreement and that I, for my part, in
consideration of IES having entered into that agreement with Company, agree to
fully and completely perform all of the services which Company is required
thereby to cause me to perform.
Sincerely yours,
Tyra L. Banks
- -----------------------
Tyra Banks
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EXHIBIT 10.3
AGREEMENT
THIS AGREEMENT, made and entered into as of the 1st day of January, 1998,
by and between TY GIRL, INC. (hereinafter referred to as "Licensor") having an
address c/o IMG Models, Inc., 304 Park Avenue South, Penthouse North, New York,
New York 10010 and INTERACTIVE ENTERTAINMENT STUDIO, INC. having an address of
1905 Anderson Avenue, Suite 200, Ann Arbor, Michigan 48104 ("IES").
WITNESSETH:
WHEREAS, IES desires to obtain the right to use the name, likeness and
endorsement of Tyra Banks (hereinafter called "Tyra") in connection with the
advertisement, promotion and sale of Company's "Licensed Calendars"
(hereinafter defined);
WHEREAS, Banks has granted such rights to Licensor together with the right
to sublicense such rights;
NOW, THEREFORE, for and in consideration of the premises and of the mutual
promises and conditions herein contained, the parties do hereby agree as
follows:
1. Definitions. As used herein, the following terms will be defined as
follows:
(a) "Licensor Identification" will mean Tyra's name and image of Tyra in
the form as approved in writing in advance by Licensor and as provided
by Licensor to IES.
(b) "Licensed Calendars" will mean one (1) or more versions of a sixteen
(16) month 1999 calendar with separate or multiple photographs for
each month, produced in accordance with the terms hereof in a form as
approved in writing in advance by Licensor.
(c) "Contract Period" will mean that period of time commencing on the
date hereof and continuing until December 31, 1999.
(d) "Contract Territory" will mean worldwide.
2. Format of the Licensed Calendar. The Licensed Calendars will consist of
a collection of sixteen (16) monthly calendar pages in one (1) format with an
approximate size of 13 inches by 15 inches and other formats, including
electronically or by CD-ROM, as approved by Licensor in writing in advance.
Such Licensed Calendar will contain photographs of Tyra supplied to IES in the
manner described in Paragraph 3 immediately below. IES agrees that advertising
material and credit as designated by Licensor will be included in the contents
of the Licensed Calendar or published or packaged together with the Licensed
Calendar with Licensor's written approval given in advance.
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3. Images. (a) Provided that IES pays the amount set forth in Section 3(b)
below on or before January 23, 1998, Licensor agrees to supply to IES
approximately sixteen (16) photographic images approved by Licensor (the
"Images") for use by IES in the Licensed Calendar.
(b) IES agrees to pay to Licensor the amount of up to Eighty-Seven Thousand
United States Dollars (US$87,000) for the production expenses of Licensor in
connection with the creation of the Images for the Licensed Calendar. Payment
of this amount is due within ten (10) days of an invoice with documentation of
the expenses.
4. Grant. (a) Subject to all the terms and conditions of this Agreement,
Licensor hereby grants to IES the right and license to use the Images and
Licensor Identification throughout the Contract Territory and during the
Contract Period in connection with the manufacture, advertisement, distribution
and sale of Licensed Calendars.
(b) IES shall have no right to grant any sublicenses hereunder, but IES
will have the right to make arrangements for the subcontract manufacture,
finishing, packaging and storing of Licensed Calendars, provided that IES shall
ensure that no such subcontractor shall take any action contrary to or
inconsistent with the terms and conditions set forth in this Agreement.
5. Guaranteed Minimum Royalty. As compensation to Licensor for the grant to
IES of the above rights, IES shall pay to Licensor a guaranteed minimum royalty
payment in the amount of One Hundred Thousand United States Dollars
(US$100,000). Such amount is payable upon the execution of this Agreement. Time
is of the essence with regard to this payment.
6. Earned RoYaltY. (a) IES shall pay to Licensor an earned royalty at the
rate of twelve percent (12%) of the total "Net Wholesale Sales" of all
quantities of Licensed Calendars sold hereunder by IES; provided, however the
full amount of the guaranteed minimum royalty payable to Licensor by IES as
described in Paragraph 5 above will first be credited against the payment of
any earned royalty with respect to sales of Licensed Calendars achieved. Earned
royalties shall be payable within forty-five (45) days following the end of
each calendar year quarter with respect to sales made during such calendar year
quarter.
(b) For the purposes hereof, "Net Wholesale Sales" shall mean IES's
invoiced wholesale billing price to its customers or distributors, less only
actual shipping charges, discounts actually given, sales taxes, and credits
allowed for actual returned or defective merchandise. All royalties due
Licensor will accrue upon the sale of the Licensed Calendars regardless of time
of collection by IES. Licensed Calendars will be considered "sold" as of the
date on which such Licensed Calendars are invoiced, shipped or paid for,
whichever first occurs. If sales are made to any party affiliated with or
related to IES, royalties will be computed based upon the regular price for
such Licensed Calendars charged to unrelated third parties. There will be no
deduction from "Net Wholesale Sales" for uncollectable accounts and no reserve
for returns.
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7. Sales Reports. IES shall supply Licensor with an itemized, detailed
sales report with respect to all sales of Licensed Calendars sold during each
calendar year quarter, said sales reports to be delivered to Licensor within
forty-five (45) days following the conclusion of each calendar year quarter.
Such sales reports shall indicate the number of each item of Licensed Calendars
sold during the calendar year quarter, the price at which such items of
merchandise were sold, and itemization of all deductions, credits and returns
and shall be certified by the chief financial officer of IES.
8. Books and Records. IES will keep and maintain accurate books and records
with respect to all purchases of Licensed Calendars and the computation of
earned royalties with respect thereto, which books and records will be
available upon reasonable advance notice for inspection and copying by Licensor
or its authorized agents or representatives during ordinary business hours
prior to the conclusion of a two-year period following the conclusion of the
relevant calendar year quarter. If any examination of IES's books and records
reveals that IES has failed properly to account for and pay royalties owing to
Licensor hereunder, and the amount of any royalties which IES has failed
properly to account for and pay for any calendar year quarter exceeds, by five
percent (5%) or more, the royalties actually accounted for and paid to
Licensor for such period, then IES will, in addition to paying Licensor such
past due royalties with interest, reimburse Licensor or its authorized
representatives for their direct out-of-pocket expenses incurred in conducting
such examination.
9. Payments. All payments to be made by IES to Licensor hereunder will be
made by way of check payable to the order of "IMG Models, Inc." and mailed to
Licensor at the following address:
IMG Models, Inc.
304 Park Avenue South
Penthouse North
New York, New York 10010
Attention: Jill Miller
All sales reports to be submitted by IES to Licensor will be sent to the
above address. Past due payments hereunder will bear interest at the rate of
(i) one percent (1%) per month or (ii) the maximum rate permissible under
law, whichever is less.
10. Approval of Licensed Calendars. (a) IES agrees that Licensor shall have
the right to approve or disapprove in advance of sale the quality, style,
colors, appearance, material and workmanship of all Licensed Calendars and the
packaging therefor, and to approve or disapprove any and all endorsements,
trademarks, trade names, designs and logos used in connection with Licensed
Calendars. IES shall not distribute or sell any product which has not been
approved by Licensor in writing or which is, at any time, disapproved in
writing within five (5) business days after receipt thereof.
(b) Before selling or distributing any Licensed Calendars hereunder, IES
will submit to Licensor, at the address set forth in Paragraph 12 below, for
its examination and approval or
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disapproval, a production sample thereof together with its containers, labels
and the like. Licensor agrees that it will promptly examine and either
approve or disapprove in writing such samples, and that Licensor will promptly
notify IES of its written approval or disapproval. Licensor agrees that it will
not unreasonably disapprove any item and, if any item is disapproved, that IES
will be advised of the specific reasons in each case.
11. Approval of Advertising and Promotional Materials. IES agrees that
Licensor shall have the right to approve or disapprove in writing in advance
the contents, appearance and presentation of any and all advertising or
promotional materials which incorporate the Licensor Identification or which
make reference in any way to Tyra. IES agrees that it will not produce, publish
or in any manner distribute any such advertising materials which have not been
approved in writing in advance by Licensor or which are, at any time,
disapproved by Licensor in accordance with the provisions hereinbelow. Before
producing, publishing or distributing any advertising materials hereunder,
IES will submit to Licensor, at the address set forth in Paragraph 12 below,
for its examination and written approval or disapproval, a sample thereof
together with text, coloring and a copy of any photograph proposed to be used.
Licensor agrees that it will promptly examine and either approve or disapprove
in writing such sample advertising material, and that Licensor will promptly
notify IES of its approval or disapproval. Licensor agrees that it will not
unreasonably disapprove any sample advertising and, if any is disapproved, that
IES will be advised of the specific reasons in each case.
12. Notices and Submissions. (a) All notices or submissions to be made or
delivered by IES to Licensor pursuant to this agreement will be delivered to
the address of Licensor as follows:
Ty Girl, Inc.
c/o IMG Models, Inc.
304 Park Avenue South
Penthouse North
New York, New York 10010
Attention: Mia Lolordo
with a copy to:
Andrew Fox, Esq.
1626 Broadway
New York, New York 10019
and
London Management
10061 Riverside Drive, #1018
Toluca Lake, California 91602
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All such materials will be delivered to Licensor free of all charges such as,
for example, shipping charges or customs charges. In the event that any such
charges are paid by Licensor, IES agrees to make prompt reimbursement. The
foregoing notwithstanding, this agreement may not be changed or modified except
as provided herein.
(b) All notices or submissions to be made or delivered by Licensor to IES
pursuant to this Agreement will be delivered to the address of IES as follows:
Interactive Entertainment Studio, Inc.
1905 Anderson Avenue, Suite 200
Ann Arbor, Michigan 48104
Attn.: Peter Klamka
13. Products for the Use of Licensor. During the Contract Period, IES will
supply Licensor, free-of-charge, and at no cost or expense, with one hundred
(100) copies of each version of the Licensed Calendar for the promotional use
of Licensor (not for resale). IES agrees to sell additional copies of the
Licensed Calendars requested by Licensor's at IES's wholesale price for the
Licensed Calendars.
14. Licensor Identification. (a) IES agrees that nothing herein will give
to IES any right, title or interest in the Licensor Identification (except the
licensed rights in accordance with this Agreement), that each and every part of
the Licensor Identification is, and is to be, the sole property of Licensor and
that any and all use by IES of any part of the Licensor Identification, and the
goodwill arising therefrom, will inure to the benefit of Licensor.
(b) IES agrees never to raise or to cause to be raised any questions
concerning, or objections to the validity of, or the right to the use of, the
Licensor Identification or the right of Licensor thereto, on any grounds
whatsoever.
(c) IES agrees that it will not file any application for any mark, or
obtain or attempt to obtain ownership of any mark or trade name, in any country
of the world, which refers to or is suggestive of the Licensor Identification
or any other mark, design or logo intended to identify or refer to the
Licensor.
(d) IES acknowledges and agrees that use of the Licensor Identification
other than as expressly permitted in this Agreement will cause Licensor
immediate irreparable harm for which an adequate remedy does not exist at law.
Accordingly, IES agrees that Licensor will be entitled to prevent any
threatened misuse or breach by obtain injunctive relief without being required
to post any bond or security and without giving advance notice to IES.
(e) IES acknowledges the great value of the goodwill associated with the
name "Tyra Banks."
15. Notices. IES shall cause to be imprinted irremovably and legibly on
each Licensed Product manufactured, distributed or sold under this Agreement
and on all material
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used in connection therewith, including, but not limited to, advertising,
promotional, packaging and wrapping material and any other such material
wherein the Licensor Identification appears, any copyright or trademark,
notices designated by Licensor, together with a statement that the Licensed
Product is manufactured and distributed under license from Licensor.
16. Product Liability Indemnity. (a) IES agrees to provide and maintain, at
its own expense, product liability insurance with limits of no less than
$1,000,000 and within thirty (30) days from the date hereof, IES will submit to
Licensor a fully paid policy or certificate of insurance naming Licensor and
Tyra as insured parties, requiring that the insurer shall not terminate or
materially modify such policy without written notice to Licensor at least twenty
(20) days in advance thereof.
(b) IES agrees to protect, indemnify and save harmless Licensor and
Licensor's authorized employees, agents, etc., or either of them, from and
against any and all expenses, damages, claims, suits, actions, judgments and
costs whatsoever, including reasonable attorneys' fees, arising out of, or in
any way connected with, any claim or action for injury, death or other cause of
action involving alleged defects in IES's Products, any infringement by IES of
the trademark rights, copyrights, personal or proprietary rights of any third
party, and any breach by IES of any statutory or regulatory obligation,
provided that IES will be given prompt notice of any such action or claim.
17. Use of Licensor Identification After Termination. It is understood and
agreed by IES that from and after the termination of the Contract Period all of
the rights of IES to the use of the Licensor Identification shall cease
absolutely, and IES will not thereafter manufacture or sell any item whatsoever
with the use of the Licensor Identification or use the Licensor Identification
in any way whatsoever.
18. Termination for Default. If either party at any time during the period
of this Agreement shall (a) fail to make any payment of any sum of money herein
specified to be made, or (b) fail to observe or perform any of the covenants,
agreements, or obligations hereunder (other than the payment of money), the
non-defaulting party may terminate this Agreement as follows: as to (a) if such
payment is not made within ten (10) days after the defaulting party will have
received written notice of such failure to make payment, or as to (b) if such
default is not cured within thirty (30) days after the defaulting party will
have received written notice specifying in detail such default. Failure to
terminate this Agreement pursuant to this section will not effect or constitute
a waiver of any remedies the non-defaulting party would have been entitled to
demand in the absence of this section, whether by way of damages, termination
or otherwise. Termination of this Agreement for whatever reason will be without
prejudice to the rights and liabilities of either party to the other in respect
of any matter arising under this agreement.
19. Representations and Warranties of IES. (a) IES hereby represents and
warrants to Licensor that:
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<PAGE>
(i) IES is not insolvent and has financial resources adequate to
undertake the exploitation of the rights herein granted to IES.
(ii) IES will, throughout the Contract Period, use its diligent good
faith efforts to exploit the rights herein granted to IES,
(iii) IES will devote an adequate amount of financial resources and
personnel so as to meet the obligations of IES herein set forth.
(iv) Licensed Calendars actually distributed and sold by IES will be of
no lesser quality than the sample products submitted to Licensor and
approved by Licensor as hereinbefore described.
(v) IES will, in connection with the production, advertising, and
distribution of Licensed Calendars comply with all applicable
statutory laws and regulatory orders within the Contract Territory.
All of the representations and warranties made by IES will survive the
termination of this Agreement.
(b) IES agrees to protect, idemnify and save harmless Licensor and
Licensor's authorized agent, or either of them from and against any and all
expenses, damages, claims, suits, action, judgments and costs whatsoever,
including reasonable attorney's fees, arising out of, or in any way connected
with, any default by IES of its representations and warranties as hereinbefore
set forth.
20. Waiver. The failure of either party at any time or times to demand
strict performance by the other of any of the terms, covenants or conditions
set forth herein will not be construed as a continuing waiver or relinquishment
thereof and each may at any time demand strict and complete performance by the
other of said terms, covenants and conditions.
21. Bankruptcy. If IES files or has filed any petition for bankruptcy,
reorganization or similar relief, ceases or winds-up its business, makes and
assignment for the benefit of creditors, or if IES's business will be placed in
the hands of a receiver or trustee, whether by voluntary act of IES or
otherwise, the Contract Period will, at the option of Licensor, immediately
terminate. Upon termination, Licensor, at its option, may purchase any
remaining inventory of Licensed Calendars at one-half the manufacturing cost,
exclusive of overhead, and IES hereby grants a security interest in such
inventory to Licensor solely for the purposes of effectuating this Paragraph.
If Licensor elects not to exercise such option within sixty (60) days after the
occurrence of any such event of bankruptcy, it will discharge its security
interest and the bankruptcy trustee, receiver or assignee may sell the
inventory on hand, subject to the royalty provisions herein. IES agrees to
execute any and all documents necessary to effectuate this Paragraph.
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<PAGE>
22. Warranty by Licensor. Licensor hereby warrants and represents to IES
that Licensor has all of the right and authority to grant to IES the right to
use the Licensor Identification as herein described. Licensor agrees to
protect, indemnify and save harmless IES from and against any and all expenses,
damages, claims, suits, actions, judgments and costs whatsoever, including
reasonable attorneys' fees, arising out of, or in any way connected with, any
claim or action in which it is alleged that use by IES of the Licensor
Identification and the Images constitutes an infringement of the trademark
rights, copyrights, personal or proprietary rights of any third party, provided
that Licensor will be given prompt written notice of any such action or claim.
23. Assignment. This agreement shall bind and inure to the benefit of
Licensor, its successors and assigns. IES understands and agrees that Licensor
may assign this Agreement and/or its rights in the Licensor Identification to a
party related to or affiliated with Licensor, but that any such assignment will
not diminish the rights granted to IES hereunder. The rights granted IES
hereunder will be personal to it and shall not, without the prior written
consent of Licensor, be transferred or assigned to any other party.
24. Significance of Headings. Paragraph headings contained herein are
solely for the purpose of aiding in speedy location of subject matter and are
not in any sense to be given weight in the construction of this Agreement.
Accordingly, in case of any question with respect to the construction of this
Agreement, it is to be construed as though such paragraph headings had been
omitted.
25. Entire Agreement. This writing constitutes the entire agreement between
the parties hereof and may not be changed or modified except by a writing
signed by the party or parties to be charged thereby.
26. Joint Venture. This Agreement does not constitute and will not be
construed as constituting a partnership or joint venture between Licensor and
IES. Neither party will have any right to obligate or bind the other party in
any manner whatsoever, and nothing herein contained will give, or is intended
to give, any rights of any kind to any third persons.
27. Governing Law. This Agreement will be governed by and interpreted in
accordance with the laws of the state of New York without regard to conflict of
laws.
28. Arbitration. If a dispute arises under this agreement which cannot be
resolved, the dispute will be submitted to arbitration and resolved by a single
arbitrator (who will be a lawyer) in accordance with the Commercial Arbitration
Rules of the American Arbitration Association then in effect. All arbitration
will take place at the office of the American Arbitration Association located
in New York City, New York. Each party is entitled to depose one (1) fact
witness and any expert witness designated by the other party, and to conduct
such other discovery as the arbitrator deems appropriate. The award or decision
rendered by the arbitrator will be final binding and conclusive and judgment
may be entered upon the award by any court.
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<PAGE>
29. Limit of Liability. Licensor's and Tyra's maximum liability to IES for
all claims related to this Agreement will not exceed the total amount due
Licensor under this Agreement. IES's sole remedy against Licensor and Tyra for
loss or damage arising out of the performance or non-performance under this
Agreement shall be proven direct, actual damages. Licensor and Tyra shall not
be liable for any indirect, incidental, reliance, special, punitive, or
consequential damages arising out of its performance or non-performance under
this Agreement, whether or not Licensor or Tyra had been advised of the
possibility of such damages.
30. Confidentiality. Except as required by law, neither party shall
disclose to anyone any confidential or proprietary information designated as
such obtained hereunder, including any of the financial terms of this
Agreement.
31. Execution and Delivery Required. This instrument when signed by IES
will be deemed only on application for a license and will not be considered to
be a binding agreement unless and until signed by all parties noted at the
appropriate place at the conclusion of this instrument. Acceptance of the offer
made herein is expressly limited to the terms of the offer.
32. First Negotiation. Before granting any rights to others for the use of
Licensor Identification within the Contract Territory with respect to a 2000
calendar, Licensor agrees that it will first negotiate in good faith
exclusively with IES during a thirty (30) day period ("Negotiation Period") as
designated in writing by Licensor. If IES and Licensor fail to reach a mutually
acceptable agreement, then Licensor may enter into an agreement with a third
party with respect to a 2000 calendar, but in no event shall the terms of any
such third party agreement be more favorable to such third party than the terms
most recently proposed by IES to Licensor during the Negotiation Period.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
TY GIRL, INC. INTERACTIVE ENTERTAINMENT
STUDIO, INC.
By: /s/ Tyra L. Banks By
----------------- -------------
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<PAGE>
January 1, 1998
Interactive Entertainment Studio, Inc.
1905 Anderson Avenue, Suite 200
Ann Arbor, Michigan 48104
Ladies and Gentlemen:
I have been advised of an agreement between Interactive Entertainment
Studio, Inc. ("IES") and Ty Girl, Inc. ("Licensor") pursuant to which Licensor
agrees to cause me to perform certain services for IES and in which Licensor
grants IES certain rights to use my name, image and likeness.
This letter is to advise you that Licensor has all of the authority necessary
to make the commitments made by it and to grant the rights granted by it in
that agreement and that I, for my part, in consideration of IES having entered
into that agreement with Licensor agree to fully and completely perform all of
the services which Licensor is required thereby to cause me to perform.
Best regards.
Sincerely yours,
/s/ Tyra Banks
Tyra Banks
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<PAGE> EXHIBIT 10.4
617 Detroit Street
Suite 100
Ann Arbor, Michigan 48104
(313) 769-2700
Facsimile: (313) 769-8560
LEASE AGREEMENT
Dated February 27, 1998
This agreement is made and entered into between First Miller Limited
Partnership, c/o Peter Allen 617 Detroit St., Ann Arbor, Michigan 48104
(Lessor or Landlord) (Maintenance Beeper 796-0555) and
PTN Media, Inc. c/o David Feldman, 36 W. 44th St., New York, New York 10036
(Lessee or Tenant) Phone: (O) 734-913-8204; (F) 734-913-0781.
WITNESSETH
1. Tenant shall have possession of Suite 8B, per attached plan, 313 N. First
St., Ann Arbor 48104, at the First & Miller Technology Center.
2. The Tenant shall relocate to equivalent or better space approximately May 1,
1998 within First & Miller.
3. Tenant's rent shall commence March 1, 1998.
4. The monthly rent will be $690, with March rent due upon execution of this
lease.
5. The initial term shall be for two years.
6. The purpose for the premises shall be web site development.
7. The space shall include two parking spaces marked Secodyne.
8. The tenant shall pay an additional charge of $63 for utilities. These costs
are fixed so long as tenant has normal utility consumption.
9. The security deposit is $690.
10. Will name as additional insured on existing corporate policy.
11. Tenant shall install professional signs, compatible with existing signs, on
entry and parking at his expense.
SIGNED Leasee LESSOR First Miller
/s/ Peter Allen
ATTEST TITLE General Partner
LESSEE
ATTEST TITLE
<PAGE>
EXHIBIT 10.5
WEBSITE DESIGN SERVICES AGREEMENT
This Website Design Services Agreement ("Agreement") is effective as of
December 20, 1996 ("Effective Date"), by and among zoecom, inc., an Indiana
corporation, having its principal place of business located at 611 Broadway,
Suite 212, New York, New York 10012 ("zoecom"), and Interactive Entertainment
Studio, Inc. a Nevada corporation, having its principal place of business
located at 1905 Anderson Avenue, Ann Arbor, Michigan 48104 ("Client").
In consideration of the mutual promises and covenants set forth below, the
parties hereto agree as follows:
1. Work Orders. This Agreement will incorporate one or more separate
attachments that describe specific services and deliverables to be provided by
zoecom, provided that such attachments (i) are signed by both parties and (ii)
refer to the same Agreement Number as appears above (collectively, the "Work
Orders"). THE TERMS AND CONDITIONS CONTAINED IN THE WORK ORDERS ARE IN ADDITION
TO AND, TO THE EXTENT THAT THEY ARE CONTRADICTORY, SUPERSEDE THE PROVISIONS OF
THE MAIN BODY OF THIS AGREEMENT. Together the Agreement and the Work Orders
represent the complete and exclusive statement of the mutual agreement of the
parties and supersede and cancel all previous written and oral agreements and
communications concerning the subject matter of this Agreement.
2. Services and Deliverables. zoecom agrees to undertake and provide Client
with the services (the "Services") and the deliverables (the "Deliverables") in
relation to one or more sites on the World Wide Web (the "Website(s)"), all as
set forth on the Work Orders. The Deliverables may include, without limitation,
certain designs for the aesthetic and functional characteristics of Websites
and the HTML and other computer files and code that implement the Website
("Website Designs") to be created by zoecom for Client, as set forth on the
Work Orders. The parties agree that zoecom's obligations with respect to the
Services and Deliverables are dependent on Client providing assistance and
information to zoecom and on Client providing zoecom with any access to
Client's materials, products and facilities as is set forth in the applicable
Work Order. Accordingly, zoecom will not be responsible for any delays caused
by Client's failure to provide such assistance, information or access and any
time schedules shall be adjusted accordingly. If a party proposes to change a
Work Order after it has been signed, the other party will reasonably and in
good faith consider and discuss the proposed change. If zoecom agrees to accept
any change proposed by Client, Client agrees to bear any extra expense and pay,
at zoecom's standard time and material rates, for any additional work required
by such change.
3. Delivery and Acceptance of Deliverables. When zoecom believes it has
appropriately completed a Deliverable, it will deliver the same to Client.
Delivery shall be made in a format or medium that is mutually acceptable to
both parties or as specified in the applicable Work Order. Client will accept
or reject the Deliverable within five (5) business days after delivery. Any
approval of IES are also subject to approvals by Niki Inc. Failure to give
notice of acceptance or rejection within that period or prior to first public
on-line use or other commercial distribution (regardless of notice of
rejection) will constitute acceptance. Client may reject any Deliverable that
fails to meet substantially all the requirements stated in the applicable Work
Order. If Client rejects the Deliverable, zoecom will correct the failures
specified in the rejection notice within fifteen (15) days of the rejection
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notice. When zoecom believes that it has made the necessary corrections, it
will again deliver the Deliverable to Client and the
acceptance/rejection/correction provisions above shall be reapplied until the
Deliverable is accepted by Client.
4. Payment.
a. Client shall pay zoecom the amounts specified in the applicable Work
Order for the Services and Deliverables. Each payment will be in U.S. dollars
and will be made in accordance with the payment schedule specified in the
applicable Work Order. In addition, Client shall reimburse zoecom for
reasonable travel (transportation, lodging and meals) and other expenses zoecom
is required to incur in providing the Services and Deliverables outside of New
York City. All travel and lodging will be coach class or equivalent. Expenses
must be approved by IES.
b. Unless otherwise specified, all payments are due and payable within
thirty (30) days of the date of the invoice from zoecom. Late payments will
bear interest at the rate of 2% per month to cover costs of collections as well
as interest, or, if lower, the maximum rate allowed by law.
5. Ownership.
a. The parties acknowledge that each Website Design to be delivered to
Client by zoecom hereunder will be a compilation of various components, which
may include, without limitation, graphics, diagrams, images, graphical user
interfaces, text, figures, tables, sounds, video, names, trademarks and service
marks (collectively "Content"), that will be selected, coordinated and arranged
by zoecom for Client, in accordance with Client's reasonable directions. zoecom
hereby assigns to Client the copyright for each of such compilations.
b. The parties also acknowledge that each Website Design will include
Content created by or licensed to zoecom ("zoecom Content") and Content created
by or licensed to Client ("Client Content"). zoecom retains all right, title
and interest to zoecom Content, except for the license granted under Section 6
hereof, and Client retains all right, title and interest to Client Content.
c. The parties also acknowledge that each Website Design may include
computer programs, algorithms, cookies or applets that were created or licensed
by zoecom (collectively "zoecom Software"). zoecom retains all right, title and
interest to zoecom Software, except for the license granted under Section 6
hereof.
d. Client agrees that any assignments to Client hereunder do not extend to
any zoecom Content or zoecom Software.
e. In the event any third party software is supplied by zoecom to Client,
Client agrees to be bound by and comply with all the terms and conditions
provided by the original manufacturer or vendor of such software, including,
but not limited to, any license or other agreement and any warranties,
disclaimers and limitations of liability set forth therein. Client agrees and
understands that any rights and claims it may have in connection with any third
party software are with the original manufacturer or vendor of such software
and not with zoecom, who shall "pass through" any warranties provided by the
original manufacturer or vendor to the fullest extent possible under applicable
law.
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f. The parties acknowledge that each Website Design may incorporate
concepts and/or metaphors that zoecom uses or will reuse for other clients.
zoecom shall not require any prior consent from Client for any reuse of a
concept and/or metaphor used in a Website Design created by zoecom for Client.
6. License.
a. Subject to all the terms and conditions of this Agreement, zoecom hereby
grants to Client a perpetual, non-exclusive, worldwide license to reproduce,
use and transmit the zoecom Content and zoecom Software as part of the
applicable Website Design and Website on the World Wide Web. Client may not use
or allow any third party to use the zoecom Content or zoecom Software for any
other purpose, including, but not limited to, using any of the zoecom Content
or any zoecom Software in or in relation to any other World Wide Web sites or
in any other medium, such as CD-ROM or print. Client may not modify, adapt,
translate or create any derivative work from any zoecom Content or zoecom
Software. In the event that Client desires to make any use of zoecom Content or
zoecom Software which exceeds the foregoing license, or if Client desires to
modify, adapt, translate or create a derivative work from any zoecom Content or
zoecom Software, Client must first obtain zoecom's written consent. Any
material breach by Client of the terms of the foregoing license shall entitle
zoecom to terminate Client's license in respect of the zoecom Content or zoecom
Software in question.
7. Notices and Credit.
a. zoecom may include the following credit in the Website Design (the
"Credit"):
Site Design: zoecom, Inc.
where the word "zoecom" serves as an external hypertext link (opening
another browser window, thereby not forcing the visitor to leave the
Niki-Site) to zoecom's World Wide Website.
The Credit shall appear on the bottom of the home page or introductory page.
The Credit shall be displayed in normal HTML height font. Except for the
foregoing. Client shall not use or reproduce the ZOECOM mark, ZOECOM LOGO or Z
LOGO without zoecom's prior written consent.
8. Confidentiality. Except as expressly allowed herein, a party receiving
any Proprietary Information of another party (the "Receiving Party") will hold
in confidence and not use or disclose any such Proprietary Information of the
disclosing party (the "Disclosing Party") and shall similarly bind its
employees, officers, directors, consultants and agents. For purposes of this
agreement, "Proprietary Information" shall mean any information that is not
generally known and the Disclosing Party regards as confidential, proprietary
and/or a trade secret. zoecom's Proprietary Information includes, but is not
limited to, zoecom's original proposal for the Website Design, the discussions
between the parties, the zoecom Software and zoecom Content, and the terms and
conditions of this Agreement and any Work Order. The Receiving Party shall not
be obligated under this Section 8 with respect to information the receiving
party can document: (i) is or has become readily publicly available without
restriction through no fault of the Receiving Party or its employees or agents;
(ii) is received without restriction from a third party lawfully in possession
of such information and lawfully empowered to disclose such information; or
(iii) was rightfully in the possession of the Receiving Party without
restriction prior to its disclosure by the Disclosing Party.
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9. Warranties and Disclaimer.
a. Client warrants to zoecom that:
(a) Client has, or shall, obtain all rights, licenses, waivers,
permissions, credits and attribution necessary for zoecom to use the Client
Content for purposes of this Agreement, including but not limited to,
incorporating Client Content into the Website Design. Client shall at its sole
cost and expense, obtain any rights that zoecom identifies as necessary for
zoecom to incorporate the Client Content into the Website Design.
(b) Client will diligently maintain and regularly update the Website(s)
that incorporate a Website Design prepared by zoecom, so as to ensure the
availability, accessibility, currency, accuracy, aesthetic quality, proper
functionality and technical performance of such Website(s), consistent with
standards generally applicable to sites on the World Wide Web. The Website(s)
that incorporate a Website Design prepared by zoecom shall not defame zoecom,
its employees, officers, directors, consultants or agents or any third party or
constitute a violation of the rights of privacy of zoecom's employees or any
third party.
b. zoecom warrants to Client that:
(a) The Services will be performed in a professional and workman-like
manner;
(b) Each Website Design will conform substantially with the
specifications therefore in the applicable Work Order; and
(c) zoecom has and will obtain agreements with its employees, officers,
directors, consultants and agents sufficient to allow it to grant
Client the assignments and licenses provided for herein.
OTHER THAN THE FOREGOING, ZOECOM MAKES NO WARRANTIES WITH RESPECT TO ANY
WEBSITE DESIGN, ZOECOM CONTENT, ZOECOM SOFTWARE, OR ANY OTHER DELIVERABLE, OR
WITH RESPECT TO THE SERVICES, AND DISCLAIMS ALL IMPLIED WARRANTIES, INCLUDING
WITHOUT LIMITATION WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE. SPECIFICALLY, ZOECOM MAKES NO REPRESENTATION OR WARRANTY THAT (I) THE
WEBSITE DESIGN OR ANY CONTENT WILL APPEAR IN THE SAME WAY TO ALL VISITORS TO
THE APPLICABLE WEBSITE, (II) THE WEBSITE DESIGNS WILL BE ERROR FREE, OR (III)
ANY WEBSITE WHICH INCORPORATES A WEBSITE DESIGN PREPARED BY ZOECOM WILL BE
POPULAR OR PROFITABLE.
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10. Indemnification.
a. zoecom shall indemnify and hold Client and its officers, directors,
agents and employees (collectively, "Client Indemnitees") harmless from
liability (including without limitation fees and disbursements of legal counsel
incurred by a Client Indemnitee in any action or proceeding between Client
Indemnitee and zoecom, or between Client Indemnitee and any third party or
otherwise) resulting from infringement by any Website Design of any United
States copyright of any third party; provided that zoecom is promptly notified
of any and all threats, claims and proceedings related thereto and given
reasonable assistance and the opportunity to assume sole control over the
defense and all negotiations for a settlement or compromise. zoecom will not be
responsible for any settlement it does not approve in writing. The foregoing
obligations of zoecom do not apply with respect to Deliverables or portions or
components thereof (i) that include Client Content or that are modified after
delivery by zoecom, if the alleged infringement relates to such Client Content
or such modification, (ii) where Client Indemnitee continues allegedly
infringing activity after being notified thereof or after being informed of
modifications that would have avoided the alleged infringement, or (iii) where
Client Indemnitee's use of the zoecom Content or zoecom Software is not in
accordance with the license granted hereunder.
b. Client shall indemnify and hold zoecom and its officers, directors,
agents and employees (collectively, "zoecom Indemnitees") harmless from
liability (including without limitation fees and disbursements of legal counsel
incurred by a zoecom Indemnitee in any action or proceeding between zoecom
Indemnitee and Client, or between zoecom Indemnitee and any third party or
otherwise) resulting from either (i) a breach by Client of any of its
representations and warranties to zoecom contained in this Agreement or the
Work Orders or (ii) any other liability resulting from any Website that
incorporates a Website Design prepared by zoecom, except for liabilities
covered by zoecom's indemnity in favor of Client Indemnitees in Section 10.a.
hereof; provided that Client is promptly notified of any and all threats,
claims and proceedings related thereto and given reasonable assistance and the
opportunity to assume sole control over the defense and all negotiations for a
settlement or compromise. Client will not be responsible for any settlement it
does not approve in writing.
11. Limited Liability.
a. NOTWITHSTANDING ANYTHING ELSE IN THIS AGREEMENT OR OTHERWISE, ZOECOM
SHALL NOT BE LIABLE OR OBLIGATED UNDER ANY SECTION OF THIS AGREEMENT OR UNDER
ANY CONTRACT, NEGLIGENCE, STRICT LIABILITY OR OTHER LEGAL OR EQUITABLE THEORY
(I) FOR ANY AMOUNTS IN EXCESS IN THE AGGREGATE OF THE AMOUNT OF THE FEES PAID
TO ZOECOM HEREUNDER DURING THE TWELVE MONTH PERIOD PRIOR TO THE DATE THE CAUSE
OF ACTION AROSE, OR (II) FOR ANY COST OF PROCUREMENT OF SUBSTITUTE GOODS OR
SERVICES.
b. NEITHER PARTY SHALL BE LIABLE WITH RESPECT TO ANY SUBJECT MATTER OF THIS
AGREEMENT UNDER ANY CONTRACT, NEGLIGENCE, STRICT LIABILITY OR OTHER THEORY FOR
ANY INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES, INCLUDING, WITHOUT
LIMITATION, LOSS OF PROFITS OR REVENUES.
12. Term and Termination.
a. This Agreement will remain in effect until terminated in accordance with
this Section 12. Upon any termination of this Agreement for any reason, zoecom
shall promptly return all Proprietary Information of Client and Client shall
promptly return all Proprietary Information of zoecom.
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b. If either party should breach a material provision of this Agreement,
the other party may terminate this Agreement upon seven (7) days written notice
unless the breach is cured within such seven (7) day notice period.
c. Either party may terminate this Agreement with or without cause upon
fifteen (15) days prior written notice to the other party; provided, however,
that Client shall be liable to pay zoecom for any Services or Deliverables
provided to Client and expenses incurred in connection with the provision for
such Services prior to the effective date of termination.
d. Sections 5, 6, 7, 8, 9, 10, and 11 of this Agreement, any accrued rights
to payment and any remedies for breach of this Agreement shall survive
termination.
13. Relationship of the Parties. Notwithstanding any provision hereof, for
all purposes of this Agreement the parties shall be and act as independent
contractors and not as partners, joint venturers or agents of each other and
shall not bind nor attempt to bind the other party to any contract. The parties
acknowledge and agree that zoecom shall have no responsibility or liability for
any services or goods that are provided to Client by any third party in
relation to the Website(s).
14. Publicity and Press Releases. The parties agree that the terms of this
Agreement and the Work Orders are confidential and shall not be disclosed by
either party. zoecom may publicize the fact that Client is a client of zoecom.
Client shall mention zoecom, Inc. for their involvement and design in relation
to the Website as part of their Website press releases.
15. Assignment. The parties shall not have any right or ability to assign,
transfer, or sub-license any obligations or benefit under this Agreement
without the written consent of the other party except that a party (i) may
assign and transfer this Assignment and its rights and obligations hereunder to
any entity which acquires substantially all of its business, stock or assets,
and (ii) may assign or transfer any rights to receive payments hereunder, or
(iii) is working for zoecom.
16. Notice. All notices under this Agreement shall be in writing, and shall
be deemed given when personally delivered, or five (5) days after being sent by
prepaid certified or registered U.S. mail, or upon receipt after being sent by
commercial overnight courier service with tracking capabilities, to the address
of the party first set forth above or such other address as such party last
provided to the other party by written notice.
17. Miscellaneous.
a. The failure of any party to enforce its rights under this Agreement at
any time for any period shall not be construed as a waiver of such rights.
b. No changes or modifications to or waivers of any provision of this
Agreement shall be effective unless evidenced in writing and signed by both
parties.
c. During the term of this Agreement and for a period of one (1) year
thereafter, neither party will solicit any employee or consultant of the other
party to leave the employ of such party; the foregoing does not prohibit mass
media "want ads" not specifically directed towards the employees or consultants
of a party.
d. In the event that any provision of this Agreement shall be determined to
be
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illegal or unenforceable, such provision will be limited or eliminated to the
minimum extent necessary so that this Agreement shall otherwise remain in full
force and effect and enforceable.
e. This Agreement shall be governed by and construed in accordance with the
laws of the State of New York without regard to the conflicts of laws
provisions thereof. The sole jurisdiction and venue for actions related to the
subject matter of this Agreement shall be the state and federal courts located
in New York City. In any action or proceeding to enforce rights under this
Agreement, the prevailing party will be entitled to recover costs and
attorneys' fees.
f. Headings herein are for convenience of reference only and shall in no
way affect interpretation of the Agreement.
g. A party shall not be liable for nonperformance or delay in performance
(other than of obligations regarding payment of money or confidentiality)
caused by any event beyond the reasonable control of such party including, but
not limited to, wars, hostilities, revolutions, riots, civil commotion,
national emergency, strikes, lockouts, unavailability of supplies, epidemics,
fire, flood, earthquake, force of nature, explosion, embargo, or any other Act
of God, or any law, proclamation, regulation, ordinance, or other act or order
of any court, government or governmental agency.
h. Except as otherwise expressly stated in this Agreement, the rights and
remedies of a party set forth herein with respect to failure of the other to
comply with the terms of this Agreement (including, without limitation, rights
of full termination of this Agreement) are not exclusive, the exercise thereof
shall not constitute an election of remedies and the aggrieved party shall in
all events be entitled to seek whatever additional remedies may be available in
law or in equity.
IN WITNESS WHEREOF, the parties hereto have executed this Website Design
Services Agreement as of the Effective Date.
zoecom, inc. CLIENT: IES, Inc.
By: /s/ Till Krueger By: /s/ Peter Klamka
---------------- ----------------
Name: Till Krueger Name: Peter Klamka
Title: President Title: President
7
<PAGE>
E. PAYMENT SCHEDULE
1. PRE-LAUNCH PAYMENTS Payment ($)
------------------- -------------
Initial payment on signature of Work Order US$ 15,000.00
Mid-point payment US$ 30,000.00
Acceptance of final Website Design US$ 45,000.00
Total payments US$ 90,000.00
2. POST-LAUNCH PAYMENTS
To be agreed on a project by project basis and set forth in subsequent Work
Orders. Payments for such post-launch projects will be made 50% in advance on
execution of the Work Order, and 50% on final acceptance of the completed
project.
IN WITNESS WHEREOF, the parties hereto have executed this Work Order as of the
last date written below.
zoecom, inc. CLIENT: IES, Inc.
By: /s/ Till Krueger By: /s/ Peter Klamka
---------------- ----------------
Name: Till Krueger Name: Peter Klamka
Title: President Title: President
*IES AGREES TO USE ITS BEST EFFORTS TO MEET ABOVE SCHEDULE. ALL PAYMENTS
SUBJECT TO APPROVAL BY NIKI INC. IN THE EVENT OF CHANGES TO THIS SCHEDULE,
SECTION 4 (a & b) SHALL GOVERN.
8
<PAGE>
EXHIBIT 10.6
8 September 1997
Mr. Peter Klamka
Interactive Entertainment Studio
1905 Anderson Ave. Ste 200
Ann Arbor, MI 48104
Re: Letter of Intent between CDnow, Inc. and Interactive Entertainment Studio
Dear Peter:
Pursuant to conversations between Dave Badger and yourself, I have summarized
below the major business terms to be included in the merchandising agreement
between CDnow, Inc. ("CDnow") and Interactive Entertainment Studio (IES) with
regard to IES' website "Fashion House with Niki Taylor" ("Fashion House").
In addition to the specific points below we would like to discuss an integrated
promotional arrangement. We believe that a high level of visibility for the
joint CDnow/Fashion House store can only reinforce both brands.
* CDnow will create co-branded pages accessible only to Fashion House users by
placing a carry-through bar which links back to Fashion House on every page
of the CDnow/Fashion House site.
* For all visitors who initially create an account at CDnow on a registered
direct link through Fashion House. CDnow will pay Fashion House the
following graduated commission percentages on net revenues derived from
sales for music, movie, and apparel products through CDnow using those
accounts ("Fashion House Accounts") whether they are used to make purchases
directly through Fashion House or through any other site during the length
of the term.
Range of Net Sales Revenues Per Quarter % Applicable to Orders for Music
--------------------------------------- --------------------------------
From $0 up to and including $24,999.99 3%
From $25,000 up to and including $49,999.99 4%
In excess of $50,000 5%
Range of Net Sales Revenues Per Quarter % Applicable to Orders for Movies
--------------------------------------- ---------------------------------
From $0 up to and including $24,999.99 4%
From $25,000 up to and including $49,999.99 5%
In excess of $50,000 6%
1
<PAGE>
Range of Net Sales Revenues Per Quarter % Applicable to Orders for Apparel
--------------------------------------- ---------------------------------
From $0 up to and including $24,999.99 8%
From $25,000 up to and including $49,999.99 9%
In excess of $50,000 10%
* Fashion House will include CDnow in its "advertisers", "sponsors" or "links"
sections.
* Fashion House will grant CDnow the exclusive right to be the online video
and music retailer promoted through links from the Fashion House site.
* Fashion House will brand CDnow with a CDnow logo anywhere a link to CDnow's
site is located on Fashion House' sites.
* Fashion House will be entitled to commissions on net revenues on the basis
of account ownership ("Fashion House Accounts").
* The agreement will remain in effect for six months, and renew automatically
for subsequent one year terms unless either party terminates the agreement
within 30 days of the end of the term.
This letter of intent is intended to summarize the discussions by Fashion House
and CDnow to date of certain major business terms, and to constitute a
non-legally binding letter of intent. The discussions expressed in this letter
of intent are intended to be embodied into a legally binding final agreement to
be signed by CDnow and Fashion House. It is understood that the final agreement
may contain other terms and conditions which will have to be negotiated and
agreed to before such final agreement can be signed. Until the final agreement
is properly executed, no party shall have any legally binding obligation to the
other (whether under this letter of intent or otherwise).
In the meantime, we would like to move forward and begin work under the terms
noted above. If you are in agreement, please sign below.
Regards, Accepted,
/s/ Peter Klamka
Andrew Sternthal Peter Klamka
Director, New Business Development President
CDnow, Inc. IES
<PAGE>
EXHIBIT 10.7
Agreement for Fashion House Flowers & Gifts Service w/Niki Taylor
This Agreement is entered into this 9 day of September, 1997 by and between PC
Flowers & Gifts, Inc., a Delaware Corporation, doing business at 1 Landmark
Square, Stamford, Connecticut 06901 (PC) and Interactive Entertainment, a
Nevada Corporation, doing business at 1905 Anderson Avenue, Ann Arbor, Michigan
(IE).
Definitions:
"Order" shall mean any order for a Product through the Niki Taylor's Fashion
House Flowers & Gifts service by consumers who will view and utilize the Niki
Taylor's Fashion House Flowers & Gifts service and will consider the Service as
part of the IE content and the 1-800 PC FLOWERS toll free service which will be
utilized in conjunction with a unique operator number for IE customers only.
"Product" shall mean any flowers, balloons, gift baskets, greeting cards,
stuffed animals, gourmet foods or any other items chosen by PC and IE to be
offered on the Niki Taylor's Fashion House Flowers & Gifts service.
"Net Sales Price" ("NSP") shall mean PC's suggested retail price of any Product
sold through the Niki Taylor's Fashion House Flowers & Gifts service, less
applicable sales tax, service charge, discounts, credits or returns for each
Order.
"Proprietary Mark" shall mean any trademark, service mark, trade name or design
logo of either IE or PC.
The Niki Taylor's Fashion House Flowers & Gifts service shall mean a service
which is offered by IE as an integral part of IE's content to its customers to
enable a customer to gain access to and purchase Products from the Niki
Taylor's Fashion House Flowers & Gifts service. The service will also be
available to IE customers through the 1-800 PC FLOWERS telemarketing program
which will be utilized in conjunction with a unique operator number for IE
customers only.
1. Responsibilities of the Parties
PC Responsibilities
a. PC will develop and maintain a "private label" Niki Taylor's Fashion
House Flowers & Gifts service in HTML format. The entire flowers and gifts
service will reside on PC's web servers. When an IE customer enters the
Niki Taylor's Fashion House Flowers & Gifts service to review the
content and ultimately to place an order, they will be seamlessly
transported to the PC Flowers & Gifts web servers. PC will also assign a
unique operator number to IE which will be made available to IE
customers in conjunction with the 1-800 PC FLOWERS toll free number.
Page 1 of 6
<PAGE>
Product Categories IE Sales Commission
------------------ -------------------
Flowers shipped directly from growers
to the IE consumer.....................................10%
Flowers delivered through PC Flowers &
Gifts' network of FTD florists (PC Net).................8%
Balloons delivered through PC Flowers &
Gifts' network of FTD florists (PC NET).................8%
Gourmet foods & gift baskets.............................10%
Greeting cards...........................................10%
*All commissions are exclusive of applicable sales tax, shipping and
handling charges, credits, discounts, and/or returns for each Order.
b. PC will update the home page for the Niki Taylor's Fashion House Flowers
& Gifts service on a monthly basis in order to take advantage of the
event-driven nature of the floral and gift business and help IE to
increase traffic and gain a promotional opportunity on a monthly basis.
c. PC will utilize a proprietary technical program to track all orders
placed on the Niki Taylor's Fashion House Flowers & Gifts service.
d. PC shall at all times keep an accurate and auditable account of the
Orders subject to this Agreement and shall render to IE monthly statements
containing the number of visitors which originate from the PC Flowers &
Gifts site at IE, the product ordered and the total sales price less the
service charge and applicable sales tax. PC shall retain such records
for a period of one (1) year following the date of each order subject to
this Agreement. IE shall have the right to audit such accounts up to two
(2) times during the year.
e. PC shall abide by all applicable portions of the Direct Marketing
Association's then-current Guidelines for Ethical Business Practices,
and all Federal, State and local laws and regulations, applicable to any
advertisements, promotions or offers made by PC on the Niki Taylor's
Fashion House Flowers & Gifts service.
IE Responsibilities:
a. IE will include the Niki Taylor's Fashion House Flowers & Gifts service
as an integral part of its content and promote the Service on a monthly
basis in order to take advantage of the event-driven nature of the
flower and gift business.
b. IE will include a reference to the availability of the Niki Taylor's
Fashion House Flowers & Gifts service on the IE web site and through the
1-800 PC FLOWERS phone number and the unique operator number whenever
possible on promotional print materials in order to enable IE customers
to order PC Flowers & Gifts flowers and gifts products through the Niki
Taylor's Fashion House Flowers & Gifts service on the IE web site and
through the 1-800 PC FLOWERS phone number which will be utilized in
conjunction with a unique operator number.
Page 2 of 6
<PAGE>
2. Use of PC Flowers & Gifts content and technology on the Niki Taylor's
Fashion House Flowers & Gifts service.
PC hereby grants IE a non-exclusive, paid-up, royalty-free, perpetual,
world-wide license to use, distribute, perform, exhibit, reproduce, publish,
display and prepare derivative works of, PC Materials as necessary and
approved by PC to fulfill the rights and obligations of IE under this
Agreement, including without limitation the right to display the Niki
Taylor's Fashion House Flowers & Gifts service home page and seamlessly
direct customers to the PC Flowers & Gifts Silicon Graphic web servers for
review of the content of the Niki Taylor's Fashion House Flowers & Gifts
service and to place orders on the Service.
PC shall have the responsibility for determining the adequacy and
acceptability of the Niki Taylor's Fashion House Flowers & Gifts service.
PC shall retain all right, title and interest, including ownership of
copyright, for all programs, program listings, programming tools,
documentation, drawings and reports developed hereunder by PC or its
affiliates.
3. PC Represents and Warrants
PC represents and warrants that it has the full right, title and authority
to grant IE the rights and licenses herein granted.
PC warrants that it is and will remain free of any obligations and
restrictions that would interfere or be inconsistent with, or present a
conflict of interest concerning the services to be furnished by it under
this Agreement.
PC represents and warrants that the Products which will be offered on the
Niki Taylor's Fashion House Flowers & Gifts Service will comply with all
applicable governmental regulations, rules and guidelines.
4. Charges and Payments
PC will remit to IE, within twenty (20) days after the end of each calendar
month, an amount equal to the percent listed on paragraph 1, page 2 of PC
Responsibilities. This monthly payment shall hereinafter be referred to as
the "royalty payment".
5. Indemnification
PC shall indemnify, defend and hold IE harmless against any claim, action,
liability, losses, and expenses (including reasonable attorneys' fees)
relating to or arising out of any Product offered by, or ordered or
requested from PC by means of the Niki Taylor's Fashion House Flowers &
Gifts service.
Page 3 of 6
<PAGE>
PC assumes all responsibility for the content and subject matter of PC's
Commerce Service screens and related material (including text and
illustrations), and shall indemnify, defend and hold IE harmless against any
claim, action, liability, losses, and expenses (including reasonable
attorneys' fees) resulting from or arising out of IE's use of such
Material under this Agreement or IE's performance hereunder.
6. Limitation of Liability
a. IE will have no liability for failure for any reason to direct IE
consumers to the PC Flowers & Gifts web server, for the unavailability
of the Niki Taylor's Fashion House Flowers & Gifts service, for the
adequacy of performance of the Niki Taylor's Fashion House Flowers &
Gifts service.
b. PC will have no liability for failure for any reason for the
unavailability of the Niki Taylor's Fashion House Flowers & Gifts
Service or for the adequacy of performance of the Niki Taylor's Fashion
House Flowers & Gifts Service.
7. Term and Termination
Either party may terminate this Agreement at any time upon ninety (90) days
written notice to the other.
It is the intent of PC and IE to evaluate and develop mutually beneficial
applications, products or services, for merchandising on the Niki Taylor's
Fashion House Flowers & Gifts service.
Either IE or PC may propose to the other new marketing programs, promotions
and/or revenue sharing programs. Each party may, at its sole discretion,
decide to forego or engage in any particular business opportunity.
8. General
IE accepts any PC Material intended for use in connection with the Niki
Taylor's Fashion House Flowers & Gifts service only upon the representation
that PC has the right (including all necessary content) to publish the
entire content and subject matter thereof. Submission (including electronic
transmission) of material for display on the Niki Taylor's Fashion House
Flowers & Gifts service constitutes consent to display.
IE reserves the right to reject any material submitted from PC for any
reason at any time, regardless of any prior acceptance or display of any
such material.
Governing Law. The final Agreement shall be governed by and construed and
enforced in accordance with the substantive laws of the State of New York.
Page 4 of 6
<PAGE>
If any provision of this Agreement shall be found by a court of competent
jurisdiction to be invalid or unenforceable, such finding shall not affect the
validity or enforceability of this Agreement as a whole or of any other part of
this Agreement. Any such provision shall be enforced to the maximum extent
permissible. In the event such provision is considered an essential element of
this Agreement, PC and IE agree to promptly negotiate a replacement thereof.
All notices and other official communications under this Agreement shall be in
writing and addressed as follows for each of the parties:
For PC: William J. Tobin
PC Flowers & Gifts, Inc.
134 Davenport Drive
Stamford, Connecticut 06902
For IE: -------------------------------
Interactive Entertainment
1905 Anderson Avenue
Ann Arbor, Michigan 48104
Notices shall be effective upon receipt.
All terms of this Agreement which by their nature extend beyond its termination
remain in effect until fulfilled, and apply to respective successors and
assigns.
PC shall not sell, transfer, assign, or subcontract any right or obligation
hereunder without the prior written consent of IE. IE shall not sell, transfer,
assign, or subcontract any right or obligation hereunder without the prior
written consent of PC.
No failure to enforce any provision, assert any right, or insist on performance
of any obligation under this Agreement in any instance shall be deemed a waiver
of the ability to enforce such provision, assert such right, or insist on the
performance of such obligations in the future. No course of dealing or informal
communication of any kind shall be deemed to amend this Agreement. This
Agreement will be the only agreement between PC and IE, and will supersede all
other Agreements relating to the Niki Taylor's Fashion House Flowers & Gifts
service. This Agreement may be amended only by mutual written amendment signed
by both PC and IE.
No terms or provisions under this Agreement shall be deemed waived and no
breach excused, unless such waiver or consent shall be in writing and signed by
the party claimed to have waived or consented. Any consent by any party to, or
waiver of, a breach by the other, whether expressed or implied, shall not
constitute a consent to or waiver of, or excuse for any other different or
subsequent breach.
Page 5 of 6
<PAGE>
The provisions of this Agreement set forth the entire agreement and
understanding between PC and IE as to the subject matter hereof and supersedes
all prior agreements, oral or written, and all other communications between PC
and IE relating to the subject matter hereof.
This Agreement may be executed in counterparts, each of which shall constitute
an original but all of which, when taken together, shall constitute one
agreement, and shall become effective when one or more such counterparts have
been signed by each of the parties and delivered to the other party.
This Agreement is Accepted by:
Interactive Entertainment PC Flowers & Gifts, Inc.
By: /s/ By: /s/ William J. Tobin
Hereunto Duly Authorized Hereunto Duly Authorized
Name: ---------------------- William J. Tobin
Title: President President
Page 6 of 6
<PAGE>
EXHIBIT 10.8
STANDARD PUBLICISTS GUILD AGENCY - CLIENT AGREEMENT
[LOGO]
April 15, 1998
I. The following will confirm the terms upon which you PTN Media have engaged
an agency of The Publicists Guild as your publicity and public relations
representative.
II. The Angellotti Company will provide publicity and public relations service
to you, on a non-exclusive basis and agree to devote such time as the
agency deems necessary to accomplish the desired results on your behalf.
III. The contract shall be for a period of Eight (8) Months effective May 1,
1998.
IV. For planning and deadline purposes, it is necessary that you advise us by
registered mail at least 30 days prior to the expiration of this
agreement if you do not plan to continue. It is mutually agreed that in
the event we do not receive such written notification within the time
period specified this agreement shall be renewed automatically under the
same terms and conditions outlined.
V. As compensation for our services you agree to pay us a fee of $28,000.00
payable at the rate of $3,500.00 per month.
VI. You further agree to pay expenses rendered mandatory under the Publicists
Guild Contract which include business class transportation, travel
subsistence, mileage plus expenses such as photography, long distance
telephone, cable, message service, press entertainment mailings and
sundry other expenses and services as may be customarily incurred on
your behalf in the course of a publicity campaign.
VII. A copy of this agreement is required to be filed with legal counsel
representing The Publicists Guild. The Guild may take whatever action is
necessary to protect the agency should any provision of this agreement be
breached by you and you agree to pay whatever costs of collection should
arise out of said default, if any.
VIII. We mutually agree, should disputes between us arise which cannot be
solved by the parties involved, to submit same for adjudication to the
American Arbitration Association.
IX. The foregoing properly sets forth this agreement. Please sign in the
space provided below and return two copies of this contract to us.
The Angellotti
------------------------------------------
(Name of Company)
/s/ Jay
------------------------------------------
Officer
AGREED AND ACCEPTED BY: Peter Klamka for PTN Media Inc.
----------------------------------
(Name of Client)
/s Peter Klamka
----------------------------------
Signature
If the agreement is to be signed by the client's authorized
representative, please complete the following:
AGREED AND ACCEPTED ON BEHALF OF ------------------------------
(Client's Name)
BY SAID AUTHORIZED REPRESENTATIVE -----------------------------
Signature
THIS AGREEMENT HAS BEEN DULY APPROVED AS TO FORM BY THE PUBLICISTS GUILD,
LOCAL 818, I. A. T. S. E. & M. P. M. O.
Original (WHITE), to be returned with CANARY copy to Agency. Client to
retain PINK.
<PAGE>
EXHIBIT 11
PTN MEDIA, INC.
COMPUTATION OF EARNINGS PER COMMON SHARE
FOR THE PERIOD ENDED
DECEMBER 31, 1997
--------------------
NET (LOSS).................................... $ (155,017)
----------
----------
WEIGHTED AVERAGE COMMON SHARES................ 2,967,348
----------
----------
BASIC (LOSS) PER COMMON SHARE................. $ (.05)
----------
----------
- Exhibit 11 -
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
PTN Media, Inc.
We hereby consent to the use in the Registration Statement on Form SB-2 of our
report dated March 26, 1998, relating to the financial statements of PTN Media,
Inc., and to the reference to our firm under the caption "Experts" in this
registration statement.
LAZAR LEVINE & FELIX LLP
New York, New York
May 6, 1998
