As filed with the Securities and Exchange Commission on June 29, 1999
CIK: 0001084718
Registration No. 333-77691
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
PRE-EFFECTIVE AMENDMENT No. 1
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------------
Information Network Radio, Inc.
(Name of small business issuer in its charter)
California 94-3323226
(State or jurisdiction of incorporation or (I.R.S. Employer
organization) Identification No.)
4832
(Primary Standard Industrial
Classification Code Number)
114 Sansome Street, Suite 1410
San Francisco, California 94104
415.434.1220
(Address and telephone number of principal executive offices
and principal place of business)
N. John Douglas, Chairman/Chief Executive Officer
Information Network Radio, Inc.
114 Sansome Street, Suite 1410
San Francisco, California 94104
415.434.1220
(Name, address and telephone of agent for service)
----------------------
Copies to:
Drew Field
534 Pacific Avenue
San Francisco, CA 94133
415.296.9795
----------------------
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement.
----------------------
<TABLE>
CALCULATION OF REGISTRATION FEE
<CAPTION>
====================================================================================================================================
Title of each Dollar Proposed maximum Proposed maximum
class of securities Amount to be offering price aggregate offering Amount of
to be registered registered per share price registration fee
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, without par value $8,000,000 $100.00 $8,000,000 $2,224
====================================================================================================================================
</TABLE>
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 the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
If any of the securities on this Form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, check
the following: X
================================================================================
<PAGE>
<TABLE>
INFORMATION NETWORK RADIO, INC.
Cross-reference Sheet Showing Location in Prospectus of:
PART I -- INFORMATION REQUIRED IN PROSPECTUS
<CAPTION>
Form SB-2 Item Number and Caption Caption in Prospectus
- ------------------------------------------------- ---------------------------------------
<S> <C>
1. Front of Registration Statement and
Outside Front Cover of Prospectus......... Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover
Pages of Prospectus....................... Inside Front Cover Page of Prospectus
3. Summary Information and Risk Factors Prospectus Summary; Risk Factors
4. Use of Proceeds............................. Use of Proceeds
5. Determination of Offering Price............. Plan of Distribution -- Determination of Offering Price
6. Dilution.................................... Dilution
7. Selling Security Holders.................... Not applicable
8. Plan of Distribution........................ Plan of Distribution
9. Legal Proceedings........................... Business -- Legal Proceedings
10. Directors, Executive Officers, Promoters
and Control Persons....................... Management
11. Security Ownership of Certain Beneficial
Owners and Management..................... Principal Shareholders
12. Description of Securities................... Description of Common Stock
13. Interest of Named Experts and Counsel Not applicable
14. Disclosure of Commission Position on Management -- Indemnification of
Indemnification for Securities Act ....... Officers and Directors
15. Organization Within Last Five Years......... Organization of the Company
16. Description of Business..................... Prospectus Summary; Risk Factors;
Business; Certain Transactions
17. Management's Discussion and Analysis
or Plan of Operation ..................... Management's Plan of Operations
18. Description of Property..................... Business - Properties/Facilities
19. Certain Relationships and Related
Transactions.............................. Certain Transactions
20. Market for Common Equity and Related
Stockholder Matters Risk Factors; Shares Eligible
for Future Resale
21. Executive Compensation...................... Management: Executive Compensation
22. Financial Statements........................ Index to Financial Statements
23. Changes In and Disagreements With
Accountants on Accounting and
Financial Disclosure...................... None
</TABLE>
<PAGE>
80,000 SHARES
[logo, consisting of block letters "IN," with a globe on top of the I,
with "RADIO" on one side of the block letters and
"Information Network Radio" on the other side]
IN Radio
COMMON STOCK
----------------------
Information Network Radio, Inc. is offering these 80,000 shares of common
stock directly to investors, through designated executive officers who will
register as sales representatives, where required, and will not receive any
commission. There has been no public trading market for the shares and we do not
expect there to be one after this offering. Our management has determined this
initial public offering price. The terms "IN Radio," "we" or "our" all mean the
corporation, Information Network Radio, Inc, its subsidiaries and its
predecessor, Information Network Radio, LLC.
This offering will end when all the shares have been purchased or an
earlier date, if we decide to close the offering. The minimum purchase for each
investor is 250 shares. We reserve the right to reject any share order form in
full or in part.
----------------------
This offering involves a high degree of risk.
See "Risk Factors" beginning on page 4.
----------------------
Neither the Securities and Exchange Commission nor any state securities
regulator has approved or disapproved the shares or determined if this
prospectus is accurate or complete. Any representation to the contrary is a
criminal offense.
================================================================================
Public Underwriting
Offering Discounts and Proceeds to
Price Commissions (1) IN Radio (2)
- --------------------------------------------------------------------------------
Per Share $100.00 None $100.00
- --------------------------------------------------------------------------------
Total $8,000,000 None $8,000,000
================================================================================
(1) Before deducting estimated expenses of $150,000 payable by IN Radio,
including registration fees, legal and accounting fees, costs of printing,
copying and postage and other offering costs.
----------------------
The date of this Prospectus is ___________, 1999
<PAGE>
We have not authorized anyone to give you any information or make any
representation that is not in this prospectus. The information in this
prospectus is current and correct only as of the date of this prospectus,
regardless of the time of its delivery or of any sale of the shares. We are
offering to sell, and seeking offers to buy the shares only in jurisdictions
where offers and sales are permitted.
----------------------
TABLE OF CONTENTS
Page
----
Prospectus Summary ........................................................ 3
Risk Factors .............................................................. 4
Use of Proceeds ........................................................... 7
Dilution .................................................................. 7
Management's Plan of Operation ............................................ 8
Business .................................................................. 9
Management ................................................................ 16
Certain Transactions ...................................................... 19
Principal Shareowners ..................................................... 19
Description of Capital Stock .............................................. 20
Shares Eligible for Future Resale ......................................... 20
Plan of Distribution ...................................................... 21
Experts ................................................................... 21
Additional Information .................................................... 22
Index to Financial Statements ............................................. F-1
---------------------
Until , 1999 (90 days after the date of this Prospectus), all dealers
that buy, sell or trade our common stock, whether or not participating in this
offering, may be required to deliver a prospectus. This requirement is in
addition to the dealers' obligation to deliver a prospectus when acting as
underwriters and with respect to their unsold allotments or subscriptions.
---------------------
<PAGE>
- --------------------------------------------------------------------------------
PROSPECTUS SUMMARY
IN Radio's business
IN Radio was founded by N. John Douglas, who has 37 years of
broadcasting, financial and technology experience. Our business is developing
and producing unique talk-formatted audio programming for a new service
providing digital satellite transmission directly to vehicles and homes. We are
preparing to begin operations October 1, 2000, when the first satellites are to
have been launched. IN Radio has agreements to provide seven channels of audio
programming to the satellite radio industry.
Satellite radio
Satellite radio will provide a new generation of radio service,
offering a wide variety of music and talk formats, nearly seamless signal
coverage throughout the United States and compact disc quality programming. Two
companies are licensed by the Federal Communications Commission. Each will have
up to 100 channels, of which 50 channels will be commercial-free music
programming and up to 50 will be advertiser-supported channels of non-music
programming, including news, sports, and talk.
Our satellite radio channels
We have contracts with each of the satellite radio companies to provide
talk-formatted programming 24 hours a day, seven days a week. Five channels are
with CD Radio and two are with XM Satellite Radio. Our revenues will come
primarily from selling up to 12 minutes an hour of commercial advertising
messages and company-sponsored programs. We pay the satellite radio companies a
share of that time or revenues.
Our programming formats
Our agreements with the satellite radio companies are exclusive for our
formats. They are:
o BEST
o Cruisin' (And Having Fun) [for aging "baby boomers"]
o China Wave [for Chinese Americans]
o Especially Women . .
o Taj Radio Network [for Asian Indians]
o Information First! (Success Tools for African Americans)
o Personal Achievement Live
Our development plan
The proceeds of this offering will be used to build and equip our San
Francisco studio and to pay for marketing and operations until we achieve
positive cash flow from operations, which we project we'll do in 2002. We have
put together a board of directors and management team with extensive experience
in areas important to our development and operation. We are ready now to create
programming, hire and train our employee team and then begin marketing and
operations.
Communicating with us
Our office is at 114 Sansome Street, Suite 1410, San Francisco,
California 94104. Our telephone number is 415.434.1220, the fax number is
415.434.1280 and our email address is [email protected].
Becoming a shareowner
We are offering shares of our common stock directly to selected
investors, for a minimum investment of 250 shares at $100 per share, or $25,000.
You may become a shareowner by filling out the share order form and returning it
with your check for the amount of your investment. When your order has been
accepted, we will return a signed copy to you, with an acknowledgment letter.
Within a few weeks, you will receive a certificate for your shares. You are
invited to call or write John Douglas with any questions.
- --------------------------------------------------------------------------------
<PAGE>
RISK FACTORS
We expect to have losses and negative cash flow for at least the next four
years.
Our business is in an early development stage. We do not expect to begin
generating revenues from operations until late 2000, at the earliest. We expect
that positive cash flow from operations will not occur before 2002. The
satellite radio companies may never commence operations. Even if they do, we may
never achieve or sustain profitability. Financial statements in this prospectus
have been prepared assuming that we will continue as a going concern.
We need the funds from this offering to start the business on time.
Cost overruns or failure to sell sufficient shares in this offering, or to
secure other equity or debt financing on a timely basis could cause us not to be
ready when the radio satellites are launched. This would violate our agreements
with the satellite radio companies. There is no minimum amount required to be
sold in this offering. It could close with less than all $8 million having been
sold. We estimate that $4.2 million will be needed to commence commercial
operation by the end of 2000.
We may need more money to operate until we reach breakeven. It could be
unavailable or costly.
Additional funding may be necessary to reach the point when we would be
generating positive cash flow from operations. We could be unable to raise
additional capital. Payments of interest and principal on any additional debt or
lease financing could delay the time when we are generating positive cash flow.
Our estimates of cash flow are based upon assumptions, particularly when
satellite radio service will begin and how quickly it is accepted in the market.
Actual results may be very different from our assumptions. Whether and how much
money we may need will depend upon the actual timing of satellite launches and
consumer subscriptions to the satellite services.
IN Radio's business depends upon CD Radio and XM Satellite Radio and our
agreements with them.
IN Radio's success is dependent upon the financial strength and ability of CD
Radio and XM Satellite Radio to commence and maintain satellite radio service.
No one else has the FCC authority to operate a similar service. We have
five-year agreements with CD Radio and with XM Satellite Radio. Each agreement
has options to extend but extension is not totally within our control and may
not be granted. Our business could be destroyed or severely harmed by
termination of or significant change in these agreements. There is a description
of the agreements, including what could cause early termination, in the
prospectus section, "Business: Essential Contracts: Broadcast Contracts."
Delay in the start of satellite radio operations could have serious consequences
for us.
A significant delay in the commencement of operations by CD Radio or XM
Satellite Radio would have a material adverse effect on IN Radio. CD Radio
announced in February 1999 that its projected start of operations was postponed
from April 2000 to the fourth quarter of 2000 because of a shortage in launch
vehicles for the satellites, as well as delays and cost increases for the
integrated circuits used in its customers' receivers. Further delays could
result from any one or more of many causes, such as unanticipated delays
associated with obtaining additional FCC authorizations, coordinating use of
radio spectrum with Canada and Mexico, inability of the satellite radio
companies to obtain necessary financing in a timely manner, delays in or
modifications to the design, development, construction or testing of radio
satellites, the national broadcast studios or other aspects of the satellite
radio system, changes of technical specifications, delay in commercial
availability of radio cards, S-band radios or miniature satellite dish antennas,
failure of the satellite radio's vendors to perform as anticipated or a delayed
or unsuccessful satellite launch or deployment.
Satellite radio relies on unproven applications of technology.
Satellite radio is designed to be broadcast from two or three satellites in
geosynchronous or elliptical orbits that transmit identical signals to radio
cards or S-band radios through miniature satellite dish antennas. This design
involves new applications of existing technology and the satellite radio system
may not work as planned. The necessary radio cards, S-band radios and miniature
satellite dish antennas are not currently available in production quantities.
Signals from both satellites will be blocked and satellite radio reception will
diminish in areas with high concentrations of tall buildings and other
obstructions, such as in large urban areas, or in tunnels. In urban areas, the
satellite radio companies plan to install terrestrial repeating transmitters to
rebroadcast the satellite radio signal. Certain areas with impediments to
satellite line-of-sight may still experience "dead zones." However, parts of the
<PAGE>
technologies to be employed by these companies have been used successfully in
direct satellite television broadcasting and cable radio.
Satellites may fail in orbit or have shorter than expected useful lives.
Our operating results could be harmed if the initial satellites fail, or have
significantly shorter useful lives than 15 years, and if the satellite radio
companies have not launched replacement satellites. Random failure of satellite
components could result in damage to or loss of a satellite. In rare cases,
satellites could also be damaged or destroyed by electrostatic storms or
collisions with other objects in space. If the satellite radio company is
required to launch a spare satellite, due to failure of the launch or in-orbit
failure of one of the operational satellites, its operational timetable would be
delayed for approximately six months or more. The launch or in-orbit failure of
two satellites would require the satellite radio company to arrange for
additional satellites to be built and could delay the commencement or
continuation of the satellite radio's operations for three years or more. The
satellites are expected to have useful lives of approximately 15 years, after
which their performance is expected to deteriorate. A number of factors will
affect the useful lives of the satellites, including the quality of
construction, the expected gradual environmental degradation of solar panels,
the amount of fuel on board and the durability of component parts.
Radio cards, S-band radios or miniature satellite dish antennas may not be
available.
The satellite radio companies' business strategies require that subscribers to
the service purchase radio cards or S-band radios as well as the associated
miniature satellite dish antennas in order to receive the signal. Our revenues
could be delayed by a failure to have those products available in sufficient
quantities, in a timely manner and at an affordable price. These products are
not now available in production quantities, although major consumer electronics
manufacturers have contracted to manufacture them for retail sale in the United
States. The FCC satellite radio licenses are conditioned upon receivers being
available which will operate on both of the significantly different transmission
technologies planned by the two satellite radio companies.
Changing technology could put us out of business.
Our ability to begin and continue operations depends upon the satellite radio
companies operating and having sufficient subscribers to their services. One or
more of the technologies to be used by satellite radio companies may become
obsolete or their services may not be in demand at the time they are offered.
More advanced satellite radio technologies, or broadcast technologies other than
satellite radio may be used by media competitors. Delay in launching satellite
radio service could place us at a competitive disadvantage in relation to any
competitor in any electronic media that succeeds in beginning operations earlier
than we do.
There may not be enough demand for satellite radio to make us profitable.
The consumer demand for satellite radio service may not be sufficient for IN
Radio to achieve significant revenues or positive cash flow or profitable
operations. There is currently no satellite radio service in commercial
operation for consumers in the United States. As a result, the extent of the
potential demand for such a service and the degree to which the proposed service
will meet the demand is difficult to estimate. Factors beyond our control will
affect the success of satellite radio in gaining market acceptance, including
the willingness of consumers to pay subscription fees to obtain satellite radio
broadcast; the cost, availability and consumer acceptance of radio cards, S-band
radios and miniature satellite dish antennas; the marketing and pricing
strategies of audio media competitors; the development of alternative
technologies or services and general economic conditions.
Development and operation of the business are highly dependent on the services
of N. John Douglas.
N. John Douglas, Chairman and Chief Executive Officer, is responsible for IN
Radio's overall direction and strategic planning. The loss of the services of
Mr. Douglas would have a material adverse effect upon our business and
prospects. Mr. Douglas does not have an employment agreement with IN Radio and
we have no insurance on his life. He is the majority shareowner.
Satellite radio could be subject to signal theft.
The satellite radio signal, like all broadcasts, is subject to piracy. Signal
theft, if widespread, could be commercially harmful to the satellite radio
companies and IN Radio. The satellite radio companies plan to use
state-of-the-art encryption technology to mitigate signal theft. They do not
believe that this technology is infallible.
7
<PAGE>
This prospectus contains forward-looking statements, based on our current
expectations.
Our actual results could differ materially from those anticipated in
these forward-looking statements, as a result of various factors, including the
risks described in this prospectus.
USE OF PROCEEDS
<TABLE>
The net proceeds to IN Radio from this offering are estimated to be
approximately $7.85 million after deducting estimated expenses. We plan to use
these proceeds to pay for pre-operational development expenses, working capital
and to cover expected net cash outflow from the date our operations begin
through our projected 2002 breakeven point and self-supporting positive cash
flow. If less than all the shares offered are sold, these are our planned
allocations:
<CAPTION>
Planned Use of Proceeds Allocation if These Percentages of the Offering are Sold
----------------------- -------------------------------------------------------------------
25% 50% 75% 100%
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Pre-operational development expenses $1,500,000 $1,500,000 $1,500,000 $1,500,000
Working Capital 350,000 500,000 500,000 500,000
Net operating cash outflow to breakeven -- 1,850,000 3,850,000 5,850,000
</TABLE>
Our planning estimates $8,628,000 in revenues and $15,030,000 in expenses during
the period from when we begin operations through the breakeven point. That would
cause a total net operating cash flow of $6,402,000. We plan to fund the excess
over the available proceeds from this offering by a further share offering or by
debt. The components of the expected net operating cash outflow to breakeven,
and the percentages of proceeds (and any other financing that may be used) are:
employee compensation - 69%, rent - 4%, leased equipment - 4%, advertising - 10%
and other expenses -13%.
DILUTION
The public offering price per share is substantially higher than the
net tangible book value per share of our common stock. Purchasers of shares in
this offering will experience immediate and substantial dilution in the pro
forma net tangible book value per share. The issuance of additional equity
securities could also cause substantial dilution of the ownership interest of
purchasers of the shares offered by this prospectus.
On March 31, 1999 IN Radio had a net tangible book value of ($23,749)
or ($.20) per share. The net tangible book value per share is equal to its total
tangible assets, less its total liabilities and divided by its total number of
shares of common stock outstanding. We have computed a pro forma net tangible
book value on the same date, by giving effect to the sale of all the shares in
this offering and the application of the estimated net offering proceeds. That
pro forma net tangible book value would have been $7,826,251, or $39.17 per
share. This represents an immediate increase in net tangible book value of
$39.37 per share to existing shareowners and an immediate dilution of $60.83 per
share to new shareowners in this offering. The following table illustrates this
dilution to new shareowners:
Public offering price per share ................................. $ 100.00
Net tangible book value per share .......................... (0.20)
Increase in net tangible book value per share
attributed to new investors .............................. 39.37
----------
Pro forma net tangible book value per share
after this offering ........................................ 39.17
----------
Net tangible book value dilution per share
to new investors ........................................... $ 60.83
==========
<PAGE>
<TABLE>
The following table shows, on a pro forma basis as of March 31, 1999,
the difference between existing shareowners and new shareowners in this
offering, with respect to the number of shares purchased, the total
consideration paid and the average price paid per share:
<CAPTION>
Shares Purchased Total Consideration
-------------------------- ------------------------- Average Price
Number Percent Amount Percent Per Share
------ ------- ------ ------- ---------
<S> <C> <C> <C> <C> <C>
Existing Shareowners .................... 119,825 60.00 $ 10,000 0.12 % $ 0.08
New Shareowners ......................... 80,000 40.00 8,000,000 99.88 100.00
------- ----- ---------- ------- ----------
Total ................................ 199,825 100.00% $8,010,000 100.00%
======= ====== ========== ======
</TABLE>
MANAGEMENT'S PLAN OF OPERATION
Our plan of operation is linked to the schedules of the satellite radio
companies. We are planning to be ready for transmitting a test signal to them by
June 2000 and programming by October 2000, when CD Radio has projected its
service will begin. XM Satellite Radio is forecasted to commence no later than
six months after CD Radio's initial satellite broadcast service.
Development of the Business Up to Now. We began as a limited liability company
on September 18, 1998 and incorporated the business March 9, 1999. The financial
statements in this Prospectus are for the period from September 18, 1998 through
March 31, 1999. Our development during that time has primarily included creating
the working relationships with XM Satellite Radio, CD Radio and
Nightingale-Conant and completing the agreements with them described in the
"Business: Essential Contracts" section of this Prospectus. We have also been
working with a marketing consultant and others in planning, locating studio
facilities and equipment, and identifying prospective employees and suppliers.
Plan for Development Until we Begin Operations. Our development from now until
we are scheduled to begin operations, in October 2000, will focus on locating,
designing and constructing the studio facility, hiring and training about 165
employees, designing the programming schedules, creating and acquiring
programming content, contracting with numerous suppliers and testing all parts
of the proposed operation. We need to go from no employees or facilities to a
full complement for operating seven channels of radio broadcasting 24 hours a
day, seven days a week. Our agreements with the satellite radio companies will
terminate if we are not ready to deliver programming when they begin operations.
Our agreement with Nightingale-Conant will terminate if we do not begin
broadcasting by June 30, 2001.
Our Cash Requirements. We expect the amount of this offering to be sufficient to
pay the costs during our pre-operational period and to fund the business until
we are receiving more cash from operations than we are paying. Our plan projects
reaching this positive cash flow in 2002. Both the market for satellite radio
and its technology are untested. We have based our estimates upon our
management's experience in the radio broadcasting business, and upon advice from
others. We may need to change our plan of operation in major ways, to
accommodate new information or unexpected events. If that happens, we may need
to raise additional funds. We currently plan a second public offering of common
stock after operations commence. Our financial statements are presented as a
going concern on the basis that funding will be available. Our Chief Executive
Officer and Chief Financial Officer have committed to providing any funding
necessary during the next twelve months, to the extent it is not available from
this offering or other sources.
The following table describes our estimated uses of funds through 2002,
when we project reaching positive cash flow from operations. This projection is
forward-looking and could vary, perhaps substantially, from actual results, due
to events outside our control, including unexpected costs and unforeseen delays.
The "Risk Factors" section of this prospectus describes several of those
possible events. There may well be others.
<PAGE>
Uses of Funds (in millions)
From this Total uses
Offering of funds
-------- --------
Leasehold capital improvements and equipment ............ $ 2.20(a)
Estimated costs of this offering ........................ $ 0.15 0.15
Working capital ......................................... 0.50 0.50
Operating expenses until operations commence ............ 1.50 1.50
Losses until there is positive cash flow from operations 5.85(b) 5.85(b)
------ -------
Total uses .............................................. $ 8.00 $ 10.20
====== =======
(a) We expect to finance these through debt and/or lease financing.
(b) This includes our estimate of funds needed to cover negative cash flow
until the projected breakeven in 2002.
BUSINESS
IN Radio is a satellite radio network programming company. We will
provide talk-formatted programming to a new multi-channel radio service that
broadcasts directly from satellites to vehicles and homes.
IN Radio was formed September 18, 1998 as Information Network Radio,
LLC, a Delaware limited liability company. Information Network Radio, Inc. was
incorporated under California law on March 9, 1999 and is the successor to
Information Network Radio, LLC. IN Radio has two wholly-owned subsidiaries,
Personal Achievement Live, LLC, formed as a Delaware limited liability company
March 4, 1998 and AsiaOne Network, LLC, formed as a Delaware limited liability
company August 10, 1998.
In October 1997, two companies were granted licenses from the Federal
Communication Commission after an auction process to build, launch and operate
national satellite radio broadcast systems. The FCC licenses cost CD Radio $83
million and XM Satellite Radio $89 million. Each company plans to have up to 100
channels of which 50 channels will be commercial-free, compact disc quality
music programming and up to 50 will be advertiser-supported channels of
non-music programming including news, sports, and talk.
<PAGE>
<TABLE>
We have agreements to broadcast five channels on CD Radio and two
channels on XM Satellite Radio. (The agreement for two channels with CD Radio
was initially with our subsidiary, Personal Achievement Live, LLC and the
agreement with XM Satellite Radio was initially with our subsidiary, AsiaOne,
LLC. These subsidiaries have had no activity and the agreements have been
assigned to the parent company, with required consents.) We plan to develop and
offer the following wide range of informational talk programming on a 24-hour,
7-day/week basis:
<CAPTION>
- ----------------------------------------------- -------------------------------- ------------------------------
Programming Format Target Demographics Satellite Operator
- ----------------------------------------------- -------------------------------- ------------------------------
<S> <C> <C>
BEST 25 - 54 CD Radio
- ----------------------------------------------- -------------------------------- ------------------------------
Cruisin'(And Having Fun) 45+ CD Radio
- ----------------------------------------------- -------------------------------- ------------------------------
China Wave Chinese Americans XM Satellite Radio
- ----------------------------------------------- -------------------------------- ------------------------------
Especially Women... Women,25 - 54 CD Radio
- ----------------------------------------------- -------------------------------- ------------------------------
Information First!
(Success Tools For African Americans) African Americans CD Radio
- ----------------------------------------------- -------------------------------- ------------------------------
Personal Achievement Live 25 - 54 CD Radio
- ----------------------------------------------- -------------------------------- ------------------------------
Taj Radio Network
(Home Away From Home) Asian Indians XM Satellite Radio
- ----------------------------------------------- -------------------------------- ------------------------------
</TABLE>
IN Radio will have multiple state-of-the-art radio production studios in our San
Francisco national broadcast facility. We will be able to create, edit, store,
and transmit high-quality, digital programming to either the CD Radio (New York
City) or XM Satellite Radio (Washington, D.C.) national studios. We will also
have eight regional "micro" studios in New York, Washington D.C., Atlanta,
Chicago, Dallas, Detroit, Los Angeles, and Denver for regional/national sales
departments, local/regional news bureaus and talk interview studios.
The Satellite Radio Opportunity
The last major advance in radio technology was the introduction of FM
broadcasts and FM multiplexed sound in the 1940's and 1950's. Television
technology has meanwhile advanced steadily, from black and white to color, from
broadcast to cable, and from ordinary to high-definition television. Satellite
radio could provide a new generation of radio service, offering a wide variety
of music formats available on demand, nearly seamless signal coverage throughout
the United States and commercial-free, compact disc quality music programming.
In addition, this service will provide a wide variety of targeted talk formats
that may not be economically viable in local markets, yet could have a strong
national following. The satellite radio industry's planned multiplicity of
formats is currently not available in any market within the United States.
CD Radio's service is primarily for motorists and XM Satellite Radio's
service is primarily for radios in homes or other buildings. The Yankee Group, a
Boston-based market research organization, estimates that there will be
approximately 200 million registered private motor vehicles in the United States
by the end of 2000, when CD Radio expects to commence broadcasting. At present,
approximately 89% of all private vehicles have a radio that could easily receive
satellite radio type broadcasts, according to a Bear Stearns & Co., Inc. Equity
Research Report, "CD Radio, Inc.," dated September 2, 1998. CD Radio, in its
November 20, 1997 common stock prospectus, targeted a number of demographic
groups among the drivers of these vehicles. The group included 110 million
commuters, 34 million of whom spend between one and two hours commuting daily,
three million truck drivers and three million owners of recreational vehicles.
This Prospectus also stated that almost all vehicles contain either a cassette
or a compact disc player, but 87% of automobile commuters still listened to the
radio an average of 50 minutes a day while commuting. Between 95% and 98% of all
Americans age 12 and up listen to radio every week, and 75% listen on a daily
basis, according to The Arbitron Company, a New York City broadcast industry
ratings organization, as reported in an October 10, 1998 press release from XM
Satellite Radio. A typical
<PAGE>
listener spends three hours and 20 minutes each day listening to the radio,
which is more than 22 hours a week and more than 1,200 hours a year, according
to the Radio Advertising Bureau, and there are about 104 million listeners
outside of radio's top 50 markets. That includes markets like Dayton, Ohio (#54
with 28 stations), Richmond, Virginia (#56 with 26 stations) and Tucson, Arizona
(#61 with 28 stations) according to the third edition of BIA Research's
publication, "Investing in Radio Market Report, 1998."
We expect that the satellite radio industry's wide choice of
programming will appeal to a large number of currently underserved listeners.
The economics of the existing advertiser-supported local radio industry dictate
that radio stations generally program for the greatest potential audience in
their limited geographic range. Even in the largest metropolitan areas, station
formats are limited. According to Item 1 of CD Radio's 1998 Form 10-K, filed
with the SEC:
o Nearly half of all commercial radio stations in the United
States offer one of only three formats: country, adult
contemporary and news/talk, and the next three most prevalent
formats account for another 30% of all stations.
o Approximately 30% of sales of recorded music in 1996 were in
niche music categories such as classical, jazz, rap, gospel,
oldies, soundtracks, new age and children's. Those formats are
generally unavailable on existing radio stations.
According to XM Satellite Radio, based on Nashville's M Street Radio Directory
Data, over half of the 30 most popular music formats are not even available in
New York City, the largest radio market in the United States.
Due to the limited coverage area of conventional radio broadcasting,
listeners often travel beyond the range of any single station. Conventional FM
stations have an average range of only approximately 30 miles before reception
fades. Satellite radio's signal is designed to cover the entire continental
United States, enabling listeners almost always to remain within its broadcast
range. Delivery systems are designed to permit satellite radio to be received by
motorists in all outdoor locations where a vehicle has an unobstructed
line-of-sight with one of the satellites or are within range of one of the
terrestrial repeating transmitters located in major markets.
The satellite radio industry will also be able to serve underserved
geographic radio markets. According to CD Radio's 1998 Form 10-K, there are more
than 45 million people in the United States aged 12 and over living in areas
with such limited radio station coverage that the areas are not monitored by
Arbitron. CD Radio believes that approximately 22 million people receive five or
fewer FM stations, 1.6 million receive only one FM station and at least one
million people receive no FM stations. This segment of the population also has a
limited choice of radio music formats and is one of the satellite radio
industry's primary target markets.
The Satellite Radio Service
The satellite radio industry will offer consumers: (i) a wide range of
finely focused music and talk programs in digital form; (ii) nearly seamless
signal coverage throughout the continental United States; (iii) commercial-free
or very low commercial inventory music programming; and (iv) plug and play
convenience and/or replacement radios. The following description of the service
is summarized from the 1998 Form 10-K filed with the SEC by CD Radio.
Wide Choice of Programming. Both CD Radio and XM Satellite Radio will have 50
music channels, each with distinctive formats, such as opera, reggae, classic
jazz, and children's entertainment, intended to cater to specific subscriber
tastes. The talk channels will also have a wide range of programming. In most
markets, radio broadcasters target their programming to broad audience segments.
Even in the largest metropolitan markets the variety of station formats
generally is limited, and many of the satellite radio industry's planned formats
are not available.
"Seamless" Signal Coverage. The satellite radio service will be available
throughout the continental United States, enabling listeners almost always to be
within its broadcast range. We expect that its nearly seamless signal will
appeal to motorists who frequently travel long distances, including truck
drivers and recreational vehicle owners, as well as commuters and others who
outdrive the range of their FM signals. Satellite radio broadcasts are expected
to appeal to the 45 million consumers who live in areas that currently receive
only a small number of FM stations.
<PAGE>
Even in dense, urban cores with skyscraper buildings, satellite radio, with
digital signals and terrestrial repeaters, will probably outperform local
stations which often suffer from "ghosting" and "shadowing" effects.
Commercial-Free Music Programming. CD Radio and probably XM Satellite Radio will
provide commercial-free music programming. A principal complaint of radio
listeners concerning conventional broadcast radio is the frequency of
commercials. Satellite radios, unlike most commercial AM and FM stations, will
probably be on a subscription of about $9.95/month and not an
advertiser-supported service. Music channels will most likely not contain
commercials. Talk channels will include commercials. The success models for this
concept are the premium services on satellite television and cable that are
commercial free, but subscriber based.
The Receivers. Subscribers will receive satellite radio programming initially by
purchasing specially designed radio receivers for their existing vehicles and
later through a new generation of three-band radios installed in new vehicles by
major automotive manufacturers. In the automotive aftermarket, subscribers will
initially have the choice of one of three different receiving devices for their
cars -- an FM modulated receiver, a three-band receiver and a radio card. All
these receivers will visually display the channel and format selected, as well
as the title, recording artist and album title of the musical selection being
played.
o FM Modulated Receivers. The FM modulated receiver will be usable in all
vehicles which have an FM radio, or approximately 95% of all U.S.
vehicles. Each FM modulated receiver will operate with a downlink
processor, or 'DLP,' that will be approximately the size of a 35mm
camera, and will be mounted either in the vehicle's trunk, behind the
dashboard or under a seat. The retail price of this FM modulated
receiver (including the DLP), with a hard-wired satellite antenna and
professional installation, will be approximately $299.
o Three-Band Receivers. A receiver capable of receiving AM, FM and
satellite radio broadcasts is expected to be available. In appearance,
this three-band receiver will be nearly identical to existing
aftermarket car stereos and will permit the user to listen to AM, FM,
or satellite radio with the push of a button. Like existing
conventional radios, a number of these three-band receivers may also
incorporate cassette or compact disc players. The retail price of these
receivers, including the DLP, antenna and professional installation, is
expected to be approximately $150 more than similar receivers which are
not capable of receiving satellite radio broadcasts.
o Radio Cards. CD Radio's wireless adapter, or radio card, will not
require professional installation and will be usable by all vehicles in
the United States equipped with a cassette player, which represent
approximately 65% of all vehicles on the road. Each radio card will
include two components -- the radio card adapter, which will insert
into existing cassette slots, and a wireless version of the satellite
radio antenna. The radio card will be designed so that it can be
removed by pushing the cassette player's 'eject' button. We expect the
radio card, including the wireless satellite antenna, will be sold
though electronics superstores, mass merchant stores and direct
marketing channels, such as the Internet, for approximately $199.
XM Satellite Radio has announced that Sharp Corp., Pioneer Electronics
Corp., and Alpine Electronics, Inc. will build the receiver units for its
service. CD Radio has Delphi Electronics Systems (Delco brand) and Recoton Corp.
(Jensen, Advent, AR/Acoustic Research and Interact brands) as suppliers of their
receiver units. XM Satellite Radio and CD Radio have both recently announced
exclusive agreements with General Motors and Ford brands, respectively, for
installing the three-band receivers in new cards and trucks as early as the
first quarter of 2001.
The Satellite Radio Delivery System
XM Satellite Radio and CD Radio have designed delivery systems to transmit
an identical signal from two satellites placed in geosynchronous and low
attitude, elliptical orbits, respectively. In the case of CD Radio, a third
satellite will also be in a low altitude, elliptical orbit, but only two of the
three satellites will have a "footprint" of the continental United States at any
one time. The two-satellite systems will permit both operators to provide
"seamless" signal coverage throughout the continental United States. This means
that listeners will almost always be within the broadcast range of satellite
radio, unlike current FM and AM radio broadcasts, which have a limited range.
The systems are designed to provide clear reception in most areas despite
variations in terrain, buildings and other obstructions. The systems are
designed to enable motorists to receive satellite radio in all outdoor locations
where the vehicle has an unobstructed line-of-sight with one of the satellites
or is within range of one of the
<PAGE>
terrestrial repeating transmitters. These broadcast repeaters will supplement
the satellites with a terrestrial network that will fill in gaps in satellite
coverage caused by tall buildings and other obstructions in urban areas.
The portion of the S-band located between 2320 MHz and 2345 MHz has
been allocated by the FCC exclusively for national satellite radio broadcasts.
This portion of the spectrum was selected because there are virtually no other
users of this frequency band in the United States, thus minimizing potential
signal interference. In addition, this frequency band is relatively immune to
weather-related attenuation, which is not the case with higher frequencies. XM
Satellite Radio's three satellites (two for launch and one spare) will be built
by Hughes Space & Communications and Alcatel Espace, while CD Radio's four
satellites (three for launch and one spare) will be built by Loral Space &
Communications. CD Radio has contracted with Lucent Technologies to design and
build the microchips for its satellite radio system, while XM Satellite Radio
will be using STMicroelectronics.
The Satellite Radio Programming Service
CD Radio and XM Satellite Radio will each have 50 music channels. Each channel
will be operated as a "separate radio station" with a distinct format. Certain
music channels will offer continuous music while others will have program hosts,
depending on the type of music programming. CD Radio will offer a wide range of
music categories, such as:
- --------------------------------------------------------------------------------
50 MUSIC CHANNELS
- --------------------------------------------------------------------------------
o Symphonic o Tropical
- --------------------------------------------------------------------------------
o Chamber Music o Latin Contemporary
- --------------------------------------------------------------------------------
o Opera/Classical Voices o Merengue
- --------------------------------------------------------------------------------
o Top of the Charts o Boleros
- --------------------------------------------------------------------------------
o 50's Hits o Mexicana
- --------------------------------------------------------------------------------
o 60'S Hits o Rock en Espanol
- --------------------------------------------------------------------------------
o 70's Hits o Tex Mex
- --------------------------------------------------------------------------------
o 80's Hits o Cumbia
- --------------------------------------------------------------------------------
o 90's Hits o Latin Jazz
- --------------------------------------------------------------------------------
o Soft Rock o Today's Country
- --------------------------------------------------------------------------------
o Love Songs o Country Gold
- --------------------------------------------------------------------------------
o Singers & Songs o Traditional Country
- --------------------------------------------------------------------------------
o Beautiful Instrumentals o Folk Rock
- --------------------------------------------------------------------------------
o Broadway's Best o Alternative Rock I
- --------------------------------------------------------------------------------
o Big Band/Swing o Alternative Rock II
- --------------------------------------------------------------------------------
o Classic Jazz o Classic Rock I
- --------------------------------------------------------------------------------
o Contemporary Jazz o Classic Rock II
- --------------------------------------------------------------------------------
o NAC Jazz o Album Rock
- --------------------------------------------------------------------------------
o New Age o Hard Rock/Metal
- --------------------------------------------------------------------------------
o Soul Ballads o Blues
- --------------------------------------------------------------------------------
o Classic Soul Hits o Reggae
- --------------------------------------------------------------------------------
o R&B Oldies o World Beat
- --------------------------------------------------------------------------------
o Urban Contemporary o Gospel
- --------------------------------------------------------------------------------
o Rap/Hip Hop o Contemporary Christian
- --------------------------------------------------------------------------------
o Dance o Children
- ------------------------------------------------- ------------------------------
<PAGE>
Information Network Radio's Programming Channels
There will be 50 non-music formats on CD Radio and 20 to 50 on XM Satellite
Radio. We will have five of those channels on CD Radio and two on XM Satellite
Radio. This is a description of our planned programming formats for these
satellite radio channels:
Especially Women...
This format is aimed at women (25-54), who constitute as a whole
approximately 52% of the total population. According to the Small Business
Administration, the number of women-owned businesses increased 89% between 1987
and 1997. They increased revenues by 209% and increased their total number of
employees by 262%.
The programming will be directed at women in a similar manner as cable
TV's Lifetime Channel. Subjects of particular interest to women will be
programmed through a talk format. IN Radio anticipates creating alliances with a
cross section of the nation's most successful magazine publishers and women's
Internet sites, such as women.com.
Personal Achievement Live (PAL)
PAL is primarily targeted at adults aged 25 to 54. The format will be
talk with subject matter aimed at positive thinking, self-help, motivation,
improving success and business skills, and healthy lifestyles. Speakers on the
air will be well-known, national motivational speakers in different segments,
ranging from health to wealth. In addition, PAL has the exclusive satellite
radio rights to Nightingale-Conant's library of audio tape material, as
described under "Programming Content Agreements." Nightingale-Conant, located in
Niles, Illinois, has been the leader in the development and syndication of
personal development audio tapes for decades, as reported in Marketdata
Enterprises, Inc. February 1997 research report, "The U.S. Market for
Self-Improvement Products and Services."
Information First! (Success Tools for African Americans)
This format is aimed at upwardly mobile African Americans.
Approximately 12% of the U.S. population is African American. Approximately 41%
of African Americans have an annual income over $35,000. The programming format
of Information First! will be talk. The content is anticipated to include topics
ranging from relationships, business, money management, careers, investment
strategies, politics, education, history, entertainment and the arts. The format
will program an array of features aimed at African Americans. IN Radio plans to
form a strategic relationship with NetNoir Online, the leading African American
web site, which is partially owned by America Online, and with Black Enterprise
Magazine.
Cruisin' (And Having Fun)
Cruisin' is primarily aimed at the 45 plus age group and particularly
the baby boomers who started to turn fifty in 1996. "Seniors," usually defined
as over 50, is a growing demographic group that will control more spending power
than any other group in the near future. There are currently 93 million seniors
in the U.S. and 76 million baby boomers will join this group between 1996 -
2002. Approximately 77% of all assets in the U.S. belong to people over the age
of 55.
The programming on Cruisin' will include a wide variety of formats:
talk, lectures, debates, call-ins, entertainment, sports, etc. The content is
expected to include politics, estate planning, travel, health, and books.
However, throughout the programming the focus will be on the viewpoint of the
targeted age group. IN Radio plans to form strategic alliances with key
organizations, magazines, and Internet providers.
BEST
"BEST." This channel will be formatted with sponsored programming only.
The programs will range from special events to live business broadcasts.
<PAGE>
Taj Radio Network (Home Away From Home)
This channel will be programmed in English and Hindi targeting listeners in the
United States with ties to India. They are highly educated, with 52% of Asian
Indians having college degrees, and their leading professions are medicine,
research, technology, and academia. There are over one million Asian Indians in
the U.S. and this population figure grew by 126% between 1980 and 1990. This
demographic group has a median household income more than 22% above the general
population with strong values on education and entrepreneurship. IN Radio will
have Cyrus Bharucha, former President of TV Asia, to head the channel and plan
the programming content.
China Wave
China Wave will program a wide variety of talk and music subjects programmed
primarily in Mandarin. The format will be specially tailored to the interest and
needs of the Chinese population of the U.S. The largest segment of the Asian
American population is of Chinese descent. The only larger ethnic groups are
Hispanic and African American. In 1990, according to the U.S. Census, the
population numbered more than 1.6 million, an increase of 104% from 1980. The
current level is estimated to be greater than 3 million. In 91% of Chinese
American households, a language other than English was spoken at home. IN Radio
has targeted Jay "Stone" Shih, a leading producer and syndicator of Chinese
American programming to China, to head this channel.
Other Talk Format Programmers
CD Radio and XM Satellite Radio have signed lease agreements with other
companies to program other non-music channels. A selection of these programming
agreements are:
o USA TODAY, the nation's largest-selling daily newspaper, will provide,
exclusively for XM Satellite Radio, its expertise for a news and
information channel.
o Salem Communications, the nation's premier Christian broadcaster, will
create three distinctive, high-quality channels exclusively for XM
Satellite Radio, including contemporary general interest Christian talk
focusing on current events and traditional Christian themes.
o Bloomberg L.P. entered into agreements in which both CD Radio and XM
Satellite Radio will carry Bloomberg's 24-hour news and information
service on one of its broadcast channels and Bloomberg will
custom-design a second channel for CD Radio.
o CD Radio also signed an agreement with C-SPAN in which CD Radio will
carry C-SPAN 24-hours on one of its channels. C-SPAN currently provides
video-programming services related to national, literary, cultural and
international affairs.
o Classic Radio, recently acquired by Audio Books, also entered into an
agreement with CD Radio. Classic Radio will provide 24-hour programming
of exclusively old time radio programs such as "The Shadow", "Dragnet",
"Gunsmoke", and many others.
o CD Radio entered an agreement with Sports Byline USA. Sports Byline USA
will program national sports programming, including live talk shows,
interviews and features 24 hours a day.
o Hispanic Radio Network will program on two of CD Radio's channels. La
Red Hispana and the Hispanic Radio Network will also be carried 24
hours a day.
o National Public Radio will have up to four channels on CD Radio, on an
exclusive basis.
o CD Radio and Public Radio International have signed an agreement to
develop exclusive programming.
<PAGE>
<TABLE>
This is a description of the talk and some music formats that will be programmed
by third party sources:
<CAPTION>
- ----------------- ---------------------------------------------- -------------------------- --------------------------
# of Channels
Programmer Format Satellite Radio
- ----------------- ---------------------------------------------- -------------------------- --------------------------
<S> <C> <C> <C>
5 IN Radio Various Talk CD Radio
- ----------------- ---------------------------------------------- -------------------------- --------------------------
2 IN Radio (Asia One Network) Asian XM Satellite Radio
- ----------------- ---------------------------------------------- -------------------------- --------------------------
1 USA Today News XM Satellite Radio
- ----------------- ---------------------------------------------- -------------------------- --------------------------
2 Fox/Liberty Networks; Cox Communications; Speedvision/Outdoor
Comcast and MediaOne Life CD Radio
- ----------------- ---------------------------------------------- -------------------------- --------------------------
5 Heftel Broadcasting Spanish Music XM Satellite Radio
- ----------------- ---------------------------------------------- -------------------------- --------------------------
2 Bloomberg News Radio Business News CD Radio
- ----------------- ---------------------------------------------- -------------------------- --------------------------
1 Bloomberg News Radio Business News XM Satellite Radio
- ----------------- ---------------------------------------------- -------------------------- --------------------------
3 Salem Communications Religion (includes 2 XM Satellite Radio
music channels)
- ----------------- ---------------------------------------------- -------------------------- --------------------------
1 C-SPAN Radio Public Affairs XM Satellite Radio
- ----------------- ---------------------------------------------- -------------------------- --------------------------
2 C-SPAN Radio Public Affairs CD Radio
- ----------------- ---------------------------------------------- -------------------------- --------------------------
2 World Radio Network World News World News CD Radio
- ----------------- ---------------------------------------------- -------------------------- --------------------------
4 BET/Radio One African American Talk XM Satellite Radio
(includes 3 music
channels)
- ----------------- ---------------------------------------------- -------------------------- --------------------------
1 One-on-One Sports Sports XM Satellite Radio
- ----------------- ---------------------------------------------- -------------------------- --------------------------
3 Time Warner CNN (Sports Illustrated) XM Satellite Radio
CNN fn (Financial)
CNN en Espanol
- ----------------- ---------------------------------------------- -------------------------- --------------------------
2 Hispanic Radio Network Spanish CD Radio
- ----------------- ---------------------------------------------- -------------------------- --------------------------
1 Sports Byline U.S.A. Sports CD Radio
- ----------------- ---------------------------------------------- -------------------------- --------------------------
1 Audio Books Classical Radio CD Radio
- ----------------- ---------------------------------------------- -------------------------- --------------------------
4 National Public Radio Talk CD Radio
- ----------------- ---------------------------------------------- -------------------------- --------------------------
1 Public Radio International Talk CD Radio
- ----------------- ---------------------------------------------- -------------------------- --------------------------
Total - 43
- ----------------- ---------------------------------------------- -------------------------- --------------------------
</TABLE>
<PAGE>
Essential Contracts
Our business is developing and producing audio programming for digital
satellite transmission. We have signed contracts with each of the two companies
licensed by the FCC for satellite radio transmission. We also have signed
contracts with certain suppliers of program content.
Broadcast Contracts. CD Radio has licensed programming from us for five of its
50 channels of news, sports and talk channels. (CD Radio's other 50 channels are
commercial-free music formats, which CD Radio will produce itself.) XM Satellite
Radio and IN Radio have a "Programming Partner Agreement" for two of their
channels (they may transmit as many as 100 channels, including 50 music
channels.)
<TABLE>
This is a brief description of the contracts we have with both CD Radio
and XM Satellite Radio:
<CAPTION>
Subject CD Radio XM Satellite Radio
- --------- --------------------------------------- --------------------------------------------
<S> <C> <C>
Length Five years from when service Five years from when service begins,
of begins, with automatic two-year with two one-year renewals, if XM's
contract* renewals, unless either terminates revenue share meets agreed levels
Cost CD Radio gets time for commercials, XM gets a percentage of net advertising
to increasing to 50% of all commercial revenues, increasing to 50% in the third,
IN Radio inventory in year 5 fourth and fifth years
<FN>
*All these contracts may be terminated earlier by a failure to perform, such as
our ceasing to furnish programming or changing the programming format without
their consent. The agreements may also be terminated by us if the necessary
regulatory approvals are not available for operating the satellite radio
service.
</FN>
</TABLE>
CD Radio. Our agreements with CD Radio have us providing formatting for five
channels of satellite radio broadcasting, 24 hours a day, seven days a week. We
pay CD Radio in broadcasting time allocated for commercials. They can either
sell that commercial time or use it internally for promotional purposes. The
amount of commercial time graduates from one minute per hour in the first and
second years of operations, to three in the third, four in the fourth, five in
the fifth and to half of all commercial time after the fifth year.
CD Radio was incorporated in 1990 as Satellite CD Radio, Inc. and
changed to its current name in 1992. It is publicly traded on the NASDAQ
National Market System under the symbol CDRD. On May 18, 1999, CD Radio
announced the closing of a $200 million debt offering, which brought its total
pre-operational funding to $1 billion. On June 15, 1999, CD Radio and Ford Motor
Company issued a news release announcing a "partnership" to have
factory-installed satellite radio receivers in all Ford, Lincoln, Mercury,
Mazda, Jaguar, Aston Martin and Volvo cars and trucks. Additional information is
in CD Radio's June 15, 1999 Form 8-K, filed with the SEC.
XM Satellite Radio. We have one agreement with XM Satellite Radio to broadcast
two formats, China Wave and Taj Radio Network (Asian Indian). The contract has a
five-year term commencing the day XM Satellite Radio starts broadcasting. We
have all rights to advertising and sponsorship and may have a maximum twelve
minutes per hour of advertising.
XM Satellite Radio is based in Washington, D.C. and was founded in 1992 as
American Mobile Radio corporation. XM Satellite Radio is owned by American
Mobile Satellite Corp. (publicly traded on the NASDAQ National Market System
under the symbol SKYC). On June 8, 1999, XM Satellite Radio issued a press
release, announcing a combined investment commitment of $250 million from Clear
Channel Communications Inc.; DIRECTTV, Inc., a unit of Hughes Electronics
Corporation; General Motors Corporation and a private investment group comprised
of
<PAGE>
Columbia Capital, Telcom Ventures L.L.C. and Madison Dearborn Partners. XM
Satellite also announced a long-term distribution agreement, which will factory
install receivers manufactured by XM Satellite Radio's consumer electronics
partners, in GM cars and trucks. Additional information is in American Mobile
Satellite Corp.'s June 9, 1999 Form 8-K, filed with the SEC and in the
description of XM Satellite in its Form 10-K for 1998.
Programming Content Agreements. Most of the programming for the seven satellite
radio channels will be created by our own staff. In addition, we expect to have
agreements from time to time with the owners of audio and other media content
that fits within our formats.
We have an exclusive agreement for programming content with
Nightingale-Conant, the leading publisher of sound recordings on personal
achievement subjects such as success, health, inner self, wealth and business.
(As reported by Marketdata Enterprises, Inc., Tampa, Florida, in its February
1997 "The U.S. Market for Self-Improvement Products and Services.") The
agreement's initial term is for seven years, provided we begin broadcasting by
June 30, 2001. They will make available to us, for satellite radio broadcasting,
at least 3,800 audio segments of their program archive. They will also provide
other programs for which they have broadcast rights. We have rights and
obligations to sell Nightingale-Conant recordings, handling purchases through an
800 number call-in. In return for providing this content, Nightingale-Conant was
issued 12,500 shares of our common stock.
Management Services Agreement. We have contracted with MDW, an independent
management consultant based in Lake Buff, Illinois., for assistance in
developing, recording, editing and delivering our programming to the satellite
radio companies. We will pay consulting fees and commissions on certain
promotion sales. They have been paid 625 shares of our common stock.
Competition
IN Radio will be seeking market acceptance of its proposed service in a
new, untested market and will compete with established conventional radio
stations, which do not charge subscription fees or require the purchase of radio
cards or S-band radios and associated miniature satellite dish antennas to
receive their services. Many radio stations also carry information programming
of a local nature such as local news or traffic reports which we will not be
able to offer. We expect that, prior to the commercial launch of satellite
radio, some traditional FM and/or AM radio broadcasting stations could begin to
transmit digital, compact disc quality signals. In addition, the FCC could grant
new licenses which would enable further competition to broadcast satellite
radio. New media such as Internet broadcasts could cut into our market. There
are many portions of the electromagnetic spectrum that are currently licensed
for other uses and certain other portions for which licenses have been granted
by the FCC without restriction as to use. These portions of the spectrum could
be used for satellite radio broadcasting in the future. The number of
competitors in the satellite radio industry could increase in the future and
someone may design a satellite radio broadcast system that is superior to the
current systems.
Employees
We have no employees now, other than John Douglas, the Chairman and Chief
Executive Officer. Upon closing this offering, we intend to employ the other
executives shown under "Management." We have identified experienced people in
several of the needed areas. We plan to have 165 employees immediately after we
commence digital satellite broadcasting operations. We need to hire a broad
range of employees to program our broadcast service, manage operations and
engineering, handle sales and promotions, marketing efforts and perform finance,
administrative and accounting functions. We expect significant and rapid growth
in the scope and complexity of the business as we proceed with the satellite
radio system and the commencement of broadcasting.
Properties/Facilities
We are currently located in a temporary facility that has a lease expiring
December 31, 1999 (with options to extend.) Our plan is to secure a 18,000 to
20,000 square foot location in San Francisco.
<PAGE>
Legal Proceedings
IN Radio is not currently involved in any material litigation or legal
proceedings and is not aware of any material litigation or proceeding pending or
threatened against it.
Government Regulation
We do not require any FCC license or other regulatory authority to
operate our business as planned. However, the satellite radio companies were
required to obtain a license from the FCC to launch and operate their
satellites. If they have any serious regulatory difficulties with the FCC, it
would probably hurt our business. The term of the FCC License with respect to
each satellite is eight years, commencing from the date each satellite is
declared operational after having been inserted into orbit. Upon the expiration
of the term with respect to each satellite, the satellite radio companies will
be required to apply for a license renewal. The satellite radio companies
believe that the FCC will grant renewals absent significant misconduct on their
part. Our business will also be affected by the results of other FCC actions.
FCC authorization is necessary for the satellite radio companies to install
terrestrial repeating transmitters to rebroadcast the signal in certain urban
and other areas where signals from the satellites will be blocked and reception
will be adversely affected. The satellite radio companies also need to obtain
the rights to use the roofs of certain structures and other strategically
positioned towers where the repeating transmitters will be installed. The FCC
has also required that the satellite radio companies complete frequency
coordination with Canada and Mexico before starting service. The FCC has
indicated that it may in the future impose public service obligations on
satellite radio licensees, such as channel set-asides for educational
programming. Changes in law, FCC regulations or international agreements
relating to communications policy generally or to matters relating specifically
to the services to be offered by satellite radio could affect their ability to
retain the FCC Licenses or the manner in which satellite radio would be offered
or regulated.
<PAGE>
MANAGEMENT
Directors and Executive Officers
Our executive officers and directors and their ages and positions with
IN Radio are:
Name Age Position
- ---- --- --------
Divakar R. Kamath................. 51 Board of Directors
J. Peter Thompson................. 56 Board of Directors
Edgar W. Hirst.................... 56 Board of Directors
Suzanne M. Lopez.................. 49 Board of Directors
N. John Douglas................... 60 Board of Directors, Chairman
and Chief Executive Officer
Gregory J. Douglas................ 28 Board of Directors, President
and Chief Operating Officer
C. Andrew Whatley................. 46 Executive Vice President -
Sales and Marketing
Walter E. Thill................... 62 Vice President Finance and
Chief Financial and
Administrative Officer
William E. Green.................. 62 Vice President, General
Counsel and Secretary
The term of office for all directors is until the annual meeting of
shareholders in 2000. John Douglas and Gregory Douglas have served as directors
since the March 9, 1999 incorporation and the other four have served as
directors since April 20, 1999.
Background of Directors and Executive Officers
Divakar Kamath is Executive Vice President of Mesbic Ventures Holding Company.
He is a Co-founder and Managing Director of Pacesetter Growth Fund and of two
specialized investment companies which have combined assets under management of
$56 million. He has 18 years of venture capital experience. Before joining
Mesbic Ventures in 1995, Mr. Kamath held various leadership positions with
Equico Capital Corporation and Fulcrum Venture Capital Corporation. Mr. Kamath
is a former Chairman of the Board of Directors of the National Association of
Investment Companies. He received a B. Tech. in Metallurgical Engineering from
the Indian Institute of Technology in Bombay, India in 1970, an M.S. in
Materials Science from Stanford University in 1971, and an M.B.A. in Finance and
General Management from the Graduate School of Management at UCLA in 1973.
Peter Thompson, President of Opportunity Capital Corporation, is a Venture
Capitalist with over 25 years of experience in providing investment financing to
various start-up and later-stage companies. He began as Vice President of
Opportunity Capital at its inception in 1971 and has been its President since
1979. He served as a member of the Board of Directors of several of its
portfolio companies, of the National Association of Investment Companies, the
Bay Area's Small Business Development Corporation and as a member of the Board
of Trustees of the Entrepreneurial Growth and Investment Institute. He has an
undergraduate degree from Hampton University and an MBA from Wharton School of
Business.
<PAGE>
Edgar Hirst, is Vice President - Production of Illusion, Inc., which develops
and markets interactive extreme sports and other customized attractions for the
entertainment industry. Until he accepted that position, he was a consultant to
the electronic media industry, from 1995 to 1997, and before that he was with
ABC Television for over twenty years as a senior-level executive in television
program production, operations, and administration. He was Vice President -
Production for ABC Daytime and Entertainment responsible for the management of
such programs as Good Morning America, General Hospital, The Academy Awards,
America's Funniest Home Videos, Primetime Emmy Awards, American Music Awards,
Comedy Awards, and American Bandstand. Previously, he was Executive-In-Charge of
Production for Paramount Domestic Television. In addition, he was the Director,
Olympic Operations and Production Control for the 1994 Summer Olympics on ABC
Sports and Unit Manager of Broadcast Operations & Engineering in the ABC News
Bureau. Mr. Hirst has a B.A. degree from Dartmouth College and a M.S. degree in
Business from Columbia University and is a graduate of the Executive
Entrepreneur Institute Program.
Suzanne Lopez, Director of the Institute for Unlimited Human Potential since
1985, is a talk show host, guest, columnist, author, lecturer and professor
involved in such subjects as relationships, work, family, personal growth,
children, and women's issues. She has appeared as a guest expert in a wide range
of national shows, such as NBC-TV, Lifetime, ABC-TV, Hard Copy, Leeza, Ricki
Lake, Montel Williams, Jenny Jones, Geraldo, Donahue, Sally Jesse Raphael and
Gordon Elliot shows. In addition, she is the author of a recently released book
by Putnam Books and has been in private practice for almost 20 years. She has a
B.F.A. degree from the University of California at Santa Cruz and a M.S. degree
in Psychology from California State University at Los Angeles.
John Douglas is the Founder and Chairman/CEO of Information Network Radio, Inc.
He has been the Chairman/CEO of OIA, LLC, which includes KBZS-AM (Palo Alto),
since 1997. From 1988 to 1998, he was President/CEO of Douglas Broadcasting/PAR
Holding, Inc., the 24th largest radio broadcast group in the U.S. in 1997, with
19 stations primarily in major markets. This group included the production and
broadcast of the Personal Achievement Radio programming syndicated nationally by
ABC Radio Network. He also created AsiaOne Network, the largest group of radio
stations broadcasting in Asian languages outside of Asia. Mr. Douglas was also
the Founder and Chairman of National Group Television, licensee of KSTS-TV (San
Francisco TV market). He was the Creator and News Director of "Business Today",
the Nation's first nationally syndicated morning business news TV show and the
Executive Producer of "Front Page", a daily, 2-minute news highlight broadcast
by the Black Entertainment Television, a major cable programming company. He has
37 years of experience in broadcasting, finance, communications, strategic
planning, and technology. Mr. Douglas has served as a member on several boards,
including California Broadcasters Association and Z-Spanish Media. He is
currently a board member for Radio Advertising Bureau, Comerica Bank -
California, and Broadcast Music Industries ("BMI"). He was a Trustee of Bates
College until this year. Mr. Douglas has a B.S. degree and M.S. degree in
Physics from Bates College and Howard University respectively, and is a graduate
of the Executive Program of Darden Graduate School of Business Administration,
University of Virginia.
Gregory Douglas is the President/COO of Information Network Radio Inc. Since
1998, he has been President/COO of OIA, LLC and a Partner of Q2 Broadcast,
syndicator of Personal Achievement Radio. From 1996 to 1998, he was the Director
of Network Operations for Personal Achievement Radio in Los Angeles responsible
for the production, operation and distribution of the PAR format. In 1996, he
was the General Manager of the two-station Seattle operations of Douglas
Broadcasting, Inc. and Station Manager at WBPS - AM in Boston from 1994 to 1996.
He was also the Management Information System Manager for DBI, responsible for
the traffic/business computer functions as well as the computer networking of
DBI/PAR radio outlets. Mr. Douglas has been involved in almost all areas of
broadcasting, including traffic, talk-format programming, network automation
systems, business, engineering, promotion, production, syndication, marketing,
and sales. He has sixteen years of experience in radio, television and computer-
related areas. He has a B.A. degree from the University of California at
Berkeley, California. He is the son of John Douglas.
Andy Whatley is the Executive Vice President - Marketing and Sales of
Information Network Radio, Inc. He is also Partner of Q2 Broadcast (since 1998)
and Vice President of OIA, LLC (beginning January, 1999.) He was the General
Manager of KYPA-AM in Los Angeles from 1996 to 1998. He has more than 25 years
of media experience including radio, television, print and media brokerage,
including 19 years of broadcast management experience, and 15 years of radio
ownership. He established a joint venture media group (Great Electric Media
<PAGE>
Group) and was its Vice President and General Manager from 1987 to 1996. It
included four radio stations, a weekly television program and a visitor market
publication. He attended the University of Texas at El Paso majoring in Mass
Communications/Radio and Television and holds a Bachelor of Arts Degree.
Walter Thill is the Vice President - Finance and Administration and CFO of
Information Network Radio, Inc. Since 1997, he has been controller of Ally
Capital and consultant to NationsBanc Montgomery Securities LLC and its
predecessor. He was the Vice President of Operations and Finance and also
General Manager of Healthcare for the California College of Podiatric Medicine
from 1995 to 1997. He also acted as the interim General Manager at Serrano
Irrigation District. In addition, he was an Independent Management Consultant to
companies in the mergers and acquisitions, distressed situations, and leveraged
buyouts areas. During that time, he also served as interim CFO for six other
companies. Mr. Thill was Director of Strategic Planning at Castle & Cooke, Inc.
(now Dole Foods), a NYSE company, responsible for the review of the food
industry for acquisitions and strategic planning for the company's food and
other businesses. He was also the former President of the Corporate Planners
Association. Mr. Thill has an AB from Cornell University and a MBA from the
University of Michigan and he earned his CPA while in Michigan.
William Green is the Vice President, General Counsel and Secretary for
Information Network Radio, Inc. Since 1974, he has had a private law practice,
William Green & Associates, located in Palo Alto, California. He was the
Corporate Secretary and Legal Counsel for Douglas Broadcasting, Inc. and
Personal Achievement Radio. Formerly, he was the Assistant General Counsel for
Boise Cascade Corp. He was also Associate Counsel and Associate Patent Counsel
of Sybron Corp., a Fortune 500 Company, representing the Corporation in its
general legal affairs, mergers and acquisitions activity and patent and
trademark matters. He was also employed as a patent coordinator at the Applied
Research Laboratories of United States Steel Corp. He is a former member on the
Executive and Audit Committees of the National Board of Governors of the
American Red Cross and Mr. Green was also on the Executive Committee of the
Board of Governors of United Way of America. He is a graduate of the University
of Pittsburgh with a B.S. degree in Chemistry. He has a L.L.B. degree from
Duquesne University School of Law and was Managing Editor of the Law Review. Mr.
Green passed the Bar in California, Pennsylvania and New York. He is a member of
the Charles Houston, State of California, American, and National Patent Law Bar
Associations. He is a Director of the Williams Companies, A NYSE and Fortune 500
Company.
Indemnification of Directors and Officers
Our Articles of Incorporation provide that the liability of the directors
for monetary damages shall be eliminated to the fullest extent permissible under
California law. We have been advised that, in the opinion of the Securities and
Exchange Commission, permitting indemnification to directors, officers and
controlling persons for liabilities arising under the federal securities laws is
against public policy and unenforceable.
Board Committees
An audit committee of nonemployee directors meets with our independent
public accountants and reviews our internal accounting procedures. Divakar R.
Kamath and J. Peter Thompson currently constitute the audit committee.
Director Compensation
We do not currently compensate directors for their services, except to
reimburse them for their travel expenses in attending board and committee
meetings. After we begin satellite radio service, each director who is not a
full-time employee of IN Radio will receive options to purchase shares under the
stock incentive compensation plan to be adopted, as well as quarterly payments.
Executive Compensation
No compensation has yet been paid to any of our executives. We expect to
pay a $100,000 salary to John Douglas in 1999. We intend to hire the other
executive officers upon closing of this offering, each one at a salary not to
exceed $100,000 a year. We have planned no other forms of compensation, such as
bonuses or stock options, to be paid to executives in 1999.
<PAGE>
Stock Option Plan
The Board of Directors has reserved shares equal to 10% of our outstanding
common stock for issuance to employees, officers, directors and consultants
pursuant to a stock incentive option plan they expect to adopt.
CERTAIN TRANSACTIONS
106,700 of the shares outstanding before this offering were issued in
exchange for ownership in the predeccessor limited liability company and in
Personal Achievement Live, LLC and AsiaOne Network, LLC, which are both now
completely owned by IN Radio. Each of the persons to whom the shares were issued
are officers and are listed in the "Principal Shareholders" table in this
prospectus.
It is our policy that all material related party transactions will be on
terms that are no less favorable to IN Radio than those that can be obtained
from unaffiliated third parties and must be approved by a majority of our
independent, disinterested directors.
PRINCIPAL SHAREHOLDERS
The founding executive officers and directors of IN Radio will own
106,700 shares, or approximately 53.4% of its outstanding common stock, after
sale of all the shares in this offering. They will be able to control election
of a majority of the board of directors and other corporate action. Such a
concentration of ownership may have the effect of delaying or preventing a
change of control.
<PAGE>
The following table shows the beneficial ownership of IN Radio's common
stock immediately prior to this offering, and as adjusted to reflect the sale of
the shares being offered, for shares owned by (i) each of IN Radio's directors
and executive officers , (ii) each shareowner we know to own beneficially 5% or
more of the outstanding shares of our common stock and (iii) all directors and
officers as a group. We believe that the beneficial owners of the common stock
listed below, based on information they furnished, have sole investment and
voting power over their shares, subject to community property laws where
applicable.
Number of Percentage of Total Common
Shares Stock Beneficially Owned
Beneficially Before After
Name and Address of Owner Owned Offering Offering
N. John Douglas 89,500 74.7% 44.8%
114 Sansome Street, Suite 1410
San Francisco, CA 94104
Gregory J. Douglas 7,700 6.4 3.9
114 Sansome Street, Suite 1410
San Francisco, CA 94104
C. Andrew Whatley 7,700 6.4 3.9
114 Sansome Street, Suite 1410
San Francisco, CA 94104
Walter E. Thill 1,500 1.3 0.8
114 Sansome Street, Suite 1410
San Francisco, CA 94104
William E. Green 300 0.2 0.2
550 Hamilton Avenue
Palo Alto, CA 94301
Nightingale-Conant 12,500 10.4 6.3
7300 Lehigh Avenue
Niles, IL 60714
All directors and executive officers 106,700 89.0 53.4
as a group (5 Persons)
* Does not include any additional dilution from shares issued in additional
financings or upon exercise of any options issued under the proposed stock
incentive option plan.
DESCRIPTION OF COMMON STOCK
IN Radio has authorized 10,000,000 shares of common stock, without par
value. There were 119,825 shares of common stock outstanding immediately prior
to this offering, which were held of record by seven shareowners. Owners of
common stock are entitled to one vote for each share held of record on all
matters to be voted on by shareowners, except that, upon giving the legally
required notice, shareowners may cumulate their votes in the election of
directors. The shareowners are entitled to receive dividends when, as and if
declared by the board of directors out of funds legally available. Our board of
directors does not currently anticipate paying any dividends. Any debt or
preferred stock financing we may use would probably restrict dividend payments.
In the event of liquidation, dissolution or winding up of the corporation, the
shareowners are entitled to share ratably in all assets remaining which are
available for distribution to them after payment of liabilities. Shareowners, as
such, have no
<PAGE>
conversion, preemptive or other subscription rights, and there are no redemption
provisions applicable to the common stock. All of the outstanding shares of
common stock, and the shares issued in this offering, will be fully paid and
nonassessable. The transfer agent and registrar for our common stock is American
Securities Transfer & Trust, Inc.
SHARES ELIGIBLE FOR FUTURE RESALE
Legal ability to sell. The shares sold in this offering will be freely
tradable without restriction or registration under federal securities laws.
Sales of shares to residents of certain states or jurisdictions may require
registration or an applicable exemption from registration provisions of the
shares in those states or jurisdictions. The 119,825 shares of common stock
previously issued are "restricted securities" and may not be sold in a public
distribution except in compliance with those securities laws. After those shares
have been held for more than a year, they could, under applicable securities
laws, be offered for sale through any trading market, if reporting and other
requirements were met. They could also be sold in a transaction negotiated
directly with a buyer. This ability to sell could have the effect of keeping any
investor demand from increasing the price at which shares may be sold after this
offering is over. All of the executive officers have signed an agreement not to
sell any of their 106,700 shares for a year after completion of this offering.
In return, IN Radio has agreed to include, in any registered public offering we
make, any of their shares they ask to be included, and to pay the costs of
registration and sale (except any commissions or underwriting fees.)
Absence of any trading market. Investors in this offering should be
prepared for there being no liquid trading market or other mechanics for
converting their shares back into cash. We have no plans to apply for exchange
listing or interdealer market making immediately after this offering. The number
of shareowners after this offering will probably be too limited to attract any
securities dealers into creating a trading market. We plan a second public
offering after the launch of broadcasting on satellite radio. We expect there
would be a trading market after that, but any further offering and trading
market may be delayed or may not happen. Shareholders would have to arrange
their own private sale of shares, until a trading market existed or there was
another way to convert their shares back into cash. Acquisitions of or by IN
Radio, or some other event, could also result in cash payment to shareowners or
in a trading market.
Tax effects of selling "Small Business Stock." Individuals buying shares in
this offering, and holding them for at least five years, would pay a maximum 14%
effective tax rate on any gain from their sale, under existing tax laws. Or, no
tax at all would be payable on the sales proceeds "rolled over" into the
purchase of other "small business stock," within 60 days of the sale. This
favorable tax treatment could be changed. Various conditions and limitations
apply. Shareholders will want to consult their own tax advisor if this tax
effect is important in their investment decision.
PLAN OF DISTRIBUTION
General
Announcements of this offering will be communicated to persons selected by
our officers and directors. A copy of this prospectus will be delivered to those
who request it, together with the share purchase order. All shares will be sold
at the public offering price of $100.00 per share and a minimum purchase of 250
shares is required. We reserve the right to reject any share purchase order in
full or in part.
IN Radio will only effect offers and sales of shares through N. John
Douglas, its Chairman and Chief Executive Officer, or Walter E. Thill, its Vice
President Finance and Chief Financial and Administrative Officer. Only Messrs.
Douglas or Thill will sign share purchase orders on our behalf and they will be
the only individuals who will conduct activities that involve making oral
solicitations or approval of written communications. They will not receive,
directly or indirectly, any commissions or other remuneration based either
directly or indirectly on transactions in securities. Their activities are
intended to be within Rule 3a4-1 of the federal Securities Exchange Act of 1934
and the securities regulations of certain states. Some states may require Mr.
Douglas or Mr. Thill to be registered or licensed as an issuer representative or
sales agent.
<PAGE>
This direct offering by IN Radio differs from a "firm commitment
underwriting," in which one or more registered securities dealers either
purchase all of the shares, for resale to their customers, or no shares are sold
at all. In our direct offering, we may not sell all of the shares offered. That
means that we may receive only a portion of the offering proceeds that we intend
to use for development of our business and operation until we reach positive
cash flow from operations. When a securities dealer acts as an underwriter, it
assumes certain legal responsibilities under the federal securities laws. To
create a defense against potential liability to persons who buy shares in the
underwriting, the dealer may perform a "due diligence" investigation of the
business issuing shares. In this direct offering, there is no securities dealer
performing that investigation.
Determination of Offering Price
Prior to this offering there has been no market for our shares of common
stock. Our Board of Directors has determined the public offering price. Among
factors considered in determining the public offering price were IN Radio's
future prospects, the state of the markets for its services, the experience of
management and the economics of the industry in general.
EXPERTS
IN Radio's Financial Statements as of and for the period ended March 31,
1999, audited by Hollander, Lumer & Co. LLP, independent auditors, have been
included in this Prospectus in reliance upon their report, which is also
included in this Prospectus.
AVAILABLE INFORMATION
This prospectus is part of a registration statement on Form SB-2 filed
under the Securities Act of 1933. This prospectus does not contain all of the
information in the Registration Statement and its exhibits. Statements in this
prospectus about any contract or other document are just summaries. You may be
able to read the complete document as an exhibit to the Registration Statement.
IN Radio will have to file reports under the Securities Exchange Act of
1934. You may read and copy the Registration Statement and our reports at the
Commission's public reference rooms at 450 Fifth Street, N.W., Washington, D.C.
20549, Seven World Trade Center, 13th Floor, New York, New York 10048, and 500
West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. (You may
telephone the Commission's Public Reference Branch at 800-SEC-0330.) Our
Registration Statement and reports are also available on the Commission's
Internet site at http://www.sec.gov.
We intend to furnish our shareowners with annual reports containing
financial statements audited by an independent public accounting firm after the
end of each fiscal year.
<PAGE>
INFORMATION NETWORK RADIO, INC.
(A DEVELOPMENT STAGE COMPANY)
INDEX TO FINANCIAL STATEMENTS
Independent Auditors' Report F-1
Balance Sheet F-2
Statement of Operations F-3
Statement of Stockholders' Deficiency F-4
Statement of Cash Flows F-5
Notes to Financial Statements F-6
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Information Network Radio, Inc.
San Francisco, California
We have audited the accompanying balance sheet of Information Network Radio,
Inc. (A Development Stage Company), a successor to Information Network Radio,
LLC, as of March 31, 1999, and the related statements of operations,
stockholders' deficiency, and cash flows for the period from September 18, 1998
(inception) through March 31, 1999. 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 Information Network Radio, Inc.
as of March 31, 1999, and the results of its operations and its cash flows for
the initial period then ended in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. [added to file 6/25/99] As discussed
in Note 1 to the financial statements, there is a substantial doubt about the
ability of the Company to continue as a going concern. The Company is a
development stage company that has incurred a net loss for the initial period
ended March 31, 1999. The Company has significant capital requirements to
continue with its development plan. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
HOLLANDER, LUMER & CO. LLP
Los Angeles, California
April 6, 1999
F-1
<PAGE>
INFORMATION NETWORK RADIO, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
MARCH 31, 1999
ASSETS
CURRENT ASSETS
Cash $ 3,651
Deferred offering costs 12,000
--------
TOTAL CURRENT ASSETS 15,651
--------
TOTAL ASSETS $ 15,651
========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Accounts payable $ 1,400
Loans payable 26,000
--------
TOTAL CURRENT LIABILITIES 27,400
STOCKHOLDERS' DEFICIENCY
Common stock, no par value; authorized 10,000,000 shares;
issued and outstanding - 106,700 shares 10,000
Deficit accumulated during the development stage (21,749)
--------
TOTAL STOCKHOLDERS' DEFICIENCY (11,749)
--------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY $ 15,651
========
F-2
<PAGE>
INFORMATION NETWORK RADIO, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM SEPTEMBER 18, 1998 (INCEPTION) TO MARCH 31, 1999
REVENUES $ --
OPERATING EXPENSES 21,749
---------
NET LOSS $ (21,749)
=========
LOSS PER SHARE $ (0.18)
=========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 123,785
=========
F-3
<PAGE>
<TABLE>
INFORMATION NETWORK RADIO, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' DEFICIENCY
FOR THE PERIOD FROM SEPTEMBER 18, 1998 (INCEPTION) TO MARCH 31, 1999
<CAPTION>
Deficit
Accumulated
Common Stock During The
--------------------------- Development
Shares Amount Stage Total
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Common stock issued 106,700 $ 10,000 $ -- $ 10,000
Net loss incurred during the period -- -- (21,749) (21,749)
-------- -------- -------- --------
Balance, March 31, 1999 106,700 $ 10,000 $(21,749) $(11,749)
======== ======== ======== ========
F-4
</TABLE>
<PAGE>
INFORMATION NETWORK RADIO, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM SEPTEMBER 18, 1998 (INCEPTION) TO MARCH 31, 1999
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(21,749)
Adjustments to reconcile net loss to net
cash used in operating activities:
Increase in accounts payable 1,400
--------
NET CASH USED IN OPERATING ACTIVITIES (20,349)
--------
CASH FLOWS FROM FINANCING ACTIVITIES
Deferred offering costs (12,000)
Proceeds from loans payable 26,000
Capital contributions 10,000
--------
NET CASH PROVIDED BY FINANCING ACTIVITIES 24,000
--------
CASH AT END OF PERIOD $ 3,651
========
F-5
<PAGE>
INFORMATION NETWORK RADIO, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
Information Network Radio, Inc. (the "Company") was incorporated in
California on March 9, 1999. On March 10, 1999, the Company issued
106,700 shares of common stock to the members of Information Network
Radio, LLC, its predecessor, pursuant to an Agreement of Merger.
Information Network Radio, LLC was a Delaware Limited Liability Company
formed on September 18, 1998. The accompanying financial statements
include the results of operations of the Company's predecessor for the
period from inception to March 9, 1999.
The Company is involved in developing and producing unique
talk-formatted audio programming for a new service providing digital
satellite transmission directly to vehicles and homes. Revenues are
projected to begin on October 1, 2000 when the satellites are to have
been launched. Revenues will come primarily from selling up to 12
minutes an hour of commercial advertising messages and
company-sponsored programs.
Going Concern
[added to file 6/25/99] The accompanying financial statements have been
prepared on a going concern basis, which contemplates the realization
of assets and satisfaction of liabilities in the normal course of
business. As shown in the financial statements, from inception through
March 31, 1999, the Company incurred net loss of $21,749, which was
funded by the initial capital contributions and advances from the
principal stockholder. Management is currently preparing for a direct
public offering of the Company's common stock to obtain additional
funds so that the Company can meet its obligations and sustain its
development activities. If the Company is unable to successfully
complete an offering or obtain funding from other sources, the Company
will not be able to continue as a going concern. The financial
statements do not include any adjustments relating to the
recoverability of the recorded assets or the classification of the
liabilities that might be necessary should the Company be unable to
continue as a going concern.
Deferred Offering Costs
The Company records incremental costs directly attributable to the
proposed offering of securities as deferred offering costs. These costs
will be charged against the gross proceeds of the offering, upon its
completion. If the offering is not completed, these costs will be
expensed.
Use of Estimates
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities, and
the reported revenues and expenses. Actual results could differ from
those estimates.
Fair Value of Financial Instruments
The fair value of financial instruments is determined by reference to
various market data and other valuation techniques as appropriate.
Considerable judgment is required to develop estimates of fair values;
therefore, the estimates are not necessarily indicative of the amounts
that could be realized or would be paid in a current market exchange.
The effect of using different market assumptions and/or estimation
methodologies may be material to the estimated fair value amounts. The
Company estimates that the fair value of its financial instruments
approximates their carrying value.
Broadcast Rights
The Company owns the right to utilize a satellite network over an
agreed-upon license period. The Company capitalizes certain costs to
acquire these rights. The Company's policy is to amortize the cost of
these rights on a straight-line basis over the term of the contract.
F-6
<PAGE>
INFORMATION NETWORK RADIO, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
Income Taxes
The Company elected to be taxed as a partnership for federal income tax
purposes for the period from inception through March 9, 1999.
Accordingly, the members, in their individual tax returns, report any
tax on income of the Company.
Effective March 10, 1999, the Company is subject to corporate tax
rates. The Company utilizes the asset and liability method for income
taxes. Under this method, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and operating loss and tax
credit carryforwards. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered
or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes
the enactment date.
Earnings (Loss) Per Share
Effective March 31, 1999, the Company adopted Statement of Financial
Accounting Standards No.128 ("SFAS No. 128"), Earnings Per Share
("EPS") which established simplified standards for computing and
presenting earnings per share information. Basic earnings (loss) per
common share is based upon the net earnings (loss) applicable to common
shares after preferred dividend requirements and upon the weighted
average number of common shares outstanding during the period. Diluted
earnings per common share adjusts for the effect of convertible
securities, stock options and warrants only in the periods presented in
which such effect would have been dilutive.
Staff Accounting Bulletin No. 98 ("SAB 98") describes the Securities
and Exchange Commission ("SEC") staff's interpretations and practices
on EPS computations in an initial public offering. In applying the
requirements of SFAS No. 128, the staff believes that nominal issuances
are recapitalizations in substance. In computing basic EPS for the
periods covered by income statements included in the registration
statement and in subsequent filings with the SEC, nominal issuances of
common stock should be reflected in a manner similar to a stock split
or stock dividend for which retroactive treatment is required by
paragraph 54 of SFAS No. 128. In computing diluted EPS for such
periods, nominal issuances of common stock and potential common stock
should be reflected in a manner similar to a stock split or stock
dividend.
Pursuant to SAB 98, the Company accounted for the subsequent issuance
of 17,085 shares of common stock as outstanding for the historical
period presented.
NOTE 2 - COMMITMENTS
On January 28, 1999, the Company entered into an agreement for legal
and related services for its direct public offering of common stock.
The agreement requires sixteen semi-monthly payments of $3,000 each
followed by one payment of $2,000. Consulting fees paid during the
period ended March 31, 1999 totaled $12,000. Upon completion of the
contemplated public offering, for at least any minimum amount offered,
the agreement also requires a payment of $25,000, of which half would
be in the Company's shares of common stock, at the public offering
price.
F-7
<PAGE>
INFORMATION NETWORK RADIO, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
During the period ended March 31, 1999, the Company entered into
contracts with providers of satellite radio transmission granting them
a license to transmit the Company's programming. The contracts expire
five years after service begins and have provisions for renewals. The
contracts allow the licensees the right to use, or to dispose of the
right to use, commercial time beginning with one minute per hour in the
first year of the contract and increasing to 50% of the net commercial
time available (however no less than five minutes) per each hour.
Modifications to these agreements are currently being negotiated.
NOTE 3 - RELATED PARTY TRANSACTIONS
The majority stockholder made advances to the Company, bearing interest
at 6.00% and payable on demand. At March 31, 1999, aggregate advances
were $26,000.
The Company's principal stockholder and companies owned and/or
controlled by him have provided corporate services at no cost to the
Company.
NOTE 4 - SUBSEQUENT EVENTS
The Company issued 17,085 shares to certain companies for management
consulting services, programming content and for extension of satellite
radio transmission contracts. These additional shares were valued at
$1,708,500 based on the public offering price of $100 per share.
<TABLE>
Pro forma unaudited financial information of the Company is as follows:
<CAPTION>
Pro Forma
---------------------------------------------
Balance Sheet: Historical Adjustments Pro Forma
-------------- ---------- ----------- ----------
<S> <C> <C> <C>
Total Current Assets $ 15,651 $ 15,651
Intangible Assets $ 1,646,000 (1) $ 1,646,000
Total Assets $ 15,651 $ 1,646,000 (1) $ 1,661,651
Total Liabilities $ 27,400 $ 27,400
Stockholders' Equity (Deficiency) $ (11,749) $ 1,646,000 (1) $ 1,634,251
Statement of Operations:
Net loss $ (21,749) $ (62,500)(2) $ (84,249)
Loss per share $ (0.18) $ (.50) $ (0.68)
Weighted average number of common shares
outstanding 123,785 123,785
</TABLE>
Pro forma adjustments are as follows:
1. Issuance of 16,460 shares of common stock for programming and
satellite broadcast rights.
2. Issuance of 625 shares of common stock for marketing services.
F-8
<PAGE>
PART II -- INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers.
The Registrant's Articles of Incorporation, Article V, and Bylaws,
Article VI, provide that the Registrant shall indemnify any officer, director or
former officer or director, to the fullest extent permitted by California law.
We have been advised that, in the opinion of the Securities and
Exchange Commission, permitting indemnification to directors, officers and
controlling persons for liabilities arising under the federal securities laws is
against public policy and unenforceable.
Item 25. Other Expenses of Issuance and Distribution.
Expenses of the Registrant in connection with the issuance and
distribution of the securities being registered are estimated as
follows, assuming the Maximum offering amount is sold:
Securities and Exchange Commission filing fee ................... $ 2,224
Blue sky fees and expenses ...................................... 3,000
Accountant's fees and expenses .................................. 12,000
Special Counsel's fees and expenses ............................. 75,000
General Counsel's fees and expenses ............................. 15,000
Printing and Edgar filer ........................................ 5,000
Postage and other delivery media ................................ 1,000
Marketing expenses, including travel ............................ 10,000
Miscellaneous ................................................... 26,776
--------
Total ...................................................... $150,000
========
(The Registrant will bear all these expenses.)
Item 26. Recent Sales of Unregistered Securities.
(a) The following information is given for all securities that the Registrant
sold within the past three years without registering the securities under the
Securities Act.
Date Title Amount
---- ----- ------
(1) March 22, 1999 common stock 106,700 shares
(2) June 24, 1999 common stock 12,500 shares
(3) June 24, 1999 common stock 625 shares
(b) No underwriters were used in connection with any of the issuances of shares.
The classes of persons to whom the Registrant issued shares were:
(1) The five founding officers of the Registrant
(2) Nightingale Conant, a major contractor of content for Registrant's
programming.
(3) MDW, a management, marketing, sales and product fulfillment
consultant.
(c) There were no underwriting discounts or commissions. The transactions and
the types and amounts of consideration received by the Registrant were:
(1) Transfer of contractual rights and development, as owners of
Information Network Radio, LLC.
(2) Agreement to provide programming content for Registrant's PAL
satellite radio channels.
(3) Agreement to consult on Registrant's marketing, sales and product
fulfillment.
(d) The sections of the Securities Act under which the Registrant claims
exemption from registration and the
<PAGE>
facts relied upon to make the exemption available are:
(1) Section 4(2). This was a transaction between the Registrant and its
founding officers, who continue to own all the shares.
(2) Section 4(2). The transaction was between the Registrant and its major
provider to date of content for the Registrant's digital satellite radio
programming.
(3) Section 4(2). The transaction was between the Registrant and its
management consulting firm.
Item 27. Exhibits
The exhibits listed below are filed as part of this Registration
Statement pursuant to Item 601 of Regulation S-B.
Exhibit
Number Description
------ -----------
3.1 Articles of Incorporation of the Registrant, dated March 9, 1999
3.2 By-laws of the Registrant
4.1 Article II, pages 2-15, of the By-laws (Reference is made to Exhibit
3.2)
4.2 Form of common stock certificate
5 Opinion and consent of counsel with respect to the legality of the
shares being registered
10.1* Radio License Agreement with CD Radio Inc.
10.2* Programming Partner Agreement with XM Satellite
10.3* Programming Services and Equity Agreement with Nightingale-Conant
Corporation
21 List of Registrant's subsidiaries, states of organization and names
under which they do business.
23.1* Consent of Hollander, Lumer & Co. LLP.
23.2 Consent of counsel (Reference is made to Exhibit 5.)
24 Power of Attorney
27 Financial Data Schedule
99.1 Share Purchase Order
99.2* Agreement Not to Sell Shares
- ---------------------------
* Filed with this amendment
Item 28. Undertakings.
(a) The Registrant hereby undertakes that it will:
(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by section 10(a)(3) of the
Securities Act; (ii)Reflect in the prospectus any facts or events
which, individually or together, represent a fundamental change in
the information in the registration statement; and (iii) Include
any additional or changed material information on the plan of
distribution.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the
securities offered, and the offering of the securities at that
time to be the initial bona fide offering.
(3) File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
(d) The registrant has been advised that, in the opinion of the Securities and
Exchange Commission, indemnification to directors, officers and controlling
persons of the registrant for liabilities arising under the Securities Act
is against public policy as expressed in the Securities Act and is,
therefore, unenforceable.
<PAGE>
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 authorizes this Pre-Effective
Amendment No. 1 to Registration Statement to be signed on its behalf by the
undersigned, in San Francisco, California, on June 25, 1999.
INFORMATION NETWORK RADIO, INC. (Issuer)
By S/N. John Douglas
----------------------------------------
N. John Douglas, Chief Executive Officer
<TABLE>
In accordance with the requirements of the Securities Act of 1933, this
Pre-Effective Amendment No. 1 to registration statement was signed by the
following persons in the capacities and on the dates stated.
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
S/N. John Douglas Chief Executive Officer and June 25, 1999
- ------------------------------ Chairman of the Board of Directors
N. John Douglas
S/Gregory D. Douglas* President, Chief Operating Officer June 25, 1999
- ------------------------------ and Director
Gregory D. Douglas
S/Walter E. Thill* Vice President Finance and Chief June 25, 1999
- ------------------------------ Financial and Administrative Officer
Walter E. Thill (Principal financial and accounting officer)
S/Divakar R. Kamath* Director June 25, 1999
- ------------------------------
Divakar R. Kamath
S/J. Peter Thompson* Director June 25, 1999
- ------------------------------
J. Peter Thompson
S/Edgar W. Hirst* Director June 25, 1999
- ------------------------------
Edgar W. Hirst
S/Suzanne M. Lopez* Director June 25, 1999
- ------------------------------
Suzanne M. Lopez
* S/N. John Douglas June 25, 1999
- ------------------------------
N. John Douglas
Attorney-in-fact
</TABLE>
[Note: This is one of four substantially identical agreements between
CD Radio Inc. and the Registrant or one of its subsidiaries.]
RADIO LICENSE AGREEMENT
AGREEMENT, dated as of February 2, 1999, between CD RADIO INC., a
Delaware corporation ("CD Radio"), and INFORMATION NETWORK RADIO, LLC, Delaware
a limited liability company ("In Radio").
For good and valuable consideration, the sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. Definitions. Capitalized terms used in this Agreement and not
otherwise defined herein shall have the following meanings:
"Especially Women" means the twenty-four (24) hour, seven (7) day a
week, talk and information programming service to be financed and produced
solely by In Radio, which shall target its content towards women, presenting
call-ins and features and utilizing, among other things, the resources of the
Women.com network of websites.
"Platform" means CD Radio's digital audio radio delivery system
consisting of the appropriate digital satellite delivery technology and
equipment configured to provide Subscribers with digital audio radio service via
a consumer reception device.
"Subscriber" means any person in the Territory receiving digital audio
radio service from CD Radio via the Platform.
"Territory" means the United States its territories and possessions,
and Canada.
2. Limited License. (a) Subject to the terms and conditions of this
Agreement, In Radio hereby grants to CD Radio a nontransferable (except as
otherwise provided in this Agreement) license to transmit Especially Women to
Subscribers via the Platform. The license hereby granted to CD Radio shall be
without license fee or other charge to CD Radio.
(b) CD Radio acknowledges and agrees that the copyright, patent, trade
secret and all other intellectual property rights of whatever nature that are
now existing or may accrue in Especially Women (and any promotional materials
created and provided exclusively by In Radio relating thereto) are and shall
remain the property of In Radio, and that nothing in this Agreement shall be
construed as transferring any aspects of such rights to CD Radio or any third
party other than as expressly set forth herein. No other rights are hereby
granted to CD Radio, and CD Radio is specifically prohibited from copying,
editing, modifying, transmitting or distributing Especially Women other than as
expressly permitted in this Agreement. All rights not expressly granted to CD
Radio in this Agreement are expressly reserved by In Radio for its exclusive
use.
3. Term. (a) The term of this Agreement (the "Term") shall commence on
the date hereof and shall extend until the fifth (5th) anniversary of the date
on which CD Radio begins offering its service to the public via the Platform
(such service commencement date being referred to herein as the "Launch Date").
The Term shall automatically renew thereafter for successive two (2) year
periods unless either party shall notify the other in writing of its intention
not to renew this Agreement at least ninety (90) days before the expiration of
the Term or any renewal thereof.
Exhibit 10.1
<PAGE>
(b) Notwithstanding the foregoing, In Radio shall have the right to
terminate this Agreement at any time upon thirty (30) days prior written notice
without incurring any liability to CD Radio if (i) In Radio ceases to produce or
offer Especially Women or (ii) In Radio is unable to obtain any necessary
regulatory approvals required in connection with the performance of its
obligations and duties under this Agreement.
(c) CD Radio shall have the right to terminate this Agreement
immediately at any time without the requirement of prior notice and without
incurring any liability to In Radio if (i) CD Radio ceases to offer its service
via the Platform, (ii) CD Radio is unable to obtain any necessary regulatory
approvals required in connection with the performance of its obligations and
duties under this Agreement or (iii) In Radio materially alters the format of
Especially Women from that defined herein without the prior consent of CD Radio.
4. Exclusivity; Right of First Refusal. (a) In Radio hereby covenants
and agrees that during the Term, In Radio shall not license or otherwise permit
the transmission, retransmission or other use of Especially Women to or by any
other person or entity in the business of providing a satellite digital audio
radio service transmitted within the Territory.
(b) In Radio hereby covenants and agrees that if at any time during the
Term, In Radio or any of its subsidiaries or affiliates develops any additional
English or Spanish language audio services (each, an "Additional Service") and
In Radio or any of its subsidiaries or affiliates desires to license or
otherwise permit the transmission, retransmission or other use of such
Additional Service by any person or entity in the business of providing a
satellite digital audio radio service transmitted within the Territory (other
than CD Radio and its subsidiaries), then In Radio or such subsidiary or
affiliate of In Radio shall deliver to CD Radio a written statement describing
in reasonable detail such Additional Service. Within ninety (90) days of receipt
by CD Radio of such written statement describing in reasonable detail the
Additional Service, CD Radio shall notify In Radio whether or not it has elected
to transmit the Additional Service on the Platform. If CD Radio notifies In
Radio that it has elected to transmit the Additional Service on the Platform,
then CD Radio and In Radio shall promptly enter into a license agreement
relating to such Additional Service. The terms of such license agreement for the
Additional Service shall be substantially similar to the terms of this
Agreement, with such changes and modifications as may be mutually agreed to by
CD Radio and In Radio. If CD Radio notifies In Radio that it has elected not to
transmit the Additional Service on the Platform, then In Radio and its
subsidiaries and affiliates shall be free to license or otherwise permit the
transmission, retransmission or other use of the Additional Service by any
person or entity, including any person or entity in the business of providing a
satellite digital audio radio service transmitted within the Territory.
5. Remedy. Either party may terminate this Agreement prior to the end
of the Term if (i) the other party fails to cure (or provide evidence, to the
other party's reasonable satisfaction, that it is working diligently toward
curing) a material breach or violation within thirty (30) days after its receipt
of written notice from the other party validly asserting such breach or
violation or (ii) any representation or warranty made by the other in this
Agreement is no longer true. Such termination (in addition to the
indemnifications provided hereunder) shall be In Radio's sole and exclusive
remedy for any breach by CD Radio.
6. Distribution. From the Launch Date until the end of the Term, CD
Radio shall make Especially Women available to Subscribers on a full-time basis
via the Platform. Especially Women shall be offered via the Platform on a
channel selected by CD Radio in its sole discretion and dedicated solely to
Especially Women. All numeric channel designations are subject to CD Radio's
sole discretion, and no representation or assurance in that regard is made by CD
Radio herein. CD Radio shall distribute Especially Women in accordance with all
applicable local, state and federal laws in the manner specified above, without
modification, material delay, or alteration, other than with respect to
advertising and promotional insertions as provided for under this Agreement.
Notwithstanding the foregoing, CD Radio may remove from Especially Women, or
insist upon the removal from Especially Women by In Radio of, any material
contained in the programming content of Especially Women which CD Radio, in its
sole discretion, determines to be (i) misleading or deceptive, (ii) obscuring of
the distinction between editorial and advertising content, (iii) in violation of
any federal, state or local law or regulation, any industry standard, or the
rights of any third party, or (iv) otherwise detrimental to CD Radio or
inconsistent with CD Radio's standards of appropriateness. In Radio shall be
responsible for delivery of Especially Women to CD Radio. In Radio hereby agrees
to make its feed available to CD Radio beginning September 1, 1999.
2
<PAGE>
7. Commercial Time. (a) All rights to advertising or sponsorship of
Especially Women shall be reserved to In Radio; provided, that (i) on the Launch
Date, CD Radio shall acquire the right to use or to dispose of the right to use
one (1) minute of commercial time per each hour on Especially Women; (ii) on the
second (2nd) anniversary of the Launch Date, CD Radio shall acquire the right to
use or to dispose of the right to use a total of three (3) minutes of commercial
time per each hour on Especially Women; (iii) on the third (3rd) anniversary of
the Launch Date, CD Radio shall acquire the right to use or to dispose of the
right to use a total of four (4) minutes of commercial time per each hour on
Especially Women, (iv) on the fourth (4th) anniversary of the Launch Date, CD
Radio shall acquire the right to use or to dispose of the right to use a total
of five (5) minutes of commercial time per each hour on Especially Women, and
(v) on the fifth (5th) anniversary of the Launch Date CD Radio shall acquire the
right to use or to dispose of the right to use fifty percent (50%) of the net
commercial time available to In Radio per each hour on Especially Women, but in
no event less than a total of five (5) minutes per each hour.
(b) CD Radio reserves the right to require commercial sponsors to
revise or remove any material that CD Radio, in its sole discretion, determines
to be (i) misleading or deceptive, (ii) obscuring of the distinction between
editorial and advertising content, (iii) in violation of any federal, state or
local law or regulation, any industry standard, or the rights of any third
party, or (iv) otherwise detrimental to CD Radio or inconsistent with CD Radio's
standards of appropriateness.
(c) In providing the Especially Women feed to CD Radio, In Radio shall
include therein all necessary signaling to enable CD Radio to utilize any right
to use or dispose of the use of commercial time on Especially Women which CD
Radio may acquire under paragraph (a) above.
8. Reports and Records. Within thirty (30) days following the last day
of each calendar month in which Especially Women is scheduled for airing by CD
Radio, CD Radio shall deliver to In Radio a report verifying that Especially
Women was aired by CD Radio during such month in accordance with this Agreement.
9. Promotion. (a) CD Radio is hereby granted the right to issue
publicity about Especially Women, which publicity may include the name, logo and
other information provided to CD Radio by In Radio regarding Especially Women;
provided, that such name, logo and information shall in no event be used by CD
Radio in any manner which may reasonably be expected to have a material adverse
effect on In Radio. In Radio is hereby granted the right to issue publicity
about CD Radio limited to publicity regarding the transmission of Especially
Women on the Platform, which publicity may include CD Radio's name, logo and
other information provided to In Radio regarding the Platform; provided, that
any such use of CD Radio's name, logo and such other information shall be
subject to the prior approval of CD Radio.
(b) During the Term, CD Radio shall promote Especially Women in a
manner consistent with its promotion of other information services on the
Platform.
(c) During the Term, In Radio shall promote the availability of
Especially Women on the Platform. Such promotion, which will commence no later
than sixty (60) days prior to the Launch Date, shall include:
(i) promotion by In Radio of the availability of Especially
Women on CD Radio on a continual basis via its Internet Website;
(ii) maintenance by In Radio of an Internet Website link to CD
Radio's Website; and
(iii) commencing sixty (60) days prior to the Launch Date,
constant mention of the availability of Especially Women in all publications, on
the website "Women.com" and all other Internet Websites that are now, or
hereafter become, aligned with In Radio during the Term.
(d) In Radio shall promote its availability on the Platform through its
media outlets. The parties contemplate that such outlets may include: (i)
terrestrial radio stations owned and operated by In Radio affiliates; (ii) live
3
<PAGE>
seminars featuring In Radio talent; (iii) direct mail initiated by In Radio;
(iv) outdoor billboards; and (v) publications.
(e) CD Radio shall provide In Radio with any promotional materials that
CD Radio shall make generally available to programming providers on the Platform
for such promotional purposes. Any manner or medium of promotion used by In
Radio to promote In Radio's availability on the Platform which is not provided
by CD Radio shall be subject to CD Radio's reasonable prior approval.
(f) Unless otherwise required by applicable law or regulation, neither
CD Radio nor In Radio shall make any public announcement regarding this
Agreement or any of the provisions contained herein without the consent of the
other.
10. Representations and Warranties.
(a) Power and Authority. Each party warrants to the other that it has
the power and authority to enter into this Agreement and to perform all of its
obligations hereunder.
(b) Quality and Nature of the Transmissions. CD Radio warrants that its
transmissions of Especially Women shall be of a technical quality that is
comparable to the quality of other information services provided on the
Platform. CD Radio does not warrant that transmissions of Especially Women will
be uninterrupted or error-free. CD Radio's sole liability and In Radio's sole
remedy in the event of any failure in the operation of the Platform shall be for
CD Radio to use its reasonable commercial efforts to remedy such failure. CD
Radio makes no warranty as to the retransmission of materials or as to the
services provided to CD Radio by third parties in connection with the
transmission of Especially Women on the Platform, or as to the results to be
obtained from such third parties' services. Except as otherwise permitted by
this Agreement, Especially Women will be retransmitted "as is", and the
retransmission services provided by third parties are provided "as is", without
warranties of merchantability or fitness for a particular purpose or use.
(c) Noninfringement. In Radio warrants that it has all requisite
rights, power and authority to provide Especially Women to CD Radio as
contemplated in this Agreement and that CD Radio's distribution and promotion of
Especially Women and use of In Radio's name, logo and other information provided
to CD Radio by In Radio in accordance with the terms and conditions of this
Agreement (i) will not give rise to any claim by any third party, including,
without limitation, claims arising from or relating to copyright, rights of
publicity, patent or trademark infringement, unfair competition, idea
misappropriation, plagiarism, defamation, libel, slander or any other
intellectual property right, intentional infliction of emotional distress or
related torts, obscenity, indecency, professional malpractice, violation of
statutory, common law or contractual rights of privacy or confidentiality or of
any other right of any third party, including, without limitation, any royalty,
reuse, residual, guild or union obligations, all of which shall be borne
exclusively by In Radio, and (ii) will not otherwise result in injury or damage
to any third party. In Radio represents and warrants that In Radio has obtained
all rights, waivers, permissions and clearances necessary to air Especially
Women on the Platform.
(d) No Conflict. Each party represents and warrants that neither the
execution and delivery of this Agreement, nor the performance of its obligations
hereunder, will violate any agreement to which it is a party or any federal,
state, or local law or regulation to which it is subject.
(e) Performance Guarantee. CD Radio represents, warrants, and covenants
that it will provide the services required by this Agreement to all persons in
the Territory who become Subscribers during the term of this Agreement.
11. Indemnity. (a) In Radio shall defend, indemnify and hold CD Radio
harmless from and against any loss, damage, expense or claim arising from or out
of the content of Especially Women as furnished to CD Radio by In Radio,
including, but not limited to, any loss, damage, expense or claim based upon
alleged violation or infringement of any intellectual property right, including,
without limitation, libel, slander, defamation, invasion of the right of
privacy, or violation or infringement of copyright (including music performance
rights), literary or music synchronization rights. In addition, In Radio shall
defend, indemnify, and hold CD Radio harmless from any
4
<PAGE>
loss, damage, expense, or claim arising from an action brought against CD Radio
by a third party alleging facts based on In Radio's breach of its
representations, warranties or obligations under this Agreement.
(b) CD Radio shall defend, indemnify, and hold In Radio harmless from
any loss, damage, expense, or claim arising from an action brought against In
Radio by a third party alleging facts based on CD Radio's breach of its
representations, warranties or obligations under this Agreement. Notwithstanding
the foregoing, however, CD Radio shall not be responsible for actions of third
parties resulting in harm due to change, loss, damage, destruction or
unauthorized use of Especially Women, including, without limitation,
unauthorized use or reproduction of Especially Women or any portion thereof by
third parties, including, without limitation, Subscribers.
12. Limitation of Liability. Notwithstanding anything in this Agreement
to the contrary:
(a) IN NO EVENT SHALL EITHER PARTY HERETO BE LIABLE TO THE OTHER PARTY
FOR ANY INCIDENTAL, SPECULATIVE, CONSEQUENTIAL OR PUNITIVE DAMAGES, WHETHER
FORESEEABLE OR NOT (INCLUDING, WITHOUT LIMITATION, THOSE ARISING FROM
NEGLIGENCE, OCCASIONED BY ANY FAILURE TO PERFORM OR THE BREACH OF ANY OBLIGATION
UNDER THIS AGREEMENT FOR ANY CAUSE WHATSOEVER) .
(b) NEITHER CD RADIO NOR IN RADIO MAKE ANY WARRANTIES HEREIN EXCEPT FOR
THE WARRANTIES SPECIFIED IN THIS AGREEMENT. CD RADIO AND IN RADIO, EACH FOR
ITSELF, DISCLAIM ALL OTHER EXPRESS WARRANTIES AND ALL IMPLIED WARRANTIES,
INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF MERCHANTABILITY OR FITNESS FOR ANY
PURPOSE OR USE.
(c) CD RADIO'S MAXIMUM LIABILITY FOR DAMAGES TO IN RADIO FOR ANY AND
ALL CAUSES WHATSOEVER AND IN RADIO'S MAXIMUM REMEDY, REGARDLESS OF THE FORM OF
ACTION, WHETHER IN CONTRACT OR IN TORT, SHALL BE LIMITED TO EARLY TERMINATION OF
TRANSMISSION OF ESPECIALLY WOMEN. IN NO EVENT SHALL CD RADIO OR ANYONE ELSE
INVOLVED IN TRANSMISSION OF ESPECIALLY WOMEN BE LIABLE FOR ANY LOST DATA, LOST
REVENUES, OR BUSINESS INTERRUPTION. EXCEPT AS PROVIDED IN SECTION 11(b) OF THIS
AGREEMENT, CD RADIO SHALL NOT BE LIABLE TO IN RADIO FOR ANY CLAIM AGAINST IN
RADIO BY ANY OTHER PARTY.
13. Assignment. (a) The rights and obligations of CD Radio under this
Agreement may be assigned or transferred without the consent of In Radio in the
event CD Radio transfers its control and/or ownership of the Platform to a third
party; Provided. however, that such third party shall in all events agree to
accept and abide by all of the terms and conditions of this Agreement.
Notwithstanding the foregoing, CD Radio may assign this Agreement to any entity
which, as of the date of this Agreement, controls, is controlled by, or is under
common control with CD Radio or to any entity which, following the date of this
Agreement, merges with CD Radio or acquires all or substantially all of CD
Radio's stock or assets.
(b) The rights and obligations of In Radio under this Agreement may not
be assigned to a third party without the prior written consent of CD Radio,
which consent shall not unreasonably be withheld; provided, however, that such
third party shall in all events agree to accept and abide by the terms and
conditions of this Agreement. Notwithstanding the foregoing, In Radio may,
without the requirement of CD Radio's consent, assign this Agreement to any
entity which, as of the date of this Agreement, controls, is controlled by, or
is under common control with In Radio.
14. Notices. All notices that either CD Radio or In Radio is required
or may desire to give to the other under this Agreement shall be in writing and
shall be delivered personally or sent by registered or certified mail (postage
prepaid) or telecopy to such party at the address set forth below, or at such
other address as such party shall have designated by notice duly given in the
manner provided above. All such notices shall be deemed given on receipt.
Notice to CD Radio shall be sent to:
5
<PAGE>
CD Radio Inc.
1180 Avenue of the Americas
14th Floor
New York, New York 10036
Attention: General Counsel
Telecopier: (212) 899-5036
Notice to In Radio shall be sent to:
Information Network Radio, LLC
114 Sansome Street
Suite 1410
San Francisco, California 94104
Attention: Mr. N. John Douglas
Telecopier: (415) 434-1280
with a copy to:
Howard Tepel, Esq.
Fleischman and Walsh, L.L.P.
1400 Sixteenth Street, N.W.
Washington, D.C. 20036
15. Miscellaneous. (a) Neither party shall be liable to the other under
the terms of this Agreement for any delays, preemptions or their failure to
perform when such delays, preemption or failures are due to any cause beyond the
control of the party whose performance is so affected.
(b) This Agreement, and all collateral matters relating thereto, shall
be governed and construed under the laws of the State of New York (without
regard to conflict of laws or choice of law principles in the governing
jurisdiction), applicable to agreements fully made and performed therein,
subject to applicable provisions of the Communications Act of 1934, as amended,
and the applicable rules, regulations and orders of the Federal Communications
Commission.
(c) Nothing contained herein shall be deemed to create, and the parties
do not intend to create, any relationship as partners or joint venturers between
CD Radio and In Radio with respect to this Agreement.
(d) The invalidity or unenforceability of any provision of this
Agreement will not affect the validity of any other provision of this Agreement,
and in the event that any provisions are determined to be invalid or otherwise
illegal, this Agreement will remain in effect and will be construed in
accordance with its terms as if the invalid or illegal provision were not
contained herein.
(e) This Agreement constitutes the entire agreement and understanding
between the parties with regard to the subject matter hereof, and supersedes all
prior or contemporaneous oral or written agreements and representations between
the parties. Any amendment, modification or alteration of this Agreement must be
in writing and signed by the duly authorized representatives of the parties.
(f) No term or condition of this Agreement will be deemed waived, and
no breach will be excused, unless such waiver or excuse is in writing and signed
by the party against whom such waiver or excuse is sought to be enforced.
(g) The captions and headings in this Agreement are intended only for
convenience, and will in no event be construed to define, limit or describe the
scope or intent of this Agreement, or of any provision of this Agreement, nor in
any way affect the interpretation of this Agreement.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
CD RADIO INC. INFORMATION NETWORK RADIO, LLC
Name Joseph S. Capobianco Name: N. John Douglas
Title: Executive Vice President, Title: Chairman and Chief Executive
Content Officer
7
PROGRAMMING PARTNER AGREEMENT
THIS PROGRAMMING PARTNER AGREEMENT ("Agreement") is made as of this
18th day of August 1998, by and between American Mobile Radio Corporation
("AMRC"'), a Delaware corporation having its principal place of business at 1250
23rd Street, NW, Washington, D.C. 20037, and AsiaOne Network, L.L.C.
("Programmer"), a Delaware limited liability company having its principal place
of business at 114 Sansome Street, Suite 1410, San Francisco, California 94104.
W I T N E S S E T H:
WHEREAS, AMRC is implementing a system (the "System") to provide a
digital audio radio service in the continental United States (the "DARS")
pursuant to authorizations issued by the Federal Communications Commission (the
"FCC"); and
WHEREAS, Programmer represents that it is expert in the development,
production, supply and marketing of audio programming, and desires to develop,
produce and supply to AMRC certain programming as described in Appendix A hereto
(the "Programming") to be distributed over one or more audio channels of the
System (the System, the DARS and the Programming hereinafter being referred to
collectively as, the "Service") as well as market the Service, all on the terms
and conditions set forth herein; and
WHEREAS, AMRC desires to carry such Programming on the System, subject
to the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises contained herein, the parties, intending to be legally bound, hereby
agree as follows:
ARTICLE ONE
TERM
1.1 Term. Subject to earlier termination in accordance with the terms
of this Agreement, the term of this Agreement (the "Term") shall be for the
period commencing as of the date set forth above and continuing to, and
including, the date set forth in Appendix B hereto. The Term shall include any
and all renewals and extensions of the original term of this Agreement.
ARTICLE TWO
PROGRAMMING
2.1 Program Supply and Carriage. Programmer shall develop, produce and
supply the Programming to AMRC as provided in this Agreement. AMRC shall carry
such Programming on the System as specified in Appendix C hereto. AMRC shall
have complete and sole authority over the System, including the right to
control, designate and modify the Channel(s) (as defined in Appendix C hereto)
over which the Programming is to be carried on the System.
2.2 Grant of Rights to AMRC.
(a) Programmer hereby grants to AMRC and its agents and
contractors during the Term the exclusive right and license to transmit, use and
distribute the Programming by satellite and/or any other means of distribution,
including without limitation terrestrial repeaters and microwave facilities, in
connection with AMRC's provision of the Service. The scope of rights granted to
AMRC herein shall also include any right(s) and license(s) described in Appendix
D hereto.
Exhibit 10.2
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(b) Programmer hereby also grants to AMRC and its agents and
contractors during the Term the non-exclusive right and license to advertise,
publicize, exploit, use and promote the Programming or any portion thereof in
any manner and by any means or media in connection with AMRC's provision of the
Service, marketing and promotion thereof and advertising thereon. In connection
therewith, Programmer hereby grants to AMRC a non exclusive, royalty-free,
license to use all trade names, trademarks, service marks, trade dress, logos,
designs and other identifying marks of Programmer or the Programming
(collectively, the "Marks") in connection with the provision of the Service,
marketing and promotion thereof and advertising thereon, including any
marketing, promotional or other advertising materials, subject to adherence by
AMRC to Programmer's standards for use and display of such Marks and to AMRC's
identification of Programmer as the owner of such Marks. AMRC acknowledges that
the Marks are the exclusive property of the Programmer, and that AMRC has not
and will not acquire any proprietary rights therein by reason of this Agreement.
2.3 Program Development. Production and Content Requirements.
(a) Programmer shall, at its own cost and expense, develop,
produce and supply to AMRC sufficient Programming throughout the Term to enable
AMRC to transmit the Programming continuously, 24 hours per day, seven days a
week on each Channel as contemplated in Appendix C hereto.
(b) Programmer shall conform the Programming to the
description in, and meet or exceed the standards set forth in, Appendix A hereto
for such Programming. Any change in the nature, content or quality of the
Programming shall be subject to the prior written approval of AMRC in its sole
discretion. During the Term, Programmer shall consult with AMRC on a regular
basis, as determined by AMRC, regarding the nature, content and quality of the
Programming, and AMRC shall have full authority and control over decisions
regarding the nature, content and quality of the Programming, subject to AMRC's
recognition of Programmer's desire to optimize advertising revenues and to
attract listeners. Programmer shall furnish AMRC with programming logs
(containing at least, where applicable, program titles, names of talent, music
titles, artists' names and special features) from time to time upon AMRC's
request. Programmer shall also give AMRC seven (7) days prior written notice of
any special programming or features, as well as any changes in program
scheduling or on-air talent. AMRC shall have sole authority to determine service
tier-packaging.
(c) The name branding of the Channel(s) and any related
slogans (collectively, the "Channel BrandName") shall be subject to the prior
written approval of AMRC. Unless Programmer owns or holds an existing trademark
in such Channel Brand Name, as identified in Appendix F hereto, AMRC shall own
all right, title and interest in the Channel Brand Name. Programmer does hereby
assign to AMRC all right, title and interest of Programmer in and to the
trademark, together with the goodwill associated therewith. Programmer shall
execute all further instruments as may be necessary to effectuate and/or confirm
such assignments. In no event shall Programmer use such Channel Brand Name used
in connection with the Programming on any other DARS system or the equivalent
which provides service to any portion of the continental United States.
(d) AMRC may preempt (in accordance with current FCC standards
and policies applicable to terrestrial broadcast stations or the equivalent for
DARS systems) the Programming or any portion thereof and cause Programmer to
insert AMRC's own programming material in such manner as AMRC may determine in
its good faith, sole discretion. AMRC may also delay, defer, reschedule and
interrupt the Programming or any portion thereof as AMRC deems necessary in its
good faith, sole discretion. One 1 5-second spot each shall be reserved for
AMRC's use at both the top and the bottom of each clock hour for purposes of
airing AMRC identifications and promotional announcements relating to the
Service and/or the Programming. In addition, in the event of any unsold
commercial availabilities (and Programmer is not airing per inquiry and/or
public service announcements in such spots), AMRC may air, at its discretion,
promotional announcements during such unused spots. AMRC may also air an
additional 30 second promotional spot per hour, provided that it does not
preempt any paid advertising, per inquiry or public service announcements. AMRC
shall furnish Programmer with these promotional announcements at least three (3)
days in advance, and Programmer shall include the announcements within the
Programming. Programmer shall only identify the System, the Programming and the
Channel(s) consistent with AMRC's own standards as developed and modified from
time to time.
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(e) If, for any reason, including without limitation, causes
beyond the control of Programmer, AMRC determines, in good faith, that the
Programming does not include programming of at least the quantity, nature,
content and quality as required by Section 2.3(b) or as referenced in Appendix A
hereto, AMRC shall give Programmer written notice of such deficiency. If
Programmer has not cured such deficiency within thirty (30) days after its
receipt of notice, AMRC may, at its option, and in addition to any other
remedies available to AMRC hereunder, in law or in equity, discontinue carriage
of the Programming, or any portion thereof, effective upon notice to Programmer,
and/or terminate this Agreement.
2.4 Delivery of Programming.
(a) During the Term, Programmer shall, at its own cost and
expense: (i) cause the Programming to be received in digital signal(s) via
satellite (or other means acceptable to AMRC) at a satellite uplink facility
identified in writing by AMRC from time to time ("Uplink Facility"); and (ii)
fully encrypt the signal utilizing an encryption technology acceptable to AMRC.
The signal(s) and facilities used in connection with the delivery of the
Programming to the Uplink Facility shall fully comply with all applicable
technical and other requirements of AMRC and the FCC, including without
limitation the technical specifications set forth in Appendix E hereto
(collectively, the "AMRC Requirements"). AMRC reserves the right to change such
requirements from time to time, upon reasonable notice to Programmer. Programmer
shall, at its own cost and expense, secure all licenses, permits, rights-of-way,
approvals, and any other arrangements necessary or appropriate for receipt of
the Programming via satellite at the Uplink Facility.
(b) The specifications and quality of Programmer's signal(s),
and mode of delivery, shall be subject to AMRC's approval. If Programmer fails,
for any reason, to comply with the AMRC Requirements, Programmer shall
immediately take all actions necessary to correct the deficiency. In
circumstances of a failure to meet the AMRC Requirements, Programmer shall bear
all reasonable expenses of AMRC relating to its monitoring of Programmer's
signal(s).
ARTICLE THREE
MARKETING AND PROMOTION OF SERVICE
3.1 Marketing and Promotion. AMRC shall have sole authority and
discretion to determine and control all aspects of marketing and promotion of,
and advertising on, the Service, including the Programming. All marketing,
promotional and advertising materials furnished by Programmer shall conform with
all applicable laws, and shall be submitted to AMRC in advance for its written
approval, which shall not be unreasonably withheld. Such written approval shall
not relieve Programmer of responsibility for ensuring the compliance of such
marketing, promotional and advertising materials with all applicable laws.
Programmer acknowledges and agrees that it has no right to use AMRC's trade
names, trademarks, service marks, trade dress, logos, designs and other
identifying marks without the prior written consent of AMRC, and that Programmer
has not and will not acquire any proprietary rights therein by reason of this
Agreement.
3.2 Programmer's Marketing and Promotion Obligations. Programmer shall
use all commercially reasonable best efforts in accordance with this Agreement
to market and promote an awareness of the Service, including the Programming,
among potential subscribers. To assist AMRC in promoting the Service, Programmer
shall provide the marketing and promotional support described in Appendix G
hereto.
3.3 Market Research. Programmer may not undertake marketing tests,
surveysg rating polls and/or other research in connection with the Programming
or the Service (collectively, the "Market Research") without AMRC's prior
written consent, which consent shall not be unreasonably withheld. If AMRC does
approve of the Marketing Research, Programmer shall furnish AMRC with copies of
all Market Research and results immediately following Programmer's receipt
thereof. AMRC acknowledges that the Marketing Research and results are highly
proprietary to Programmer, and both AMRC and Programmer shall keep the Marketing
Research and results confidential under the provisions of Section 9.2 hereof;
provided. however, that AMRC agrees that Programmer may repackage such market
research in its advertising sales materials for distribution to advertisers and
agencies in connection with its marketing and sales activities. AMRC shall
furnish Programmer with any Market Research and results conducted by or on
behalf of AMRC insofar as such research relates specifically to the Channel(s).
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ARTICLE FOUR
SALE OF ADVERTISING/PROGRAM TIME
4.1 Sale of Advertising/Program Time.
(a) In consideration of Programmer's full performance of its
obligations hereunder, Programmer shall be entitled to retain a percentage of
Net Advertising Revenues (as defined in Appendix H hereto) derived from its sale
of (i) commercial advertising included within or adjacent to the Programming,
and (ii) program time, on each Channel (collectively, the "Advertising"),
subject to the terms and conditions of this Section. Programmer acknowledges
that it shall not have any right, title or interest in or to any Advertising or
any Net Advertising Revenues other than those which it is expressly entitled to
retain hereunder.
(b) Programmer shall use all commercially reasonable best
efforts to sell commercial advertising time and program time on each Channel as
specified in Appendix A hereto. The Advertising shall conform to the standards
of lawful advertising, and AMRC reserves the right, in its sole discretion, to
refuse to accept any advertising deemed by AMRC to be unlawful, contrary to
public policy, unsuitable, objectionable or otherwise in violation of the
standards contained in Appendix A hereto, as determined by AMRC from time to
time in its sole discretion. Nothing herein shall be deemed to preclude
Programmer from pursuing its available remedies in the event it believes that
AMRC has wrongfully refused to accept such advertising. Notwithstanding anything
contained herein to the contrary, AMRC's exercise of its authority, control and
discretion shall be reasonably exercised, and shall not unreasonably diminish
Programmer's ability to market and promote the Programming, sell advertising and
sign up new subscribers for the Service.
(c) Programmer shall have the right to designate the times
during each clock hour at which the Advertising may be transmitted.
(d) Programmer hereby assumes the responsibility and cost for
selling the Advertising on the Channel(s); provided, however, that Programmer's
selection and use of a national advertising sales representation firm (and any
subsequent change thereof) shall be subject to AMRC's prior written approval,
which shall not be unreasonably withheld.
(e) The percentage of Net Advertising Revenues to which
Programmer shall be entitled, together with terms and conditions governing
Programmer's sale of Advertising, are set forth in Appendix H hereto.
4.2 Subscriber Commissions. In addition to the consideration set forth
in Section 4.1, AMRC shall pay to Programmer the amount set forth in Appendix I
hereto ("Subcom Fee") for each New Subscriber (as defined herein) whom
Programmer is responsible for signing up for the Service at subscription rates
set by AMRC, as the same may be changed by AMRC from time to time. Programmer
shall strictly follow all sales policies established by AMRC. For purposes of
this paragraph, a "New Subscriber" means a subscriber who has fulfilled all of
his or her Service subscription obligations to AMRC (including payment
obligations) for three months, and a Subcom Fee shall become due and payable to
Programmer only after the New Subscriber has fulfilled such obligations. Except
for the Subcom Fee, Programmer shall not be entitled to any activation fee or
any other type of fees paid by New Subscribers. Programmer acknowledges that any
increase in the subscription fees during the Term shall not affect the Subcom
Fee set forth above. In addition, if AMRC reduces subscription fees for the
Service generally, the Subcom Fee shall be reduced on a proportionate basis,
provided that if AMRC stops charging subscription fees for the Service
generally, AMRC shall be relieved of any obligation to pay any future Subcom Fee
and Programmer's obligations under the remainder of this Agreement shall not be
affected thereby. Programmer expressly acknowledges and agrees that AMRC's sole
obligation herein shall be to pay a single Subcom Fee per subscriber, and that
in the event a New Subscriber identifies more than one referral source (and each
source is eligible to earn a Subcom Fee), the Subcom Fee may be split equally
among the referral sources in the sole discretion of AMRC.
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ARTICLE FIVE
TERMINATION
5.1 Termination Upon Default. Either party may terminate this Agreement
(the "Terminating Party") if the other party (the "Defaulting Party") is in
breach of or default under the provisions of this Agreement. For purposes of
this Section 5.1, a default shall be any of the following:
(a) the Defaulting Party fails to pay any amount due hereunder
within fifteen (15) business days after written notice is given by the other
party that the same is overdue (or shall be delinquent in such payment on more
than five occasions during the Term);
(b) the Defaulting Party fails to perform any of its covenants
or obligations hereunder in all material respects or makes any material
misrepresentation hereunder, which failure or misrepresentation is not cured
within fifteen (15) business days after written notice thereof is given by the
other party;
(c) the Defaulting Party dissolves or liquidates, or transfers
all or substantially all of its assets to another person or entity otherwise
than as permitted under Section 9.3 of this Agreement; or
(d) the Defaulting Party becomes the subject of voluntary or
involuntary bankruptcy, insolvency, reorganization or liquidation proceedings,
makes an assignment for the benefit of creditors, or admits in writing its
inability to pay its debts as they mature, or a receiver is appointed or any of
its assets or properties, and the same is not dismissed, vacated, or stayed
within ninety (90) days.
Termination under this Section 5.1 shall be effective immediately on the
date on which the Defaulting Party is given written notice of default or at the
end of any applicable cure period.
5.2 Other Remedies. If this Agreement is terminated in accordance with
the provisions set forth in Section 5.1 above, the Terminating Party shall be
entitled to exercise all remedies which may be available to it, either at law or
in equity, or both. Notwithstanding any limitation set forth in Section 5.6
hereof, in connection with the Terminating Party's recovery of actual damages
incurred as a result of the Defaulting Party's breach, the parties agree that
such actual damages shall be deemed to include (but shall not be limited to) an
amount equal to the Net Advertising Revenues received by the Terminating Party
during the 6-month period preceding the date on which the breach occurred. In
the case where AMRC is the Terminating Party, this amount shall equal at least
50% of the applicable minimum payment due to AMRC for the year in which the
breach occurred, as described in Appendix H hereto.
5.3 Regulatory approvals. If: (a) AMRC fails, for any reason, to obtain
and maintain all material FCC authorizations or other government approvals for
the provision of the Service; or (b) a final order of the FCC, or other
government agency having jurisdiction, revoking or denying renewal of the DARS
authorization(s) granted to AMRC is issued and becomes effective, this Agreement
shall terminate immediately, upon written notice to Programmer.
5.4 System Launch Failure: Business Cessation.
(a) Either party may terminate this Agreement without
liability in the event that the Commercial Operations Date does not occur, for
any reason, by December 31, 2001.
(b) AMRC may terminate this Agreement in the event it ceases,
for any reason, providing the Service altogether.
5.5 Early Termination. During the 30-day period immediately following
each of the third and fourth anniversaries of the Commercial Operations Date
(each, an "Early Termination Period"), the parties may terminate this Agreement
as provided in Appendix J hereto.
5.6 Limitation of Liability. In no event shall either party be liable
for any indirect, consequential, or special damages, or for any lost profits,
even if advised of the possibility of the same.
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ARTICLE SIX
REPRESENTATIONS, WARRANTIES AND COVENANTS
6.1 Programmer's Representations. Warranties and Covenants. Programmer
represents, warrants and covenants to AMRC, as of the date hereof and throughout
the Term, as follows:
(a) Programmer is a limited liability company duly organized
and validly existing under the laws of the State of Delaware. Programmer has
full power and authority to enter into this Agreement and to perform its
obligations hereunder. The execution and delivery of this Agreement and the
performance of Programmer's obligations hereunder have been duly and validly
authorized by Programmer and no other proceedings on the part of Programmer are
necessary to authorize this Agreement or to perform its obligations hereunder.
This Agreement has been duly and validly executed and delivered by Programmer
and constitutes the legal, valid and binding obligation of Programmer
enforceable in accordance with its terms, except as may be limited by
bankruptcy, insolvency or other laws affecting generally the enforcement of
creditors' rights or the application of principles of equity. The individual
executing this Agreement on behalf of Programmer has the authority to do so. The
execution, delivery and performance of this Agreement by Programmer will not
result in the breach or termination of, or constitute a default under or
conflict with any of the terms, conditions or provisions of, any agreement or
other instrument to which Programmer is a party or by which it is bound.
(b) Programmer has the full power and authority and has
obtained all necessary rights and/or permission to grant the licenses
contemplated in Section 2.2 above. Without limiting the generality of the
foregoing, Programmer has secured all necessary rights from third parties in
order to grant AMRC the exclusive license to use the Programming as described in
Section 2.2 above, and upon request of AMRC, Programmer shall furnish
appropriate documentation evidencing such rights. The Programming, in the form
delivered by Programmer to AMRC from time to time and when used for the purpose
and in the manner contemplated by this Agreement, does not and will not infringe
upon any United States or foreign patent, copyright, trade name, trademark,
service mark, trade secret, literary or dramatic right or other proprietary
right of any third person (including the right of privacy and publicity) and
will not violate the terms of any music performance rights license of AMRC
(compulsory or otherwise).
(c) The receipt, transmission and use of the Programming by
AMRC, as contemplated by this Agreement, will not cause AMRC or any of its
affiliates, agents or employees to violate any domestic or foreign law, rule,
regulation, court or administrative decree. The Programming shall comply with
all applicable governmental and international laws, conventions, treaties and
regulations, including laws regarding defamatory, obscene or pornographic
materials or communications.
(d) Programmer shall maintain, at its own cost and expense,
insurance with a carrier satisfactory to AMRC concerning and covering any and
all of Programmer's obligations under this Agreement. Such insurance shall name
AMRC as an additional insured and shall include, without limitation,
comprehensive general liability (including a contractual liability endorsement),
with limits of at least one million dollars ($1,000,000.00), and errors and
omissions coverage, including intellectual property infringement liability, with
limits of at least three million dollars ($3,000,000.00). Such insurance shall
remain in force at all times during the Term hereof and for a period of five
years thereafter. At periodic intervals determined by AMRC, AMRC may require
Programmer to increase these coverage limits by a reasonable amount as AMRC may
determine is necessary in good faith. Programmer shall provide AMRC with a
certificate of insurance evidencing this coverage upon the execution hereof. At
least thirty (30) days prior to the expiration of such policy, Programmer shall
provide AMRC with appropriate proof of issuance of a policy continuing in force
and effect the insurance coverage of the insurance so expiring. Programmer shall
provide AMRC with thirty (30) days written notice of any changes in such policy;
provided, however, that Programmer shall not make any revisions to such policy
which could adversely affect AMRC's rights without AMRC's prior written consent.
(e) Programmer shall be solely responsible for the content of
the Programming and for any advertising that it sells for distribution via the
Service. To the extent that the Programming or Advertising is not in the English
language, upon AMRC's request, Programmer shall provide to AMRC a translation
into the English language of any
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of the same and/or a translator to enable AMRC to monitor such Programming. The
cost of such translation shall be shared equally by the parties.
(f) During the Term hereof, Programmer shall not, directly or
indirectly, transmit, distribute, commercially exploit or otherwise authorize,
within the areas in which AMRC is authorized by the FCC to provide service, the
reception of all or any portion of the Programming furnished to AMRC hereunder,
including the Channel Brand Name, via other distribution technologies (e.g.,
audio cable, wireless cable, Internet or other interactive and/or computer
applications), except as otherwise specifically authorized in Appendix K hereto.
(g) Programmer shall not take any action that is intended or
designed to have the effect of discouraging any licensor, subscriber, supplier
or other business associate of AMRC from maintaining the same business
relationship with AMRC. In that regard, Programmer shall not directly or
indirectly: (i) induce or attempt to influence any present or future Service
subscriber to cancel his or her subscription to the Service; or (ii) induce or
attempt to influence any employee of AMRC (including talent) to terminate his or
her employment. Programmer's obligations under this subparagraph (h) shall
survive the expiration or termination of this Agreement.
6.2 AMRC's Representations. Warranties and Covenants. AMRC represents,
warrants and covenants to Programmer AMRC, as of the date hereof and throughout
the Term, as follows:
(a) AMRC is a corporation duly organized and validly existing
under the laws of the State of Delaware. AMRC has full power and authority to
enter into this Agreement and to perform its obligations hereunder. The
execution and delivery of this Agreement and the performance of AMRC's
obligations hereunder have been duly and validly authorized by AMRC and no other
proceedings on the part of AMRC are necessary to authorize this Agreement or to
perform its obligations hereunder. This Agreement has been duly and validly
executed and delivered by AMRC and constitutes the legal, valid and binding
obligation of AMRC enforceable in accordance with its terms, except as may be
limited by bankruptcy, insolvency or other laws affecting generally the
enforcement of creditors' rights or the application of principles of equity. The
individual executing this Agreement on behalf of AMRC has the authority to-do
so. The execution, delivery and performance of this Agreement by AMRC will not
result in the breach or termination of, or constitute a default under or
conflict with any of the terms, conditions or provisions of, any agreement or
other instrument to which AMRC is a party or by which it is bound.
(b) EXCEPT AS OTHERWISE PROVIDED IN THIS AGREEMENT, AMRC MAKES
NO WARRANTY REGARDING THE PROVISION OF THE SERVICE, INCLUDING WITHOUT
LIMITATION, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE.
6.3 Joint Covenants.
(a) AMRC and Programmer shall each refrain from doing anything
that would tend to discredit, dishonor, reflect adversely upon, or in any manner
injure, the reputation of the other or the Service, or adversely affect the
other or the Service, or, in the case of AMRC, adversely affect AMRC's status as
a licensed DARS provider, except that a party's enforcement of its rights and
performance of its duties and obligations contained herein shall not be deemed a
violation of the provisions of this Section 6.3(a). Each party shall be governed
in all its dealings under this Agreement by the highest standards of honesty,
integrity, and fair dealing.
(b) At the request of AMRC, the parties shall jointly prepare
a plan for developing and producing the Programming, for delivering the
Programming to AMRC, for marketing and promoting the Service and for testing and
implementing the Service ("Implementation Plan"). The Implementation Plan shall
address, at a minimum, the following:
(i) Development and production of the Programming;
(ii) Delivery of the Programming to AMRC;
(iii) Marketing and promoting the Service;
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(iv) Sale of Advertising; and
(v) Testing and implementation of the Service:
(1) The schedule for implementation of the
Channel(s) by Programmer;
(2) Installation and testing of Programmer
equipment located at, and integration with, AMRC's
facilities and services;
(3) Integration of and testing of AMRC's
facilities with Programmer's means of transmitting
the Programming to the AMRC facility; and
(4) The processes and procedures for
maintenance and repair.
ARTICLE SEVEN
INDEMNIFICATION
7.1 Breach or Default. AMRC and Programmer shall each indemnify, defend
and forever hold harmless the other and the other's affiliated companies and
each of the other's (and the other's affiliated companies') respective present
and former officers, shareholders, directors, employees, partners and agents,
from and against any and all losses, liabilities, claims, costs, damages,
expenses, including without limitation, fines, forfeitures, attorneys' fees,
disbursements and court and/or administrative costs (collectively, "Loss and
Expense"), arising out of the breach of or default under any term, warranty,
covenant, representation or other provision contained herein.
7.2 Program Related. Without limiting the provisions of Section 7.1
hereof, Programmer shall indemnify, defend and forever hold harmless AMRC and
AMRC's affiliated companies and each of AMRC's (and its affiliated companies')
respective present and former officers, shareholders, directors, employees,
partners and agents, from and against all Loss and Expense arising directly or
indirectly out of: (i) the development, production, supply, delivery or content
of the Programming or the marketing, promotion, transmission or use of the
Programming hereunder and any Advertising included therein or adjacent thereto;
or (ii) any alleged or proven libel, slander, defamation, invasion of the right
of privacy or publicity, violation, infringement or misappropriation of any
performance right, patent, copyright, trade name, trademark, trade secret,
literary or dramatic right, or obscenity or indecency based in whole or in part
upon the Programming and/or AMRC's use thereof and any sponsorship, promotional
and advertising spots contained therein (provided that AMRC shall, to like
extent, indemnify Prograrnmer for any deletion or addition of material by AMRC
to the Programming which deletion from, or addition to, the Programming gives
rise to any Loss or Expense, unless such deletion or addition was required to
comply with applicable law; or (iii) the negligent or willful acts or omissions
of Programmer or its equipment and/or service vendors.
7.3 System Related. Without limiting the provisions of Section 7.1
hereof, AMRC shall indemnify, defend and forever hold harmless Programmer and
Programmer's affiliated companies and each of Programmer's (and its affiliated
companies') respective present and former officers, shareholders, directors,
employees, partners and agents, from and against all Loss and Expense arising
directly or indirectly out of (i) the operation of the System, or (ii) the
negligent or willful acts or omissions of AMRC.
7.4 Indemnification Procedures. Each party seeking indemnity hereunder
(the "Indemnified Party") shall give prompt written notice to the other party
(the "Indemnifying Party") of any circumstances which may give rise to any Loss
or Expense under this Article 7 as soon as the Indemnified Party knows of such
circumstances; provided, however, that the failure to give such notice shall not
relieve the Indemnifying Party of its obligation to indemnify the Indemnified
Party under this Article 7. The Indemnifying Party shall, at its own cost and
expense and using counsel acceptable to the Indemnified Party, contest and
assume responsibility for the defense of such litigation, provided that the
Indemnified Party may, at the Indemnifying Party's own cost and expense,
participate in the defense of any such claim, action or suit. The Indemnifying
Party shall have the right to control the defense and any
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settlement of such claim, action or suit. The Indemnifying Party shall pay all
expenses and satisfy all judgments, including reasonable attorneys' fees and
litigation expenses, which may be incurred by or rendered against the
Indemnified Party in connection therewith.
The indemnification obligations of the parties under this Article 7
shall survive the expiration or termination of this Agreement.
ARTICLE EIGHT
FORCE MAJEURE
8.1 Force Majeure. Neither AMRC nor Programmer shall have any rights
against the other for any failure of performance due to causes beyond its
control, including without limitation, failure of the System facilities
(including general satellite or transponder failure), acts of God, fires, floods
or other catastrophes; national emergencies, insurrections, riots or wars;
strikes, lockouts, work stoppages or other labor difficulties; and any law,
order, regulation or other action of any governing authority or agency thereof.
8.2 Emergency Preemption.
(a) The carriage of Programming on the System may, in AMRC's
sole discretion, be preempted, interrupted or suspended due to unusual, abnormal
or other unforeseen situations, or conditions or for reasons beyond AMRC's
control, including without limitation, maintenance requirements or emergency
conditions experienced by AMRC; or to protect AMRC's System, personnel,
facilities or services (collectively, "Emergency Preemption").
(b) Upon notice of or otherwise becoming aware of an Emergency
Preemption, Programmer shall, upon the request of AMRC, immediately cease
transmissions of the Programming. AMRC may cause such Emergency Preemption to
occur in its sole discretion without liability to Programmer; provided, however,
that AMRC shall, to the extent possible, give reasonable notice thereof and use
all commercially reasonable best efforts to restore full carriage as soon as
practicable.
ARTICLE NINE
MISCELLANEOUS
9.1 Noncompetition Covenant:
(a) Programmer hereby covenants and agrees that it shall not,
during the Term, provide any programming or services or furnish any materials
to, or enter into any relationship with other DARS provider or any entity which
is affiliated in any manner with such provider which provides service to any
portion of the continental United States. Programmer acknowledges and agrees
that its breach of the foregoing prohibition will cause irreparable harm to AMRC
for which there is no adequate remedy at law. Accordingly, Programmer hereby
agrees that specific performance, including in the form of a mandatory
injunction, is and will be an appropriate remedy and that AMRC shall not be
required to post a bond or other security to file for or obtain such remedy.
(b) If Programmer desires to grant, or offer, to any other
third party the right to distribute, transmit and/or authorize the reception of
any type of Asian language programming in the United States by any means (other
than the Programming included within the formats listed in Appendix A hereto,
which Programmer acknowledges shall not be offered or licensed, during the Term
hereof, to any other DARS provider which provides service to any portion of the
continental United States), Programmer shall, prior to the grant, or offer, of
such right, give AMRC written notice thereof. As part of such notice, Programmer
shall disclose to AMRC the material terms and conditions of any proposed offer
and the identity of the third party to whom Programmer is proposing to grant, or
offer, such right. Upon receipt of such notice, AMRC may offer to acquire such
programming from Programmer, whereupon Programmer may accept or reject such
offer as it may decide in its sole discretion; provided, however, that nothing
contained herein shall be deemed to restrict, hinder or otherwise delay
Programmer's absolute right to grant or offer such right to a third party at any
time following Programmer's notice thereof to AMRC.
9
<PAGE>
(c) Programmer's rights, if any, to provide programming to
AMRC for transmission on other Channels is set forth in Appendix L hereto.
9.2 Confidentiality. AMRC and Programmer shall hold in confidence all
information contained in this Agreement, and any information related hereto,
including all information pertaining to pricing, Marketing Research and
subscriber lists. Such information shall not be disclosed to any third party by
either party without the prior written consent of the other party, except as
otherwise permitted in Section 3.3 hereof. Without limiting the generality of
the foregoing, neither party shall, without the written approval of the other
party, make any press release or other public announcement concerning the
parties' negotiation or execution of this Agreement or the terms hereof, except
as and to the extent that such party shall be so obligated by law, in which case
such party shall give advance notice to the other and the parties shall use
their best efforts to cause a mutually agreeable press release or announcement
to be issued.
The parties' obligations under this Section 9.2 shall survive the
expiration or termination of this Agreement.
9.3 Assignment.
(a) AMRC shall have the right to assign this Agreement,
including its rights and obligations under this Agreement, without the consent
of Programmer, to such person or entity who shall from time to time hold the FCC
authorizations pursuant to which the Service is authorized by the FCC. AMRC
shall also have the unrestricted right to assign this Agreement, or any of its
rights hereunder, upon written notice to Programmer, to any lender as collateral
security in connection with any financing arrangement of AMRC; provided, that
AMRC shall remain responsible for performance of its responsibilities hereunder.
(b) Programmer shall not assign any of its rights and/or
obligations under this Agreement to any other legal or natural person or entity
without the prior written consent of AMRC, which consent shall not be
unreasonably withheld. Any purported assignment by Programmer without AMRC's
consent shall be null and void. AMRC agrees that Programmer may collaterally
assign its rights and obligations under this Agreement to any financial
institution providing financing to Programmer as security for such loan
obligation. Programmer shall give AMRC sixty (60) days prior written notice of
any change in Control (as defined herein) of Programmer. Within thirty (30) days
of its receipt of such notice, AMRC may, at its option and in its sole
discretion, terminate this Agreement without any liability or further obligation
to Programmer or any third party, by giving Programmer written notice thereof.
Such termination shall become effective thirty (30) days after the date of
AMRC's termination notice unless Programmer has abandoned such transfer of
Control and given AMRC written notice thereof during such 30-day period. For
purposes of this paragraph, the term "Control" shall mean the power to direct
the management and policies of an entity, directly or indirectly, whether
through the ownership of voting securities, by contract or otherwise.
9.4 Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their permitted assigns.
9.5 No Third Party Beneficiaries. The provisions of this Agreement are
for the exclusive benefit of the parties hereto and their permitted assigns.
Nothing contained in this Agreement will be deemed to create any third party
beneficiaries or confer any benefit or rights on or to any person not a party
hereto, and no person not a party hereto (including without limitation
customers, vendors, or creditors of Programmer) shall be entitled to enforce any
provisions hereof or exercise any rights hereunder; provided, however, that AMRC
shall be deemed to be a third party beneficiary under any arrangement under
which Programmer receives programming and/or rights thereto for the Programming.
9.6 Relationship Between the Parties. Neither AMRC nor Programmer shall
be, or hold itself out as, the agent of the other under this Agreement. Nothing
contained herein shall be deemed to create, and the parties do not intend to
create, any partnership, association, joint venture, fiduciary or agency
relationship between AMRC and Programmer, and neither party is authorized to or
shall act toward third parties or the public in any manner which would indicate
any such relationship with the other.
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<PAGE>
9.7 Notices.
(a) All notices and other communications hereunder shall be
given in writing and shall be deemed to have been duly given and effective (i)
upon receipt if delivered in person or by facsimile, (ii) one (1) day after
deposit prepaid with a national overnight express delivery service; or (iii)
three (3) days after deposit in the United States certified mail, postage
prepaid. return receipt requested:
If to AMRC:
American Mobile Radio Corporation
1250 23rd Street, NW
Washington, D.C. 20037
Attention: Mr. Lee Abrams
Senior Vice President, Content and Programming
Phone: (202) 969-7051
Facsimile: (202) 969-7101
With a copy to:
General Counsel
American Mobile Radio Corporation
1250 23rd Street, NW
Washington, D.C. 20037
Phone: (202) 969-7100
Facsimile: (202) 969-7050
If to Programmer:
AsiaOne Network, L.L.C.
499 Hamilton Avenue, Suite 140
Palo Alto, CA 94301
Attention: Mr. N. John Douglas, Chairman/CEO
Phone: (650) 324-5888
Facsimile: (650) 688-1166
With a copy to:
William E. Green, Esq.
William Green & Associates
550 Hamilton Avenue, Suite 301
Palo Alto, CA 94301
Phone: (650) 321-9992
Facsimile: (650) 325-4205
(b) Each party may designate by notice, delivered as described in
paragraph (a) of this Section 9.7, a new address (or substitute or additional
persons) to which any notice, demand, request or communication may thereafter be
so given, served or sent.
9.8 Applicable law: Dispute Resolution.
(a) This Agreement, and the rights and obligations of the
parties hereunder. are subject to all applicable federal, state and local laws,
rules and regulations (including without limitation, the Communications Act of
1934, as amended, and the rules and regulations of the FCC) and shall be
construed in accordance with and shall be governed by the laws of the State of
New York, without giving effect to the principles of conflict of laws thereof.
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<PAGE>
(b) In case of any controversy or claim arising out of or
related to this Agreement, the parties agree to meet to resolve such dispute in
good faith. Should such a resolution not be reached, the parties further agree
that the matter shall be settled by arbitration administered by JAMS/Endispute
(or such other alternative dispute resolution service provider as may be
mutually agreed upon by the parties) in accordance with such entity's expedited
arbitration rules, and judgment on the award rendered by the arbitrator(s) may
be entered in any court having jurisdiction thereof. The arbitration shall be
conducted in Washington, D.C. unless another location is agreed upon by the
parties.
9.9 Waiver and Severability.
(a) Neither the waiver by either of the parties hereto of a
breach of, or a default under, any of the provisions of this Agreement, nor the
failure of either of the parties, on one or more occasions, to enforce any of
the provisions of this Agreement or to exercise any right or privilege hereunder
shall thereafter be construed as a waiver of any preceding or subsequent breach
or default of the same or any other obligation, or as a waiver of any provision,
right, or privilege hereunder. Any waiver under this Agreement must be in
writing.
(b) In the event that any one or more of the provisions of
this Agreement shall be held by a court of competent jurisdiction to be invalid
or unenforceable in any respect, such invalidity and unenforceability shall not
affect any other provision of this Agreement, and the Agreement shall be
construed as though such invalid and/or unenforceable provision(s) had never
been contained herein.
9.10 Modification. No amendment of or modification to this Agreement
shall be valid unless made in writing and signed by the authorized
representative(s) of the parties. As to AMRC, the "authorized representatives"
means both AMRC's President or any Vice President and its General Counsel.
9.11 Headings. The headings and numbering of paragraphs in this
Agreement are for convenience only and shall not be construed to define or limit
any of the terms herein or affect the meaning or interpretation hereof.
9.12 Entire agreement. This Agreement, including all appendices hereto,
constitutes the entire agreement between the parties hereto and supersedes all
prior oral or written agreements, representations, statements, negotiations,
understandings, proposals, and undertakings with respect to the subject matter
hereof. All appendices hereto are expressly incorporated herein by reference and
made a material part of this Agreement.
9.13 Attorneys' Fees. If any suit, appeal, or other action is commenced
by a party to establish, maintain, or enforce any right or remedy arising from
this Agreement, the prevailing party shall be entitled to reimbursement from the
other party of its reasonable attorneys' fees and litigation or appeal expenses
incurred therein.
9.14 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have entered into this Agreement
as of the date first above written.
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<PAGE>
AMERICAN MOBILE RADIO CORPORATION
ASIAONE NETWORK, L.L.C.
Appendix A
Description of Programming
The Programming shall solely consist of distinctive, high quality (in terms of
sound, content and talent, as well as music rotation, where applicable), foreign
language news, talk and variety formatted audio programming (including sports),
targeted to persons within the United States from the following countries, in
the primary native language(s) of those countries:
First Channel: China
Second Channel: India
The Programming shall conform with the standards attached hereto as Schedule
A-1, together with such other reasonable standards as may be established by AMRC
from time to time during the Term.
SCHEDULE A-1
PROGRAM AND OPERATING STANDARDS
Programmer shall observe the following policies and standards in its
preparation and production of the Programming:
1. Respectful of Faiths. The subject of religion and references to
particular faiths and tenets shall be treated with respect at all times.
2. Donation Solicitation. Requests for donations in the form of a
specific amount shall not be made if there is any suggestion that such donation
will result in miracles, physical cures or life-long prosperity. However,
statements generally requesting donations to support a broadcast or church are
permitted.
3. Treatment of Parapsychology. The advertising or promotion of fortune
telling, occultism, astrology, phrenology, palm reading, numerology,
mind-reading, character readings or subjects of the like nature
("Parapsychology") will not be broadcast unless such Parapsychology is an
integral part of the culture targeted by the Programming. Any advertising or
promotion of Parapsychology is subject to Sections 2.3(b) of the Agreement and
the remaining sections of Appendix A.
4. No Ministerial Solicitations. No invitations by a minister or other
individual appearing on a program to have listeners come and visit him or her
for consultation or the like shall be made if such invitation implies that the
listeners will receive consideration, monetary gain, or physical cures for
illness.
5. No Vending of Miracles. Any exhortation to listeners to bring money
to a church affair or service containing any suggestion that miracles, physical
cures or prosperity will result will not be broadcast.
6. Sale of Religious Artifacts. The offering for sale of religious
artifacts or other items for which listeners would send money is prohibited
unless such items are: (a) normally available in ordinary commerce; (b) part of
particular cultural or religious celebrations; or (c) clearly sold for proper
fund-raising purposes.
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7. No Miracle Solicitation. Any invitation to listeners to meet at
places other than a church and/or to attend other than regular services of a
church is prohibited if the invitation, meeting or service contains any claim
that miracles, physical cures or prosperity will result.
8. No Plugola or Payola. The mention of any business activity or "plug"
for any commercial, professional or other related endeavor, except where
appropriate identification of the sponsorship is made or where contained in an
actual commercial message of a sponsor, or is otherwise lawful, is prohibited.
No commercial messages or "plugs" shall be contained in the Programming
presented over the System which refer to any business venture, profit-making
activity or other interest (other than non-commercial announcements for bona
fide charities, church activities or other public service activities) in which
Programmer or its employees is or are directly or indirectly interested without
the same having been approved in advance by AMRC or such message being announced
and logged as sponsored.
9. No Gambling. References to "dream books," the "straight line," or
other direct or indirect descriptions or solicitations relative to the "numbers
game," or the "policy game" or any other form of illegal gambling are
prohibited.
10. No Numbers Games. References to chapter and verse paragraphs,
paragraph numbers or song numbers, which involve three digits should be avoided
and, when used, must reasonably relate to a non-gambling activity.
11. Election Procedures. At least fifteen (15) days before the start of
any primary or regular election campaign, Programmer will set the rates for time
to be sold to candidates for public office and/or their supporters to make
certain that the rates charged are in conformance with applicable law and
existing AMRC policy.
12. No Illegal Announcements. No announcement or promotion prohibited
by federal or state law or regulation of any lottery or game shall be made over
the System.
13. AMRC Discretion Paramount. In accordance with AMRC's responsibility
under the Communications Act of 1934, as amended, and the rules and regulations
of the FCC, AMRC reserves the right to reject or terminate any Advertising or
Programming being presented over the System which is in conflict with AMRC
policy or which in AMRC's sole but reasonable judgment would not serve the
public interest.
14. Programming Prohibitions. Programmer shall not knowingly broadcast
any of the following programs or announcement:
(a) False Claims. False or unwarranted claims for any product
or service.
(b) Unfair Imitation. Infringements of another advertiser's
rights through plagiarism or unfair imitation of either program ideas or copy,
or any other unfair competition.
(c) Commercial Disparagement. Any unfair disparagement of
competitors or competitive goods.
(d) Defamation, Profanity, Obscenity, Indecency. Any programs
or announcements that are defamatory, obscene, indecent, profane or vulgar
according to applicable FCC regulations or policies, either in theme or
treatment.
(e) Unauthenticated Testimonials. Any testimonials which
cannot be authenticated.
(f) Descriptions of Bodily Functions. Any presentation which
describes in an obscene or indecent manner bodily functions.
(g) Advertising. Any advertising matter or announcement which
may, in the opinion of AMRC, be materially injurious or prejudicial to the
interests of the public or the System, or to honest advertising and reputable
business in general.
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(h) Contests. Any contests or promotions which are in any way
misleading or constitute a public nuisance or are likely to lead to injury to
persons or property.
(i) Telephone Conversations. Any programming in material
violation of any statute, regulation or policy, including without limitation
Section 73.1206 of the FCC's rules, or any successor regulation, dealing with
the taping and/or broadcast of telephone conversations.
AMRC may waive, in writing, any of the foregoing policies in specific
instances in its sole discretion.
In any case where obvious questions of policy or interpretation arise,
Programmer will attempt in good faith to notify AMRC of the same before making
any commitments in connection therewith.
Appendix B
Term
As used herein, the term "Commercial Operations Date" means the date
specified by AMRC in writing to Programmer, on which AMRC commences transmission
of the Service to subscribers generally. The Term of this Agreement shall end on
the fifth anniversary of the Commercial Operations Date without further action
or notice by either party; provided, this Agreement shall automatically renew
for a one year renewal term ("Renewal Term"): (1) on the fifth anniversary of
the Commercial Operation Date if, on the fourth anniversary of the Commercial
Operations Date, AMRC's share of Net Advertising Revenue for the preceding year
was at least $[number deleted]; and (2) on the sixth anniversary of the
Commercial Operations Igate if, on the fifth anniversary of the Commercial
Operations Date, AMRC's share of Net Advertising Revenue for the preceding year
was at least $[number deleted]. Upon the expiration of the Term or any Renewal
Term, the Agreement may be renewed on such terms as may be mutually agreed upon
by the parties in their sole discretion.
Appendix C
Channels
AMRC will make available two (2) full-time channels on the System to
carry the Programming (each, a "Channel"). Each Channel shall provide digital
quality for a talk format, which shall be of a quality equal to or better than
that currently provided by a Class 1 terrestrial AM radio broadcast station.
AMRC shall determine the bandwidth of each Channel in its sole discretion, as
the same may be changed from time to time by AMRC.
Appendix D
Additional Rights
Subject to mutual agreement between the parties regarding the
compensation paid to Programmer, AMRC shall also receive an exclusive license
to: (i) transmit, distribute, authorize the reception of, and otherwise exploit
the Programming via alternative distribution channels (e.g., audio cable,
wireless cable, Internet and other multimedia, interactive and/or computer
applications); and (ii) exploit any and all so-called "ancillary" rights in and
to the Programming during the term hereof, including without limitation, all
merchandising and commercial tie-up and tie-in rights and all rights relating to
the sale and distribution of compact discs, digital audio tapes and other
similar mediums containing portions of the Programming. AMRC acknowledges that
Programmer does not have any obligation to grant AMRC the rights set forth in
the preceding sentence.
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Appendix E
Technical Specifications
[To be supplied by AMRC technical people]
Programmer may change the satellite or transponder used to deliver
Programmer's signal(s) to the Uplink Facility upon ninety (90) days prior
written notice to AMRC, provided that such new mode of delivery shall conform
with the AMRC Requirements.
Appendix F
Programmer Trademarks
AsiaOne
Taj Radio Network
Appendix G
Marketing and Promotion
Programmer shall expend at least a total of $[number deleted] during
the Term hereof, and not less than $[number deleted] per calendar year, for
marketing and promoting the Service over radio (other than Programmer's own
terrestrial facilities) and television broadcast stations, on DBS and cable
television systems, and in billboard, busboard, newspaper, classified
advertising, promotional events, fairs, direct mail, shopper advertising media,
and other appropriate media outlets. Upon the request of AMRC, Programmer shall
furnish AMRC with vendor invoices and other applicable documentation to
substantiate the nature, extent and cost of its marketing and promotional
efforts. Subject to AMRC approval of advertising copy and applicable media
outlet, AMRC shall co-op 50% of Programmer's required marketing and promotional
expenditures (not to exceed aggregate payments of $[number deleted]during the
Term). Co-op payments shall be conditioned on AMRC's receipt of appropriate
affidavits of performance, ad copy and/or such other documentation as may be
reasonably required by AMRC to substantiate the co-op advertising.
To promote the Service, Programmer shall use commercially reasonable
best efforts to air a minimum of two 30-second spots per day on each of the
terrestrial radio broadcast stations which it owns and/or operates. The spots
shall be aired ROS on a commercial availability basis. AMRC shall furnish
Programmer with these promotional announcements from time to time during the
Term.
Appendix H
Revenue Sharing
1. Programmer shall use all commercially reasonable best efforts to
sell: (i) a maximum amount of commercial advertising time not to exceed twelve
(12) minutes per clock hour (combination of 30- and 60-second spots) on each
Channel, provided that AMRC may increase this limit on the number of commercial
advertising minutes upon notice to Programmer; and (ii) program time on each
Channel. All advertising/program time shall be sold at a rate not less than a
minimum rate determined by Programmer from time to time. In accordance with
Section 9.7, Programmer shall notify AMRC of the rate and any changes thereto
for all advertising/program time. Programmer shall be solely responsible for
sales, billing, collection and ad trafficking, and for furnishing appropriate
affidavits of performance, as necessary. Programmer shall provide copies of all
commercial advertising and program contract to AMRC on monthly basis, and all
commercial advertising logs to AMRC on a weekly basis.
<TABLE>
2. Programmer shall, on a monthly basis, remit to AMRC by wire transfer
the percentages of Net Advertising Revenues set forth in the chart below for
each Channel, but no less than the annual minimum amounts set forth
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therein for each Channel (on a calendar year basis). As used herein, the term
"Net Advertising Revenues" shall mean gross billings from Programmer's sale of
program time, advertising and sponsorships included in the Programming, together
with any other gross revenues generated by Programmer (on an accrual basis) from
the transmission of the Programming on the System, less agency and
representative fees and third party sales commissions, Performing Rights License
Fees, sales taxes, and any other mutually agreed upon expense items, all of
which expenses shall be paid by Programmer, or reimbursed to AMRC if paid by
AMRC. The computation of Net Advertising Revenues shall also be subject to bad
debt allowance of 0.5% to the extent funds are not collected. All payments
remitted to AMRC shall be in U.S. Dollars. As used herein, the term "Performing
Rights License Fees" means each Channel's fair allocable share of all fees,
payments and other charges attributable to music rights licenses obtained by
AMRC in any of the copyrighted musical compositions and/or sound recordings
included in the Programming, whether resulting from negotiations or otherwise.
<CAPTION>
Revenue Share 2000/2001 2002 2003 2004 2005/2006*
- ------------- --------- ---- ---- ---- ----------
<S> <C> <C> <C> <C> <C>
Programmer Revenue 85% 65% 50% 50% 50%
AMRC Revenue 15% 35% 50% 50% 50%
Minimum to AMRC $ [number deleted]* * $[deleted] $[deleted] $[deleted] $[deleted]**
per Channel
<FN>
* Minimum payment for 2006 shall apply, on a pro rata basis, if the
Commercial Operations Date commences in 2001.
** Pro rata, as applicable.
</FN>
</TABLE>
Minimum payments to AMRC shall be reconciled on a calendar quarter basis (with
the first and last year's payments prorated). Accordingly, if the Net
Advertising Revenues remitted to AMRC during any given calendar quarter is less
than 25% of the minimum annual payment set forth in the chart above, Programmer
shall remit the payment shortfall to AMRC with the next monthly payment due in
the first month of the succeeding calendar quarter.
3. On or prior to the twenty-fifth (25th) day of each calendar month,
Programmer shall remit to AMRC its share of Net Advertising Revenues generated
during the prior month, and deliver to AMRC a statement itemizing the
calculation of Net Advertising Revenues (together with invoices, billing
statements and other supporting documentation reasonably requested by AMRC) and
a list of the then currently outstanding accounts receivable by payee and amount
due. Any reserves proposed by Programmer to meet future cost obligations shall
be subject to AMRC's approval.
4. Programmer shall keep and maintain accurate books and records of all
matters relating to the performance of its sales activities hereunder in
accordance with generally accepted accounting principles. During the Term of
this Agreement and for a period of three (3) years after the last remittance is
due to AMRC, Programmer shall make its books and records available for
inspection and audit by AMRC, its employees and agents, at Programmer's offices
upon reasonable advance notice to Programmer. Notwithstanding the foregoing, in
the event an audit of Programmer's books and records reveals an underpayment to
AMRC, Programmer shall pay to AMRC the amount of such underpayment and reimburse
AMRC for all expenses incurred in connection with the audit.
5. Programmer acknowledges that AMRC may market and sell special
multiple channel, bulk advertising packages at such rates as AMRC may determine
in its sole discretion. Programmer agrees to include such advertising spots
within the Programming as part of the twelve minutes of advertising to be sold
hereunder at the times specified by AMRC, subject to inventory availability.
AMRC shall be responsible for billing and collections related to such
advertising, and AMRC will remit the Net Advertising Revenues derived from such
advertising to Programmer in accordance with the percentages and procedures set
forth above.
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6. Programmer shall not advertise, or include in the Programming any
advertisements for, "800," "900," or "976" telephone services, or other
telephone services or similar services, which bill a caller for placing or
confirming a call that relate directly or indirectly to gambling, sexual or
romantic activities or other adult-only services, or that are directed at
children.
7. Any payment due from Programmer to AMRC that is not received by AMRC
on the date it is due shall be subject to a finance charge at a rate equal to
the lesser of one and one half percent (1 l/2%) per month or the highest rate
permitted by law, which amount shall accrue daily from the date payment was due
until the date the outstanding balance is paid in full.
Appendix I
Subcom Fee
Twenty-Five Dollars ($25).
Appendix J
Early Termination
(a) After the third anniversary of the Commercial Operations
Date, the parties may, upon written notice given during the Early Termination
Period, terminate the Agreement as follows:
(i) AMRC may terminate the Agreement upon written notice
to Programmer given during the Early Termination
Period if the total Net Advertising Revenues
generated during the twelve-month period preceding
the third anniversary of the Commercial Operations
Date does not exceed $[number deleted] for each
Channel.
(ii) Programmer may terminate the Agreement upon 180 days'
prior written notice to AMRC given during the Early
Termination Period if AMRC shall have failed to
achieve a minimum of at least [number deleted]
subscribers at any time during the twelve-month
period preceding the third anniversary of the
Commercial Operations Date.
(b) After the fourth anniversary of the Commercial Operations
Date, the parties may, upon written notice given during the Early Termination
Period, terminate the Agreement as follows:
(i) AMRC may terminate the Agreement upon written notice
to Programmer given during the Early Termination
Period if the total Net Advertising Revenues
generated during the twelve-month period preceding
the fourth anniversary of the Commercial Operations
Date does not exceed $[number deleted] for each
Channel.
(ii) Programmer may terminate the Agreement upon 180 days'
prior written notice to AMRC given during the Early
Termination Period if AMRC shall have failed to
achieve a minimum of at least [number deleted]
subscribers at any time during the twelve-month
period preceding the fourth anniversary of the
Commercial Operations Date.
Appendix K
Reservation of Rights
[NONE]
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Appendix L
Right of First Offer
If, at any time during the Term hereof, AMRC desires to (i) enter into
an agreement, written or oral, with a third-party programmer to acquire
additional programming for one or more Asian-language format channels, or (ii)
develop such programming internally, AMRC shall give Programmer written notice
(the "AMRC Notice") that it desires to acquire or develop such programming and
disclose to Programmer the terms and conditions of the proposed third party
offer or development project, including the program format of the proposed
channel(s) and the nature and quality of the program content.
Within thirty (30) days after receipt of the AMRC Notice, Programmer
may give AMRC written notice of an offer (the "Programmer Offer") to provide to
AMRC the same or similar programming. AMRC acknowledges and agrees that it shall
not enter into any agreement with a third-party programmer to acquire such
programming or develop such programming internally until after it has received
the Programmer Offer, or until after the 30th day following the date of the AMRC
Notice if no Programmer Offer is given by Programmer during that 30 day period.
In the event that AMRC does not accept the Programmer Offer and elects
instead to acquire such additional programming from a third-party programmer or
otherwise elects to develop such programming internally, the parties agree that
Programmer shall thereafter have no further obligation to pay AMRC the minimum
per channel payments set forth in the table in Appendix H
19
- --------------------------------------------------------------------------------
AGREEMENT
- --------------------------------------------------------------------------------
This Programming Services and Equity Agreement is made this _____ day
of June, 1999, by and among Nightingale-Conant Corporation ("N-C"), a Delaware
Corporation, with its principal place of business located at 7300 Lehigh Avenue,
Niles, Illinois 60714, and Personal Achievement Live ("PAL"), a California
limited liability company, with its principal place of business located at 114
Sansome Street Suite 1410, San Francisco, California 94104 and Information
Network Radio, Inc. ("INR"), a California corporation with its principal place
of business located at 114 Sansome Street, Suite 1410, San Francisco, California
94104.
RECITALS
1. N-C is in the business, among other things, of publishing and
selling literary works, ("Programs") many of which are in the form of sound
recordings which feature authors expounding on subjects related to personal
achievement in areas, including but not limited to, success, health, inner self,
wealth and business.
2. N-C in conjunction with Q2 , LLC, a California limited liability
company, with its principal place of business located at 114 Sansome Street
Suite 1410, San Francisco, California 94104, has produced and syndicated
programming for the existing Personal Achievement Network ("PAN") under a Radio
Programming and Syndication Agreement dated September 21, 1998 on personal
achievement subjects, which is broadcasted by affiliated radio stations, in
local markets throughout the United States and Canada.
3. PAL, through its Radio License Agreement dated June 3, 1998 between
CD Radio Inc. ("CDR"), a Delaware corporation with its principal offices at 1221
Avenue of Americas, New York, New York 10020, is in the business of providing
radio broadcast programming to CDR for the purpose of broadcasting radio
programming via digital satellite broadcast technology to subscribers of CDR's
services, and intends to substantially feature a personal achievement format.
INR, a California corporation, is PAL's parent, and has formed other limited
liability companies with the purpose of providing satellite radio broadcast
programming to CDR, and other digital satellite radio broadcast providers,
throughout the United States, its territories and possessions.
4. PAL wants N-C to furnish PAL with recorded personal achievement
material owned by, or licensed to, N-C, for broadcast on PAL's satellite
broadcast channel on CDR on an exclusive basis and subject to N-C's prior
approval, and N-C wants to furnish those materials to PAL, all on the terms and
conditions hereinafter contained.
For good and valuable consideration, the parties agree as follows:
AGREEMENTS
Article 1. Recitals
The above recitals are hereby incorporated by reference and are made a
part of this Agreement.
Exhibit 10.3
<PAGE>
Article 2. PAL to Operate Satellite Broadcast Programming Services
Section 2.01. PAL Broadcast Services.
PAL shall operate satellite radio broadcast programming services in
conformity with all applicable laws, rules and regulations, as well as in
conformity with the terms and conditions of this Agreement and under its June 3,
1998 Agreement with CDR. PAL shall develop and broadcast personal achievement
information as the majority of its 24-hour broadcast feed to CDR. For the
purposes of this Agreement, "Personal Achievement Format" means material
intended to enhance a person's success, health, inner self, wealth, and business
performance and contains N-C, and other audio publisher's, sound recording
materials.
Section 2.02. PAL to Develop Commercials Featuring N-C Audio Programs.
PAL, at its own cost, shall prepare thirty-second, sixty-second and up
to thirty-minute commercials ("PAL Commercials"), in a format suitable for radio
broadcast, featuring N-C Programs and broadcast within the PAL format on the CDR
satellite radio broadcast service. Before airing any commercials, PAL must
submit its product selection and advertising copy to N-C, for its written
approval, which will not be unreasonably withheld or delayed. PAL shall include
a designated 800 number within each commercial, and shall solely be responsible
for the costs of all telemarketing and fulfillment services incurred by it in
connection with the PAL Commercials. PAL shall air the PAL Commercials according
to its own determination and scheduling and shall be the party responsible for
the collection of all sales revenue and be the recipient of all sales proceeds
from product sales generated by the PAL Commercials.
Article 3. N-C to Provide Broadcast Segments
Section 3.01. N-C to Provide PAN Segments.
N-C agrees to make available to PAL any, or all, of the recorded
segments from the Personal Achievement Network program archive ("PAN Segments"),
whether existing now, or hereafter created. N-C has to date created, and
provided masters approximately three thousand eight hundred digital audio
formatted ("DAT") audio segments under the PAN Agreement. PAL acknowledges that
N-C has delivered these PAN Segments to it.
Section 3.02. Additional New N-C Programming for PAL.
During the term of this Agreement, PAL will from time to time request
Programs which it wishes to license hereunder from N-C. N-C, in addition, may
suggest other Programs to PAL. Nevertheless, N-C shall make the
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decision which Program it licenses, and its decision will not be subject to
challenge. Programs N-C licenses to PAL hereunder, whether now in existence or
authored hereafter, are referred to as "Licensed Programs."
PAL must edit the Licensed Programs at its costs, unless PAL elects to
engage N-C to perform editing services for it under Section 3.04. PAL must
submit each Program it edits to N-C for its approval, which will not be
unreasonably withheld or delayed. N-C will, and shall be, the owner of each
edited Program, and the copyrights therein, and PAL will not acquire any rights
of any kind by virtue of any editing it performs, or which may be performed
under its direction. PAL must confine its editing to changes necessary to
convert the Program into radio format. PAL must not change, or alter the context
or meaning of any material contained in any Program.
N-C shall provide PAL with broadcast D.A.T. masters (hereinafter
"Broadcast Masters") of each Licensed Program. N-C shall furnish PAL the
following with respect to each Licensed Program:
a. A duplicate unmixed digital audio master from the edited
Program in D.A.T. format, when available or an unmixed analog tape master if the
Licensed Program is not available on DAT, and
b. A script, in hard copy or computer disk if available, of
each master of each Licensed Program, which PAL shall use to select two to four
minute segments ("PAL Segments") which PAL will include in its programming and
use to prepare its on-air commentary concerning the segments provide.
PAL shall prepare a reference log, containing an index of all such PAL
Segments, and PAL will from time to time send a current copy of the index to
N-C, upon N-C's request.
PAL acknowledges that N-C does not possess radio broadcast rights to
all of the sound recordings licensed to (or even owned by) it, and that N-C will
prepare Broadcast Masters of Licensed Programs from materials to which N-C holds
or acquires such broadcast rights. As it may be difficult and/or costly to
obtain radio broadcast rights, N-C will only attempt to obtain them when N-C, in
its sole and absolute discretion, believes the attempt is justifiable. N-C
represents and warrants that N-C owns or possesses such rights with respect to
the material used in, or used in the preparation of, Broadcast Masters provided
to PAL. N-C shall furnish PAL with material on the following subjects:
a. Healthy lifestyles,
b. Success skills,
c. Business skills,
d. Wealthbuilding,
e. Inner self and spiritual
from Programs chosen by N-C, in consultation with PAL. PAL further acknowledges
that N-C may, from time to time, lose radio broadcast rights for PAL Segments
previously furnished to PAL, in which case PAL's license to broadcast such PAL
Segment under Article 4 shall cease.
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Section 3.03. N-C On-Air PAL Promotions.
PAL agrees to provide N-C the right to a ten to fifteen (10-15) second
on-air promotion ("Plug") of a toll-free 800 number for PAL listener's to
receive information on N-C's programs.
Pal will broadcast each day the number of N-C Plugs equal to the
greater of:
(i) the sum of 24 multiplied by a fraction, the numerator of
which is the number of minutes of all programming during the preceding month,
excluding news, commercials and public service announcements and the denominator
of which is the number of minutes of N-C's Licensed Programs broadcast during
that month (PAL shall make such calculation monthly on the first business day of
each month); or
(ii) Eight.
PAL may not air more than one N-C Plug each hour. N-C shall pay PAL
$10.00 for each "collected sale" made by N-C of an N-C proprietary six
audiocassette product generated by an N-C Plug. N-C shall pay PAL 20% of
"collected revenues" excluding all sales taxes, handling, shipping and similar
charges on N-C's sales of any of N-C's other products generated by an N-C Plug
and is sourced through a dedicated toll free number(s) used exclusively for on
air promotions. For the purposes of this Agreement, a "collected sale" is a sale
made by N-C where the customer has actually paid the purchase price to N-C and
"collected revenues" are revenues actually received by N-C from the sale of its
products. N-C will make payments to PAL quarterly, within thirty (30) days after
the end of each quarter. N-C will subtract from payments to PAL the appropriate
calculation for returns and credit card reversals.
Section 3.04. N-C Recording and Editorial Services.
PAL may from time to time wish to engage N-C to edit Licensed Programs.
In such case, PAL shall make a written offer to engage N-C. The offer must
include (a) scope of the representation, (b) applicable specifications and (c)
estimated studio time. N-C may accept or reject any offer. The following terms
shall apply, however, in each instance where N-C accepts an offer to provide
editing services:
(i) N-C will charge PAL for all direct and indirect costs,
including a reasonable allocation for overhead.
(ii) N-C will not make any profit in connection with any such
services.
(iii) N-C will bill PAL monthly, and PAL must pay N-C's
invoices within 30 days after submittal.
Section 3.05. Labor Costs.
N-C is not now a signatory to any collective bargaining agreement with
any labor union representing any persons authoring or performing (or both) on
any Broadcast Segments. The parties acknowledge that N-C's production Broadcast
talent fees, and in some cases production fees, may dramatically increase (a
"Labor Increase"), if N-C becomes a signatory to such an agreement, or otherwise
becomes subject to unionized pay structure for either or both its authors and
its performers. PAL, within 30 days after N-C's written request, agrees to
either
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a) pay any performance, or similar fee, which N-C becomes obligated to
pay because of any broadcast of Licensed Programs under this Agreement as well
as any production costs N-C incurs which specifically arise because of the
broadcast, or anticipated broadcast of Licensed Programs under this Agreement,
or
b) cease broadcast of any Licensed Program subject to a Labor Increase,
in which case PAL shall give written notice of such cessation within the 30 day
period.
Article 4. N-C's Grant of Rights
Section 4.01. Rights.
During the term of this Agreement:
a. N-C grants the royalty free, exclusive right to PAL to
broadcast by means of Digital Satellite radio, the PAL Segments and PAN
Segments, throughout the United States, its territories and
possessions. PAL may broadcast such Segments only on CDR's Station
featuring the Personnel Achievement Format (or on a CDR affiliate
broadcast service), and in connection therewith, on Landline or end
courier to CDR's designated satellite uplink service provider.
b. N-C agrees not to provide radio programming any other
digital satellite radio broadcast services within the United States and
Canada. This restriction shall not in any way, however, limit or
restrict N-C from airing short-form or long-form commercial as part of
a commercial or public relations message, on any conventional
terrestrial radio station.
The rights granted to PAL herein are specifically limited to the rights
to broadcast via digital radio satellite any PAN or PAL Segment through CDR, or
on a CDR affiliate subscription service, and shall specifically not include the
right to broadcast via radio for free home reception to the public, or any other
media that delivers audio content to consumers. Nothing contained herein,
however, shall prevent or restrict PAL's right or ability to conduct and
broadcast an on air, or pre-recorded interview of an author of an N-C product.
Section 4.02. Withdrawal of Segment.
N-C may at any time, and from time to time, withdraw from this license
any PAN or PAL Segment previously furnished to PAL, or otherwise subject to the
license herein granted, should N-C lose the radio broadcast rights to that
Segment, or should the continued broadcast of the Segment no longer, in N-C's
sole opinion, be in N-C's best interests. N-C shall notify PAL, in writing, of
the withdrawal of any Segment. N-C, as soon after the withdrawal as is
practical, shall furnish PAL with a replacement Segment or Segments, of
comparable length, to the Segment (or Segments) withdrawn. Once N-C gives notice
that a Segment is withdrawn, PAL's license to broadcast that Segment shall
terminate within thirty (30) days after the delivery of such notice, and PAL, to
the best of its abilities through the satellite radio broadcast services it has
contracted with, shall not broadcast that Segment at any time thereafter.
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Section 4.03 Rights Reserved.
N-C reserves to itself all rights not specifically granted to PAL. PAL
must broadcast each Segment in its entirety, in a single continuous time period,
interrupted only by commercial, public service and station break announcements
and other interruptions dictated by time constraints, and in such cases PAL,
with N-C's prior consent, will edit the material but only in a way as to
maintain the integrity of the subject Segments. Under no circumstances, except
as is otherwise specifically provided herein, may PAL, or the satellite radio
broadcast services it has contracted with, delete or reposition any of N-C's or
any author's copyright notices, and/or credits or adversely, in any way, affect
the artistic or sound quality of any segment, or interfere with its continuity.
PAL may not make any copies or phonorecords of any Segment, except for in-house
music license fee, and/or FCC usage purposes. N-C shall furnish PAL with a
duplicate D.A.T. Broadcast Master if PAL certifies to N-C, in writing, that the
original master is lost, damaged, or is otherwise not useable. Within thirty
(30) days after the termination of this Agreement, PAL must return to N-C all
Broadcast Masters of all PAN and PAL Segments in its possession or under its
control, along with a written certification of PAL officer that either PAL has
not made, or caused to be made, any copies or phonorecords of any Broadcast
Masters, or has made such under the terms and conditions of this Agreement, and
all such copies or phonorecords have been delivered to N-C.
Section 4.04. Right to Market and Purchase N-C Products.
N-C further grants to PAL the non-exclusive right to advertise and
promote N-C's Programs through PAL's Commercials broadcast via satellite by CDR,
or any other CDR affiliated subscription service. PAL may purchase from N-C, for
re-sale to the general public, N-C's six-cassette audiocassette Program at a
price of twelve dollars ($12.00) per album, plus freight and an additional $3.50
charge per album fulfillment charge if PAL contracts with N-C to perform
necessary fulfillment services. Notwithstanding anything contained herein to the
contrary, however, N-C may increase the Program's purchase price from time to
time, and at any time upon 90 days prior written notice, but no sooner than the
second anniversary of this Agreement to reflect any increase in N-C's actual
material and/or labor costs.
The purchase prices under this section are limited to prices for six
audiocassette products (with workbooks) published by N-C, and applicable to
neither (a) N-C's deluxe programs, nor (b) programs published by others but sold
by N-C (so called "pick up products").
Section 4.05. Right of Opportunity.
N-C will notify PAL in writing if N-C wishes to license rights to
broadcast of any of its products in a radio format not covered by the license
granted hereunder, including, for example, pay-per-listen, cable radio, Internet
radio, and AM or FM radio syndication. If PAL is interested in acquiring such
rights, it will so notify N-C within fifteen (15) days after receipt of N-C's
notice, and the parties agree to thereupon negotiate in good faith upon the
terms of a license. If the parties are unable to enter into a definitive written
agreement within forty-five (45) days after N-C's notification, then N-C may
negotiate with others, and may enter into an agreement to license such rights
with any party of its choosing, without further restriction by this Agreement.
Nothing contained herein, however, shall restrict or prohibit or otherwise
affect N-C's right to sell, assign or license its rights to any work in any
media now known or hereafter known, other than satellite radio broadcast
technology.
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Article 5. Responsibilities
Section 5.01 PAL to Develop Programming.
PAL shall develop a Personal Achievement Format for broadcast via
satellite radio broadcast technology. The format includes the PAN and PAL
Segments licensed to PAL hereunder by N-C. Those segments will account for most
of, but not all of, PAL's programming. Personal Achievement Format will also
include announcer commentary, commercials, news, music, weather, and other
programming consistent with the personal achievement theme. PAL alone shall be
responsible for ensuring that all content, including the PAN and PAL Segments,
along with other content broadcast by PAL, complies with the Federal
Communications Act and all regulations promulgated thereunder. PAL shall operate
the its broadcast and programming services in accordance with all applicable
laws and ordinances, and will take no action, or omit to take any action, which
would harm either N-C's reputation or the reputation of any author of any of the
Segments. PAL must maintain a written log of the PAN and PAL Segments used,
including the title of each PAN and PAL Segment and the time it is aired or
module that it was included with.. PAL shall deliver a copy of the segment log
to N-C upon N-C's request. PAL shall submit scripts pertaining to N-C, and any
PAL commercials promoting N-C products, to N-C, or its designated agent for its
approval, which approval will not be unreasonably withheld. N-C will be deemed
to have approved a script if it does not disapprove it within five (5) business
days after its receipt.
Section 5.02. Either Party May Inspect Facilities.
Either party, at any time, and from time to time, during normal
business hours, upon giving the other reasonable notice, may inspect the other
party's offices and records kept with respect to this Agreement to determine
whether the other party is abiding by its obligations. Each party agrees to
cooperate with the other during all such inspections, and to furnish the other
with any documents requested relevant to this Agreement.
Section 5.03. Taxes.
PAL shall pay and hold N-C harmless from all taxes and related
charges, assessments and other fees now or hereafter imposed or based upon or
resulting from the delivery, exhibition, possession or use by PAL of the
Segments licensed hereunder. PAL will be responsible for sales taxes on such N-C
Programs sold by PAL through PAL programming.
Article 6. Names
PAL shall retain and regularly update on a computer database (the
"database") the names, addresses and other relevant information of all actual
and potential customers generated by PAL Commercials. PAL hereby grants to N-C
the following rights in and to PAL's database and the content thereof:
a. PAL from time to time shall furnish a current copy of the
database to N-C, upon its request, so that N-C may promote the sale of its
products, in any formats now known or later developed.
b. N-C may not exchange, rent, or lease the database or the
data therefrom to any third party.
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c. N-C shall reimburse PAL for the actual cost of any computer
run costs incurred by PAL regarding any special selects requested by N-C,
including by way of example, and not in limitation, zip code specific and gender
related data.
N-C grants to PAL the royalty free, single use right to use N-C's list
of names, and addresses of actual and potential customers generated by N-C
Commercials to allow PAL to promote itself when it launches a new programming
format or otherwise desires to make an announcement to the general public. PAL
acknowledges N-C's lists are N-C's trade secrets and agrees to keep the contents
confidential, and in a secure location. PAL further agrees to communicate the
confidentiality of such information to all persons having access to it.
Article 7. Term
Section 7.01. Initial Term.
This Agreement shall begin on the date hereof, and unless terminated
earlier, shall end seven (7) years therefrom. If PAL does not begin broadcasting
PAL programming on the CDR satellite radio broadcast service before June 30,
2001 this Agreement will be automatically terminated, and all materials provided
to PAL by N-C shall be returned within thirty (30) days, and all rights granted
to PAL herewithin shall terminate.
Section 7.02. Renewal.
This Agreement may be renewed for a consecutive five-year terms after
expiration of the initial term by mutual agreement of both parties, provided the
following conditions have been met:
a. The notice of renewal must be agreed to, in writing by both
parties no later than sixty (60) days before the end of the prior term and;
b. Neither party is in material default of any of the material
provisions of this Agreement, beyond any applicable cure periods, and that the
Agreement upon the date of such renewal notice is in full force and effect; and
c. PAL at the time of renewal notice features a personal
achievement format during a majority of its programming day.
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The parties, if they wish, may together waive the requirements of a or
b (or both above). Neither party, however, may unilaterally waive the
requirements of a, and the breaching party may not unilaterally waive the
requirements of b
Section 7.03. Bankruptcy and Default.
(a) If PAL materially defaults in any of its obligations
hereunder, and such default continues for a period of ten (10) days after
notice, or, if PAL is adjudicated a bankrupt, or files a petition in bankruptcy,
or makes an assignment for the benefit of creditors or takes advantage of the
provisions of any bankruptcy or debtor relief act, or if any involuntary
petition in bankruptcy is filed against PAL and is not vacated or discharged
within thirty (30) days, then, and upon the occurrence of any one or more of
such events, and without prejudice to any right or remedy which may be available
to N-C, at law or in equity, and without in any way discharging or releasing PAL
from any of its obligations under this Agreement, N-C shall have the right to
terminate each and all of the rights of PAL and/or suspend the further delivery
of Segments until such defaults have ceased and have been remedied.
(b) If N-C incurs any expenses for legal services, court
costs, and associated expenses by reason of any of the foregoing, the sum or
sums so paid by N-C and the amount of such fees, costs and associated expenses
shall be payable forthwith by PAL to N-C, together with interest thereon at ten
(10) percent per annum from the due date thereof until actual payment.
(c) If N-C materially defaults in any of its obligations
hereunder, and such default continues for a period of ten (10) days after
notice, or, if N-C is adjudicated a bankrupt, or files a petition in bankruptcy,
or makes an assignment for the benefit of creditors or takes advantage of the
provisions of any bankruptcy or debtor relief act, or if any involuntary
petition in bankruptcy is filed against N-C and is not vacated or discharged
within thirty (30) days, then, and upon the occurrence of any one or more of
such events, and without prejudice to any right or remedy which may be available
to PAL, at law or in equity, and without in any way discharging or releasing N-C
from any of its obligations under this Agreement, PAL shall have the right to
terminate this Agreement.
(d) If PAL incurs any expenses for legal services, court
costs, and associated expenses by reason of any of the foregoing, the sum or
sums so paid by PAL and the amount of such fees, costs and associated expenses
shall be payable forthwith by N-C to PAL, together with interest thereon at ten
(10) percent per annum from the due date thereof until actual payment.
Article 8. Contingency
8.1 INR intends to make a public offering of its common stock, and on
April 19, 1999, filed a registration with the Securities and Exchange Commission
("SEC"). INR, upon execution of this Agreement, as further consideration for the
rights granted by N-C, agrees to transfer to N-C 12,500 of INR's fully paid
non-assessable common stock, free and clear of any liens or encumbrances of any
kind or nature. INR shall cause N-C's stock to be registered with the SEC, free
of any cost to N-C, as part of INR's registration. INR represents that 12,500
shares of INR common stock is, as of the date hereof, equivalent in value to 50%
of the membership units of PAL, according to a bona fide appraisal made by PIA
Consulting dated March 22, 1999, of all of INR's satellite radio channels.
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In the event INR shall issue additional shares (other than the current
public offering), which would have the effect of substantially diluting the
interest of N-C in INR stock, N-C shall have the right to purchase, at the same
price as the offering price for such additional shares, the number of shares
that will permit N-C to remain substantially undiluted. This clause shall not
apply to stock issued for property for fair value or for INR company stock
option plans. Substantial dilution shall mean dilution of N-C's interest to less
than 4% of the capital of INR on a fully diluted basis. This right shall not be
assignable or transferable.
8.2. If INR does not make a public offering by December 31, 1999, then
it shall immediately cause the transfer to N-C of 50% of PAL's membership units,
against delivery of N-C's stock in INR, and INR and N-C shall amend PAL's
operating agreement in certain respects. The parties have not as yet concluded
all of their negotiations concerning the transfer, and the amendment of PAL's
operating agreement. Nevertheless, the parties intend that under such
circumstances that they will enter into, and execute a definitive amendment to
PAL's Operating Agreement memorializing their agreements. The amendment, among
other things, will provide that:
a. INR has transferred to N-C 50% of PAL's membership units
free and clear of all liens and encumbrances; and
b. INR grants to N-C a right of first refusal with respect to
any offers, to sell or transfer any of INR's membership units in PAL. INR must
give N-C, within ten days after its receipt, a copy of any offer (an "Offer") it
wishes to accept to purchase, or otherwise transfer, any interest in PAL. N-C
will upon receipt of the offer have an option to purchase all, but not less than
all of such units on all of the terms and conditions of the Offer, for a thirty
day period after it receives notice. N-C may only exercise its option in
writing. N-C shall be deemed to have refused to exercise its option if it does
not give written exercise of option to INR within the thirty day period
provided; and
c. INR shall provide N-C with a fair and reasonable mechanism
to prevent N-C's interest in PAL from being diluted.
d. Members holding 65% of the membership units must approve
any material actions affecting PAL's capital structure, direction, organization,
and policies, including but not limited to approval of:
(i) budgets;
(ii) loans in excess of $100,000.00;
(iii) executive's salaries;
(iv) changes in capitalization;
(v) changes in business purpose;
(vi) changes in Manager;
(vii) distributions to Members;
(viii) liquidation, merger or consolidation;
(ix) commencement, settlement or compromise of litigation;
(x) selection of accountants, attorneys and other
professional advisors;
(xi) material agreements;
(xii) sale of substantially all of PAL's assets;
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(xiii) Amendment of Operating Agreement;
(xiv) commencement of bankruptcy;
(xv) authorization of any additional units;
(xvi) entry into joint ventures, partnerships,
establishment of subsidiaries.
e. That there is then no litigation pending or threatened
against PAL or INR, or both, or their respective properties or assets, which may
have a materially adverse affect on PAL or its operations, PAL is then in
compliance with all applicable governmental rules, regulations and ordinances
and is duly organized and existing under the laws of California, and has all
necessary authority and approvals to conduct business, and there are no
outstanding warrants, rights, subscriptions or other commitments where PAL may
be obligated to issue, deliver or sell any of its units.
f. PAL's Manager, at the time of said Amendment, shall be John
Douglas, or such other person or entity acceptable to members holding 65% of the
membership units of PAL.
g. Such other terms as a similarly situated investor may
reasonably believe are necessary or advisable to protect its interests and
investments in PAL.
8.3. If the parties do not enter into a definitive written amendment to
PAL's operating agreement within 90 days after the date INR is obligated to
transfer 50% of PAL's membership units to N-C, then the parties must, within 10
days after the end of the 90 day period, submit any disputes which they may have
in regard to the amendment to mediation before and with the mediation services
of the American Arbitration Association, at Chicago, Illinois, and for a period
of three months after submittal must negotiate in good faith, with the
mediator's assistance, to resolve any such disputes. Each party shall bear
one-half of the costs of the mediation. If the parties, after using reasonable
bona fide efforts, are not able to resolve their differences, then the parties
must, within 15 days notice after expiration of the three month period, submit
any unresolved dispute before, to and under the rules then pertaining of the
American Arbitration Association, again at Chicago, Illinois, for binding
arbitration, to resolve those disputes, utilizing this Agreement as a guide to
such resolution. Each party shall bear one-half of the costs of the arbitration.
8.4 N-C may declare PAL's rights under this Agreement to be
non-exclusive, if at any time either N-C's interest in PAL falls below 50% of
the total outstanding membership units, or N-C's interest in INR falls below 4%
of the total of the outstanding and issued common stock.
Article 9. Indemnification
(a) Each party assumes liability for, and shall indemnify,
defend, protect, save and hold harmless the other from and against any and all
claims, actions, suits, costs, liabilities, judgments, obligations, losses,
penalties, damages and expenses (including legal fees and expenses) of
whatsoever kind and nature arising out of any breach or alleged breach by such
party of any of its warranties or representations, covenants or obligations made
pursuant to this Agreement. Further, N-C shall indemnify and hold PAL harmless
for any such loss caused because any breach of any of N-C's representations, or
because the Segments, commercials, or infomercials furnished by N-C breach, or
are alleged to have breached, any copyright, trademark trade secret or any other
right of any third party; and PAL shall indemnify and hold N-C harmless,
resulting from any breach of PAL's representations, or because or as a result of
any of PAL's programming (exclusive of the Segments, commercials and
infomercials), or from PAL's operation of the radio station.
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(b) The party seeking indemnification must promptly notify the
other of any claim or litigation of which it is aware to which the
indemnification relates, provided the failure to notify will only release the
other to the extent of actual prejudice.
Article 10. Independent Contractors
N-C and PAL are independent contractors with respect to each other.
Nothing herein shall create any association, partnership, joint venture or
agency relationship between N-C and PAL. PAL shall be solely responsible for all
persons employed by PAL in connection with PAL's performance hereunder
including, without limitation, responsibility for all compensation, withholding
taxes, worker's compensation insurance and other required payments in connection
with such employees.
Article 11. General
(a) The captions of the sections and articles of this
Agreement are for convenience only and shall not in any way affect the
interpretation of any section or article of this Agreement or the Agreement
itself.
(b) A waiver by any party of any of the terms or conditions of
this Agreement shall not be deemed or construed to be a waiver of such term or
condition for the future, or of any subsequent breach thereof. All remedies,
rights, undertakings, obligations and agreements contained in this Agreement
shall be cumulative and none of them shall be in limitation of any other remedy,
right, undertaking, obligation or agreement of any party.
(c) All notices, statements and other documents required to be
given shall be given in writing either by personal delivery, mail or facsimile
(except as herein otherwise expressly provided) at the respective addresses of
the parties as set forth, or such other addresses as may be designated in
writing by either party. Notice given by mail or by facsimile shall be deemed
given on date of faxing or upon the date of receipt for mail notices.
(d) This Agreement and all matters or issues collateral
thereto shall be governed by the laws of the State of Illinois.
(e) This Agreement constitutes the entire agreement between
N-C and PAL and INR with respect to the subject matter herein contained and this
Agreement cannot be changed or terminated orally, and no changes, amendments or
assignments thereof shall be binding upon N-C until accepted in writing by a
duly authorized officer of N-C.
(f) This Agreement supersedes all prior written or oral
communications or understandings between the parties concerning the subject
matter.
(g) Each party shall execute any and all further instruments
which either party may deem reasonably necessary and proper to carry out the
purposes of this Agreement.
(h) If any party shall fail to comply with the terms of this
Agreement because of any act of God, war, fire, flood, strike, labor dispute,
public disaster, transportation or laboratory difficulties, order or decree of
governmental agency or any other similar or dissimilar cause beyond such party's
reasonable control, then such failure shall not be deemed to be a breach of this
Agreement.
-80-
<PAGE>
(i) No party shall assign any of its rights or obligations
hereunder without the prior written consent of the others.
IN WITNESS WHEREOF, each of the parties has duly executed and delivered
this Agreement as of the date first written above.
NIGHTINGALE-CONANT CORPORATION PERSONAL ACHIEVEMENT LIVE, LLC
By____________________________ By_________________________________
Name _________________________ Name ______________________________
Title __________________________ Title _____________________________
INFORMATION RADIO NETWORK, INC.
By_________________________________
Name ______________________________
Title _____________________________
-81-
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the heading "Experts" and
to the use of our report dated April 6, 1999 with reference to our audit of the
financial statements of Information Network Radio, Inc. as of March 31, 1999 and
for the initial period then ended, in the Pre-Effective Amendment No. 1 to
Registration Statement on Form SB-2 and related Prospectus dated June 28, 1999.
HOLLANDER, LUMER & CO. LLP
Los Angeles, California
June 28, 1999
Exhibit 23.1
Agreement Not to Sell Shares
This agreement is between Information Network Radio, Inc. (the Company)
and its founding shareowners (the Cofounders).
The Cofounders agree not to sell any of their shares of the common
stock of the Company for a year after completion of the proposed public offering
by the Company of its shares to be commenced in 1999 (the Offering). During the
second year after completion of the Offering, the Cofounders agree not to sell
more than an aggregate of 2.5% of their shares during each quarter of that year,
except by registration as described in this Agreement.
At any time, following a year after completion of the Offering, the
Company determines to register for sale any of its common stock under the
federal Securities Act of 1933, as amended, it shall use its best efforts to
include in that registration all of their shares that the Cofounders shall have
requested to be registered. The Company will do all the actions with respect to
the registration of the Cofounders' shares as it does with respect to its other
shares being registered and will pay all costs of that action.
If any registration involves an underwriting, then the Cofounders will
have the right to have their shares included in the underwriting, before
inclusion of any other shares not being issued for the purpose by the Company.
These rights are not transferable by the cofounders, except to members
of their immediate families or by will or intestacy.
Cofounders: IN Radio
_______________________________ By: _______________________
N. John Douglas
_______________________________
Gregory D. Douglas
_______________________________
C. Andrew Whatley
_______________________________
Walter E. Thill
_______________________________
William E. Green
EXHIBIT 99.2
